UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811- 02753
Guggenheim Variable Funds Trust | ||
(Exact name of registrant as specified in charter) |
702 King Farm Boulevard, Suite 200 Rockville, Maryland 20850 | ||
(Address of principal executive offices) (Zip code) |
Amy J. Lee Guggenheim Variable Funds Trust 702 King Farm Boulevard, Suite 200 Rockville, Maryland 20850 | ||
(Name and address of agent for service) |
Registrant's telephone number, including area code:1-301-296-5100
Date of fiscal year end: December 31
Date of reporting period: January 1, 2019 - December 31, 2019
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. |
12.31.2019
Guggenheim Variable Funds Trust Annual Report
Series | |||
Series A | (StylePlus—Large Core Series) | ||
Series B | (Large Cap Value Series) | ||
Series D | (World Equity Income Series) | ||
Series E | (Total Return Bond Series) | ||
Series F | (Floating Rate Strategies Series) | ||
Series J | (StylePlus—Mid Growth Series) | ||
Series N | (Managed Asset Allocation Series) | ||
Series O | (All Cap Value Series) | ||
Series P | (High Yield Series) | ||
Series Q | (Small Cap Value Series) | ||
Series V | (SMid Cap Value Series) (formerly, Mid Cap Value Series) | ||
Series X | (StylePlus—Small Growth Series) | ||
Series Y | (StylePlus—Large Growth Series) | ||
Series Z | (Alpha Opportunity Series) |
Beginning on January 1, 2021, paper copies of the Funds’ annual and semi-annual shareholder reports may no longer be sent by mail, unless you specifically request paper copies of the reports from the insurance company that offers your contract or from your financial intermediary. Instead, the reports will be made available on a website, and you will be notified by mail each time a report is posted and provided with a website link to access the report. Instructions for requesting paper copies will be provided by your insurance company.
If you already elected to receive shareholder reports electronically, you will not be affected by this change and you need not take any action. At any time, you may elect to receive reports and other communications from the insurance company electronically by following the instructions provided by the insurance company.
You may elect to receive all future shareholder reports in paper free of charge. You can inform the insurance company that you wish to receive paper copies of reports by following the instructions provided by the insurance company. Your election to receive reports in paper will apply to all portfolio companies available under your contract.
GuggenheimInvestments.com | GVFT-ANN-2-1219x1220 |
TABLE OF CONTENTS |
DEAR SHAREHOLDER | 2 |
ECONOMIC AND MARKET OVERVIEW | 5 |
ABOUT SHAREHOLDERS’ FUND EXPENSES | 7 |
SERIES A (STYLEPLUS—LARGE CORE SERIES) | 9 |
SERIES B (LARGE CAP VALUE SERIES) | 18 |
SERIES D (WORLD EQUITY INCOME SERIES) | 27 |
SERIES E (TOTAL RETURN BOND SERIES) | 37 |
SERIES F (FLOATING RATE STRATEGIES SERIES) | 56 |
SERIES J (STYLEPLUS—MID GROWTH SERIES) | 69 |
SERIES N (MANAGED ASSET ALLOCATION SERIES) | 79 |
SERIES O (ALL CAP VALUE SERIES) | 88 |
SERIES P (HIGH YIELD SERIES) | 98 |
SERIES Q (SMALL CAP VALUE SERIES) | 112 |
SERIES V (SMID CAP VALUE SERIES) | 122 |
SERIES X (STYLEPLUS—SMALL GROWTH SERIES) | 132 |
SERIES Y (STYLEPLUS—LARGE GROWTH SERIES) | 142 |
SERIES Z (ALPHA OPPORTUNITY SERIES) | 151 |
NOTES TO FINANCIAL STATEMENTS | 171 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM | 196 |
OTHER INFORMATION | 197 |
INFORMATION ON BOARD OF TRUSTEES AND OFFICERS | 199 |
GUGGENHEIM INVESTMENTS PRIVACY NOTICE | 204 |
THE GUGGENHEIM FUNDS ANNUAL REPORT | 1 |
| December 31, 2019 |
Dear Shareholder:
Security Investors, LLC and Guggenheim Partners Investment Management, LLC (the “Investment Advisers”) are pleased to present the annual shareholder report for funds that are part of the Guggenheim Variable Funds Trust (the “Funds”). This report covers performance of the Funds for the annual period ended December 31, 2019.
The Investment Advisers are part of Guggenheim Investments, which represents the investment management businesses of Guggenheim Partners, LLC (“Guggenheim”), a global, diversified financial services firm.
Guggenheim Funds Distributors, LLC is the distributor of the Funds. Guggenheim Funds Distributors, LLC is affiliated with Guggenheim and the Investment Advisers.
We encourage you to read the Economic and Market Overview section of the report, which follows this letter, and then the Managers’ Commentary for each Fund.
We are committed to providing innovative investment solutions and appreciate the trust you place in us.
Sincerely,
Security Investors, LLC
Guggenheim Partners Investment Management, LLC
January 31, 2020
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.
The Series StylePlus Funds may not be suitable for all investors. Investments in large capitalization stocks may underperform other segments of the equity market or the equity market as a whole. ● Investments in small-sized company securities may present additional risks such as less predictable earnings, higher volatility and less liquidity than larger, more established companies. ● Growth stocks may be more volatile than other stocks because they are more sensitive to investor perceptions regarding the growth potential of the issuing companies. ● The Funds may invest in derivative instruments, which may be more volatile and less liquid, increasing the risk of loss when compared to traditional securities. Certain of the derivative instruments are also subject to the risks of counterparty default and adverse tax treatment. ● The Funds’ use of leverage, through borrowings or instruments such as derivatives, may cause the Funds to be more volatile than if they had not been leveraged. ● The Funds’ investments in other investment vehicles subject the Funds to those risks and expenses affecting the investment vehicle. ● The Funds may invest in foreign securities which carry additional risks when compared to U.S. securities, due to the impact of diplomatic, political or economic developments in the country in question (investments in emerging markets securities are generally subject to an even greater level of risks). ● The Funds may invest in fixed income securities whose market value will change in response to interest rate changes and market conditions among other factors. In general, bond prices rise when interest rates fall and vice versa. ● The Funds’ exposure to high yield securities may subject the Funds to greater volatility. ● The Funds may invest in bank loans and asset-backed securities, including mortgage backed, which involve special types of risks. ● The Funds may invest in restricted securities which may involve financial and liquidity risk. ● You may have a gain or loss when you sell your shares. ● It is important to note that the Funds are not guaranteed by the U.S. government. ● Please read the prospectus for more detailed information regarding these and other risks.
The Series Value Funds may not be suitable for all investors. ● An investment in the Funds will fluctuate and is subject to investment risks, which means investors could lose money. The intrinsic value of the underlying stocks may never be realized or the stocks may decline in value. Investments in small- and/or mid-sized company securities may present additional risks such as less predictable earnings, higher volatility and less liquidity than larger, more established companies. ● Please read the prospectus for more detailed information regarding these and other risks.
2 | THE GUGGENHEIM FUNDS ANNUAL REPORT |
| December 31, 2019 |
The Series D (World Equity Income Series) may not be suitable for all investors. ● Investments in securities in general are subject to market risks that may cause their prices to fluctuate over time. ●The Fund’s investments in foreign securities carry additional risks when compared to U.S. securities, due to the impact of diplomatic, political or economic developments in the country in question (investments in emerging markets are generally subject to an even greater level of risks). Additionally, the Fund’s exposure to foreign currencies subjects the Fund to the risk that those currencies will decline in value relative to the U.S. Dollar. ● The Fund’s investments in derivatives may pose risks in addition to those associated with investing directly in securities or other investments, including illiquidity of the derivatives, imperfect correlations with underlying investments or the Fund’s other portfolio holdings, lack of availability and counterparty risk. ●The Fund’s use of leverage, through instruments such as derivatives, may cause the Fund to be more volatile than if it had not been leveraged. ●The Fund’s investments in other investment vehicles subject the Fund to those risks and expenses affecting the investment vehicle. ●The Fund may have significant exposure to securities in a particular capitalization range e.g., large-, mid- or small-cap securities. As a result, the Fund may be subject to the risk that the pre-denominated capitalization range may underperform other segments of the equity market or the equity market as a whole. ● Please read the prospectus for more detailed information regarding these and other risks.
The Series E (Total Return Bond Series) may not be suitable for all investors. ● The Fund’s market value will change in response to interest rate changes and market conditions among other factors. In general, bond prices rise when interest rates fall and vice versa. ● The Fund’s exposure to high yield securities may subject the Fund to greater volatility. ● When market conditions are deemed appropriate, the Fund will leverage to the full extent permitted by its investment policies and restrictions and applicable law. Leveraging will exaggerate the effect on net asset value of any increase or decrease in the market value of the Fund’s portfolio. ● The Fund may invest in derivative instruments, which may be more volatile and less liquid, increasing the risk of loss when compared to traditional securities. Certain of the derivative instruments are also subject to the risks of counterparty default and adverse tax treatment. ● Instruments and strategies (such as borrowing transactions and reverse repurchase agreements) may provide leveraged exposure to a particular investment, which will magnify any gains or losses on those investments. ● Investments in reverse repurchase agreements expose the Fund to many of the same risks as investments in derivatives. ● The Fund’s investments in other investment vehicles subject the Fund to those risks and expenses affecting the investment vehicle. ● The Fund’s investments in foreign securities carry additional risks when compared to U.S. securities, due to the impact of diplomatic, political, or economic developments in the country in question (investments in emerging markets securities are generally subject to an even greater level of risk). ● Investments in syndicated bank loans generally offer a floating interest rate and involve special types of risks. ● The Fund’s investments in municipal securities can be affected by events that affect the municipal bond market. ● The Fund’s investments in real estate securities subject the Fund to the same risks as direct investments in real estate, which is particularly sensitive to economic downturns. ● The Fund’s investments in restricted securities may involve financial and liquidity risk. ● You may have a gain or loss when you sell your shares. ● It is important to note that the Fund is not guaranteed by the U.S. government. ● Please read the prospectus for more detailed information regarding these and other risks.
The Series F (Floating Rate Strategies Series) may not be suitable for all investors. ● Investments in floating rate senior secured syndicated bank loans and other floating rate securities involve special types of risks, including credit rate risk, interest rate risk, liquidity risk and prepayment risk. ● The Fund’s market value will change in response to interest rate changes and market conditions among other factors. In general, bond prices rise when interest rates fall and vice versa. ● The Fund’s exposure to high yield securities may subject the Fund to greater volatility. ● When market conditions are deemed appropriate, the Fund may use leverage to the full extent permitted by its investment policies and restrictions and applicable law. Leveraging will exaggerate the effect on net asset value of any increase or decrease in the market value of the Fund’s portfolio. ● The Fund may invest in derivative instruments, which may be more volatile and less liquid, increasing the risk of loss when compared to traditional securities. Certain of the derivative instruments are also subject to the risks of counterparty default and adverse tax treatment. ● Instruments and strategies (such as borrowing transactions and reverse repurchase agreements) may provide leveraged exposure to a particular investment, which will magnify any gains or losses on those investments. ● Investments in reverse repurchase agreements and synthetic instruments (such as synthetic collateralized debt obligations) expose the Fund to many of the same risks as investments in derivatives. ● The Fund’s investments in other investment vehicles subject the Fund to those risks and expenses affecting the investment vehicle. ● The Fund’s investments in foreign securities carry additional risks when compared to U.S. securities, due to the impact of diplomatic, political or economic developments in the country in question (investments in emerging markets securities are generally subject to an even greater level of risk). ● The Fund’s investments in real estate securities subject the Fund to the same risks as direct investments in real estate, which is particularly sensitive to economic downturns. ● The Fund’s investments in restricted securities may involve financial and liquidity risk. ● The Fund is subject to active trading risks that may increase volatility and impact its ability to achieve its investment objective. ● You may have a gain or loss when you sell your shares. ● It is important to note that the Fund is not guaranteed by the U.S. government. ● Please read the prospectus for more detailed information regarding these and other risks.
The Series N (Managed Asset Allocation Series) may not be suitable for all investors. ● The value of an investment in the Fund will fluctuate and is subject to investment risks, which means investors could lose money. The Fund could lose money if the issuer of a bond or a counterparty to a derivatives transaction or other transaction is unable to repay interest and principal on time or defaults. The issuer of a bond could also suffer a decrease in quality rating, which would affect the volatility and liquidity of the bond. Derivatives may pose risks in addition to those associated with investing directly in securities or other investments, including the risk that the Fund will be unable to sell, unwind or value the derivative because of an illiquid market, the risk that the derivative is not well correlated with underlying investments or the Fund’s other portfolio holdings, and the risk that the counterparty is unwilling or unable to meet its obligation. The use of derivatives by the Fund to hedge risk may reduce the opportunity for gain by offsetting the positive effect of favorable price movements. Furthermore, if the Investment Manager is incorrect about its expectations of market conditions, the use of derivatives could result in a loss, which in some cases may be unlimited. Foreign securities carry additional risks when compared to U.S. securities, including currency fluctuations, adverse political and economic developments, unreliable or untimely information, less liquidity, limited legal recourse and higher transactional costs. The Investment Manager may not be able to cause certain of the underlying funds’ performance to match or correlate to that of the underlying funds’ respective underlying index or benchmark, either on a daily or aggregate basis. Factors such as underlying fund expenses, imperfect correlation between an underlying fund’s investments and those of its underlying index or underlying benchmark, rounding of share prices, changes to the composition of the underlying index or underlying benchmark, regulatory policies, high portfolio turnover rate, and the use of leverage all contribute to tracking error. Tracking error may cause an underlying fund’s and, thus the Fund’s, performance to be less than you expect. ● Please read the prospectus for more detailed information regarding these and other risks.
The Series P (High Yield Series) may not be suitable for all investors. ● The Fund’s market value will change in response to interest rate changes and market conditions among other factors. In general, bond prices rise when interest rates fall and vice versa. ● The Fund’s exposure to high yield securities may subject the Fund to greater volatility. ● The Fund may invest in derivative instruments, which may be more volatile and less liquid, increasing the risk of loss when compared to traditional securities. Certain of the derivative instruments are also subject to the risks of counterparty default and adverse tax treatment. ●The Fund’s use of leverage, through borrowings or instruments such as derivatives, may cause the Fund to be more volatile than if it had not been leveraged. ● Instruments and strategies (such as borrowing transactions and reverse repurchase agreements) may provide leveraged exposure to a particular investment, which will magnify any gains or losses on those investments. ● The Fund may invest in foreign securities which carry additional risks when compared to U.S. securities, due to the impact of diplomatic, political or economic developments in the country in question (investments in emerging markets securities are generally subject to an even greater level of risks). ● Investments in syndicated bank loans generally
THE GUGGENHEIM FUNDS ANNUAL REPORT | 3 |
| December 31, 2019 |
offer a floating interest rate and involve special types of risks. ● The Fund’s investments in other investment vehicles subject the Fund to those risks and expenses affecting the investment vehicle. ● The Fund’s investments in restricted securities may involve financial and liquidity risk. ● You may have a gain or loss when you sell your shares. ● It is important to note that the Fund is not guaranteed by the U.S. government. ● Please read the prospectus for more detailed information regarding these and other risks.
The Series Z (Alpha Opportunity Series) may not be suitable for all investors. ● Investments in securities and derivatives, in general, are subject to market risks that may cause their prices to fluctuate over time. An investment in the Fund may lose money. There can be no guarantee the Fund will achieve it investment objective. ●The Fund’s use of derivatives such as futures, options and swap agreements may expose the Fund to additional risks that it would not be subject to if it invested directly in the securities underlying those derivatives. ● Certain of the derivative instruments, such as swaps and structured notes, are also subject to the risks of counterparty default and adverse tax treatment. ●The more the Fund invests in leveraged instruments, the more the leverage will magnify any gains or losses on those investments. ● The Fund’s use of short selling involves increased risk and costs, including paying more for a security than it received from its sale and the risk of unlimited losses. ●In certain circumstances the fund may be subject to liquidity risk and it may be difficult for the fund to purchase and sell particular investments within a reasonable time at a fair price. ●In certain circumstances, it may be difficult for the Fund to purchase and sell particular investments within a reasonable time at a fair price. ●The Fund’s fixed income investments will change in value in response to interest rate changes and other factors. ● Please read the prospectus for more detailed information regarding these and other risks.
4 | THE GUGGENHEIM FUNDS ANNUAL REPORT |
ECONOMIC AND MARKET OVERVIEW (Unaudited) | December 31, 2019 |
Recent U.S. economic data demonstrates that the expansion is being helped by lower interest rates. New home sales have risen at a double-digit, year-over-year pace for four consecutive months since August, spurred by lower mortgage rates but also base effects. Manufacturing production rose in both November and December, corroborating the signal seen in improving manufacturing surveys. Monthly non-farm payroll gains averaged 184,000 jobs in the fourth quarter of 2019, above underlying labor force growth. Income gains and a positive wealth effect are also flowing through into retail sales, where “core” sales recovered in December after three months of declines.
The latest evidence suggests that the U.S. Federal Reserve’s (the “Fed”) easing efforts have given the U.S. economy the extra gas it needs to extend the cycle. Furthermore, the new year kicks off with some clarity on U.S.-China trade policy. The eleventh-hour phase one U.S.-China trade agreement may give U.S. companies some comfort that they can expect tariffs on either side to remain where they are for now. This should help support U.S. manufacturing activity, especially if China steps up purchases of U.S. goods as promised.
Over the next several months, we expect the Fed will stay on hold as it watches incoming data to ensure that the current level of fed funds remains appropriate. Monetary policy acts on the economy with a timing lag, so the effects of the last rate cut in October 2019 might not be apparent until mid-2020. More economic data improvements may come as low rates flow through to consumers and to the credit markets.
While the Fed successfully pushed off a recession in 2019, 2020 arrives with several risks worth watching, including the U.S. presidential election, U.S.-Europe trade negotiations, the potential for a military conflict between the U.S. and Iran, and rising corporate and local government defaults in China.
For the 12 months ended December 31, 2019, the Standard & Poor’s 500® (“S&P 500®”) Index* returned 31.49%. The MSCI Europe-Australasia-Far East (“EAFE”) Index* returned 22.01%. The return of the MSCI Emerging Markets Index* was 18.42%.
In the bond market, the Bloomberg Barclays U.S. Aggregate Bond Index* posted a 8.72% return for the period, while the Bloomberg Barclays U.S. Corporate High Yield Index* returned 14.32%. The return of the ICE Bank of America (“BofA”) Merrill Lynch 3-Month U.S. Treasury Bill Index* was 2.28% for the 12-month period.
The opinions and forecasts expressed may not actually come to pass. This information is subject to change at any time, based on market and other conditions, and should not be construed as a recommendation of any specific security or strategy.
*Index Definitions:
The following indices are referenced throughout this report. Indices are unmanaged and not available for direct investment. Index performance does not reflect transaction costs, fees, or expenses.
Bloomberg Barclays 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 Barclays 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.
Credit Suisse Leveraged Loan Index is designed to mirror the investable universe of the U.S. dollar-denominated leveraged loan 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.
Morningstar Long/Short Equity Category Average represents long-short portfolios which hold sizable stakes in both long and short positions in equities and related derivatives. Some funds that fall into this category will shift their exposure to long and short positions depending on their macro outlook or the opportunities they uncover through bottom-up research. Some funds may simply hedge long stock positions through exchange traded funds or derivatives. At least 75% of the assets are in equity securities or derivatives.
MSCI EAFE Index is a free float-adjusted market capitalization index that is designed to measure the equity market performance of developed markets, excluding the U.S. & Canada.
MSCI Emerging Markets Index is a free float-adjusted market capitalization weighted index that is designed to measure equity market performance in the global emerging markets.
MSCI World Index is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed markets.
Russell 1000® Growth Index measures the performance of the large-cap growth segment of the U.S. equity universe. It includes those Russell 1000 companies with higher price-to-book ratios and higher forecasted growth value.
THE GUGGENHEIM FUNDS ANNUAL REPORT | 5 |
ECONOMIC AND MARKET OVERVIEW(Unaudited)(concluded) | December 31, 2019 |
Russell 1000® Value Index: A measure of the performance for the large-cap value segment of the U.S. equity universe. It includes those Russell 1000 companies with lower price-to-book ratios and lower expected growth values.
Russell 2000® Growth Index measures the performance of the small-cap growth segment of the U.S. equity universe. It includes those Russell 2000 companies with higher price-to-book ratios and higher forecasted growth values.
Russell 2000® Value Index measures the performance of the small-cap value segment of the U.S. equity universe. It includes those Russell 2000 companies with lower price-to-book ratios and lower forecasted growth values.
Russell 2500® Value Index measures the performance of the small- to mid-cap value segment of the U.S. equity universe. It includes those Russell 2500 companies with lower price-to-book ratios and lower forecasted growth values.
Russell 3000® Index measures the performance of the largest 3,000 U.S. companies, representing approximately 98% of the investable U.S. equity market.
Russell 3000® Value Index measures the performance of the broad value segment of the U.S. equity value universe. It includes those Russell 3000 companies with lower price-to-book ratios and lower forecasted growth values.
Russell Midcap® Growth Index measures the performance of the mid-cap growth segment of the U.S. equity universe. It includes those Russell Midcap Index companies with higher price-to-book ratios and higher forecasted growth values.
S&P 500® is a broad-based index, the performance of which is based on the performance of 500 widely held common stocks chosen for market size, liquidity, and industry group representation.
6 | THE GUGGENHEIM FUNDS ANNUAL REPORT |
ABOUT SHAREHOLDERS’ FUND EXPENSES (Unaudited) |
|
All mutual funds have operating expenses, and it is important for our shareholders to understand the impact of costs on their investments. Shareholders of a fund incur two types of costs: (i) transaction costs, including sales charges (loads) on purchase payments, reinvested dividends, other distributions, and exchange fees, and (ii) ongoing costs, including management fees, administrative services, and shareholder reports, among others. These ongoing costs, or operating expenses, are deducted from a fund’s gross income and reduce the investment return of the fund.
A fund’s expenses are expressed as a percentage of its average net assets, which is known as the expense ratio. The following examples are intended to help investors understand the ongoing costs (in dollars) of investing in a fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The examples are based on an investment of $1,000 made at the beginning of the period and held for the entire six-month period beginning June 30, 2019 and ending December 31, 2019.
The following tables illustrate the Funds’ costs in two ways:
Table 1. Based on actual Fund return: This section helps investors estimate the actual expenses paid over the period. The “Ending Account Value” shown is derived from the Fund’s actual return, and the fifth column shows the dollar amount that would have been paid by an investor who started with $1,000 in the Fund. Investors may use the information here, together with the amount invested, to estimate the expenses paid over the period. Simply divide the Fund’s account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number provided under the heading “Expenses Paid During Period.”
Table 2. Based on hypothetical 5% return: This section is intended to help investors compare a fund’s cost with those of other mutual funds. The table provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses paid during the period. The example is useful in making comparisons because the U.S. Securities and Exchange Commission (the “SEC”) requires all mutual funds to calculate expenses based on the 5% return. Investors can assess a fund’s costs by comparing this hypothetical example with the hypothetical examples that appear in shareholder reports of other funds.
The calculations illustrated above assume no shares were bought or sold during the period. Actual costs may have been higher or lower, depending on the amount of investment and the timing of any purchases or redemptions.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads) on purchase payments, and contingent deferred sales charges (“CDSC”) on redemptions, if any. Therefore, the second table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
More information about the Funds’ expenses, including annual expense ratios for periods up to five years (subject to the Fund’s inception date), can be found in the Financial Highlights section of this report. For additional information on operating expenses and other shareholder costs, please refer to the appropriate Fund prospectus.
THE GUGGENHEIM FUNDS ANNUAL REPORT | 7 |
ABOUT SHAREHOLDERS’ FUND EXPENSES (Unaudited)(concluded) |
|
| Expense | Fund | Beginning | Ending | Expenses |
Table 1. Based on actual Fund return3 | |||||
Series A (StylePlus—Large Core Series) | 0.95% | 10.66% | $ 1,000.00 | $ 1,106.60 | $ 5.04 |
Series B (Large Cap Value Series) | 0.80% | 8.65% | 1,000.00 | 1,086.50 | 4.21 |
Series D (World Equity Income Series) | 0.90% | 7.91% | 1,000.00 | 1,079.10 | 4.72 |
Series E (Total Return Bond Series) | 0.78% | 0.98% | 1,000.00 | 1,009.80 | 3.95 |
Series F (Floating Rate Strategies Series) | 1.22% | 2.77% | 1,000.00 | 1,027.70 | 6.24 |
Series J (StylePlus—Mid Growth Series) | 0.97% | 6.95% | 1,000.00 | 1,069.50 | 5.06 |
Series N (Managed Asset Allocation Series) | 0.99% | 6.27% | 1,000.00 | 1,062.70 | 5.15 |
Series O (All Cap Value Series) | 0.88% | 9.50% | 1,000.00 | 1,095.00 | 4.65 |
Series P (High Yield Series) | 1.13% | 3.26% | 1,000.00 | 1,032.60 | 5.79 |
Series Q (Small Cap Value Series) | 1.14% | 9.48% | 1,000.00 | 1,094.80 | 6.02 |
Series V (SMid Cap Value Series) | 0.91% | 10.34% | 1,000.00 | 1,103.40 | 4.82 |
Series X (StylePlus—Small Growth Series) | 1.09% | 5.69% | 1,000.00 | 1,056.90 | 5.65 |
Series Y (StylePlus—Large Growth Series) | 0.95% | 11.34% | 1,000.00 | 1,113.40 | 5.06 |
Series Z (Alpha Opportunity Series) | 2.00% | 1.26% | 1,000.00 | 1,012.60 | 10.15 |
| |||||
Table 2. Based on hypothetical 5% return (before expenses) | |||||
Series A (StylePlus—Large Core Series) | 0.95% | 5.00% | $ 1,000.00 | $ 1,020.42 | $ 4.84 |
Series B (Large Cap Value Series) | 0.80% | 5.00% | 1,000.00 | 1,021.17 | 4.08 |
Series D (World Equity Income Series) | 0.90% | 5.00% | 1,000.00 | 1,020.67 | 4.58 |
Series E (Total Return Bond Series) | 0.78% | 5.00% | 1,000.00 | 1,021.27 | 3.97 |
Series F (Floating Rate Strategies Series) | 1.22% | 5.00% | 1,000.00 | 1,019.06 | 6.21 |
Series J (StylePlus—Mid Growth Series) | 0.97% | 5.00% | 1,000.00 | 1,020.32 | 4.94 |
Series N (Managed Asset Allocation Series) | 0.99% | 5.00% | 1,000.00 | 1,020.21 | 5.04 |
Series O (All Cap Value Series) | 0.88% | 5.00% | 1,000.00 | 1,020.77 | 4.48 |
Series P (High Yield Series) | 1.13% | 5.00% | 1,000.00 | 1,019.51 | 5.75 |
Series Q (Small Cap Value Series) | 1.14% | 5.00% | 1,000.00 | 1,019.46 | 5.80 |
Series V (SMid Cap Value Series) | 0.91% | 5.00% | 1,000.00 | 1,020.62 | 4.63 |
Series X (StylePlus—Small Growth Series) | 1.09% | 5.00% | 1,000.00 | 1,019.71 | 5.55 |
Series Y (StylePlus—Large Growth Series) | 0.95% | 5.00% | 1,000.00 | 1,020.42 | 4.84 |
Series Z (Alpha Opportunity Series) | 2.00% | 5.00% | 1,000.00 | 1,015.12 | 10.16 |
1 | Annualized and excludes expenses of the underlying funds in which the Funds invest, if any. This ratio represents net expenses, which may include expenses that are excluded from the expense limitation agreement and affiliated waivers. Excluding these expenses, the net expense ratios for the period would be: |
Fund | 12/31/19 | |
Series A (StylePlus—Large Core Series) | 0.90% | |
Series B (Large Cap Value Series) | 0.80% | |
Series D (World Equity Income Series) | 0.90% | |
Series E (Total Return Bond Series) | 0.77% | |
Series F (Floating Rate Strategies Series) | 1.15% | |
Series J (StylePlus—Mid Growth Series) | 0.92% | |
Series O (All Cap Value Series) | 0.88% | |
Series P (High Yield Series) | 1.07% | |
Series Q (Small Cap Value Series) | 1.14% | |
Series V (SMid Cap Value Series) | 0.91% | |
Series X (StylePlus—Small Growth Series) | 1.04% | |
Series Y (StylePlus—Large Growth Series) | 0.91% | |
Series Z (Alpha Opportunity Series) | 2.00% |
2 | Expenses are equal to the Fund’s annualized expense ratio, net of any applicable fee waivers, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). Expenses shown do not include fees charged by insurance companies. |
3 | Actual cumulative return at net asset value for the period June 30, 2019 to December 31, 2019. |
8 | THE GUGGENHEIM FUNDS ANNUAL REPORT |
MANAGERS’ COMMENTARY (Unaudited) | December 31, 2019 |
To Our Shareholders:
The Series A (StylePlusTM—Large Core Series) (the “Fund”) is managed by a team of seasoned professionals, including Farhan Sharaff, Senior Managing Director and Assistant Chief Investment Officer, Equities; Jayson Flowers, Senior Managing Director and Portfolio Manager; Qi Yan, Managing Director and Portfolio Manager; and Adam J. Bloch, Managing Director and Portfolio Manager. In the following paragraphs, the investment team discusses performance for the fiscal year ended December 31, 2019.
For the year ended December 31, 2019, Series A (StylePlus—Large Core Series) returned 29.97%, compared with the 31.49% return of its benchmark, the S&P 500 Index.
Investment Approach
Through a combination of actively managed individual equity, passive equity, and actively managed fixed income, the Fund seeks to exceed the total return of the S&P 500 Index. The actively managed equity and fixed income components seek to provide multiple sources of outperformance and take advantage of Guggenheim’s competencies in both fixed income and systematic stock selection.
The active and passive decisions seek to add value by tactically allocating to actively managed equity through quantitative selection models when stock picking opportunities are high. During periods when Guggenheim views these opportunities to be less attractive, the Fund seeks to increase its passive exposure to equities and the allocation to fixed-income securities. The prospective return during such periods is the equity index plus an “alpha” component coming from the yield of the fixed-income overlay.
Performance Review
Over the period, from 15-25% of the total equity position was allocated to actively managed equity and 75-85% to passive equity. Remaining Fund assets were invested in the Guggenheim Strategy Funds, short-term fixed-income investment companies advised by Guggenheim Investments, and the Guggenheim Ultra Short Duration Fund whose objective is to seek a high level of income consistent with the preservation of capital.
The Fund underperformed the S&P 500 Index for the year ended December 31, 2019 by 152 basis points net of fees. The actively managed equity sleeve detracted from performance on a relative basis. The passive equity position, maintained through swap agreements and futures contracts, contributed to performance for the period.
The fixed income sleeve comprised investments in certain of the underlying series of Guggenheim Funds Trust and Guggenheim Strategy Funds Trust, specifically Guggenheim Ultra Short Duration, Guggenheim Strategy Fund II, Guggenheim Strategy Fund III, and Guggenheim Variable Insurance Strategy Fund III, (collectively, the “Short Term Investment Vehicles”), each of which are open-end management investment companies managed by Guggenheim Investments. The Short Term Investment Vehicles, which launched on March 11, 2014, are offered as short term investment options only to mutual funds, trusts, and other accounts managed by Guggenheim Investments and/or its affiliates, and are not available to the public, with the exception of Guggenheim Ultra Short Duration Fund, which is available to the public. Guggenheim Strategy Fund II, Guggenheim Strategy Fund III, and Guggenheim Variable Insurance Strategy Fund III do not charge an investment management fee. Guggenheim Ultra Short Duration Fund charges an investment management fee but that fee is waived by the respective investee fund. For the one-year period ended December 31, 2019, investment in the Short Term Investment Vehicles benefited Fund performance.
Performance displayed represents past performance which is no guarantee of future results.
The opinions and forecast expressed may not actually come to pass. This information is subject to change at any time, based on market and other conditions, and should not be construed as a recommendation of any specific security or strategy.
THE GUGGENHEIM FUNDS ANNUAL REPORT | 9 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2019 |
SERIES A (STYLEPLUS—LARGE CORE SERIES)
OBJECTIVE: Seeks long-term growth of capital.
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments, investments in Guggenheim Strategy Funds Trust mutual funds, or investments in Guggenheim Ultra Short Duration Fund.
Inception Date: May 1, 1979 |
Ten Largest Holdings (% of Total Net Assets) | |
Guggenheim Variable Insurance Strategy Fund III | 31.7% |
Guggenheim Strategy Fund III | 28.4% |
Guggenheim Ultra Short Duration Fund — Institutional Class | 7.8% |
Guggenheim Strategy Fund II | 5.5% |
Apple, Inc. | 0.9% |
Microsoft Corp. | 0.8% |
Alphabet, Inc. — Class C | 0.7% |
Amazon.com, Inc. | 0.6% |
Johnson & Johnson | 0.5% |
Verizon Communications, Inc. | 0.4% |
Top Ten Total | 77.3% |
“Ten Largest Holdings” excludes any temporary cash or derivative investments. |
10 | THE GUGGENHEIM FUNDS ANNUAL REPORT |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2019 |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2019
| 1 Year | 5 Year | 10 Year |
Series A (StylePlus—Large Core Series) | 29.97% | 11.29% | 12.37% |
S&P 500 Index | 31.49% | 11.70% | 13.56% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The S&P 500 Index is an unmanaged index and, unlike the Fund, has no management fees or operating expenses to reduce its reported return. |
† | Performance figures do not reflect fees and expenses associated with an investment in variable insurance products. If returns had taken into account these fees and expenses, performance would have been lower. Shares of a series of Guggenheim Variable Funds Trust are available only through the purchase of such products. |
THE GUGGENHEIM FUNDS ANNUAL REPORT | 11 |
SCHEDULE OF INVESTMENTS | December 31, 2019 |
SERIES A (STYLEPLUS—LARGE CORE SERIES) |
| Shares | Value | ||||||
COMMON STOCKS† - 22.4% | ||||||||
Consumer, Non-cyclical - 6.7% | ||||||||
Johnson & Johnson | 6,750 | $ | 984,622 | |||||
Merck & Company, Inc. | 9,179 | 834,830 | ||||||
Pfizer, Inc. | 20,780 | 814,160 | ||||||
Amgen, Inc. | 2,865 | 690,666 | ||||||
Medtronic plc | 6,003 | 681,040 | ||||||
Eli Lilly & Co. | 5,012 | 658,727 | ||||||
Kimberly-Clark Corp. | 4,226 | 581,286 | ||||||
Baxter International, Inc. | 6,817 | 570,038 | ||||||
Abbott Laboratories | 6,341 | 550,779 | ||||||
Gilead Sciences, Inc. | 8,343 | 542,128 | ||||||
Philip Morris International, Inc. | 5,927 | 504,328 | ||||||
Anthem, Inc. | 1,643 | 496,235 | ||||||
UnitedHealth Group, Inc. | 1,553 | 456,551 | ||||||
Regeneron Pharmaceuticals, Inc.* | 1,194 | 448,323 | ||||||
General Mills, Inc. | 8,145 | 436,247 | ||||||
Archer-Daniels-Midland Co. | 9,409 | 436,107 | ||||||
McKesson Corp. | 3,109 | 430,037 | ||||||
Humana, Inc. | 1,142 | 418,566 | ||||||
Altria Group, Inc. | 8,228 | 410,660 | ||||||
Alexion Pharmaceuticals, Inc.* | 3,343 | 361,545 | ||||||
Procter & Gamble Co. | 2,859 | 357,089 | ||||||
CVS Health Corp. | 4,565 | 339,134 | ||||||
Thermo Fisher Scientific, Inc. | 1,023 | 332,342 | ||||||
HCA Healthcare, Inc. | 2,163 | 319,713 | ||||||
Zimmer Biomet Holdings, Inc. | 2,031 | 304,000 | ||||||
Biogen, Inc.* | 923 | 273,882 | ||||||
Molson Coors Beverage Co. — Class B | 4,636 | 249,881 | ||||||
H&R Block, Inc. | 10,016 | 235,176 | ||||||
Cardinal Health, Inc. | 4,312 | 218,101 | ||||||
AbbVie, Inc. | 2,138 | 189,299 | ||||||
Bristol-Myers Squibb Co. | 2,609 | 167,472 | ||||||
Tyson Foods, Inc. — Class A | 1,655 | 150,671 | ||||||
Incyte Corp.* | 1,663 | 145,213 | ||||||
Total Consumer, Non-cyclical | 14,588,848 | |||||||
Communications - 3.7% | ||||||||
Alphabet, Inc. — Class C* | 1,190 | 1,591,054 | ||||||
Amazon.com, Inc.* | 709 | 1,310,118 | ||||||
Verizon Communications, Inc. | 15,725 | 965,515 | ||||||
Facebook, Inc. — Class A* | 4,415 | 906,179 | ||||||
AT&T, Inc. | 22,252 | 869,608 | ||||||
Cisco Systems, Inc. | 10,007 | 479,936 | ||||||
eBay, Inc. | 12,360 | 446,319 | ||||||
Booking Holdings, Inc.* | 190 | 390,209 | ||||||
Omnicom Group, Inc. | 3,582 | 290,214 | ||||||
Juniper Networks, Inc. | 10,740 | 264,526 | ||||||
Comcast Corp. — Class A | 5,511 | 247,830 | ||||||
Discovery, Inc. — Class A* | 7,021 | 229,867 | ||||||
Total Communications | 7,991,375 | |||||||
Consumer, Cyclical - 3.5% | ||||||||
Aptiv plc | 5,651 | 536,675 | ||||||
Cummins, Inc. | 2,932 | 524,710 | ||||||
Walmart, Inc. | 4,154 | 493,661 | ||||||
Delta Air Lines, Inc. | 7,815 | 457,021 | ||||||
BorgWarner, Inc. | 10,191 | 442,086 | ||||||
Whirlpool Corp. | 2,903 | 428,280 | ||||||
Southwest Airlines Co. | 7,510 | 405,390 | ||||||
Carnival Corp. | 7,910 | 402,065 | ||||||
United Airlines Holdings, Inc.* | 4,527 | 398,784 | ||||||
PACCAR, Inc. | 4,218 | 333,644 | ||||||
General Motors Co. | 8,915 | 326,289 | ||||||
Home Depot, Inc. | 1,418 | 309,663 | ||||||
Royal Caribbean Cruises Ltd. | 2,072 | 276,633 | ||||||
DR Horton, Inc. | 5,087 | 268,339 | ||||||
AutoZone, Inc.* | 211 | 251,366 | ||||||
Las Vegas Sands Corp. | 3,586 | 247,577 | ||||||
Starbucks Corp. | 2,804 | 246,528 | ||||||
Norwegian Cruise Line Holdings Ltd.* | 4,199 | 245,264 | ||||||
Best Buy Company, Inc. | 2,436 | 213,881 | ||||||
Lennar Corp. — Class A | 3,806 | 212,337 | ||||||
NIKE, Inc. — Class B | 1,932 | 195,731 | ||||||
Hanesbrands, Inc. | 11,321 | 168,117 | ||||||
Alaska Air Group, Inc. | 2,439 | 165,242 | ||||||
PulteGroup, Inc. | 3,765 | 146,082 | ||||||
Total Consumer, Cyclical | 7,695,365 | |||||||
Technology - 3.1% | ||||||||
Apple, Inc. | 6,654 | 1,953,947 | ||||||
Microsoft Corp. | 11,730 | 1,849,821 | ||||||
Intel Corp. | 13,149 | 786,967 | ||||||
Oracle Corp. | 8,493 | 449,959 | ||||||
Cerner Corp. | 6,097 | 447,459 | ||||||
Seagate Technology plc | 3,809 | 226,636 | ||||||
International Business Machines Corp. | 1,483 | 198,781 | ||||||
QUALCOMM, Inc. | 2,092 | 184,577 | ||||||
Activision Blizzard, Inc. | 3,003 | 178,438 | ||||||
Skyworks Solutions, Inc. | 1,444 | 174,551 | ||||||
NetApp, Inc. | 2,647 | 164,776 | ||||||
Fidelity National Information Services, Inc. | 1,041 | 144,793 | ||||||
Total Technology | 6,760,705 | |||||||
Industrial - 2.3% | ||||||||
Caterpillar, Inc. | 4,090 | 604,011 | ||||||
CSX Corp. | 6,820 | 493,495 | ||||||
Norfolk Southern Corp. | 2,489 | 483,190 | ||||||
Union Pacific Corp. | 2,354 | 425,580 | ||||||
J.B. Hunt Transport Services, Inc. | 3,401 | 397,169 | ||||||
FedEx Corp. | 2,256 | 341,130 | ||||||
Kansas City Southern | 1,918 | 293,761 | ||||||
CH Robinson Worldwide, Inc. | 3,736 | 292,155 | ||||||
Textron, Inc. | 5,984 | 266,887 | ||||||
Garmin Ltd. | 2,704 | 263,802 | ||||||
General Electric Co. | 21,663 | 241,759 | ||||||
United Parcel Service, Inc. — Class B | 1,892 | 221,477 | ||||||
Agilent Technologies, Inc. | 2,123 | 181,113 | ||||||
3M Co. | 1,008 | 177,831 | ||||||
United Technologies Corp. | 1,184 | 177,316 | ||||||
Waters Corp.* | 668 | 156,078 | ||||||
Total Industrial | 5,016,754 | |||||||
12 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2019 |
SERIES A (STYLEPLUS—LARGE CORE SERIES) |
| Shares | Value | ||||||
Energy - 1.7% | ||||||||
Exxon Mobil Corp. | 10,816 | $ | 754,740 | |||||
Chevron Corp. | 4,471 | 538,800 | ||||||
ConocoPhillips | 7,871 | 511,851 | ||||||
EOG Resources, Inc. | 5,742 | 480,950 | ||||||
Devon Energy Corp. | 15,911 | 413,209 | ||||||
Marathon Oil Corp. | 21,484 | 291,753 | ||||||
Pioneer Natural Resources Co. | 1,757 | 265,957 | ||||||
HollyFrontier Corp. | 5,159 | 261,613 | ||||||
Halliburton Co. | 9,899 | 242,229 | ||||||
Total Energy | 3,761,102 | |||||||
Financial - 1.3% | ||||||||
Berkshire Hathaway, Inc. — Class B* | 2,578 | 583,917 | ||||||
JPMorgan Chase & Co. | 4,143 | 577,534 | ||||||
Northern Trust Corp. | 3,052 | 324,244 | ||||||
Bank of America Corp. | 8,728 | 307,400 | ||||||
Citigroup, Inc. | 2,777 | 221,855 | ||||||
Visa, Inc. — Class A | 1,058 | 198,798 | ||||||
Franklin Resources, Inc. | 7,310 | 189,914 | ||||||
Wells Fargo & Co. | 3,112 | 167,426 | ||||||
U.S. Bancorp | 2,436 | 144,430 | ||||||
Progressive Corp. | 1,955 | 141,523 | ||||||
Total Financial | 2,857,041 | |||||||
Utilities - 0.1% | ||||||||
PPL Corp. | 4,823 | 173,049 | ||||||
Total Common Stocks | ||||||||
(Cost $43,612,093) | 48,844,239 | |||||||
MUTUAL FUNDS† - 73.4% | ||||||||
Guggenheim Variable Insurance Strategy Fund III1 | 2,789,273 | 69,062,402 | ||||||
Guggenheim Strategy Fund III1 | 2,505,389 | 61,933,211 | ||||||
Guggenheim Ultra Short Duration Fund — Institutional Class1 | 1,709,571 | 17,010,235 | ||||||
Guggenheim Strategy Fund II1 | 485,663 | 12,015,307 | ||||||
Total Mutual Funds | ||||||||
(Cost $161,288,656) | 160,021,155 | |||||||
MONEY MARKET FUND† - 4.2% | ||||||||
Dreyfus Treasury Securities Cash Management Fund — Institutional Shares 1.44%2 | 9,146,793 | 9,146,793 | ||||||
Total Money Market Fund | ||||||||
(Cost $9,146,793) | 9,146,793 | |||||||
Total Investments - 100.0% | ||||||||
(Cost $214,047,542) | $ | 218,012,187 | ||||||
Other Assets & Liabilities, net - 0.0% | 70,266 | |||||||
Total Net Assets - 100.0% | $ | 218,082,453 |
Futures Contracts | ||||||||||||||||
Description | Number of | Expiration | Notional | Value and | ||||||||||||
Equity Futures Contracts Purchased† | ||||||||||||||||
S&P 500 Index Mini Futures Contracts | 10 | Mar 2020 | $ | 1,614,750 | $ | 15,817 |
Total Return Swap Agreements | ||||||||||||||||||||||
Counterparty | Index | Financing | Payment | Maturity | Units | Notional | Value and | |||||||||||||||
OTC Equity Index Swap Agreements†† | ||||||||||||||||||||||
Citibank, N.A. | S&P 500 Index | 2.22% (3 Month USD LIBOR + 0.16%) | At Maturity | 01/02/20 | 52,154 | $ | 168,498,100 | $ | 17,897,688 |
* | Non-income producing security. |
** | Includes cumulative appreciation (depreciation). Variation margin is reported within the Statement of Assets and Liabilities. |
† | Value determined based on Level 1 inputs — See Note 4. |
†† | Value determined based on Level 2 inputs — See Note 4. |
1 | Affiliated issuer. |
2 | Rate indicated is the 7-day yield as of December 31, 2019. |
plc — Public Limited Company | |
See Sector Classification in Other Information section. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 13 |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2019 |
SERIES A (STYLEPLUS—LARGE CORE SERIES) |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2019 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stocks | $ | 48,844,239 | $ | — | $ | — | $ | 48,844,239 | ||||||||
Mutual Funds | 160,021,155 | — | — | 160,021,155 | ||||||||||||
Money Market Fund | 9,146,793 | — | — | 9,146,793 | ||||||||||||
Equity Futures Contracts** | 15,817 | — | — | 15,817 | ||||||||||||
Equity Index Swap Agreements** | — | 17,897,688 | — | 17,897,688 | ||||||||||||
Total Assets | $ | 218,028,004 | $ | 17,897,688 | $ | — | $ | 235,925,692 |
** | This derivative is reported as unrealized appreciation/depreciation at period end. |
Affiliated Transactions
Investments representing 5% or more of the outstanding voting shares of a company, or control of or by, or common control under Guggenheim Investments (“GI”), result in that company being considered an affiliated issuer, as defined in the 1940 Act.
The Fund may invest in certain of the underlying series of Guggenheim Strategy Funds Trust, including Guggenheim Strategy Fund II, Guggenheim Strategy Fund III, and Guggenheim Variable Insurance Strategy Fund III, (collectively, the “Short Term Investment Vehicles”), each of which are open-end management investment companies managed by GI. The Short Term Investment Vehicles, which launched on March 11, 2014, are offered as short term investment options only to mutual funds, trusts, and other accounts managed by GI and/or its affiliates, and are not available to the public. The Short Term Investment Vehicles pay no investment management fees. The Short Term Investment Vehicles’ annual report on Form N-CSR dated September 30, 2019, is available publicly or upon request. This information is available from the EDGAR database on the SEC’s website at https://www.sec.gov/Archives/edgar/data/1601445/000089180419000405/gug78512-ncsr.htm.
Transactions during the year ended December 31, 2019, in which the company is an affiliated issuer, were as follows:
Security Name | Value | Additions | Reductions | Realized | Change in | Value | Shares | Investment | ||||||||||||||||||||||||
Mutual Funds | ||||||||||||||||||||||||||||||||
Guggenheim Strategy Fund II | $ | 7,374,635 | $ | 4,677,574 | $ | — | $ | — | $ | (36,902 | ) | $ | 12,015,307 | 485,663 | $ | 277,806 | ||||||||||||||||
Guggenheim Strategy Fund III | 60,332,371 | 1,776,124 | — | — | (175,284 | ) | 61,933,211 | 2,505,389 | 1,781,309 | |||||||||||||||||||||||
Guggenheim Ultra Short Duration Fund — Institutional Class | 3,611,649 | 32,525,111 | (19,119,988 | ) | (10,825 | ) | 4,288 | 17,010,235 | 1,709,571 | 395,158 | ||||||||||||||||||||||
Guggenheim Variable Insurance Strategy Fund III | 67,282,594 | 1,752,869 | — | — | 26,939 | 69,062,402 | 2,789,273 | 1,750,772 | ||||||||||||||||||||||||
$ | 138,601,249 | $ | 40,731,678 | $ | (19,119,988 | ) | $ | (10,825 | ) | $ | (180,959 | ) | $ | 160,021,155 | $ | 4,205,045 |
14 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SERIES A (STYLEPLUS—LARGE CORE SERIES) |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2019 |
Assets: | ||||
Investments in unaffiliated issuers, at value (cost $52,758,886) | $ | 57,991,032 | ||
Investments in affiliated issuers, at value (cost $161,288,656) | 160,021,155 | |||
Segregated cash with broker | 63,000 | |||
Unrealized appreciation on OTC swap agreements | 17,897,688 | |||
Prepaid expenses | 12,167 | |||
Receivables: | ||||
Dividends | 345,501 | |||
Interest | 6,690 | |||
Fund shares sold | 49 | |||
Total assets | 236,337,282 | |||
Liabilities: | ||||
Overdraft due to custodian bank | 11,687 | |||
Segregated cash due to broker | 17,310,000 | |||
Payable for: | ||||
Securities purchased | 284,372 | |||
Fund shares redeemed | 276,532 | |||
Swap settlement | 88,733 | |||
Management fees | 76,321 | |||
Distribution and service fees | 44,323 | |||
Trustees’ fees* | 19,383 | |||
Fund accounting/administration fees | 14,184 | |||
Variation margin on futures contracts | 4,050 | |||
Transfer agent/maintenance fees | 2,347 | |||
Miscellaneous (Note 11) | 122,897 | |||
Total liabilities | 18,254,829 | |||
Commitments and contingent liabilities (Note 14) | — | |||
Net assets | $ | 218,082,453 | ||
Net assets consist of: | ||||
Paid in capital | $ | 184,104,052 | ||
Total distributable earnings (loss) | 33,978,401 | |||
Net assets | $ | 218,082,453 | ||
Capital shares outstanding | 4,929,247 | |||
Net asset value per share | $ | 44.24 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2019 |
Investment Income: | ||||
Dividends from securities of unaffiliated issuers | 1,021,204 | |||
Dividends from securities of affiliated issuers | 4,205,045 | |||
Interest | 167,099 | |||
Total investment income | 5,393,348 | |||
Expenses: | ||||
Management fees | 1,556,107 | |||
Distribution and service fees | 518,702 | |||
Transfer agent/maintenance fees | 25,095 | |||
Fund accounting/administration fees | 165,986 | |||
Interest expense | 124,754 | |||
Professional fees | 86,062 | |||
Trustees’ fees* | 39,665 | |||
Custodian fees | 19,201 | |||
Miscellaneous | 108,581 | |||
Total expenses | 2,644,153 | |||
Less: | ||||
Expenses reimbursed by Adviser | (356 | ) | ||
Expenses waived by Adviser | (666,079 | ) | ||
Earnings credits applied | (5,698 | ) | ||
Total waived/reimbursed expenses | (672,133 | ) | ||
Net expenses | 1,972,020 | |||
Net investment income | 3,421,328 | |||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments in unaffiliated issuers | 868,193 | |||
Investments in affiliated issuers | (10,825 | ) | ||
Swap agreements | 8,886,339 | |||
Futures contracts | 1,093,610 | |||
Net realized gain | 10,837,317 | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments in unaffiliated issuers | 9,221,459 | |||
Investments in affiliated issuers | (180,959 | ) | ||
Swap agreements | 30,716,186 | |||
Futures contracts | (85,729 | ) | ||
Net change in unrealized appreciation (depreciation) | 39,670,957 | |||
Net realized and unrealized gain | 50,508,274 | |||
Net increase in net assets resulting from operations | $ | 53,929,602 |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 15 |
SERIES A (STYLEPLUS—LARGE CORE SERIES) |
STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | ||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income | $ | 3,421,328 | $ | 4,394,496 | ||||
Net realized gain on investments | 10,837,317 | 17,775,188 | ||||||
Net change in unrealized appreciation (depreciation) on investments | 39,670,957 | (34,114,045 | ) | |||||
Net increase (decrease) in net assets resulting from operations | 53,929,602 | (11,944,361 | ) | |||||
Distributions to shareholders | (15,823,058 | ) | (30,223,315 | ) | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 2,928,839 | 5,163,296 | ||||||
Distributions reinvested | 15,823,058 | 30,223,315 | ||||||
Cost of shares redeemed | (29,420,471 | ) | (54,369,310 | ) | ||||
Net decrease from capital share transactions | (10,668,574 | ) | (18,982,699 | ) | ||||
Net increase (decrease) in net assets | 27,437,970 | (61,150,375 | ) | |||||
Net assets: | ||||||||
Beginning of year | 190,644,483 | 251,794,858 | ||||||
End of year | $ | 218,082,453 | $ | 190,644,483 | ||||
Capital share activity: | ||||||||
Shares sold | 70,822 | 117,562 | ||||||
Shares issued from reinvestment of distributions | 387,345 | 731,268 | ||||||
Shares redeemed | (709,256 | ) | (1,202,046 | ) | ||||
Net decrease in shares | (251,089 | ) | (353,216 | ) |
16 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SERIES A (STYLEPLUS—LARGE CORE SERIES) |
FINANCIAL HIGHLIGHTS |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 36.80 | $ | 45.50 | $ | 38.20 | $ | 34.34 | $ | 37.53 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | .68 | .83 | .62 | .46 | .30 | |||||||||||||||
Net gain (loss) on investments (realized and unrealized) | 10.06 | (3.10 | ) | 7.76 | 4.09 | .36 | ||||||||||||||
Total from investment operations | 10.74 | (2.27 | ) | 8.38 | 4.55 | .66 | ||||||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | (.91 | ) | (.75 | ) | (.50 | ) | (.32 | ) | (.52 | ) | ||||||||||
Net realized gains | (2.39 | ) | (5.68 | ) | (.58 | ) | (.37 | ) | (3.33 | ) | ||||||||||
Total distributions | (3.30 | ) | (6.43 | ) | (1.08 | ) | (.69 | ) | (3.85 | ) | ||||||||||
Net asset value, end of period | $ | 44.24 | $ | 36.80 | $ | 45.50 | $ | 38.20 | $ | 34.34 | ||||||||||
| ||||||||||||||||||||
Total Returnb | 29.97 | % | (6.56 | %) | 22.22 | % | 13.34 | % | 1.50 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 218,082 | $ | 190,644 | $ | 251,795 | $ | 223,705 | $ | 218,880 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | 1.65 | % | 1.89 | % | 1.48 | % | 1.31 | % | 0.83 | % | ||||||||||
Total expensesc | 1.27 | % | 1.26 | % | 1.12 | % | 0.93 | % | 0.96 | % | ||||||||||
Net expensesd,e,f | 0.95 | % | 0.97 | % | 0.91 | % | 0.93 | % | 0.96 | % | ||||||||||
Portfolio turnover rate | 41 | % | 45 | % | 44 | % | 43 | % | 66 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not take into account any of the expenses associated with an investment in variable insurance products. If total return had taken into account these expenses, performance would have been lower. Shares of a series of Guggenheim Variable Funds Trust are available only through the purchase of such products. |
c | Does not include expenses of the underlying funds in which the Fund invests. |
d | Net expense information reflects the expense ratios after expense waivers and reimbursements, as applicable. |
e | Net expenses may include expenses that are excluded from the expense limitation agreement. Excluding these expenses, the net expense ratios for the period would be: |
12/31/19 | 12/31/18 | 12/31/17 | 12/31/16 | 12/31/15 | |
0.89% | 0.91% | 0.90% | 0.93% | 0.96% |
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 periods presented was as follows: |
12/31/19 | 12/31/18 | 12/31/17 | 12/31/16 | |
— | 0.02% | — | — |
SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 17 |
MANAGERS’ COMMENTARY (Unaudited) | December 31, 2019 |
To Our Shareholders:
The Series B (Large Cap Value Series) (“the Fund”) is managed by a team of seasoned professionals led by David Toussaint, CFA, CPA, Managing Director and Portfolio Manager; James Schier, CFA, Senior Managing Director and Portfolio Manager; Farhan Sharaff, Senior Managing Director, Assistant Chief Investment Officer, Equities, and Portfolio Manager; Gregg Strohkorb, CFA, Director and Portfolio Manager; and Burak Hurmeydan, Ph.D., Director and Portfolio Manager. In the following paragraphs, the investment team discusses the market environment and performance of the Fund for the fiscal year ended December 31, 2019.
For the year ended December 31, 2019, Series B (Large Cap Value Series) returned 21.82%, compared with the 26.54% return of its benchmark, the Russell 1000® Value Index.
Strategy and Market Overview
Our investment approach focuses on understanding how companies make money and how easily companies can improve returns, maintain existing high levels of profitability, or benefit from change that occurs within the industries in which they operate. In today’s rapidly changing environment marked by very sharp and quick, but constrained volatility, our long-term orientation and discipline are a competitive advantage. This should become especially critical when the environment of indiscriminant valuation expansion subsides, and fundamentals once again become a more dominant factor in the market.
Performance Review
The Fund underperformed the index over the one-year period, mostly due to the Fund’s deeper value bias relative to the benchmark. The growth investing style has strongly outperformed value for the last several years, but value gained some ground in the late third and early fourth quarters of 2019.
Stock selection was also a factor behind the Fund’s showing relative to the benchmark, with sector allocation providing an additional headwind to results.
The Fund benefited most from its overweight and selection in the strong-performing Information Technology sector, where its largest individual contributor was Apple, Inc., a stock not included in the index. Other individual holdings that made strong contributions were Reliance Steel & Aluminum Co. in the Materials sector and Tyson Foods, Inc. in the Consumer Staples sector. Both were the best-returning holdings and the largest overweights in their respective sectors for the period. Also highlighting the positive side was selection in the Financial sector, where the Fund has large positions in money-center and regional U.S. banks.
Selection in the Energy, Health Care, and Utilities sectors detracted from performance. Relative underperformance in Health Care was driven by poor performance among the Fund’s pharmaceutical and biotech holdings. Performance in Utilities was influenced by an overweight to Exelon Corp., which was a relatively poor performer, and not owning strong performers NextEra Energy and Southern Company. Among individual holdings, the Fund was penalized for an underweight in strong Communications Services performer AT&T, Inc. and an overweight for poor Real Estate performer Realogy.
Negative influences also included unfavorable stock selection in the Energy sector. Oil prices softened over the period as economic uncertainty surrounding the trade dispute was especially magnified in smaller exploration and production companies. Fund holdings in Range Resources Corp. and Whiting Petroleum Corp. declined significantly in response. Overweights in large oil exploration company Hess Corp. and transporter Kinder Morgan, Inc. were sector bright spots.
Portfolio Positioning
While this strategy is balanced relative to the benchmark, it does possess defensive characteristics in virtue of overweights in the Utilities and Health Care sectors.
At the end of the period, the Fund’s largest sector overweights relative to the benchmark were in Information Technology, Financials, and Health Care. The Fund’s largest sector underweights were in Industrials, Communication Services, and Consumer Staples.
18 | THE GUGGENHEIM FUNDS ANNUAL REPORT |
MANAGERS’ COMMENTARY (Unaudited)(concluded) | December 31, 2019 |
Portfolio and Market Outlook
The market volatility late in the year caused sudden changes in the market. The perception of a friendlier environment from the U.S. Federal Reserve and continued hope that trade issues can be relatively quickly and favorably resolved has created an environment where the market is beginning to treat earnings disappointments and reduced outlooks in a less harsh manner since these are being viewed as more temporary issues. The total return potential for stocks now seems more favorable than it was just a few months ago, and the market appears to have begun the early phase of a calculated rebound that may have some duration in time and level.
The Fund has a value bias compared with the benchmark and is positioned favorably as the value investing style continues to improve. We continue to find niche companies with what we believe to be attractive growth opportunities, and, as such, are constructive on the outlook.
Performance displayed represents past performance which is no guarantee of future results.
The opinions and forecast expressed may not actually come to pass. This information is subject to change at any time, based on market and other conditions, and should not be construed as a recommendation of any specific security or strategy.
THE GUGGENHEIM FUNDS ANNUAL REPORT | 19 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2019 |
SERIES B (LARGE CAP VALUE SERIES)
OBJECTIVE: Seeks long-term growth of capital.
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments.
Inception Date: May 1, 1979 |
Ten Largest Holdings (% of Total Net Assets) | |
iShares Russell 1000 Value ETF | 4.0% |
Bank of America Corp. | 3.8% |
Chevron Corp. | 3.0% |
Citigroup, Inc. | 2.8% |
Intel Corp. | 2.8% |
Verizon Communications, Inc. | 2.7% |
JPMorgan Chase & Co. | 2.5% |
Pfizer, Inc. | 2.2% |
Berkshire Hathaway, Inc. — Class B | 2.0% |
Wells Fargo & Co. | 1.9% |
Top Ten Total | 27.7% |
“Ten Largest Holdings” excludes any temporary cash investments. |
20 | THE GUGGENHEIM FUNDS ANNUAL REPORT |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2019 |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2019
| 1 Year | 5 Year | 10 Year |
Series B (Large Cap Value Series) | 21.82% | 8.02% | 10.62% |
Russell 1000 Value Index | 26.54% | 8.29% | 11.80% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The Russell 1000 Value Index is an unmanaged index and, unlike the Fund, has no management fees or operating expenses to reduce its reported return. |
† | Performance figures do not reflect fees and expenses associated with an investment in variable insurance products. If returns had taken into account these fees and expenses, performance would have been lower. Shares of a series of Guggenheim Variable Funds Trust are available only through the purchase of such products. |
THE GUGGENHEIM FUNDS ANNUAL REPORT | 21 |
SCHEDULE OF INVESTMENTS | December 31, 2019 |
SERIES B (LARGE CAP VALUE SERIES) |
| Shares | Value | ||||||
COMMON STOCKS† - 95.7% | ||||||||
Financial - 29.3% | ||||||||
Bank of America Corp. | 247,492 | $ | 8,716,668 | |||||
Citigroup, Inc. | 78,919 | 6,304,839 | ||||||
JPMorgan Chase & Co. | 40,704 | 5,674,138 | ||||||
Berkshire Hathaway, Inc. — Class B* | 20,208 | 4,577,112 | ||||||
Wells Fargo & Co. | 78,884 | 4,243,959 | ||||||
Truist Financial Corp. | 53,865 | 3,033,677 | ||||||
Zions Bancorp North America | 55,143 | 2,863,024 | ||||||
Allstate Corp. | 23,741 | 2,669,675 | ||||||
Prudential Financial, Inc. | 25,393 | 2,380,340 | ||||||
Voya Financial, Inc. | 38,150 | 2,326,387 | ||||||
Equity Commonwealth REIT | 70,611 | 2,318,159 | ||||||
MetLife, Inc. | 45,139 | 2,300,735 | ||||||
Hartford Financial Services Group, Inc. | 34,287 | 2,083,621 | ||||||
Principal Financial Group, Inc. | 37,840 | 2,081,200 | ||||||
Loews Corp. | 36,285 | 1,904,600 | ||||||
Morgan Stanley | 34,665 | 1,772,075 | ||||||
Medical Properties Trust, Inc. REIT | 65,452 | 1,381,692 | ||||||
KeyCorp | 64,668 | 1,308,880 | ||||||
Charles Schwab Corp. | 27,103 | 1,289,019 | ||||||
Howard Hughes Corp.* | 9,645 | 1,222,986 | ||||||
Regions Financial Corp. | 70,117 | 1,203,208 | ||||||
Marsh & McLennan Companies, Inc. | 10,341 | 1,152,091 | ||||||
Old Republic International Corp. | 44,139 | 987,389 | ||||||
American International Group, Inc. | 18,813 | 965,671 | ||||||
Jones Lang LaSalle, Inc. | 4,866 | 847,122 | ||||||
Park Hotels & Resorts, Inc. REIT | 30,801 | 796,822 | ||||||
Total Financial | 66,405,089 | |||||||
Consumer, Non-cyclical - 18.1% | ||||||||
Pfizer, Inc. | 127,456 | 4,993,726 | ||||||
Johnson & Johnson | 19,495 | 2,843,736 | ||||||
HCA Healthcare, Inc. | 18,846 | 2,785,627 | ||||||
Tyson Foods, Inc. — Class A | 30,226 | 2,751,775 | ||||||
McKesson Corp. | 17,897 | 2,475,513 | ||||||
Archer-Daniels-Midland Co. | 52,046 | 2,412,332 | ||||||
Humana, Inc. | 6,387 | 2,340,963 | ||||||
Zimmer Biomet Holdings, Inc. | 13,693 | 2,049,568 | ||||||
Alexion Pharmaceuticals, Inc.* | 18,567 | 2,008,021 | ||||||
Merck & Company, Inc. | 20,657 | 1,878,754 | ||||||
Quest Diagnostics, Inc. | 17,512 | 1,870,107 | ||||||
Encompass Health Corp. | 25,501 | 1,766,454 | ||||||
Amgen, Inc. | 6,861 | 1,653,982 | ||||||
Medtronic plc | 13,608 | 1,543,828 | ||||||
Bunge Ltd. | 25,800 | 1,484,790 | ||||||
Biogen, Inc.* | 4,948 | 1,468,220 | ||||||
United Therapeutics Corp.* | 14,302 | 1,259,720 | ||||||
Ingredion, Inc. | 13,001 | 1,208,443 | ||||||
Procter & Gamble Co. | 9,301 | 1,161,695 | ||||||
UnitedHealth Group, Inc. | 3,439 | 1,010,997 | ||||||
Total Consumer, Non-cyclical | 40,968,251 | |||||||
Energy - 8.5% | ||||||||
Chevron Corp. | 57,407 | 6,918,118 | ||||||
ConocoPhillips | 55,659 | 3,619,505 | ||||||
Exxon Mobil Corp. | 41,397 | 2,888,683 | ||||||
Marathon Oil Corp. | 158,094 | 2,146,916 | ||||||
Cabot Oil & Gas Corp. — Class A | 91,049 | 1,585,163 | ||||||
Parsley Energy, Inc. — Class A | 56,789 | 1,073,880 | ||||||
Range Resources Corp. | 107,163 | 519,741 | ||||||
Whiting Petroleum Corp.* | 55,030 | 403,920 | ||||||
Antero Resources Corp.* | 56,985 | 162,407 | ||||||
Total Energy | 19,318,333 | |||||||
Communications - 8.2% | ||||||||
Verizon Communications, Inc. | 99,873 | 6,132,202 | ||||||
Comcast Corp. — Class A | 82,304 | 3,701,211 | ||||||
NortonLifeLock, Inc. | 115,160 | 2,938,883 | ||||||
Cisco Systems, Inc. | 46,985 | 2,253,401 | ||||||
Juniper Networks, Inc. | 43,590 | 1,073,622 | ||||||
AT&T, Inc. | 24,582 | 960,664 | ||||||
F5 Networks, Inc.* | 6,844 | 955,765 | ||||||
T-Mobile US, Inc.* | 8,470 | 664,217 | ||||||
Total Communications | 18,679,965 | |||||||
Technology - 8.0% | ||||||||
Intel Corp. | 104,561 | 6,257,976 | ||||||
Micron Technology, Inc.* | 69,212 | 3,722,221 | ||||||
Apple, Inc. | 10,204 | 2,996,404 | ||||||
Skyworks Solutions, Inc. | 19,813 | 2,394,996 | ||||||
Qorvo, Inc.* | 13,783 | 1,601,998 | ||||||
Amdocs Ltd. | 15,609 | 1,126,814 | ||||||
Total Technology | 18,100,409 | |||||||
Consumer, Cyclical - 7.4% | ||||||||
Walmart, Inc. | 26,728 | 3,176,356 | ||||||
Southwest Airlines Co. | 47,188 | 2,547,208 | ||||||
LKQ Corp.* | 49,954 | 1,783,358 | ||||||
Lear Corp. | 12,115 | 1,662,178 | ||||||
Walgreens Boots Alliance, Inc. | 27,602 | 1,627,414 | ||||||
PACCAR, Inc. | 20,253 | 1,602,012 | ||||||
PVH Corp. | 14,248 | 1,498,177 | ||||||
Carnival Corp. | 23,157 | 1,177,070 | ||||||
Home Depot, Inc. | 4,427 | 966,768 | ||||||
Macy’s, Inc. | 44,265 | 752,505 | ||||||
Total Consumer, Cyclical | 16,793,046 | |||||||
Utilities - 7.3% | ||||||||
Exelon Corp. | 79,898 | 3,642,550 | ||||||
Public Service Enterprise Group, Inc. | 56,473 | 3,334,731 | ||||||
Edison International | 27,657 | 2,085,614 | ||||||
Duke Energy Corp. | 21,954 | 2,002,424 | ||||||
AES Corp. | 71,750 | 1,427,825 | ||||||
NiSource, Inc. | 51,045 | 1,421,093 | ||||||
Pinnacle West Capital Corp. | 15,680 | 1,410,102 | ||||||
PPL Corp. | 33,862 | 1,214,969 | ||||||
Total Utilities | 16,539,308 | |||||||
Basic Materials - 4.8% | ||||||||
Freeport-McMoRan, Inc. | 178,263 | 2,338,811 | ||||||
Nucor Corp. | 38,756 | 2,181,188 | ||||||
Huntsman Corp. | 78,933 | 1,907,021 |
22 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2019 |
SERIES B (LARGE CAP VALUE SERIES) |
| Shares | Value | ||||||
Olin Corp. | 90,597 | $ | 1,562,798 | |||||
Reliance Steel & Aluminum Co. | 10,519 | 1,259,755 | ||||||
DuPont de Nemours, Inc. | 18,012 | 1,156,371 | ||||||
Dow, Inc. | 9,877 | 540,568 | ||||||
Total Basic Materials | 10,946,512 | |||||||
Industrial - 4.1% | ||||||||
Eaton Corporation plc | 18,940 | 1,793,997 | ||||||
Owens Corning | 26,430 | 1,721,122 | ||||||
FedEx Corp. | 10,635 | 1,608,119 | ||||||
Valmont Industries, Inc. | 7,628 | 1,142,522 | ||||||
General Electric Co. | 97,873 | 1,092,262 | ||||||
Knight-Swift Transportation Holdings, Inc. | 29,105 | 1,043,123 | ||||||
Johnson Controls International plc | 24,247 | 987,095 | ||||||
Total Industrial | 9,388,240 | |||||||
Total Common Stocks | ||||||||
(Cost $173,388,328) | 217,139,153 | |||||||
EXCHANGE-TRADED FUNDS† - 4.0% | ||||||||
iShares Russell 1000 Value ETF | 65,517 | 8,941,760 | ||||||
Total Exchange-Traded Funds | ||||||||
(Cost $8,296,190) | 8,941,760 | |||||||
MONEY MARKET FUND† - 0.5% | ||||||||
Dreyfus Treasury Securities Cash Management Fund — Institutional Shares 1.44%1 | 1,246,858 | 1,246,858 | ||||||
Total Money Market Fund | ||||||||
(Cost $1,246,858) | 1,246,858 | |||||||
Total Investments - 100.2% | ||||||||
(Cost $182,931,376) | $ | 227,327,771 | ||||||
Other Assets & Liabilities, net - (0.2)% | (359,960 | ) | ||||||
Total Net Assets - 100.0% | $ | 226,967,811 |
* | Non-income producing security. |
† | Value determined based on Level 1 inputs — See Note 4. |
1 | Rate indicated is the 7-day yield as of December 31, 2019. |
plc — Public Limited Company | |
REIT — Real Estate Investment Trust | |
See Sector Classification in Other Information section. |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2019 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stocks | $ | 217,139,153 | $ | — | $ | — | $ | 217,139,153 | ||||||||
Exchange-Traded Funds | 8,941,760 | — | — | 8,941,760 | ||||||||||||
Money Market Fund | 1,246,858 | — | — | 1,246,858 | ||||||||||||
Total Assets | $ | 227,327,771 | $ | — | $ | — | $ | 227,327,771 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 23 |
SERIES B (LARGE CAP VALUE SERIES) |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2019 |
Assets: | ||||
Investments, at value (cost $182,931,376) | $ | 227,327,771 | ||
Prepaid expenses | 5,626 | |||
Receivables: | ||||
Dividends | 271,055 | |||
Fund shares sold | 3,532 | |||
Interest | 3,160 | |||
Total assets | 227,611,144 | |||
Liabilities: | ||||
Due to custodian bank | 333,011 | |||
Payable for: | ||||
Fund shares redeemed | 120,830 | |||
Management fees | 55,451 | |||
Distribution and service fees | 46,032 | |||
Fund accounting/administration fees | 14,730 | |||
Trustees’ fees* | 6,641 | |||
Transfer agent/maintenance fees | 2,367 | |||
Miscellaneous | 64,271 | |||
Total liabilities | 643,333 | |||
Commitments and contingent liabilities (Note 14) | — | |||
Net assets | $ | 226,967,811 | ||
Net assets consist of: | ||||
Paid in capital | $ | 165,289,708 | ||
Total distributable earnings (loss) | 61,678,103 | |||
Net assets | $ | 226,967,811 | ||
Capital shares outstanding | 5,596,690 | |||
Net asset value per share | $ | 40.55 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2019 |
Investment Income: | ||||
Dividends | $ | 5,671,274 | ||
Interest | 98,375 | |||
Total investment income | 5,769,649 | |||
Expenses: | ||||
Management fees | 1,410,804 | |||
Distribution and service fees | 542,617 | |||
Transfer agent/maintenance fees | 25,081 | |||
Fund accounting/administration fees | 173,639 | |||
Professional fees | 62,009 | |||
Trustees’ fees* | 27,023 | |||
Custodian fees | 8,786 | |||
Miscellaneous | 80,299 | |||
Total expenses | 2,330,258 | |||
Less: | ||||
Expenses reimbursed by Adviser | (9,851 | ) | ||
Expenses waived by Adviser | (586,680 | ) | ||
Earnings credits applied | (100 | ) | ||
Total waived/reimbursed expenses | (596,631 | ) | ||
Net expenses | 1,733,627 | |||
Net investment income | 4,036,022 | |||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments | 15,885,112 | |||
Net realized gain | 15,885,112 | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | 23,033,020 | |||
Net change in unrealized appreciation (depreciation) | 23,033,020 | |||
Net realized and unrealized gain | 38,918,132 | |||
Net increase in net assets resulting from operations | $ | 42,954,154 |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
24 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SERIES B (LARGE CAP VALUE SERIES) |
STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | ||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income | $ | 4,036,022 | $ | 3,840,780 | ||||
Net realized gain on investments | 15,885,112 | 16,968,144 | ||||||
Net change in unrealized appreciation (depreciation) on investments | 23,033,020 | (42,619,610 | ) | |||||
Net increase (decrease) in net assets resulting from operations | 42,954,154 | (21,810,686 | ) | |||||
Distributions to shareholders | (17,179,352 | ) | (19,382,371 | ) | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 10,450,047 | 5,515,601 | ||||||
Distributions reinvested | 17,179,352 | 19,382,371 | ||||||
Cost of shares redeemed | (33,603,539 | ) | (45,795,901 | ) | ||||
Net decrease from capital share transactions | (5,974,140 | ) | (20,897,929 | ) | ||||
Net increase (decrease) in net assets | 19,800,662 | (62,090,986 | ) | |||||
Net assets: | ||||||||
Beginning of year | 207,167,149 | 269,258,135 | ||||||
End of year | $ | 226,967,811 | $ | 207,167,149 | ||||
Capital share activity: | ||||||||
Shares sold | 272,332 | 132,720 | ||||||
Shares issued from reinvestment of distributions | 454,721 | 480,475 | ||||||
Shares redeemed | (863,141 | ) | (1,090,519 | ) | ||||
Net decrease in shares | (136,088 | ) | (477,324 | ) |
SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 25 |
SERIES B (LARGE CAP VALUE SERIES) |
FINANCIAL HIGHLIGHTS |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 36.14 | $ | 43.36 | $ | 39.08 | $ | 33.20 | $ | 41.40 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | .72 | .65 | .48 | .50 | .61 | |||||||||||||||
Net gain (loss) on investments (realized and unrealized) | 6.93 | (4.42 | ) | 5.52 | 6.48 | (2.29 | ) | |||||||||||||
Total from investment operations | 7.65 | (3.77 | ) | 6.00 | 6.98 | (1.68 | ) | |||||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | (.72 | ) | (.58 | ) | (.53 | ) | (.61 | ) | (.47 | ) | ||||||||||
Net realized gains | (2.52 | ) | (2.87 | ) | (1.19 | ) | (.49 | ) | (6.05 | ) | ||||||||||
Total distributions | (3.24 | ) | (3.45 | ) | (1.72 | ) | (1.10 | ) | (6.52 | ) | ||||||||||
Net asset value, end of period | $ | 40.55 | $ | 36.14 | $ | 43.36 | $ | 39.08 | $ | 33.20 | ||||||||||
| ||||||||||||||||||||
Total Returnb | 21.82 | % | (9.53 | %) | 15.81 | % | 21.41 | % | (5.08 | %) | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 226,968 | $ | 207,167 | $ | 269,258 | $ | 260,692 | $ | 233,098 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | 1.86 | % | 1.54 | % | 1.17 | % | 1.44 | % | 1.63 | % | ||||||||||
Total expensesc | 1.07 | % | 1.07 | % | 1.02 | % | 0.82 | % | 0.84 | % | ||||||||||
Net expensesd,e | 0.80 | % | 0.80 | % | 0.81 | % | 0.82 | % | 0.84 | % | ||||||||||
Portfolio turnover rate | 32 | % | 21 | % | 27 | % | 44 | % | 38 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not take into account any of the expenses associated with an investment in variable insurance products. If total return had taken into account these expenses, performance would have been lower. Shares of a series of Guggenheim Variable Funds Trust are available only through the purchase of such products. |
c | Does not include expenses of the underlying funds in which the Fund invests. |
d | Net expense information reflects the expense ratios after expense waivers and reimbursements, as applicable. |
e | Net expenses may include expenses that are excluded from the expense limitation agreement. Excluding these expenses, the net expense ratios for the years would be: |
12/31/19 | 12/31/18 | 12/31/17 | 12/31/16 | 12/31/15 | |
0.80% | 0.80% | 0.79% | 0.82% | 0.84% |
26 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
MANAGERS’ COMMENTARY (Unaudited) | December 31, 2019 |
To Our Shareholders:
The Series D (World Equity Income Series) (the “Fund”) is managed by a team of seasoned professionals, including Farhan Sharaff, Senior Managing Director and Assistant Chief Investment Officer, Equities, and Portfolio Manager; Jayson Flowers, Senior Managing Director and Portfolio Manager; and Evan Einstein, Director and Portfolio Manager. In the following paragraphs, the investment team discusses performance for the fiscal year ended December 31, 2019.
For the one year period ended December 31, 2019, Series D (World Equity Income Series) returned 21.40%, compared with the 27.67% return of its benchmark, the MSCI World Index.
Performance Review
The Guggenheim World Equity Income Fund delivered on its mandate to provide current equity income while providing a stable long-term total return. During the year, the Fund balanced generating income while doing so with lower risk than the benchmark. The Fund tends to outperform in periods of market decline or uncertainty.
Even though the Fund underperformed the MSCI World Index, it performed well considering dividend yield was a headwind during the year. It did pay a distribution from net investment income of 3.1% for the year, which reflected its successful navigation of the declining rate environment; being cognizant of companies with unsustainable dividends is one of the primary drivers for the Fund’s track record relative to peers.
The tactical currency hedge, which helps to reduce volatility and is achieved via currency futures contracts, was a negative contributor to performance this year, as the Fund navigated very choppy currency rates, particularly in the euro, pound, and yen. Currencies were in flux with factors like Brexit, trade uncertainty, and concerns over slower global growth.
The Fund had negative attribution in selection and, to a lesser extent, allocation. Contributing the most to allocation and selection performance was the Energy sector, where an underweight relative to the benchmark benefited the Fund. Declining energy prices throughout the year were key drivers of this.
The Fund kept pace with the benchmark in the Information Technology sector, the largest weight and the leading performer in both the Fund and benchmark. The major contributors to relative performance were underweights in Apple, Inc., and Microsoft Corp., the largest holdings in the Fund. Both had strong returns this year.
Utilities, a consistent overweight in the portfolio, was the largest positive overall contributor to performance this year. This was thanks to an overweight in strong performers like NextEra Energy, a sustainable energy company, as well as UK energy company SSE Plc. Real Estate was also a bright spot for performance, where the Fund’s overall overweight and individual overweights in Essex Property Trust and Verit, Inc. led the way higher. Real Estate is a prime sector to find stable-yielding names.
The Industrials sector was the largest detractor from performance, hurt by an underweight in United Technologies, Union Pacific, and Airbus, which benefited from the 737 trouble Boeing experienced during the year. Financials was another detractor, where underweights in big U.S. banks hurt performance; however, the Fund benefited from the strong performance of, and overweights to, banks like National Australia Bank and the Bank of Montreal.
From a country perspective, allocation overall detracted from performance. The Fund’s small underweight to U.S. exposure, the largest in both the Fund and benchmark, was neutral to allocation performance, but it was the largest detractor from overall relative performance contribution. Underweights to Japan and Germany slightly benefited the Fund’s allocation performance. Germany was the best overall relative performance contributor, followed by Spain. The UK, roughly equal weight, was not impactful to allocation but was the second largest detractor from total relative contribution. This was in part due to Brexit uncertainty over much of the period.
Portfolio Positioning
Global equities remain an important allocation in investors’ portfolios. Although the year was volatile, the market moved significantly higher. Still, the Fund continues to position itself more defensively than the broader market as the decline in volatility over recent quarters may pause. Accordingly, we have increased exposure to the Industrials, Consumer Staples, and Materials sectors. Communication Services has been brought down from an overweight to a slight underweight, as has exposure to Financials.
THE GUGGENHEIM FUNDS ANNUAL REPORT | 27 |
MANAGERS’ COMMENTARY (Unaudited)(concluded) | December 31, 2019 |
As we look to the future and the uncertainty it brings, we feel it is a good time to seek out dividend yield. It is also a good idea to not reach for excessive or unsustainable yields. As such, we have moderately reduced our overall yield but continue to be positioned well in excess of the benchmark. An income-producing portfolio can prove prudent in a variety of market environments.
Performance displayed represents past performance which is no guarantee of future results.
The opinions and forecast expressed may not actually come to pass. This information is subject to change at any time, based on market and other conditions, and should not be construed as a recommendation of any specific security or strategy.
28 | THE GUGGENHEIM FUNDS ANNUAL REPORT |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2019 |
SERIES D (WORLD EQUITY INCOME SERIES)
OBJECTIVE: Seeks to provide total return, comprised of capital appreciation and income.
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments.
COUNTRY DIVERSIFICATION
At December 31, 2019, the investment diversification of the Fund by Country was as follows:
Country | % of Long-Term |
United States | 55.3% |
Japan | 6.5% |
Canada | 6.3% |
Switzerland | 5.2% |
Italy | 4.0% |
Finland | 3.4% |
Australia | 3.1% |
Other | 16.2% |
Total Long-Term Investments | 100.0% |
Inception Date: April 19, 1984 |
Ten Largest Holdings (% of Total Net Assets) | |
Microsoft Corp. | 2.8% |
Apple, Inc. | 2.2% |
Mastercard, Inc. — Class A | 1.5% |
Home Depot, Inc. | 1.3% |
Verizon Communications, Inc. | 1.3% |
AT&T, Inc. | 1.3% |
Roche Holding AG | 1.2% |
Alphabet, Inc. — Class C | 1.2% |
AbbVie, Inc. | 1.2% |
Amazon.com, Inc. | 1.1% |
Top Ten Total | 15.1% |
“Ten Largest Holdings” excludes any temporary cash or derivative investments. |
THE GUGGENHEIM FUNDS ANNUAL REPORT | 29 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2019 |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2019
| 1 Year | 5 Year | 10 Year |
Series D (World Equity Income Series) | 21.40% | 7.06% | 7.18% |
MSCI World Index | 27.67% | 8.74% | 9.47% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The MSCI World Index is an unmanaged index and, unlike the Fund, has no management fees or operating expenses to reduce its reported return. |
† | Performance figures do not reflect fees and expenses associated with an investment in variable insurance products. If returns had taken into account these fees and expenses, performance would have been lower. Shares of a series of Guggenheim Variable Funds Trust are available only through the purchase of such products. |
30 | THE GUGGENHEIM FUNDS ANNUAL REPORT |
SCHEDULE OF INVESTMENTS | December 31, 2019 |
SERIES D (WORLD EQUITY INCOME SERIES) |
| Shares | Value | ||||||
COMMON STOCKS† - 98.3% | ||||||||
Financial - 20.8% | ||||||||
Mastercard, Inc. — Class A | 6,500 | $ | 1,940,835 | |||||
HSBC Holdings plc | 186,100 | 1,458,979 | ||||||
Intesa Sanpaolo SpA | 462,400 | 1,218,385 | ||||||
Zurich Insurance Group AG | 2,900 | 1,190,311 | ||||||
DBS Group Holdings Ltd. | 57,400 | 1,104,930 | ||||||
Sampo Oyj — Class A | 24,700 | 1,078,287 | ||||||
Assicurazioni Generali SpA | 49,900 | 1,029,856 | ||||||
United Overseas Bank Ltd. | 52,300 | 1,027,374 | ||||||
Chubb Ltd. | 6,300 | 980,658 | ||||||
Swiss Life Holding AG | 1,900 | 954,055 | ||||||
Annaly Capital Management, Inc. REIT | 100,300 | 944,826 | ||||||
Simon Property Group, Inc. REIT | 5,900 | 878,864 | ||||||
Swedbank AB — Class A | 58,700 | 874,267 | ||||||
Extra Space Storage, Inc. REIT | 8,200 | 866,084 | ||||||
Public Storage REIT | 4,000 | 851,840 | ||||||
SmartCentres Real Estate Investment Trust | 35,100 | 843,910 | ||||||
Vonovia SE | 15,300 | 823,965 | ||||||
RioCan Real Estate Investment Trust | 39,700 | 818,411 | ||||||
Marsh & McLennan Companies, Inc. | 6,600 | 735,306 | ||||||
Aflac, Inc. | 13,500 | 714,150 | ||||||
Intercontinental Exchange, Inc. | 7,300 | 675,615 | ||||||
H&R Real Estate Investment Trust | 38,300 | 622,553 | ||||||
First Capital Real Estate Investment Trust | 38,300 | 609,866 | ||||||
Ageas | 9,600 | 567,405 | ||||||
Covivio REIT | 4,800 | 545,002 | ||||||
Vornado Realty Trust REIT | 7,600 | 505,400 | ||||||
American Financial Group, Inc. | 4,000 | 438,600 | ||||||
Klepierre S.A. REIT | 11,500 | 436,750 | ||||||
American Express Co. | 3,200 | 398,368 | ||||||
Host Hotels & Resorts, Inc. REIT | 20,900 | 387,695 | ||||||
Swiss Prime Site AG* | 3,200 | 370,120 | ||||||
SL Green Realty Corp. REIT | 4,000 | 367,520 | ||||||
Mizuho Financial Group, Inc. | 229,700 | 355,772 | ||||||
JPMorgan Chase & Co. | 2,500 | 348,500 | ||||||
Prudential Financial, Inc. | 3,400 | 318,716 | ||||||
Canadian Apartment Properties REIT | 7,600 | 310,360 | ||||||
Visa, Inc. — Class A | 1,100 | 206,690 | ||||||
Total Financial | 27,800,225 | |||||||
Consumer, Non-cyclical - 19.3% | ||||||||
Roche Holding AG | 5,000 | 1,622,790 | ||||||
AbbVie, Inc. | 17,700 | 1,567,158 | ||||||
Medtronic plc | 12,300 | 1,395,435 | ||||||
Amgen, Inc. | 5,100 | 1,229,457 | ||||||
S&P Global, Inc. | 4,500 | 1,228,725 | ||||||
CSL Ltd. | 6,100 | 1,180,446 | ||||||
Kimberly-Clark Corp. | 8,500 | 1,169,175 | ||||||
Sysco Corp. | 12,100 | 1,035,034 | ||||||
Quest Diagnostics, Inc. | 9,600 | 1,025,184 | ||||||
PepsiCo, Inc. | 7,500 | 1,025,025 | ||||||
Kellogg Co. | 14,700 | 1,016,652 | ||||||
Procter & Gamble Co. | 8,000 | 999,200 | ||||||
Colgate-Palmolive Co. | 13,600 | 936,224 | ||||||
Archer-Daniels-Midland Co. | 19,100 | 885,285 | ||||||
Altria Group, Inc. | 17,300 | 863,443 | ||||||
Novartis AG | 9,000 | 854,910 | ||||||
Sonic Healthcare Ltd. | 41,900 | 845,351 | ||||||
Ono Pharmaceutical Company Ltd. | 36,000 | 828,927 | ||||||
Bunge Ltd. | 13,300 | 765,415 | ||||||
HCA Healthcare, Inc. | 5,100 | 753,831 | ||||||
Pfizer, Inc. | 18,900 | 740,502 | ||||||
Shionogi & Company Ltd. | 11,400 | 709,949 | ||||||
Zoetis, Inc. | 5,300 | 701,455 | ||||||
Japan Tobacco, Inc. | 27,100 | 606,664 | ||||||
Constellation Brands, Inc. — Class A | 2,900 | 550,275 | ||||||
Orion Oyj — Class B | 7,600 | 351,904 | ||||||
Cochlear Ltd. | 2,100 | 331,181 | ||||||
Atlantia SpA | 12,500 | 291,569 | ||||||
Cintas Corp. | 1,000 | 269,080 | ||||||
Total Consumer, Non-cyclical | 25,780,246 | |||||||
Technology - 14.3% | ||||||||
Microsoft Corp. | 23,900 | 3,769,030 | ||||||
Apple, Inc. | 9,800 | 2,877,770 | ||||||
Accenture plc — Class A | 6,900 | 1,452,933 | ||||||
Texas Instruments, Inc. | 11,200 | 1,436,848 | ||||||
International Business Machines Corp. | 9,400 | 1,259,976 | ||||||
Micron Technology, Inc.* | 22,900 | 1,231,562 | ||||||
HP, Inc. | 57,700 | 1,185,735 | ||||||
Broadcom, Inc. | 3,400 | 1,074,468 | ||||||
Seagate Technology plc | 15,300 | 910,350 | ||||||
Maxim Integrated Products, Inc. | 13,500 | 830,385 | ||||||
Canon, Inc. | 27,900 | 766,819 | ||||||
Fiserv, Inc.* | 5,600 | 647,528 | ||||||
Fidelity National Information Services, Inc. | 4,400 | 611,996 | ||||||
Western Digital Corp. | 7,600 | 482,372 | ||||||
Lam Research Corp. | 1,000 | 292,400 | ||||||
Konica Minolta, Inc. | 38,300 | 251,313 | ||||||
Total Technology | 19,081,485 | |||||||
Industrial - 12.6% | ||||||||
3M Co. | 7,100 | 1,252,582 | ||||||
Illinois Tool Works, Inc. | 6,700 | 1,203,521 | ||||||
United Parcel Service, Inc. — Class B | 10,000 | 1,170,600 | ||||||
Eaton Corporation plc | 11,700 | 1,108,224 | ||||||
Lockheed Martin Corp. | 2,828 | 1,101,166 | ||||||
Waste Management, Inc. | 9,500 | 1,082,620 | ||||||
Amcor plc | 92,800 | 1,005,952 | ||||||
Waste Connections, Inc. | 10,800 | 980,532 | ||||||
Packaging Corporation of America | 8,600 | 963,114 | ||||||
Kone Oyj — Class B | 14,200 | 928,505 | ||||||
Westrock Co. | 20,900 | 896,819 | ||||||
Komatsu Ltd. | 36,400 | 885,035 | ||||||
Lennox International, Inc. | 3,000 | 731,910 | ||||||
Republic Services, Inc. — Class A | 7,200 | 645,336 | ||||||
Geberit AG | 1,100 | 617,611 | ||||||
Sumitomo Heavy Industries Ltd. | 21,100 | 607,789 | ||||||
FedEx Corp. | 3,200 | 483,872 | ||||||
Garmin Ltd. | 3,600 | 351,216 | ||||||
Amada Holdings Company Ltd. | 26,900 | 309,449 | ||||||
Ingersoll-Rand plc | 2,300 | 305,716 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 31 |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2019 |
SERIES D (WORLD EQUITY INCOME SERIES) |
| Shares | Value | ||||||
Venture Corporation Ltd. | 23,100 | $ | 278,346 | |||||
Total Industrial | 16,909,915 | |||||||
Communications - 9.8% | ||||||||
Verizon Communications, Inc. | 28,300 | 1,737,620 | ||||||
AT&T, Inc. | 42,800 | 1,672,624 | ||||||
Alphabet, Inc. — Class C* | 1,181 | 1,579,021 | ||||||
Amazon.com, Inc.* | 800 | 1,478,272 | ||||||
Rogers Communications, Inc. — Class B | 19,200 | 953,721 | ||||||
Elisa Oyj | 15,400 | 850,948 | ||||||
TELUS Corp. | 20,400 | 790,170 | ||||||
HKT Trust & HKT Ltd. | 466,000 | 656,659 | ||||||
BCE, Inc. | 13,800 | 639,561 | ||||||
Trend Micro, Inc. | 11,400 | 587,515 | ||||||
Wolters Kluwer N.V. | 6,300 | 459,583 | ||||||
Facebook, Inc. — Class A* | 2,235 | 458,734 | ||||||
Telia Company AB | 95,900 | 412,261 | ||||||
WPP plc | 26,900 | 380,050 | ||||||
Nokia Oyj | 76,700 | 283,634 | ||||||
Proximus SADP | 7,700 | 220,469 | ||||||
Total Communications | 13,160,842 | |||||||
Consumer, Cyclical - 7.8% | ||||||||
Home Depot, Inc. | 8,200 | 1,790,716 | ||||||
Persimmon plc | 35,000 | 1,249,553 | ||||||
Ford Motor Co. | 115,300 | 1,072,290 | ||||||
General Motors Co. | 28,600 | 1,046,760 | ||||||
Sands China Ltd. | 191,600 | 1,024,147 | ||||||
McDonald’s Corp. | 3,900 | 770,679 | ||||||
Subaru Corp. | 28,800 | 719,198 | ||||||
Harvey Norman Holdings Ltd. | 232,800 | 664,909 | ||||||
Sumitomo Corp. | 34,300 | 512,633 | ||||||
Bridgestone Corp. | 11,200 | 419,506 | ||||||
Delta Air Lines, Inc. | 5,600 | 327,488 | ||||||
USS Company Ltd. | 17,100 | 325,127 | ||||||
Las Vegas Sands Corp. | 4,300 | 296,872 | ||||||
Crown Resorts Ltd. | 30,500 | 257,056 | ||||||
Total Consumer, Cyclical | 10,476,934 | |||||||
Utilities - 7.7% | ||||||||
Fortis, Inc. | 24,800 | 1,029,377 | ||||||
Fortum Oyj | 40,200 | 992,259 | ||||||
Power Assets Holdings Ltd. | 134,800 | 986,090 | ||||||
NextEra Energy, Inc. | 3,900 | 944,424 | ||||||
Snam SpA | 174,100 | 915,329 | ||||||
Terna Rete Elettrica Nazionale SpA | 134,400 | 897,809 | ||||||
AGL Energy Ltd. | 61,300 | 883,150 | ||||||
Enel SpA | 110,700 | 878,347 | ||||||
Duke Energy Corp. | 9,600 | 875,616 | ||||||
SSE plc | 22,900 | 436,388 | ||||||
Algonquin Power & Utilities Corp. | 30,200 | 427,377 | ||||||
Veolia Environnement S.A. | 15,500 | 412,325 | ||||||
Iberdrola S.A. | 30,600 | 315,167 | ||||||
Canadian Utilities Ltd. — Class A | 9,500 | 286,663 | ||||||
Total Utilities | 10,280,321 | |||||||
Basic Materials - 4.5% | ||||||||
International Paper Co. | 24,300 | 1,119,015 | ||||||
Rio Tinto plc | 17,000 | 1,013,983 | ||||||
LyondellBasell Industries N.V. — Class A | 10,600 | 1,001,488 | ||||||
Air Products & Chemicals, Inc. | 4,000 | 939,960 | ||||||
Nucor Corp. | 7,600 | 427,728 | ||||||
Showa Denko K.K. | 15,200 | 405,525 | ||||||
Westlake Chemical Corp. | 5,700 | 399,855 | ||||||
Celanese Corp. — Class A | 3,200 | 393,984 | ||||||
Nissan Chemical Corp. | 7,700 | 325,614 | ||||||
Total Basic Materials | 6,027,152 | |||||||
Energy - 1.5% | ||||||||
Exxon Mobil Corp. | 14,000 | 976,920 | ||||||
Chevron Corp. | 5,400 | 650,754 | ||||||
Occidental Petroleum Corp. | 7,600 | 313,196 | ||||||
Total Energy | 1,940,870 | |||||||
Total Common Stocks | ||||||||
(Cost $118,258,970) | 131,457,990 | |||||||
EXCHANGE-TRADED FUNDS† - 0.8% | ||||||||
iShares MSCI EAFE ETF | 7,709 | 535,313 | ||||||
SPDR S&P 500 ETF Trust | 1,659 | 533,965 | ||||||
Total Exchange-Traded Funds | ||||||||
(Cost $989,670) | 1,069,278 | |||||||
MONEY MARKET FUND† - 0.5% | ||||||||
Goldman Sachs Financial Square Treasury Instruments Fund — Institutional Shares 1.43%1 | 723,373 | 723,373 | ||||||
Total Money Market Fund | ||||||||
(Cost $723,373) | 723,373 | |||||||
Total Investments - 99.6% | ||||||||
(Cost $119,972,013) | $ | 133,250,641 | ||||||
Other Assets & Liabilities, net - 0.4% | 507,481 | |||||||
Total Net Assets - 100.0% | $ | 133,758,122 |
32 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2019 |
SERIES D (WORLD EQUITY INCOME SERIES) |
Futures Contracts | ||||||||||||||||
Description | Number of | Expiration | Notional | Value and | ||||||||||||
Currency Futures Contracts Sold Short† | ||||||||||||||||
Japanese Yen Futures Contracts | 37 | Mar 2020 | $ | 4,273,038 | $ | (452 | ) |
* | Non-income producing security. |
** | Includes cumulative appreciation (depreciation). Variation margin is reported within the Statement of Assets and Liabilities. |
† | Value determined based on Level 1 inputs — See Note 4. |
1 | Rate indicated is the 7-day yield as of December 31, 2019. |
plc — Public Limited Company | |
REIT — Real Estate Investment Trust | |
See Sector Classification in Other Information section. |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2019 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stocks | $ | 131,457,990 | $ | — | $ | — | $ | 131,457,990 | ||||||||
Exchange-Traded Funds | 1,069,278 | — | — | 1,069,278 | ||||||||||||
Money Market Fund | 723,373 | — | — | 723,373 | ||||||||||||
Total Assets | $ | 133,250,641 | $ | — | $ | — | $ | 133,250,641 |
Investments in Securities (Liabilities) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Currency Futures Contracts** | $ | 452 | $ | — | $ | — | $ | 452 |
** | This derivative is reported as unrealized appreciation/depreciation at period end. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 33 |
SERIES D (WORLD EQUITY INCOME SERIES) |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2019 |
Assets: | ||||
Investments, at value (cost $119,972,013) | $ | 133,250,641 | ||
Foreign currency, at value (cost $2,884) | 2,884 | |||
Cash | 1,219 | |||
Prepaid expenses | 4,580 | |||
Receivables: | ||||
Foreign tax reclaims | 291,937 | |||
Dividends | 232,659 | |||
Securities sold | 162,769 | |||
Fund shares sold | 74,289 | |||
Interest | 1,089 | |||
Total assets | 134,022,067 | |||
Liabilities: | ||||
Payable for: | ||||
Fund shares redeemed | 90,173 | |||
Management fees | 42,246 | |||
Printing fees | 30,707 | |||
Distribution and service fees | 27,168 | |||
Professional fees | 26,284 | |||
Custodian fees | 14,700 | |||
Fund accounting/administration fees | 8,694 | |||
Trustees’ fees* | 4,821 | |||
Transfer agent/maintenance fees | 2,473 | |||
Variation margin on futures contracts | 452 | |||
Miscellaneous | 16,227 | |||
Total liabilities | 263,945 | |||
Commitments and contingent liabilities (Note 14) | — | |||
Net assets | $ | 133,758,122 | ||
Net assets consist of: | ||||
Paid in capital | $ | 116,091,243 | ||
Total distributable earnings (loss) | 17,666,879 | |||
Net assets | $ | 133,758,122 | ||
Capital shares outstanding | 9,255,269 | |||
Net asset value per share | $ | 14.45 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2019 |
Investment Income: | ||||
Dividends (net of foreign withholding tax of $340,317) | $ | 4,245,045 | ||
Interest | 18,886 | |||
Total investment income | 4,263,931 | |||
Expenses: | ||||
Management fees | 914,134 | |||
Distribution and service fees | 326,475 | |||
Transfer agent/maintenance fees | 25,124 | |||
Fund accounting/administration fees | 104,473 | |||
Professional fees | 56,165 | |||
Custodian fees | 35,502 | |||
Trustees’ fees* | 23,515 | |||
Miscellaneous | 72,854 | |||
Total expenses | 1,558,242 | |||
Less: | ||||
Expenses reimbursed by Adviser | (2,040 | ) | ||
Expenses waived by Adviser | (382,643 | ) | ||
Earnings credits applied | (535 | ) | ||
Total waived/reimbursed expenses | (385,218 | ) | ||
Net expenses | 1,173,024 | |||
Net investment income | 3,090,907 | |||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments | 2,492,975 | |||
Futures contracts | (508,853 | ) | ||
Foreign currency transactions | 6,831 | |||
Net realized gain | 1,990,953 | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | 20,343,876 | |||
Futures contracts | (160,027 | ) | ||
Foreign currency translations | 2,937 | |||
Net change in unrealized appreciation (depreciation) | 20,186,786 | |||
Net realized and unrealized gain | 22,177,739 | |||
Net increase in net assets resulting from operations | $ | 25,268,646 |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
34 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SERIES D (WORLD EQUITY INCOME SERIES) |
STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | ||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income | $ | 3,090,907 | $ | 3,430,267 | ||||
Net realized gain on investments | 1,990,953 | 8,547,523 | ||||||
Net change in unrealized appreciation (depreciation) on investments | 20,186,786 | (22,855,163 | ) | |||||
Net increase (decrease) in net assets resulting from operations | 25,268,646 | (10,877,373 | ) | |||||
Distributions to shareholders | (10,799,071 | ) | (4,156,958 | ) | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 1,377,569 | 3,054,237 | ||||||
Distributions reinvested | 10,799,071 | 4,156,958 | ||||||
Cost of shares redeemed | (18,200,016 | ) | (27,976,438 | ) | ||||
Net decrease from capital share transactions | (6,023,376 | ) | (20,765,243 | ) | ||||
Net increase (decrease) in net assets | 8,446,199 | (35,799,574 | ) | |||||
Net assets: | ||||||||
Beginning of year | 125,311,923 | 161,111,497 | ||||||
End of year | $ | 133,758,122 | $ | 125,311,923 | ||||
Capital share activity: | ||||||||
Shares sold | 99,244 | 208,853 | ||||||
Shares issued from reinvestment of distributions | 796,979 | 288,077 | ||||||
Shares redeemed | (1,309,109 | ) | (1,924,607 | ) | ||||
Net decrease in shares | (412,886 | ) | (1,427,677 | ) |
SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 35 |
SERIES D (WORLD EQUITY INCOME SERIES) |
FINANCIAL HIGHLIGHTS |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 12.96 | $ | 14.52 | $ | 12.98 | $ | 12.12 | $ | 12.60 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | .33 | .33 | .33 | .37 | .36 | |||||||||||||||
Net gain (loss) on investments (realized and unrealized) | 2.36 | (1.47 | ) | 1.60 | .88 | (.43 | ) | |||||||||||||
Total from investment operations | 2.69 | (1.14 | ) | 1.93 | 1.25 | (.07 | ) | |||||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | (.40 | ) | (.42 | ) | (.39 | ) | (.39 | ) | (.41 | ) | ||||||||||
Net realized gains | (.80 | ) | — | — | — | — | ||||||||||||||
Total distributions | (1.20 | ) | (.42 | ) | (.39 | ) | (.39 | ) | (.41 | ) | ||||||||||
Net asset value, end of period | $ | 14.45 | $ | 12.96 | $ | 14.52 | $ | 12.98 | $ | 12.12 | ||||||||||
| ||||||||||||||||||||
Total Returnb | 21.40 | % | (8.17 | %) | 15.06 | % | 10.37 | % | (0.67 | %) | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 133,758 | $ | 125,312 | $ | 161,111 | $ | 159,978 | $ | 158,063 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | 2.37 | % | 2.29 | % | 2.38 | % | 2.92 | % | 2.88 | % | ||||||||||
Total expensesc | 1.19 | % | 1.17 | % | 1.12 | % | 0.91 | % | 0.96 | % | ||||||||||
Net expensesd,e | 0.90 | % | 0.90 | % | 0.90 | % | 0.91 | % | 0.96 | % | ||||||||||
Portfolio turnover rate | 139 | % | 134 | % | 112 | % | 43 | % | 110 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not take into account any of the expenses associated with an investment in variable insurance products. If total return had taken into account these expenses, performance would have been lower. Shares of a series of Guggenheim Variable Funds Trust are available only through the purchase of such products. |
c | Does not include expenses of the underlying funds in which the Fund invests. |
d | Net expense information reflects the expense ratios after expense waivers and reimbursements, as applicable. |
e | Net expenses may include expenses that are excluded from the expense limitation agreement. Excluding these expenses, the net expense ratios for the years would be: |
12/31/19 | 12/31/18 | 12/31/17 | |
0.90% | 0.90% | 0.88% |
36 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
MANAGERS’ COMMENTARY (Unaudited) | December 31, 2019 |
To Our Shareholders:
The Series E (Total Return Bond Series) (the “Fund”) is managed by a team of seasoned professionals, including B. Scott Minerd, Chairman of Investments and Global Chief Investment Officer; Anne B. Walsh, Senior Managing Director and Chief Investment Officer, Fixed Income; Steven H. Brown, CFA, Senior Managing Director and Portfolio Manager; and Adam J. Bloch, Managing Director and Portfolio Manager. In the following paragraphs, the investment team discusses the market environment and the Fund’s performance for the fiscal year ended December 31, 2019.
For the year ended December 31, 2019, Series E (Total Return Bond Series) returned 4.49%, compared with the 8.72% return of its benchmark, the Bloomberg Barclays U.S. Aggregate Bond Index.
The Fund seeks to provide total return, comprised of current income and capital appreciation. The Fund pursues its investment objective by investing primarily in high-quality, investment-grade fixed-income securities across multiple sectors. The Fund employs a tactical sector allocation strategy, offering the opportunity to capitalize on total return potential created by changing market conditions.
Positive total return was largely attributed to duration and the portfolio’s carry (carry refers to the income received, net of borrowing costs from portfolio investments over a defined period), with modest spread tightening also contributing to performance. Most asset categories rallied over the year as global central bank easing and a flood of liquidity drove prices higher. At the forefront of policy easing was the U.S. Federal Reserve’s (the “Fed”) dovish pivot in late 2018 which prioritized extending the expansion and resulted in three rate cuts in 2019, and the expansion of the balance sheet via U.S. Treasury bill purchases and repo operations in the second half of the year.
With its shift in policy, the Fed has decreased the odds of a recession near term and has likely extended the expansion. Within the U.S. economy, weakness in manufacturing data looks to be bottoming, the consumer is in good shape, and the labor market remains extraordinarily resilient. The recovery in the U.S. is also helping to drive a pickup in global economic activity.
Fed Chair Jerome Powell referred to the first cut as a brief “mid-cycle” rate adjustment, as opposed to the beginning of a lengthy cutting cycle. The Fed’s 1998 mid-cycle adjustment resulted in a liquidity driven rally that caused the Nasdaq index to double within a year before the bubble finally burst. It also led to a significant widening of credit spreads well in advance of the economy rolling over.
With that in mind and with corporate credit spreads near cycle tights, the Fund continued to focus on income and capital preservation in a market where the risk/reward trade-off looks unattractive in many credit sectors. Low volatility and reducing drawdown risk remained a priority for the Fund. As such, the Fund continued to invest in assets classes that have a low likelihood of default and are expected to exhibit minimal spread volatility with stable returns under a variety of credit and rate environments. This caused the Fund to underperform the benchmark during the year.
Over the year, all sectors contributed positively to total return with no negative performers. Within our credit exposure we continued to favor structured credit over corporate credit given what we view as a compelling spread pickup to similarly rated corporates while providing defensive positioning through shorter spread duration profiles.
Asset-backed securities (“ABS”), which constituted approximately 17% of the Fund at year’s end, generated positive total returns as the investor base for structured credit, including aircraft securitization and other commercial ABS, continues to grow. The aircraft ABS sector saw a record year in supply as new issuance topped $10.8bn amid lower financing costs. Lease and renewal rates for midlife aircraft (those securitized in aircraft ABS) are expected to be supported by new aircraft supply disruptions and relatively low fuel prices.
Collateralized loan obligations (“CLOs”) contributed to performance. CLOs rallied into year-end as the underlying leveraged loan collateral base performed well with the positive geopolitical backdrop. Total CLO new issuance finished the year at ~$118bn, only slightly lagging last year’s issuance activity. Spreads remained considerably wider than many other asset categories, particularly those with a similar credit profile or spread duration. We continue to favor senior CLOs with short spread durations, as they offer a compelling spread pickup to similarly rated corporates.
THE GUGGENHEIM FUNDS ANNUAL REPORT | 37 |
MANAGERS’ COMMENTARY (Unaudited)(concluded) | December 31, 2019 |
Non-agency residential mortgage-backed securities, which constituted approximately 12% of the Fund at year’s end, contributed positively as lower rates and improving credit fundamentals drove higher prepayments for discounted dollar price holdings. Limited home inventory and improving labor market conditions should support home prices and mortgage credit performance. Net issuance for the year finished positive for the first time since 2007, driven mainly by slower paydowns on existing deals. Historically low spread differences between senior and subordinated tranches suggest better value in staying structurally senior at this time.
In order to maintain our defensive positioning and short portfolio spread duration our longer duration holdings continue to be allocated to treasuries and agency debt, including agency commercial mortgage-backed securities (“Agency CMBS”). Agency CMBS has some spread tightening potential should credit spreads broadly tighten but has much less downside should spreads widen.
The Fund used various derivatives primarily to hedge risk related to outright positioning in both credit and duration as well as to effectuate certain cash investment activities. Derivatives used as hedges performed as expected.
The Fund may invest in certain of the underlying series of Guggenheim Funds Trust and Guggenheim Strategy Funds Trust, including Guggenheim Ultra Short Duration, Guggenheim Strategy Fund II, Guggenheim Strategy Fund III, and Guggenheim Variable Insurance Strategy Fund III, (collectively, the “Short Term Investment Vehicles”), each of which are open-end management investment companies managed by Guggenheim Investments. The Short Term Investment Vehicles, which launched on March 11, 2014, are offered as short term investment options only to mutual funds, trusts, and other accounts managed by Guggenheim Investments and/or its affiliates, and are not available to the public, with the exception of Guggenheim Ultra Short Duration Fund, which is available to the public. Guggenheim Strategy Fund II, Guggenheim Strategy Fund III, and Guggenheim Variable Insurance Strategy Fund III do not charge an investment management fee. Guggenheim Ultra Short Duration Fund charges an investment management fee but that fee is waived by the respective investee fund. For the one-year period ended December 31, 2019, investment in the Short Term Investment Vehicles benefited Fund performance.
Performance displayed represents past performance which is no guarantee of future results.
The opinions and forecast expressed may not actually come to pass. This information is subject to change at any time, based on market and other conditions, and should not be construed as a recommendation of any specific security or strategy.
38 | THE GUGGENHEIM FUNDS ANNUAL REPORT |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2019 |
SERIES E (TOTAL RETURN BOND SERIES)
OBJECTIVE: Seeks to provide total return, comprised of current income and capital appreciation.
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments or investments in Guggenheim Ultra Short Duration Fund.
Inception Date: April 26, 1985 |
Ten Largest Holdings (% of Total Net Assets) | |
U.S. Treasury Notes, 2.38% due 02/29/24 | 5.8% |
Guggenheim Total Return Bond Fund — R6-Class | 4.7% |
Guggenheim Limited Duration Fund — R6-Class | 2.4% |
Government of Japan, 0.10% due 08/01/21 | 1.9% |
U.S. Treasury Bonds, 2.25% | 1.8% |
U.S. Treasury Notes, 2.50% | 1.6% |
Guggenheim Ultra Short Duration Fund — Institutional Class | 1.6% |
Government of Japan, due 01/20/20 | 1.5% |
Station Place Securitization Trust, 2.38% due 03/24/20 | 1.4% |
Federative Republic of Brazil, due 07/01/21 | 1.3% |
Top Ten Total | 24.0% |
“Ten Largest Holdings” excludes any temporary cash or derivative investments. |
THE GUGGENHEIM FUNDS ANNUAL REPORT | 39 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2019 |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2019
| 1 Year | 5 Year | 10 Year |
Series E (Total Return Bond Series) | 4.49% | 4.03% | 4.69% |
Bloomberg Barclays U.S. Aggregate Bond Index | 8.72% | 3.05% | 3.75% |
Portfolio Composition by Quality Rating1 | |
Rating | % of Total |
Fixed Income Instruments | |
AAA | 46.5% |
AA | 9.1% |
A | 12.9% |
BBB | 7.4% |
BB | 1.7% |
B | 2.7% |
CCC | 1.2% |
CC | 1.0% |
C | 0.3% |
NR2 | 3.5% |
Other Instruments | 13.7% |
Total Investments | 100.0% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The Bloomberg Barclays U.S. Aggregate Bond Index is an unmanaged index and, unlike the Fund, has no management fees or operating expenses to reduce its reported return. |
† | Performance figures do not reflect fees and expenses associated with an investment in variable insurance products. If returns had taken into account these fees and expenses, performance would have been lower. Shares of a series of Guggenheim Variable Funds Trust are available only through the purchase of such products. |
1 | Source: BlackRock Solutions. Credit quality ratings are measured on a scale that generally ranges from AAA (highest) to D (lowest). All securities except for those labeled “NR” have been rated by Moody’s, Standard & Poor’s (“S&P”), or Fitch, each of which is a Nationally Recognized Statistical Rating Organization (“NRSRO”). For purposes of this presentation, when ratings are available from more than one agency, the highest rating is used. Guggenheim Investments has converted ratings to the equivalent S&P rating. Security ratings are determined at the time of purchase and may change thereafter. |
2 | NR securities do not necessarily indicate low credit quality. |
40 | THE GUGGENHEIM FUNDS ANNUAL REPORT |
SCHEDULE OF INVESTMENTS | December 31, 2019 |
SERIES E (TOTAL RETURN BOND SERIES) |
| Shares | Value | ||||||
EXCHANGE-TRADED FUNDS† - 0.8% | ||||||||
iShares Core U.S. Aggregate Bond ETF | 9,400 | $ | 1,056,278 | |||||
Total Exchange-Traded Funds | ||||||||
(Cost $1,057,160) | 1,056,278 | |||||||
MUTUAL FUNDS† - 8.7% | ||||||||
Guggenheim Total Return Bond Fund — R6-Class1 | 223,119 | 6,055,444 | ||||||
Guggenheim Limited Duration Fund — R6-Class1 | 123,485 | 3,032,782 | ||||||
Guggenheim Ultra Short Duration Fund — Institutional Class1 | 205,849 | 2,048,198 | ||||||
Total Mutual Funds | ||||||||
(Cost $10,989,863) | 11,136,424 | |||||||
MONEY MARKET FUND† - 2.3% | ||||||||
Dreyfus Treasury Securities Cash Management — Institutional Shares 1.44%2 | 2,979,834 | 2,979,834 | ||||||
Total Money Market Fund | ||||||||
(Cost $2,979,834) | 2,979,834 | |||||||
Face | ||||||||
COLLATERALIZED MORTGAGE OBLIGATIONS†† - 33.0% | ||||||||
Government Agency - 18.0% | ||||||||
Fannie Mae | ||||||||
3.58% due 04/01/33 | 1,268,054 | 1,383,039 | ||||||
3.16% due 01/01/30 | 1,300,000 | 1,369,185 | ||||||
3.00% due 12/01/29 | 1,250,000 | 1,311,821 | ||||||
2.94% due 10/01/32 | 1,153,792 | 1,189,319 | ||||||
3.83% due 05/01/49 | 1,000,000 | 1,113,796 | ||||||
3.43% due 09/01/34 | 1,000,000 | 1,083,416 | ||||||
3.37% due 06/01/39 | 1,000,000 | 1,047,297 | ||||||
3.01% due 12/01/27 | 1,000,000 | 1,046,482 | ||||||
3.33% due 04/01/30 | 973,457 | 1,028,768 | ||||||
2.50% due 12/01/29 | 693,478 | 703,239 | ||||||
3.08% due 10/01/32 | 500,000 | 522,464 | ||||||
3.11% due 10/01/29 | 500,000 | 521,752 | ||||||
2.99% due 09/01/29 | 500,000 | 519,757 | ||||||
2.96% due 11/01/29 | 500,000 | 518,451 | ||||||
2.86% due 09/01/29 | 500,000 | 518,397 | ||||||
2.90% due 11/01/29 | 500,000 | 515,915 | ||||||
1.95% due 11/01/20 | 250,000 | 249,344 | ||||||
Freddie Mac Multifamily Structured Pass Through Certificates | ||||||||
2019-K087, 3.77% due 12/25/28 | 1,250,000 | 1,372,940 | ||||||
2017-KGX1, 3.00% due 10/25/27 | 1,200,000 | 1,248,815 | ||||||
2017-KW03, 3.02% due 06/25/27 | 1,050,000 | 1,091,895 | ||||||
2018-K074, 3.60% due 02/25/28 | 1,000,000 | 1,080,512 | ||||||
2019-1513, 2.80% due 08/25/34 | 650,000 | 652,396 | ||||||
Freddie Mac Seasoned Credit Risk Transfer Trust | ||||||||
2017-3, 3.00% due 07/25/56 | 1,028,902 | 1,048,516 | ||||||
2017-4, 3.25% due 06/25/57 | 1,008,472 | 1,039,293 |
Fannie Mae-Aces | ||||||||
2017-M11, 2.98% due 08/25/29 | 900,000 | 936,684 | ||||||
Total Government Agency | 23,113,493 | |||||||
Residential Mortgage Backed Securities - 11.6% | ||||||||
New Residential Advance Receivables Trust Advance Receivables Backed | ||||||||
2019-T4, 2.33% due 10/15/513 | 1,000,000 | 998,587 | ||||||
2019-T3, 2.51% due 09/15/523 | 750,000 | 749,569 | ||||||
JP Morgan Mortgage Acquisition Trust | ||||||||
2006-WMC4, 1.91% (1 Month USD LIBOR + 0.12%, Rate Floor: 0.12%) due 12/25/364 | 1,561,309 | 972,540 | ||||||
Soundview Home Loan Trust | ||||||||
2006-OPT5, 1.93% (1 Month USD LIBOR + 0.14%, Rate Floor: 0.14%) due 07/25/364 | 924,688 | 900,763 | ||||||
Home Equity Loan Trust | ||||||||
2007-FRE1, 1.98% (1 Month USD LIBOR + 0.19%, Rate Floor: 0.19%) due 04/25/374 | 940,828 | 887,686 | ||||||
Homeward Opportunities Fund I Trust | ||||||||
2019-2, 2.70% (WAC) due 09/25/593,4 | 872,507 | 869,127 | ||||||
Deephaven Residential Mortgage Trust | ||||||||
2019-3A, 2.96% (WAC) due 07/25/593,4 | 842,406 | 844,917 | ||||||
CSMC Trust | ||||||||
2018-RPL9, 3.85% (WAC) due 09/25/573,4 | 803,583 | 834,423 | ||||||
NovaStar Mortgage Funding Trust Series | ||||||||
2007-2, 1.99% (1 Month USD LIBOR + 0.20%, Rate Cap/Floor: 11.00%/0.20%) due 09/25/374 | 804,660 | 783,122 | ||||||
GSAA Trust | ||||||||
2005-10, 2.44% (1 Month USD LIBOR + 0.65%, Rate Floor: 0.65%) due 06/25/354 | 767,992 | 773,699 | ||||||
Luminent Mortgage Trust | ||||||||
2006-2, 1.99% (1 Month USD LIBOR + 0.20%, Rate Floor: 0.20%) due 02/25/464 | 736,800 | 648,843 | ||||||
CIM Trust | ||||||||
2018-R2, 3.69% (WAC) due 08/25/573,4 | 615,787 | 618,164 | ||||||
BRAVO Residential Funding Trust | ||||||||
2019-NQM1, 2.67% (WAC) due 07/25/593,4 | 600,891 | 600,653 | ||||||
Wachovia Asset Securitization Issuance II LLC Trust | ||||||||
2007-HE2A, 1.84% (1 Month USD LIBOR + 0.13%, Rate Floor: 0.13%) due 07/25/373,4 | 623,323 | 597,402 | ||||||
HarborView Mortgage Loan Trust | ||||||||
2006-14, 1.91% (1 Month USD LIBOR + 0.15%, Rate Floor: 0.15%) due 01/25/474 | 562,749 | 558,056 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 41 |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2019 |
SERIES E (TOTAL RETURN BOND SERIES) |
| Face | Value | ||||||
CIT Mortgage Loan Trust | ||||||||
2007-1, 3.24% (1 Month USD LIBOR + 1.45%, Rate Floor: 1.45%) due 10/25/373,4 | 385,323 | $ | 386,404 | |||||
2007-1, 3.14% (1 Month USD LIBOR + 1.35%, Rate Floor: 1.35%) due 10/25/373,4 | 167,906 | 169,318 | ||||||
CSMC Series | ||||||||
2015-12R, 2.32% (WAC) due 11/30/373,4 | 556,795 | 554,554 | ||||||
American Home Mortgage Investment Trust | ||||||||
2007-1, 2.08% due 05/25/476 | 2,470,302 | 369,394 | ||||||
NRPL Trust | ||||||||
2019-3A, 3.00% due 07/25/593 | 344,151 | 342,856 | ||||||
Washington Mutual Mortgage Pass-Through Certificates WMALT Series Trust | ||||||||
2006-AR9, 3.08% (1 Year CMT Rate + 0.84%, Rate Floor: 0.84%) due 11/25/464 | 338,284 | 307,408 | ||||||
Starwood Mortgage Residential Trust | ||||||||
2019-1, 2.94% (WAC) due 06/25/493,4 | 305,209 | 305,134 | ||||||
Freddie Mac STACR Trust | ||||||||
2019-DNA3, 2.52% (1 Month USD LIBOR + 0.73%, Rate Floor: 0.00%) due 07/25/493,4 | 296,326 | 296,326 | ||||||
Towd Point Mortgage Trust | ||||||||
2018-1, 3.00% (WAC) due 01/25/583,4 | 263,194 | 265,977 | ||||||
UCFC Manufactured Housing Contract | ||||||||
1997-2, 7.38% due 10/15/28 | 112,586 | 118,714 | ||||||
Morgan Stanley Re-REMIC Trust | ||||||||
2010-R5, 5.58% due 06/26/363 | 74,466 | 68,951 | ||||||
Total Residential Mortgage Backed Securities | 14,822,587 | |||||||
Commercial Mortgage Backed Securities - 1.8% | ||||||||
CGBAM Mezzanine Securities Trust | ||||||||
2015-SMMZ, 8.21% due 04/10/283 | 500,000 | 499,790 | ||||||
Wells Fargo Commercial Mortgage Trust | ||||||||
2016-NXS5, 1.50% (WAC) due 01/15/594,6 | 4,791,738 | 285,363 | ||||||
2015-NXS1, 2.63% due 05/15/48 | 175,232 | 175,090 | ||||||
CGBAM Commercial Mortgage Trust | ||||||||
2015-SMRT, 3.77% due 04/10/283 | 450,000 | 449,744 | ||||||
Citigroup Commercial Mortgage Trust | ||||||||
2016-GC37, 1.76% (WAC) due 04/10/494,6 | 3,708,601 | 317,148 | ||||||
CFCRE Commercial Mortgage Trust | ||||||||
2016-C3, 1.03% (WAC) due 01/10/484,6 | 5,764,877 | 300,317 | ||||||
COMM Mortgage Trust | ||||||||
2015-CR26, 0.95% (WAC) due 10/10/484,6 | 6,437,735 | 287,795 | ||||||
Total Commercial Mortgage Backed Securities | 2,315,247 | |||||||
Military Housing - 1.6% | ||||||||
Freddie Mac Military Housing Bonds Resecuritization Trust Certificates | ||||||||
2015-R1, 1.93% (WAC) due 11/25/553,4 | 955,276 | 1,070,457 | ||||||
GMAC Commercial Mortgage Asset Corp. | ||||||||
2007-HCKM, 6.11% due 08/10/523 | 953,078 | 1,017,813 | ||||||
Total Military Housing | 2,088,270 | |||||||
Total Collateralized Mortgage Obligations | ||||||||
(Cost $41,127,552) | 42,339,597 | |||||||
ASSET-BACKED SECURITIES†† - 17.0% | ||||||||
Collateralized Loan Obligations - 7.5% | ||||||||
FDF II Ltd. | ||||||||
2016-2A, 4.29% due 05/12/313 | 1,000,000 | 1,016,817 | ||||||
Marathon CLO VII Ltd. | ||||||||
2017-7A, 3.59% (3 Month USD LIBOR + 1.65%, Rate Floor: 0.00%) due 10/28/253,4 | 1,000,000 | 1,000,662 | ||||||
NXT Capital CLO LLC | ||||||||
2017-1A, 3.67% (3 Month USD LIBOR + 1.70%, Rate Floor: 0.00%) due 04/20/293,4 | 1,000,000 | 1,000,115 | ||||||
Halcyon Loan Advisors Funding Ltd. | ||||||||
2017-3A, 2.90% (3 Month USD LIBOR + 0.90%, Rate Floor: 0.00%) due 10/18/273,4 | 1,000,000 | 998,402 | ||||||
MP CLO VIII Ltd. | ||||||||
2018-2A, 2.85% (3 Month USD LIBOR + 0.91%, Rate Floor: 0.00%) due 10/28/273,4 | 1,000,000 | 998,071 | ||||||
Dryden 37 Senior Loan Fund | ||||||||
2015-37A, due 01/15/313,7 | 1,000,000 | 864,472 | ||||||
NewStar Clarendon Fund CLO LLC | ||||||||
2019-1A, 3.24% (3 Month USD LIBOR + 1.30%, Rate Floor: 0.00%) due 01/25/273,4 | 859,584 | 858,889 | ||||||
Golub Capital Partners CLO Ltd. | ||||||||
2018-36A, 3.19% (3 Month USD LIBOR + 1.30%, Rate Floor: 0.00%) due 02/05/313,4 | 850,000 | 831,683 | ||||||
Fortress Credit Opportunities XI CLO Ltd. | ||||||||
2018-11A, 3.30% (3 Month USD LIBOR + 1.30%, Rate Floor: 0.00%) due 04/15/313,4 | 750,000 | 734,741 | ||||||
THL Credit Wind River CLO Ltd. | ||||||||
2019-1A, 2.88% (3 Month USD LIBOR + 0.88%, Rate Floor: 0.00%) due 01/15/263,4 | 717,777 | 717,386 | ||||||
Treman Park CLO Ltd. | ||||||||
2015-1A, due 10/20/283,7 | 500,000 | 405,985 | ||||||
Fortress Credit Opportunities IX CLO Ltd. | ||||||||
2017-9A, 3.46% (3 Month USD LIBOR + 1.55%, Rate Floor: 0.00%) due 11/15/293,4 | 109,000 | 108,260 |
42 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2019 |
SERIES E (TOTAL RETURN BOND SERIES) |
| Face | Value | ||||||
Copper River CLO Ltd. | ||||||||
2007-1A, due 01/20/215,7 | 600,000 | $ | 80,400 | |||||
Total Collateralized Loan Obligations | 9,615,883 | |||||||
Transport-Aircraft - 2.9% | ||||||||
Willis Engine Securitization Trust II | ||||||||
2012-A, 5.50% due 09/15/373,8 | 1,220,611 | 1,255,497 | ||||||
Castlelake Aircraft Securitization Trust | ||||||||
2017-1, 3.97% due 07/15/42 | 703,341 | 712,807 | ||||||
Raspro Trust | ||||||||
2005-1A, 2.89% (3 Month USD LIBOR + 0.93%, Rate Floor: 0.93%) due 03/23/243,4 | 584,129 | 574,704 | ||||||
AIM Aviation Finance Ltd. | ||||||||
2015-1A, 4.21% due 02/15/403 | 471,478 | 471,121 | ||||||
Turbine Engines Securitization Ltd. | ||||||||
2013-1A, 5.13% due 12/13/485 | 425,715 | 426,798 | ||||||
Falcon Aerospace Ltd. | ||||||||
2017-1, 4.58% due 02/15/423 | 307,939 | 309,041 | ||||||
Total Transport-Aircraft | 3,749,968 | |||||||
Financial - 2.8% | ||||||||
Station Place Securitization Trust | ||||||||
2019-8, 2.38% (1 Month USD LIBOR + 0.60%, Rate Floor: 0.60%) due 03/24/203,4 | 1,850,000 | 1,849,999 | ||||||
2019-6, 2.38% (1 Month USD LIBOR + 0.60%, Rate Floor: 0.60%) due 07/24/21†††,3,4 | 700,000 | 700,000 | ||||||
2019-9, 2.48% (1 Month USD LIBOR + 0.70%, Rate Floor: 0.00%) due 10/24/20†††,3,4 | 350,000 | 350,000 | ||||||
2019-2, 2.33% (1 Month USD LIBOR + 0.55%, Rate Floor: 0.55%) due 04/24/213,4 | 250,000 | 250,048 | ||||||
Madison Avenue Secured Funding Trust | ||||||||
2019-1, 3.22% (1 Month USD LIBOR + 1.50%, Rate Floor: 1.50%) due 11/11/203,4 | 250,000 | 250,017 | ||||||
Nassau LLC | ||||||||
2019-1, 3.98% due 08/15/343 | 244,593 | 242,799 | ||||||
Total Financial | 3,642,863 | |||||||
Collateralized Debt Obligations - 1.1% | ||||||||
Anchorage Credit Funding Ltd. | ||||||||
2016-4A, 3.50% due 02/15/353 | 1,000,000 | 1,003,950 | ||||||
Putnam Structured Product Funding Ltd. | ||||||||
2003-1A, 2.74% (1 Month USD LIBOR + 1.00%, Rate Floor: 0.00%) due 10/15/383,4 | 232,253 | 229,963 | ||||||
N-Star REL CDO VIII Ltd. | ||||||||
2006-8A, 2.49% (1 Month USD LIBOR + 0.36%, Rate Floor: 0.36%) due 02/01/413,4 | 105,440 | 104,485 | ||||||
Total Collateralized Debt Obligations | 1,338,398 | |||||||
Transport-Container - 1.0% | ||||||||
Textainer Marine Containers Ltd. | ||||||||
2017-2A, 3.52% due 06/20/423 | 877,683 | 875,125 | ||||||
Global SC Finance II SRL | ||||||||
2014-1A, 3.19% due 07/17/293 | 458,333 | 457,831 | ||||||
Total Transport-Container | 1,332,956 | |||||||
Net Lease - 1.0% | ||||||||
Store Master Funding I-VII | ||||||||
2016-1A, 3.96% due 10/20/463 | 1,177,167 | 1,224,934 | ||||||
Whole Business - 0.4% | ||||||||
Domino’s Pizza Master Issuer LLC | ||||||||
2017-1A, 3.19% (3 Month USD LIBOR + 1.25%, Rate Floor: 0.00%) due 07/25/473,4 | 490,000 | 490,358 | ||||||
Insurance - 0.3% | ||||||||
Chesterfield Financial Holdings LLC | ||||||||
2014-1A, 4.50% due 12/15/343 | 401,250 | 403,173 | ||||||
Total Asset-Backed Securities | ||||||||
(Cost $21,733,978) | 21,798,533 | |||||||
FOREIGN GOVERNMENT DEBT†† - 11.0% | ||||||||
Government of Japan | ||||||||
0.10% due 08/01/21 | JPY | 264,000,000 | 2,438,443 | |||||
due 01/20/209 | JPY | 207,000,000 | 1,905,147 | |||||
due 01/10/209 | JPY | 146,000,000 | 1,343,668 | |||||
0.10% due 05/01/21 | JPY | 88,000,000 | 812,296 | |||||
0.10% due 12/20/21 | JPY | 45,200,000 | 417,882 | |||||
0.10% due 06/01/21 | JPY | 35,000,000 | 323,159 | |||||
State of Israel | ||||||||
1.00% due 04/30/21 | ILS | 5,170,000 | 1,515,472 | |||||
5.00% due 01/31/20 | ILS | 3,300,000 | 959,046 | |||||
5.50% due 01/31/22 | ILS | 1,660,000 | 533,624 | |||||
0.50% due 01/31/21 | ILS | 1,040,000 | 302,648 | |||||
Federative Republic of Brazil | ||||||||
due 07/01/219 | BRL | 6,980,000 | 1,619,023 | |||||
due 07/01/209 | BRL | 2,490,000 | 607,517 | |||||
Kingdom of Spain | ||||||||
0.75% due 07/30/21 | EUR | 1,140,000 | 1,302,833 | |||||
United Mexican States | ||||||||
due 02/27/20 | MXN | 120,000 | 6,274 | |||||
Total Foreign Government Debt | ||||||||
(Cost $14,051,329) | 14,087,032 | |||||||
U.S. GOVERNMENT SECURITIES†† - 9.8% | ||||||||
U.S. Treasury Notes | ||||||||
2.38% due 02/29/24 | 7,260,000 | 7,467,024 | ||||||
2.50% due 02/28/26 | 2,017,000 | 2,102,013 | ||||||
2.38% due 03/15/22 | 476,000 | 484,237 | ||||||
U.S. Treasury Bonds | ||||||||
2.25% due 08/15/49 | 2,343,000 | 2,279,300 | ||||||
2.88% due 05/15/49 | 287,000 | 317,191 | ||||||
Total U.S. Government Securities | ||||||||
(Cost $12,448,580) | 12,649,765 | |||||||
SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 43 |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2019 |
SERIES E (TOTAL RETURN BOND SERIES) |
| Face | Value | ||||||
CORPORATE BONDS†† - 8.6% | ||||||||
Financial - 2.9% | ||||||||
Synchrony Bank | ||||||||
2.59% (3 Month USD LIBOR + 0.63%) due 03/30/204 | 450,000 | $ | 450,334 | |||||
Credit Suisse AG NY | ||||||||
2.33% (3 Month USD LIBOR + 0.40%) due 07/31/204 | 320,000 | 320,457 | ||||||
Standard Chartered Bank | ||||||||
2.30% (3 Month USD LIBOR + 0.40%) due 08/04/204 | 320,000 | 320,376 | ||||||
Lloyds Bank Corporate Markets plc NY | ||||||||
2.26% (3 Month USD LIBOR + 0.37%) due 08/05/204 | 320,000 | 320,318 | ||||||
Aon Corp. | ||||||||
5.00% due 09/30/20 | 300,000 | 306,438 | ||||||
Morgan Stanley | ||||||||
5.50% due 07/24/20 | 300,000 | 306,054 | ||||||
ANZ New Zealand Int’l Ltd. | ||||||||
2.85% due 08/06/203 | 300,000 | 301,470 | ||||||
Capital One Financial Corp. | ||||||||
2.39% (3 Month USD LIBOR + 0.45%) due 10/30/204 | 290,000 | 290,584 | ||||||
2.66% (3 Month USD LIBOR + 0.76%) due 05/12/204 | 10,000 | 10,019 | ||||||
UBS AG | ||||||||
2.47% (3 Month USD LIBOR + 0.58%, Rate Floor: 0.00%) due 06/08/203,4 | 300,000 | 300,496 | ||||||
American Express Co. | ||||||||
2.20% due 10/30/20 | 275,000 | 275,565 | ||||||
Discover Bank | ||||||||
3.10% due 06/04/20 | 250,000 | 250,931 | ||||||
American Equity Investment Life Holding Co. | ||||||||
5.00% due 06/15/27 | 95,000 | 101,427 | ||||||
American Tower Corp. | ||||||||
2.80% due 06/01/20 | 70,000 | 70,202 | ||||||
Assurant, Inc. | ||||||||
3.20% (3 Month USD LIBOR + 1.25%) due 03/26/214 | 62,000 | 62,007 | ||||||
Nomura Holdings, Inc. | ||||||||
6.70% due 03/04/20 | 30,000 | 30,232 | ||||||
Total Financial | 3,716,910 | |||||||
Consumer, Non-cyclical - 2.6% | ||||||||
Mondelez International, Inc. | ||||||||
3.00% due 05/07/20 | 360,000 | 361,033 | ||||||
Biogen, Inc. | ||||||||
2.90% due 09/15/20 | 340,000 | 342,499 | ||||||
Zimmer Biomet Holdings, Inc. | ||||||||
2.70% due 04/01/20 | 325,000 | 325,211 | ||||||
Cigna Corp. | ||||||||
2.25% (3 Month USD LIBOR + 0.35%) due 03/17/204 | 325,000 | 325,125 | ||||||
Humana, Inc. | ||||||||
2.50% due 12/15/20 | 300,000 | 301,269 | ||||||
Allergan Funding SCS | ||||||||
3.14% (3 Month USD LIBOR + 1.26%) due 03/12/204 | 300,000 | 300,563 | ||||||
Quest Diagnostics, Inc. | ||||||||
2.50% due 03/30/20 | 300,000 | 300,072 | ||||||
Anthem, Inc. | ||||||||
2.50% due 11/21/20 | 200,000 | 200,890 | ||||||
4.35% due 08/15/20 | 90,000 | 91,286 | ||||||
Molson Coors Beverage Co. | ||||||||
2.25% due 03/15/20 | 290,000 | 289,877 | ||||||
Constellation Brands, Inc. | ||||||||
2.25% due 11/06/20 | 250,000 | 250,506 | ||||||
Reynolds American, Inc. | ||||||||
6.88% due 05/01/20 | 145,000 | 147,317 | ||||||
AstraZeneca plc | ||||||||
2.38% due 11/16/20 | 100,000 | 100,316 | ||||||
ERAC USA Finance LLC | ||||||||
5.25% due 10/01/203 | 50,000 | 51,195 | ||||||
Total Consumer, Non-cyclical | 3,387,159 | |||||||
Utilities - 0.8% | ||||||||
NextEra Energy Capital Holdings, Inc. | ||||||||
2.41% (3 Month USD LIBOR + 0.45%) due 09/28/204 | 330,000 | 330,462 | ||||||
Ameren Corp. | ||||||||
2.70% due 11/15/20 | 300,000 | 301,606 | ||||||
Exelon Corp. | ||||||||
2.85% due 06/15/20 | 250,000 | 250,575 | ||||||
PSEG Power LLC | ||||||||
5.13% due 04/15/20 | 50,000 | 50,445 | ||||||
Pennsylvania Electric Co. | ||||||||
5.20% due 04/01/20 | 30,000 | 30,215 | ||||||
American Electric Power Company, Inc. | ||||||||
2.15% due 11/13/20 | 25,000 | 25,049 | ||||||
Total Utilities | 988,352 | |||||||
Technology - 0.8% | ||||||||
Fiserv, Inc. | ||||||||
2.70% due 06/01/20 | 340,000 | 340,842 | ||||||
Analog Devices, Inc. | ||||||||
2.95% due 01/12/21 | 300,000 | 302,509 | ||||||
Broadcom Corporation / Broadcom Cayman Finance Ltd. | ||||||||
2.38% due 01/15/20 | 300,000 | 300,014 | ||||||
QUALCOMM, Inc. | ||||||||
2.25% due 05/20/20 | 40,000 | 40,044 | ||||||
Total Technology | 983,409 | |||||||
Industrial - 0.6% | ||||||||
Rolls-Royce plc | ||||||||
2.38% due 10/14/203 | 200,000 | 200,764 | ||||||
Molex Electronic Technologies LLC | ||||||||
2.88% due 04/15/203 | 200,000 | 200,268 | ||||||
Northrop Grumman Corp. | ||||||||
3.50% due 03/15/21 | 150,000 | 152,892 |
44 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2019 |
SERIES E (TOTAL RETURN BOND SERIES) |
| Face | Value | ||||||
Ryder System, Inc. | ||||||||
2.50% due 05/11/20 | 100,000 | $ | 100,112 | |||||
United Technologies Corp. | ||||||||
1.90% due 05/04/20 | 100,000 | 99,951 | ||||||
Ingersoll-Rand Luxembourg Finance S.A. | ||||||||
2.63% due 05/01/20 | 50,000 | 50,066 | ||||||
Vulcan Materials Co. | ||||||||
2.49% (3 Month USD LIBOR + 0.60%) due 06/15/204 | 10,000 | 10,010 | ||||||
Total Industrial | 814,063 | |||||||
Consumer, Cyclical - 0.4% | ||||||||
Marriott International, Inc. | ||||||||
2.51% (3 Month USD LIBOR + 0.60%) due 12/01/204 | 300,000 | 300,959 | ||||||
McDonald’s Corp. | ||||||||
3.50% due 07/15/20 | 200,000 | 201,592 | ||||||
Total Consumer, Cyclical | 502,551 | |||||||
Energy - 0.4% | ||||||||
Occidental Petroleum Corp. | ||||||||
2.60% due 08/13/21 | 250,000 | 251,850 | ||||||
Florida Gas Transmission Company LLC | ||||||||
5.45% due 07/15/203 | 100,000 | 101,681 | ||||||
Pioneer Natural Resources Co. | ||||||||
7.50% due 01/15/20 | 80,000 | 80,133 | ||||||
Marathon Petroleum Corp. | ||||||||
3.40% due 12/15/20 | 50,000 | 50,569 | ||||||
Total Energy | 484,233 | |||||||
Basic Materials - 0.1% | ||||||||
Georgia-Pacific LLC | ||||||||
5.40% due 11/01/203 | 80,000 | 82,221 | ||||||
Communications - 0.0% | ||||||||
Telefonica Emisiones S.A. | ||||||||
5.13% due 04/27/20 | 30,000 | 30,284 | ||||||
Total Corporate Bonds | ||||||||
(Cost $10,956,574) | 10,989,182 | |||||||
FEDERAL AGENCY BONDS†† - 5.1% | ||||||||
Freddie Mac Principal Strips | ||||||||
due 07/15/329,10 | 1,950,000 | 1,431,754 | ||||||
due 03/15/319,10 | 1,500,000 | 1,145,302 | ||||||
Fannie Mae Principal Strips | ||||||||
due 07/15/379,10 | 2,500,000 | 1,565,456 | ||||||
due 05/15/309,10 | 1,245,000 | 974,184 | ||||||
Tennessee Valley Authority | ||||||||
5.38% due 04/01/56 | 750,000 | 1,139,316 | ||||||
Tennessee Valley Authority Principal Strips | ||||||||
due 01/15/489,10 | 500,000 | 215,937 | ||||||
Residual Funding Corporation Principal Strips | ||||||||
due 04/15/309,10 | 105,000 | 81,988 | ||||||
Total Federal Agency Bonds | ||||||||
(Cost $5,819,512) | 6,553,937 | |||||||
MUNICIPAL BONDS†† - 1.0% | ||||||||
California - 0.6% | ||||||||
Cypress School District General Obligation Unlimited | ||||||||
due 08/01/489 | 1,000,000 | 353,140 | ||||||
Newport Mesa Unified School District General Obligation Unlimited | ||||||||
due 08/01/469 | 700,000 | 270,165 | ||||||
California Institute of Technology | ||||||||
3.65% due 09/01/2119 | 200,000 | 193,988 | ||||||
Total California | 817,293 | |||||||
Illinois - 0.4% | ||||||||
State of Illinois General Obligation Unlimited | ||||||||
5.65% due 12/01/38 | 400,000 | 466,100 | ||||||
Total Municipal Bonds | ||||||||
(Cost $1,151,569) | 1,283,393 | |||||||
SENIOR FLOATING RATE INTERESTS††,4 - 0.2% | ||||||||
Industrial - 0.2% | ||||||||
Capstone Logistics | ||||||||
6.30% (1 Month USD LIBOR + 4.50%, Rate Floor: 5.50%) due 10/07/21 | 282,971 | 277,136 | ||||||
Total Senior Floating Rate Interests | ||||||||
(Cost $282,168) | 277,136 | |||||||
REPURCHASE AGREEMENTS††,11 - 1.6% | ||||||||
Societe Generale | ||||||||
issued 09/10/19 at 2.29% (3 Month USD LIBOR + 0.40%) due 07/07/204 | 2,000,000 | 2,000,000 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $2,000,000) | 2,000,000 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 45 |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2019 |
SERIES E (TOTAL RETURN BOND SERIES) |
|
| Value | ||||||
OTC OPTIONS PURCHASED†† - 0.2% | ||||||||
Put options on: | ||||||||
BofA Merrill Lynch 2Y-10 CMS CAP Expiring July 2022 with strike price of $0.40 | 50,900,000 | $ | 89,075 | |||||
Morgan Stanley Capital Services LLC 2Y-10 CMS CAP Expiring July 2022 with strike price of $0.40 | 41,800,000 | 73,150 | ||||||
Goldman Sachs International 2Y-10 CMS CAP Expiring July 2022 with strike price of $0.61 | 29,500,000 | 32,745 | ||||||
Goldman Sachs International 2Y-10 CMS CAP Expiring July 2022 with strike price of $0.40 | 9,300,000 | 16,275 | ||||||
BofA Merrill Lynch 2Y-10 CMS CAP Expiring July 2022 with strike price of $0.61 | 4,500,000 | 4,995 | ||||||
Total OTC Options Purchased | ||||||||
(Cost $288,851) | 216,240 | |||||||
Total Investments - 99.3% | ||||||||
(Cost $124,886,970) | $ | 127,367,351 | ||||||
Other Assets & Liabilities, net - 0.7% | 841,592 | |||||||
Total Net Assets - 100.0% | $ | 128,208,943 |
Centrally Cleared Credit Default Swap Agreements Protection Purchased†† | |||||||||||||||||||||||||||
Counterparty | Exchange | Index | Protection | Payment | Maturity | Notional | Value | Upfront | Unrealized | ||||||||||||||||||
BofA Securities, Inc. | ICE | CDX.NA.IG.31 | 1.00 | % | Quarterly | 12/20/23 | $ | 20,220,000 | $ | (510,852 | ) | $ | (187,295 | ) | $ | (323,557 | ) |
OTC Credit Default Swap Agreements Protection Purchased†† | ||||||||||||||||||||||||||
Counterparty | Index | Protection | Payment | Maturity | Notional | Value | Upfront | Unrealized | ||||||||||||||||||
Morgan Stanley Capital Services LLC | CDX.NA.IG.31 7-15% | 1.00 | % | Quarterly | 12/20/23 | $ | 1,180,000 | $ | (31,599 | ) | $ | (177 | ) | $ | (31,422 | ) | ||||||||||
Goldman Sachs International | CDX.NA.IG.31 7-15% | 1.00 | % | Quarterly | 12/20/23 | 2,630,000 | (70,428 | ) | (3,592 | ) | (66,836 | ) | ||||||||||||||
$ | (102,027 | ) | $ | (3,769 | ) | $ | (98,258 | ) |
46 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2019 |
SERIES E (TOTAL RETURN BOND SERIES) |
Centrally Cleared Interest Rate Swap Agreements†† | ||||||||||||||||||||||||||||
Counterparty | Exchange | Floating | Floating | Fixed | Payment | Maturity | Notional | Value | Upfront | Unrealized | ||||||||||||||||||
BofA Securities, Inc. | CME | Receive | 3-Month USD LIBOR | 1.54% | Quarterly | 08/04/21 | $ | 500,000 | $ | 1,359 | $ | 246 | $ | 1,113 | ||||||||||||||
BofA Securities, Inc. | CME | Pay | 3-Month USD LIBOR | 2.79% | Quarterly | 01/21/20 | 1,946,000 | 765 | 555 | 210 | ||||||||||||||||||
BofA Securities, Inc. | CME | Pay | 3-Month USD LIBOR | 2.84% | Quarterly | 01/31/20 | 377,000 | 261 | 197 | 64 | ||||||||||||||||||
BofA Securities, Inc. | CME | Pay | 3-Month USD LIBOR | 2.83% | Quarterly | 01/31/20 | 202,000 | 138 | 122 | 16 | ||||||||||||||||||
BofA Securities, Inc. | CME | Receive | 3-Month USD LIBOR | 2.83% | Quarterly | 01/31/20 | 202,000 | (138 | ) | 22 | (160 | ) | ||||||||||||||||
BofA Securities, Inc. | CME | Receive | 3-Month USD LIBOR | 2.84% | Quarterly | 01/31/20 | 377,000 | (262 | ) | 21 | (283 | ) | ||||||||||||||||
BofA Securities, Inc. | CME | Receive | 3-Month USD LIBOR | 2.79% | Quarterly | 01/21/20 | 1,946,000 | (765 | ) | 17 | (782 | ) | ||||||||||||||||
BofA Securities, Inc. | CME | Pay | Federal Funds Rate | 1.37% | Annually | 12/04/24 | 3,200,000 | (16,767 | ) | 309 | (17,076 | ) | ||||||||||||||||
BofA Securities, Inc. | CME | Pay | Federal Funds Rate | 1.23% | Annually | 08/22/21 | 6,400,000 | (25,446 | ) | 259 | (25,705 | ) | ||||||||||||||||
BofA Securities, Inc. | CME | Pay | Federal Funds Rate | 1.10% | Annually | 08/28/24 | 6,470,000 | (114,601 | ) | 306 | (114,907 | ) | ||||||||||||||||
$ | (155,456 | ) | $ | 2,054 | $ | (157,510 | ) |
Total Return Swap Agreements | ||||||||||||||||||||||
Counterparty | Reference | Financing | Payment | Maturity | Units | Notional | Value and | |||||||||||||||
OTC Fixed Income Index Swap Agreements Sold Short†† | ||||||||||||||||||||||
JPMorgan Chase Bank, N.A. | iShares Core U.S. Aggregate Bond ETF | (2.52)% (1 Month USD LIBOR + 0.80%) | At Maturity | 01/13/20 | 5,500 | $ | 618,035 | $ | 1,155 | |||||||||||||
JPMorgan Chase Bank, N.A. | iShares Core U.S. Aggregate Bond ETF | (2.79)% (1 Month USD LIBOR + 1.00%) | At Maturity | 01/23/20 | 3,900 | 438,243 | — | |||||||||||||||
$ | 1,056,278 | $ | 1,155 | |||||||||||||||||||
OTC Sovereign Debt Swap Agreements†† | ||||||||||||||||||||||
Deutsche Bank AG | Korea Monetary Stabilization Bond | 2.34% (3 Month USD LIBOR + 0.45%) | At Maturity | 08/04/21 | N/A | 517,777 | (2,576 | ) |
SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 47 |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2019 |
SERIES E (TOTAL RETURN BOND SERIES) |
Forward Foreign Currency Exchange Contracts†† | ||||||||||||||||||
Counterparty | Contracts | Currency | Settlement | Settlement | Value at | Unrealized | ||||||||||||
Bank of America, N.A. | 176,088,000 | JPY | 08/02/21 | $ | 1,737,682 | $ | 1,673,784 | $ | 63,898 | |||||||||
Bank of America, N.A. | 207,000,000 | JPY | 01/21/20 | 1,945,763 | 1,906,984 | 38,779 | ||||||||||||
Morgan Stanley Capital Services LLC | 88,044,000 | JPY | 08/02/21 | 864,108 | 836,892 | 27,216 | ||||||||||||
Citibank N.A., New York | 88,044,000 | JPY | 05/06/21 | 858,631 | 833,016 | 25,615 | ||||||||||||
Goldman Sachs International | 1,350,000 | BRL | 07/01/20 | 350,559 | 334,407 | 16,152 | ||||||||||||
Goldman Sachs International | 116,800,000 | JPY | 01/10/20 | 1,089,411 | 1,075,337 | 14,074 | ||||||||||||
Barclays Bank plc | 438,000 | EUR | 01/17/20 | 505,847 | 491,866 | 13,981 | ||||||||||||
Goldman Sachs International | 440,000 | EUR | 01/17/20 | 508,077 | 494,112 | 13,965 | ||||||||||||
Goldman Sachs International | 45,222,600 | JPY | 12/20/21 | 446,820 | 433,026 | 13,794 | ||||||||||||
Citibank N.A., New York | 1,140,000 | BRL | 07/01/20 | 293,633 | 282,388 | 11,245 | ||||||||||||
Barclays Bank plc | 35,017,500 | JPY | 06/01/21 | 342,772 | 331,769 | 11,003 | ||||||||||||
Citibank N.A., New York | 29,200,000 | JPY | 01/10/20 | 272,253 | 268,834 | 3,419 | ||||||||||||
Goldman Sachs International | 1,148,550 | EUR | 07/30/21 | 1,334,185 | 1,333,647 | 538 | ||||||||||||
Bank of America, N.A. | 9,432 | EUR | 06/15/20 | 10,846 | 10,692 | 154 | ||||||||||||
Goldman Sachs International | 8,384 | EUR | 06/15/20 | 9,646 | 9,504 | 142 | ||||||||||||
Bank of America, N.A. | 88,000 | JPY | 02/01/21 | 859 | 828 | 31 | ||||||||||||
Bank of America, N.A. | 88,000 | JPY | 08/03/20 | 851 | 820 | 31 | ||||||||||||
Bank of America, N.A. | 88,000 | JPY | 02/03/20 | 841 | 811 | 30 | ||||||||||||
Morgan Stanley Capital Services LLC | 44,000 | JPY | 08/03/20 | 423 | 410 | 13 | ||||||||||||
Morgan Stanley Capital Services LLC | 44,000 | JPY | 02/01/21 | 427 | 414 | 13 | ||||||||||||
Morgan Stanley Capital Services LLC | 44,000 | JPY | 02/03/20 | 419 | 406 | 13 | ||||||||||||
Citibank N.A., New York | 44,000 | JPY | 05/01/20 | 420 | 408 | 12 | ||||||||||||
Citibank N.A., New York | 44,000 | JPY | 11/02/20 | 424 | 412 | 12 | ||||||||||||
Goldman Sachs International | 22,600 | JPY | 06/21/21 | 221 | 214 | 7 | ||||||||||||
Goldman Sachs International | 22,600 | JPY | 12/21/20 | 218 | 212 | 6 | ||||||||||||
Goldman Sachs International | 22,600 | JPY | 06/22/20 | 216 | 210 | 6 | ||||||||||||
Barclays Bank plc | 17,500 | JPY | 06/01/20 | 167 | 162 | 5 | ||||||||||||
Barclays Bank plc | 17,500 | JPY | 12/01/20 | 169 | 164 | 5 | ||||||||||||
Goldman Sachs International | 8,550 | EUR | 07/30/20 | 9,719 | 9,720 | (1 | ) | |||||||||||
Bank of America, N.A. | 3,510 | ILS | 04/30/20 | 1,004 | 1,025 | (21 | ) | |||||||||||
Citibank N.A., New York | 6,718 | ILS | 04/30/20 | 1,931 | 1,963 | (32 | ) | |||||||||||
Deutsche Bank AG | 1,554,368 | KRW | 05/07/21 | 1,321 | 1,364 | (43 | ) | |||||||||||
Deutsche Bank AG | 1,606,762 | KRW | 11/04/20 | 1,358 | 1,402 | (44 | ) | |||||||||||
Deutsche Bank AG | 1,606,762 | KRW | 02/04/21 | 1,362 | 1,406 | (44 | ) | |||||||||||
Deutsche Bank AG | 1,606,762 | KRW | 08/05/20 | 1,354 | 1,399 | (45 | ) | |||||||||||
Deutsche Bank AG | 1,571,833 | KRW | 05/11/20 | 1,320 | 1,365 | (45 | ) | |||||||||||
Deutsche Bank AG | 1,606,762 | KRW | 02/05/20 | 1,345 | 1,392 | (47 | ) | |||||||||||
Citibank N.A., New York | 120,000 | MXN | 02/27/20 | 6,235 | 6,296 | (61 | ) | |||||||||||
Citibank N.A., New York | 120,000 | MXN | 04/23/20 | 6,179 | 6,244 | (65 | ) | |||||||||||
Barclays Bank plc | 140,000 | MXN | 04/08/20 | 7,231 | 7,301 | (70 | ) | |||||||||||
Bank of America, N.A. | 33,642 | ILS | 01/31/20 | 9,652 | 9,771 | (119 | ) | |||||||||||
Bank of America, N.A. | 33,550 | ILS | 02/01/21 | 9,803 | 9,973 | (170 | ) | |||||||||||
Goldman Sachs International | 41,614 | ILS | 04/30/20 | 11,981 | 12,159 | (178 | ) | |||||||||||
JPMorgan Chase Bank, N.A. | 900,000 | BRL | 07/01/21 | 213,802 | 216,491 | (2,689 | ) | |||||||||||
Bank of America, N.A. | 353,500 | ILS | 04/30/21 | 102,806 | 105,518 | (2,712 | ) | |||||||||||
Bank of America, N.A. | 643,550 | ILS | 01/31/22 | 190,794 | 194,601 | (3,807 | ) | |||||||||||
Citibank N.A., New York | 676,700 | ILS | 04/30/21 | 197,663 | 201,992 | (4,329 | ) | |||||||||||
Goldman Sachs International | 1,103,122 | ILS | 02/01/21 | 321,286 | 327,898 | (6,612 | ) | |||||||||||
Goldman Sachs International | 1,107,750 | ILS | 01/31/22 | 327,441 | 334,970 | (7,529 | ) | |||||||||||
Goldman Sachs International | 1,300,000 | BRL | 07/01/21 | 304,557 | 312,709 | (8,152 | ) | |||||||||||
Morgan Stanley Capital Services LLC | 8,350,000 | MXN | 02/06/20 | 431,012 | 439,329 | (8,317 | ) | |||||||||||
Barclays Bank plc | 1,365,000 | ILS | 01/31/20 | 386,194 | 396,452 | (10,258 | ) | |||||||||||
Citibank N.A., New York | 2,800,000 | BRL | 01/02/20 | 682,605 | 697,315 | (14,710 | ) | |||||||||||
Citibank N.A., New York | 4,780,000 | BRL | 07/01/21 | 1,134,050 | 1,149,807 | (15,757 | ) | |||||||||||
Deutsche Bank AG | 601,856,762 | KRW | 08/04/21 | 513,267 | 529,560 | (16,293 | ) | |||||||||||
Goldman Sachs International | 4,191,500 | ILS | 04/30/21 | 1,227,341 | 1,251,145 | (23,804 | ) | |||||||||||
Goldman Sachs International | 2,162,950 | ILS | 01/31/20 | 597,180 | 628,208 | (31,028 | ) | |||||||||||
$ | 97,177 |
48 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2019 |
SERIES E (TOTAL RETURN BOND SERIES) |
Forward Foreign Currency Exchange Contracts†† | ||||||||||||||||||
Counterparty | Contracts | Currency | Settlement | Settlement | Value at | Unrealized | ||||||||||||
Goldman Sachs International | 1,800,000 | BRL | 01/02/20 | $ | 434,646 | $ | 448,274 | $ | 13,628 | |||||||||
Morgan Stanley Capital Services LLC | 1,000,000 | BRL | 01/02/20 | 240,205 | 249,041 | 8,836 | ||||||||||||
Citibank N.A., New York | 878,000 | EUR | 01/17/20 | 979,970 | 985,978 | 6,008 | ||||||||||||
Goldman Sachs International | 8,350,000 | MXN | 02/06/20 | 437,769 | 439,329 | 1,560 | ||||||||||||
JPMorgan Chase Bank, N.A. | 17,816 | EUR | 06/15/20 | 20,054 | 20,196 | 142 | ||||||||||||
Goldman Sachs International | 120,000 | MXN | 04/23/20 | 6,223 | 6,244 | 21 | ||||||||||||
Goldman Sachs International | 140,000 | MXN | 04/08/20 | 7,281 | 7,301 | 20 | ||||||||||||
$ | 30,215 |
~ | The face amount is denominated in U.S. dollars unless otherwise indicated. |
** | Includes cumulative appreciation (depreciation). Variation margin is reported within the Statement of Assets and Liabilities. |
† | Value determined based on Level 1 inputs — See Note 4. |
†† | Value determined based on Level 2 inputs, unless otherwise noted — See Note 4. |
††† | Value determined based on Level 3 inputs — See Note 4. |
1 | Affiliated issuer. |
2 | Rate indicated is the 7-day yield as of December 31, 2019. |
3 | Security is a 144A or Section 4(a)(2) security. These securities have been determined to be liquid under guidelines established by the Board of Trustees. The total market value of 144A or Section 4(a)(2) securities is $33,356,789 (cost $33,223,277), or 26.0% of total net assets. |
4 | Variable rate security. Rate indicated is the rate effective at December 31, 2019. In some instances, the effective rate is limited by a minimum rate floor or a maximum rate cap established by the issuer. The settlement status of a position may also impact the effective rate indicated. In some cases, a position may be unsettled at period end and may not have a stated effective rate. In instances where multiple underlying reference rates and spread amounts are shown, the effective rate is based on a weighted average. |
5 | Security is a 144A or Section 4(a)(2) security. These securities have been determined to be illiquid and restricted under guidelines established by the Board of Trustees. The total market value of 144A or Section 4(a)(2) illiquid and restricted securities is $507,198 (cost $540,957), or 0.4% of total net assets — See Note 9. |
6 | Security is an interest-only strip. |
7 | Security has no stated coupon. However, it is expected to receive residual cash flow payments on defined deal dates. |
8 | Security is a step up/down bond. The coupon increases or decreases at regular intervals until the bond reaches full maturity. Rate indicated is the rate at December 31, 2019. See table below for additional step information for each security. |
9 | Zero coupon rate security. |
10 | Security is a principal-only strip. |
11 | Repurchase Agreements — The interest rate on repurchase agreements is market driven and based on the underlying collateral obtained. See additional disclosure in the repurchase agreements table below for more information on repurchase agreements. |
BofA — Bank of America | |
BRL — Brazilian Real | |
CDX.NA.IG.31 — Credit Default Swap North American Investment Grade Series 31 Index | |
CME — Chicago Mercantile Exchange | |
CMS — Constant Maturity Swap | |
CMT — Constant Maturity Treasury | |
EUR — Euro | |
ICE — Intercontinental Exchange | |
ILS — Israeli New Shekel | |
JPY — Japanese Yen | |
KRW — South Korean Won | |
LIBOR — London Interbank Offered Rate | |
MXN — Mexican Peso | |
plc — Public Limited Company | |
REMIC — Real Estate Mortgage Investment Conduit | |
WAC — Weighted Average Coupon | |
See Sector Classification in Other Information section. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 49 |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2019 |
SERIES E (TOTAL RETURN BOND SERIES) |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2019 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Exchange-Traded Funds | $ | 1,056,278 | $ | — | $ | — | $ | 1,056,278 | ||||||||
Mutual Funds | 11,136,424 | — | — | 11,136,424 | ||||||||||||
Money Market Fund | 2,979,834 | — | — | 2,979,834 | ||||||||||||
Collateralized Mortgage Obligations | — | 42,339,597 | — | 42,339,597 | ||||||||||||
Asset-Backed Securities | — | 20,748,533 | 1,050,000 | 21,798,533 | ||||||||||||
Foreign Government Debt | — | 14,087,032 | — | 14,087,032 | ||||||||||||
U.S. Government Securities | — | 12,649,765 | — | 12,649,765 | ||||||||||||
Corporate Bonds | — | 10,989,182 | — | 10,989,182 | ||||||||||||
Federal Agency Bonds | — | 6,553,937 | — | 6,553,937 | ||||||||||||
Municipal Bonds | — | 1,283,393 | — | 1,283,393 | ||||||||||||
Senior Floating Rate Interests | — | 277,136 | — | 277,136 | ||||||||||||
Repurchase Agreements | — | 2,000,000 | — | 2,000,000 | ||||||||||||
Options Purchased | — | 216,240 | — | 216,240 | ||||||||||||
Interest Rate Swap Agreements** | — | 1,403 | — | 1,403 | ||||||||||||
Total Return Swap Agreements** | — | 1,155 | — | 1,155 | ||||||||||||
Forward Foreign Currency Exchange Contracts** | — | 284,374 | — | 284,374 | ||||||||||||
Total Assets | $ | 15,172,536 | $ | 111,431,747 | $ | 1,050,000 | $ | 127,654,283 |
Investments in Securities (Liabilities) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Credit Default Swap Agreements** | $ | — | $ | 421,815 | $ | — | $ | 421,815 | ||||||||
Interest Rate Swap Agreements** | — | 158,913 | — | 158,913 | ||||||||||||
Total Return Swap Agreements** | — | 2,576 | — | 2,576 | ||||||||||||
Forward Foreign Currency Exchange Contracts** | — | 156,982 | — | 156,982 | ||||||||||||
Total Liabilities | $ | — | $ | 740,286 | $ | — | $ | 740,286 |
** | This derivative is reported as unrealized appreciation/depreciation at period end. |
Step Coupon Bonds
The following table discloses additional information related to step coupon bonds held by the Fund. Certain securities are subject to multiple rate changes prior to maturity. For those securities a range of rates and corresponding dates have been provided. Rates for all step coupon bonds held by the Fund are scheduled to increase, none are scheduled to decrease.
Name | Coupon Rate at Next | Next Rate | Future | Future | ||||||||||||
Willis Engine Securitization Trust II 2012-A, 5.50% due 09/15/37 | 8.50 | % | 09/15/20 | — | — |
50 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2019 |
SERIES E (TOTAL RETURN BOND SERIES) |
Repurchase Agreements
In connection with transactions in repurchase agreements, it is the Fund’s policy that its custodian take possession of the underlying collateral. The collateral is in the possession of the Fund’s custodian and is evaluated to ensure that its market value exceeds, at a minimum, 102% of the original face amount of the repurchase agreements.
The Fund may engage in repurchase agreements. Repurchase agreements are fixed income securities in the form of agreements backed by collateral. These agreements typically involve the acquisition by the Fund of securities from the selling institution coupled with the agreement that the selling institution will repurchase the underlying securities at a specified price and at a fixed time in the future. The Fund may accept a wide variety of underlying securities as collateral for the repurchase agreements entered into by the Fund. Any such securities serving as collateral are marked-to-market daily in order to maintain full collateralization. Securities purchased under repurchase agreements are reflected as an asset on the Statement of Assets and Liabilities. Interest earned is recorded as a component of interest income on the Statement of Operations.
The use of repurchase agreements involves certain risks. For example, if the selling institution defaults on its obligation to repurchase the underlying securities at a time when the value of securities has declined, the Fund may incur a loss upon disposition of them. In the event of an insolvency or bankruptcy by the selling institution, the Fund’s right to control the collateral could be affected and result in certain costs and delays. In addition, the Fund could incur a loss if the value of the underlying collateral falls below the agreed upon repurchase price.
At December 31, 2019, the repurchase agreements in the account were as follows:
Counterparty and Terms | Face | Repurchase |
| Collateral | Par | Fair | ||||||||||||
Societe Generale | Fannie Mae Connecticut | |||||||||||||||||
2.29% (3 Month USD LIBOR + 0.40%) | Avenue Securities 4.14% | |||||||||||||||||
07/07/20* | $ | 2,000,000 | $ | 2,038,302 | 01/25/31 | $ | 1,236,000 | $ | 1,253,551 | |||||||||
Connecticut Avenue Securities Trust | ||||||||||||||||||
3.79% | ||||||||||||||||||
07/25/39 | 624,000 | 627,120 | ||||||||||||||||
Ashford Hospitality Trust | ||||||||||||||||||
4.84% | ||||||||||||||||||
04/15/35 | 622,000 | 621,627 | ||||||||||||||||
2,482,000 | 2,502,298 |
* | Variable rate security. Rate indicated is the rate effective at December 31, 2019. In some instances, the effective rate is limited by a minimum rate floor or a maximum rate cap established by the issuer. The settlement status of a position may also impact the effective rate indicated. In some cases, a position may be unsettled at period end and may not have a stated effective rate. In instances where multiple underlying reference rates and spread amounts are shown, the effective rate is based on a weighted average. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 51 |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2019 |
SERIES E (TOTAL RETURN BOND SERIES) |
Affiliated Transactions
Investments representing 5% or more of the outstanding voting shares of a company, or control of or by, or common control under Guggenheim Investments (“GI”), result in that company being considered an affiliated issuer, as defined in the 1940 Act.
The Fund may invest in certain of the underlying series of Guggenheim Strategy Funds Trust, including Guggenheim Strategy Fund II, Guggenheim Strategy Fund III, and Guggenheim Variable Insurance Strategy Fund III, (collectively, the “Short Term Investment Vehicles”), each of which are open-end management investment companies managed by GI. The Short Term Investment Vehicles, which launched on March 11, 2014, are offered as short term investment options only to mutual funds, trusts, and other accounts managed by GI and/or its affiliates, and are not available to the public. The Short Term Investment Vehicles pay no investment management fees. The Short Term Investment Vehicles’ annual report on Form N-CSR dated September 30, 2019, is available publicly or upon request. This information is available from the EDGAR database on the SEC’s website at https://www.sec.gov/Archives/edgar/data/1601445/000089180419000405/gug78512-ncsr.htm.
Transactions during the year ended December 31, 2019, in which the company is an affiliated issuer, were as follows:
Security Name | Value | Additions | Reductions | Realized | Change in | Value | Shares | Investment | ||||||||||||||||||||||||
Mutual Funds | ||||||||||||||||||||||||||||||||
Guggenheim Floating Rate Strategies Fund — Institutional Class | $ | 202,786 | $ | 8,140 | $ | (212,428 | ) | $ | (8,736 | ) | $ | 10,238 | $ | — | — | $ | 8,166 | |||||||||||||||
Guggenheim Limited Duration Fund — R6-Class | 2,962,018 | 77,009 | — | — | (6,245 | ) | 3,032,782 | 123,485 | 76,987 | |||||||||||||||||||||||
Guggenheim Total Return Bond Fund — R6-Class | 5,784,281 | 155,720 | — | — | 115,443 | 6,055,444 | 223,119 | 155,641 | ||||||||||||||||||||||||
Guggenheim Ultra Short Duration Fund — Institutional Class | 2,489,086 | 61,683 | (500,000 | ) | 621 | (3,192 | ) | 2,048,198 | 205,849 | 61,849 | ||||||||||||||||||||||
$ | 11,438,171 | $ | 302,552 | $ | (712,428 | ) | $ | (8,115 | ) | $ | 116,244 | $ | 11,136,424 | $ | 302,643 |
52 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SERIES E (TOTAL RETURN BOND SERIES) |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2019 |
Assets: | ||||
Investments in unaffiliated issuers, at value (cost $111,897,107) | $ | 114,230,927 | ||
Investments in affiliated issuers, at value (cost $10,989,863) | 11,136,424 | |||
Repurchase agreements, at value (cost $2,000,000) | 2,000,000 | |||
Segregated cash with broker | 581,175 | |||
Unamortized upfront premiums paid on interest rate swap agreements | 2,054 | |||
Unrealized appreciation on OTC swap agreements | 1,155 | |||
Unrealized appreciation on forward foreign currency exchange contracts | 284,374 | |||
Prepaid expenses | 6,945 | |||
Receivables: | ||||
Interest | 466,545 | |||
Fund shares sold | 285,564 | |||
Investment Adviser | 23,115 | |||
Swap settlement | 19,069 | |||
Dividends | 18,208 | |||
Variation margin on credit default swap agreements | 4,496 | |||
Foreign tax reclaims | 2,649 | |||
Total assets | 129,062,700 | |||
Liabilities: | ||||
Overdraft due to custodian bank | 9,608 | |||
Segregated cash due to broker | 106,000 | |||
Unamortized upfront premiums received on credit default swap agreements | 191,064 | |||
Unrealized depreciation on OTC swap agreements | 100,834 | |||
Unrealized depreciation on forward foreign currency exchange contracts | 156,982 | |||
Payable for: | ||||
Fund shares redeemed | 58,816 | |||
Variation margin on interest rate swap agreements | 43,284 | |||
Securities purchased | 39,355 | |||
Distribution and service fees | 26,343 | |||
Fund accounting/administration fees | 8,430 | |||
Protection fees on credit default swap agreements | 8,010 | |||
Trustees’ fees* | 3,306 | |||
Transfer agent/maintenance fees | 2,373 | |||
Miscellaneous | 99,352 | |||
Total liabilities | 853,757 | |||
Commitments and contingent liabilities (Note 14) | — | |||
Net assets | $ | 128,208,943 | ||
Net assets consist of: | ||||
Paid in capital | $ | 125,177,910 | ||
Total distributable earnings (loss) | 3,031,033 | |||
Net assets | $ | 128,208,943 | ||
Capital shares outstanding | 7,950,387 | |||
Net asset value per share | $ | 16.13 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2019 |
Investment Income: | ||||
Dividends from securities of unaffiliated issuers | 5,543 | |||
Dividends from securities of affiliated issuers | 302,643 | |||
Interest from securities of unaffiliated issuers | 3,805,094 | |||
Total investment income | 4,113,280 | |||
Expenses: | ||||
Management fees | 517,009 | |||
Distribution and service fees | 331,416 | |||
Transfer agent/maintenance fees | 25,087 | |||
Professional fees | 123,229 | |||
Fund accounting/administration fees | 106,054 | |||
Custodian fees | 38,414 | |||
Trustees’ fees* | 21,991 | |||
Interest expense | 241 | |||
Miscellaneous | 76,461 | |||
Total expenses | 1,239,902 | |||
Less: | ||||
Expenses reimbursed by Adviser | (21,579 | ) | ||
Expenses waived by Adviser | (186,955 | ) | ||
Earnings credits applied | (1,889 | ) | ||
Total waived/reimbursed expenses | (210,423 | ) | ||
Net expenses | 1,029,479 | |||
Net investment income | 3,083,801 | |||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments in unaffiliated issuers | 958,442 | |||
Investments in affiliated issuers | (8,115 | ) | ||
Swap agreements | (1,329,029 | ) | ||
Futures contracts | (111,192 | ) | ||
Options purchased | (341,981 | ) | ||
Options written | 39,854 | |||
Forward foreign currency exchange contracts | 106,733 | |||
Foreign currency transactions | (26,083 | ) | ||
Net realized loss | (711,371 | ) | ||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments in unaffiliated issuers | 2,824,083 | |||
Investments in affiliated issuers | 116,244 | |||
Swap agreements | 134,503 | |||
Futures contracts | 39,035 | |||
Options purchased | 141,029 | |||
Forward foreign currency exchange contracts | 266,100 | |||
Foreign currency translations | 2,298 | |||
Net change in unrealized appreciation (depreciation) | 3,523,292 | |||
Net realized and unrealized gain | 2,811,921 | |||
Net increase in net assets resulting from operations | $ | 5,895,722 |
* | 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 | 53 |
SERIES E (TOTAL RETURN BOND SERIES) |
STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | ||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income | $ | 3,083,801 | $ | 3,447,609 | ||||
Net realized gain (loss) on investments | (711,371 | ) | 694,440 | |||||
Net change in unrealized appreciation (depreciation) on investments | 3,523,292 | (2,960,854 | ) | |||||
Net increase in net assets resulting from operations | 5,895,722 | 1,181,195 | ||||||
Distributions to shareholders | (3,605,920 | ) | (5,237,160 | ) | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 33,497,118 | 33,386,285 | ||||||
Distributions reinvested | 3,605,920 | 5,237,160 | ||||||
Cost of shares redeemed | (34,034,071 | ) | (42,216,553 | ) | ||||
Net increase (decrease) from capital share transactions | 3,068,967 | (3,593,108 | ) | |||||
Net increase (decrease) in net assets | 5,358,769 | (7,649,073 | ) | |||||
Net assets: | ||||||||
Beginning of year | 122,850,174 | 130,499,247 | ||||||
End of year | $ | 128,208,943 | $ | 122,850,174 | ||||
Capital share activity: | ||||||||
Shares sold | 2,083,694 | 2,086,086 | ||||||
Shares issued from reinvestment of distributions | 225,935 | 331,466 | ||||||
Shares redeemed | (2,107,651 | ) | (2,625,181 | ) | ||||
Net increase (decrease) in shares | 201,978 | (207,629 | ) |
54 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SERIES E (TOTAL RETURN BOND SERIES) |
FINANCIAL HIGHLIGHTS |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 15.85 | $ | 16.40 | $ | 16.05 | $ | 15.68 | $ | 15.89 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | .38 | .46 | .61 | .66 | .67 | |||||||||||||||
Net gain (loss) on investments (realized and unrealized) | .34 | (.29 | ) | .45 | .41 | (.50 | ) | |||||||||||||
Total from investment operations | .72 | .17 | 1.06 | 1.07 | .17 | |||||||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | (.44 | ) | (.72 | ) | (.71 | ) | (.70 | ) | (.38 | ) | ||||||||||
Total distributions | (.44 | ) | (.72 | ) | (.71 | ) | (.70 | ) | (.38 | ) | ||||||||||
Net asset value, end of period | $ | 16.13 | $ | 15.85 | $ | 16.40 | $ | 16.05 | $ | 15.68 | ||||||||||
| ||||||||||||||||||||
Total Returnb | 4.49 | % | 1.14 | % | �� | 6.72 | % | 6.83 | % | 1.15 | % | |||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 128,209 | $ | 122,850 | $ | 130,499 | $ | 114,043 | $ | 111,974 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | 2.33 | % | 2.85 | % | 3.76 | % | 4.13 | % | 4.19 | % | ||||||||||
Total expensesc | 0.94 | % | 0.92 | % | 0.99 | % | 1.02 | % | 1.05 | % | ||||||||||
Net expensesd,e,f | 0.78 | % | 0.78 | % | 0.81 | % | 0.83 | % | 0.83 | % | ||||||||||
Portfolio turnover rate | 54 | % | 30 | % | 76 | % | 88 | % | 85 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not take into account any of the expenses associated with an investment in variable insurance products. If total return had taken into account these expenses, performance would have been lower. Shares of a series of Guggenheim Variable Funds Trust are available only through the purchase of such products. |
c | Does not include expenses of the underlying funds in which the Fund invests. |
d | Net expense information reflects the expense ratios after expense waivers and reimbursements, as applicable. |
e | Net expenses may include expenses that are excluded from the expense limitation agreement. Excluding these expenses, the net expense ratios for the years would be: |
12/31/19 | 12/31/18 | 12/31/17 | 12/31/16 | 12/31/15 | |
0.77% | 0.77% | 0.77% | 0.78% | 0.78% |
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: |
12/31/19 | 12/31/18 | 12/31/17 | 12/31/16 | |
— | 0.00%* | — | — |
* | Less than 0.01% |
SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 55 |
MANAGERS’ COMMENTARY (Unaudited) | December 31, 2019 |
To Our Shareholders:
The Series F (Floating Rate Series) (the “Fund”) is managed by a team of seasoned professionals, including B. Scott Minerd, Chairman of Investments and Global Chief Investment Officer; Anne B. Walsh, Senior Managing Director and Chief Investment Officer, Fixed Income; Kevin H. Gundersen, Senior Managing Director and Portfolio Manager; and Thomas J. Hauser, Senior Managing Director and Portfolio Manager. In the following paragraphs, the investment team discusses the market environment and performance of the Fund for the fiscal year ended December 31, 2019.
For the year ended December 31, 2019, Series F (Floating Rate Series) returned 7.60% net of fees, compared with 8.17% for its benchmark, the Credit Suisse Leveraged Loan Index.
The bank loan market began the year with a strong rally on the back of the large technical sell-off in the fourth quarter of 2018, leading to the strongest first half returns for the Index since 2009. In the second half of the year, the market was a bit steadier, although we did see a noticeable bifurcation between higher-rated and lower-rated credits, with higher-rated names outperforming through November. In the last month of the year, mangers seemed more willing to move down in quality, driving secondary levels higher across the rating spectrum, but particularly in B and CCC-rated names, which had been largely overlooked for much of the year. Despite outflows from mutual funds and exchange-traded funds in all but one week of the past year, as retail investors reallocated capital on a shift in the U.S. Federal Reserve’s (the “Fed”) rate hike expectations, loans continued to see some technical tailwinds that helped stabilize prices in the form of continued strong collateralized loan obligation (“CLO”) demand which greatly outpaced the retail outflows.
The Fund’s returns were positive across all sectors with the exception of energy. However, the Fund lagged its benchmark on a net basis. The Fund benefitted from strong credit selection in B-rated names and non-rated names, as well as across most sectors, but particularly in the basic materials, consumer cyclical, and consumer non-cyclical sectors. Additionally, the Fund benefitted from being underweight to CCC-rated assets, which underperformed the broader index, returning 2.18% for the period. We continue to believe it is not the appropriate time in the cycle to move down in credit quality in search of incremental yield. The Fund’s returns were negatively impacted by idiosyncratic credit issues resulting in negative credit selection in the energy and technology sectors, driven mainly by stress on the energy space and certain idiosyncratic credit issues, as well as cash drag.
In the first quarter of 2019, the market experienced a technical rebound from the sharp sell-off we saw in the fourth quarter of 2018, which was driven by record outflows from retail funds that forced managers to sell assets quickly and in large amounts. While outflows from retail funds continued in 2019, the pace of those outflows slowed dramatically. Additionally, managers collected their year-end interest and amortization payments and CLO issuance began to pick up, meaning lenders were looking to put cash to work. These factors, among others, led to a sharp snap back in just the first few weeks of the year, particularly in the larger, more liquid, better-rated capital structures which bore the brunt of the sell-off in the fourth quarter of 2018. This rebound resulted in one of the strongest quarters for the loan market on record, and the strongest since the first quarter of 2010, at 3.78%.
For much of the remainder of 2019, the predominant theme was the bifurcation in demand between the demand for better-rated and lower-rated credit. From April through November, BB, B and CCC-rated names in the index returned 3.79%, 2.62% and -2.77% respectively. This was driven by two main factors in the market. The first was that CLOs (which represent ~70% of the loan buyer base) have a limitation on the amount of CCC-rated names they can hold in their portfolios. This not only limits their demand for CCCs, but also for B2s and B3s, which can quickly be downgraded into the CCC category. The second factor driving this bifurcation was credit managers growing more cautious in their positioning at this stage of the credit cycle. Geopolitical concerns, the escalating trade conflict, slowing earnings growth, and idiosyncratic credit issues, all pushed managers to try and move up in quality when the market allowed.
In December however, this trend started to reverse. Those same BB, B, and CCC-rated names in the index returned 0.83%, 1.95% and 3.38% in the month of December alone, helping to close the gap on returns between ratings categories for the year. With the signing of the phase one trade deal, a relatively positive earnings season, and a strong stock market, managers who had built cash in prior quarters started to get more comfortable moving down in credit quality to deploy capital. This comfort effected both primary and secondary markets, with new issue and secondary spreads tightening, nearly half the secondary market trading above par at year end, and more repricings coming to market in the fourth quarter than in the prior five quarters combined. We believe we will see these trends continue into the first quarter of 2020.
56 | THE GUGGENHEIM FUNDS ANNUAL REPORT |
MANAGERS’ COMMENTARY (Unaudited)(concluded) | December 31, 2019 |
Broadly speaking, over the past year the leveraged loan market has seen support from continued (albeit slowing) growth, stable fundamentals, and a modestly positive technical environment despite the outflows from retail funds. We continue to see EBITDA growth across most of the names in our portfolio, and across the broader market, although that growth has slowed over the past year, at least partially due to the roll-off of the one-time tax benefits and stimulus put into place by the Trump administration.
Additionally, the technical environment has been supported not only by strong new issue CLO volume, but also by continued demand from institutional investors and relatively limited new issue supply volumes in 2019, though the market did see a pickup in issuance in the second half of 2019. As mentioned, retail funds saw consistent outflows in all but one week of the year, totaling $30 billion. However, these outflows were more than offset by U.S. new issue CLO volume which totaled $118 billion, only 9% behind 2018’s record pace. For 2019, U.S. institutional loan volume was $309 billion, down 29% from the same period in 2018, according to S&P. This supply/demand imbalance has helped to provide some support to secondary market trading levels throughout the year.
Despite the technical support for leveraged loans from the supply/demand imbalance, the market has shown some signs of softness from a year ago. While the default rate in the market remains below the historical average at ~1.4%, distressed levels have crept up over the last few months with 8.6% of the market trading at 90 or below, versus 7.5% a year ago. Secondary and new issue spreads remain wider than a year ago, particularly in lower-rated credit, as broader geopolitical fears, weaker macroeconomic data, and a temporarily inverted yield curve stoked fears that a recession may be on the horizon, though we have seen some of these worries dampened in recent months. In the primary market, while higher-rated deals were typically easily syndicated, many lower-quality deals were forced to increase pricing or make other lender concessions to get them across the finish line for much of 2019, and B-rated new issue spreads remain wider than 2018 levels, though that gap continues to narrow.
As we move towards 2020, we believe that the Fed’s actions have staved off recession in the near term. That said, numerous headwinds, combined with limited policy space globally, mean the Fed finds itself walking a fine line, and we keep in mind the late 1990’s when the Fed effectively prolonged the expansion with rate cuts, only to see the bursting of the dot-com bubble and recession shortly thereafter. Given that credit spreads are still relatively tight on a historical basis, we continue to believe it is prudent to remain up in quality as we await better opportunities to deploy capital in riskier credits and sectors in the coming downturn. We continue to invest in less cyclical businesses with attractive cash flow profiles, that we believe are best suited to survive the next downturn whenever it occurs.
Performance displayed represents past performance which is no guarantee of future results.
The opinions and forecast expressed may not actually come to pass. This information is subject to change at any time, based on market and other conditions, and should not be construed as a recommendation of any specific security or strategy.
THE GUGGENHEIM FUNDS ANNUAL REPORT | 57 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2019 |
SERIES F (FLOATING RATE STRATEGIES SERIES)
OBJECTIVE: Seeks to provide a high level of current income while maximizing total return.
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments.
Inception Date: April 24, 2013 |
Ten Largest Holdings (% of Total Net Assets) | |
PAREXEL International Corp., 4.55% | 1.4% |
MACOM Technology Solutions Holdings, Inc., 4.05% | 1.4% |
Aspen Dental, 4.55% | 1.4% |
WP CPP Holdings LLC, 5.68% | 1.4% |
DG Investment Intermediate Holdings 2, Inc., 4.80% | 1.4% |
LTI Holdings, Inc., 5.30% | 1.3% |
Trans Union LLC, 3.55% | 1.3% |
Telenet Financing USD LLC, 3.99% | 1.3% |
Titan AcquisitionCo New Zealand Ltd., 6.19% | 1.3% |
IQVIA Holdings, Inc., 3.69% | 1.3% |
Top Ten Total | 13.5% |
“Ten Largest Holdings” excludes any temporary cash or derivative investments. |
58 | THE GUGGENHEIM FUNDS ANNUAL REPORT |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2019 |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2019
| 1 Year | 5 Year | Since |
Series F (Floating Rate Strategies Series) | 7.60% | 3.85% | 3.60% |
Credit Suisse Leveraged Loan Index | 8.17% | 4.54% | 4.16% |
Portfolio Composition by Quality Rating1 | |
Rating | % of Total |
Fixed Income Instruments | |
BBB | 6.2% |
BB | 33.4% |
B | 46.4% |
CCC | 0.6% |
NR2 | 0.7% |
Other Instruments | 12.7% |
Total Investments | 100.0% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The Credit Suisse Leveraged Loan Index is an unmanaged index and, unlike the Fund, has no management fees or operating expenses to reduce its reported return. |
† | Performance figures do not reflect fees and expenses associated with an investment in variable insurance products. If returns had taken into account these fees and expenses, performance would have been lower. Shares of a series of Guggenheim Variable Funds Trust are available only through the purchase of such products. |
1 | Source: BlackRock Solutions. Credit quality ratings are measured on a scale that generally ranges from AAA (highest) to D (lowest). All securities except for those labeled “NR” have been rated by Moody’s, Standard & Poor’s (“S&P”), or Fitch, each of which is a Nationally Recognized Statistical Rating Organization (“NRSRO”). For purposes of this presentation, when ratings are available from more than one agency, the highest rating is used. Guggenheim Investments has converted ratings to the equivalent S&P rating. Security ratings are determined at the time of purchase and may change thereafter. |
2 | NR securities do not necessarily indicate low credit quality. |
THE GUGGENHEIM FUNDS ANNUAL REPORT | 59 |
SCHEDULE OF INVESTMENTS | December 31, 2019 |
SERIES F (FLOATING RATE STRATEGIES SERIES) |
| Shares | Value | ||||||
COMMON STOCKS†† - 0.1% | ||||||||
Industrial - 0.1% | ||||||||
API Heat Transfer Parent LLC* | 170,114 | $ | 27,218 | |||||
BP Holdco LLC*,†††,1,2 | 11,609 | 4,099 | ||||||
Vector Phoenix Holdings, LP*,†††,1 | 11,609 | 972 | ||||||
Total Industrial | 32,289 | |||||||
Consumer, Non-cyclical - 0.0% | ||||||||
Chef Holdings, Inc.*,†††,1 | 20 | 2,337 | ||||||
Total Common Stocks | ||||||||
(Cost $90,943) | 34,626 | |||||||
PREFERRED STOCKS†† - 0.1% | ||||||||
Industrial - 0.1% | ||||||||
API Heat Transfer Intermediate* | 36 | 26,455 | ||||||
Total Preferred Stocks | ||||||||
(Cost $28,949) | 26,455 | |||||||
MONEY MARKET FUND† - 13.2% | ||||||||
Federated U.S. Treasury Cash Reserve Fund — Institutional Shares 1.46%3 | 6,095,872 | 6,095,872 | ||||||
Total Money Market Fund | ||||||||
(Cost $6,095,872) | 6,095,872 | |||||||
Face | ||||||||
SENIOR FLOATING RATE INTERESTS††,4 - 89.6% | ||||||||
Consumer, Cyclical - 18.0% | ||||||||
Titan AcquisitionCo New Zealand Ltd. | ||||||||
6.19% (3 Month USD LIBOR + 4.25%, Rate Floor: 4.25%) due 05/01/26 | $ | 597,000 | 598,642 | |||||
Navistar, Inc. | ||||||||
5.24% (1 Month USD LIBOR + 3.50%, Rate Floor: 3.50%) due 11/06/24 | 591,366 | 588,900 | ||||||
Packers Sanitation Services, Inc. | ||||||||
4.99% (1 Month USD LIBOR + 3.25%, Rate Floor: 4.25%) due 12/04/24 | 588,246 | 588,063 | ||||||
Power Solutions (Panther) | ||||||||
5.30% (1 Month USD LIBOR + 3.50%, Rate Floor: 3.50%) due 04/30/26 | 573,563 | 574,641 | ||||||
Crown Finance US, Inc. | ||||||||
4.05% (1 Month USD LIBOR + 2.25%, Rate Floor: 2.25%) due 02/28/25 | 572,782 | 571,997 | ||||||
AMC Entertainment, Inc. | ||||||||
4.80% (1 Month USD LIBOR + 3.00%, Rate Floor: 3.00%) due 04/22/26 | 546,497 | 550,300 | ||||||
IRB Holding Corp. | ||||||||
5.22% (3 Month USD LIBOR + 3.25%, Rate Floor: 4.25%) due 02/05/25 | 544,587 | 547,462 | ||||||
AVSC Holding Corp. | ||||||||
5.09% (1 Month USD LIBOR + 3.25% and 3 Month USD LIBOR + 3.25%, Rate Floor: 4.25%) due 03/03/25 | 540,572 | 537,869 | ||||||
American Tire Distributors, Inc. | ||||||||
9.32% (1 Month USD LIBOR + 7.50% and 3 Month USD LIBOR + 7.50%, Rate Floor: 8.50%) due 09/02/24 | 517,770 | 459,520 | ||||||
7.93% (3 Month USD LIBOR + 6.00%, Rate Floor: 7.00%) due 09/01/23 | 57,427 | 56,387 | ||||||
Samsonite IP Holdings S.A.R.L. | ||||||||
3.55% (1 Month USD LIBOR + 1.75%, Rate Floor: 1.75%) due 04/25/25 | 505,416 | 502,469 | ||||||
IBC Capital Ltd. | ||||||||
5.65% (3 Month USD LIBOR + 3.75%, Rate Floor: 3.75%) due 09/11/23 | 394,975 | 394,481 | ||||||
Mavis Tire Express Services Corp. | ||||||||
5.05% (1 Month USD LIBOR + 3.25%, Rate Floor: 3.25%) due 03/20/25 | 404,164 | 392,714 | ||||||
NVA Holdings, Inc. | ||||||||
6.50% (3 Month USD LIBOR + 2.75%, Rate Floor: 3.75%) due 02/03/25 | 312,938 | 312,613 | ||||||
Petco Animal Supplies, Inc. | ||||||||
5.18% (3 Month USD LIBOR + 3.25%, Rate Floor: 4.25%) due 01/26/23 | 349,028 | 295,801 | ||||||
EG Finco Ltd. | ||||||||
5.96% (3 Month USD LIBOR + 4.00%, Rate Floor: 4.00%) due 02/07/25 | 294,752 | 293,096 | ||||||
Equinox Holdings, Inc. | ||||||||
4.80% (1 Month USD LIBOR + 3.00%, Rate Floor: 4.00%) due 03/08/24 | 234,401 | 235,029 | ||||||
1-800 Contacts | ||||||||
4.80% (1 Month USD LIBOR + 3.00%, Rate Floor: 4.00%) due 01/22/23 | 192,545 | 192,304 | ||||||
Prime Security Services Borrower LLC (ADT) | ||||||||
4.94% (1 Month USD LIBOR + 3.25%, Rate Floor: 4.25%) due 09/23/26 | 149,625 | 149,924 | ||||||
Wyndham Hotels & Resorts, Inc. | ||||||||
3.55% (1 Month USD LIBOR + 1.75%, Rate Floor: 1.75%) due 05/30/25 | 148,125 | 148,786 | ||||||
Leslie’s Poolmart, Inc. | ||||||||
5.34% (2 Month USD LIBOR + 3.50%, Rate Floor: 3.50%) due 08/16/23 | 117,526 | 109,740 | ||||||
Playtika Holding Corp. | ||||||||
7.80% (1 Month USD LIBOR + 6.00%, Rate Floor: 7.00%) due 12/09/24 | 100,000 | 100,950 | ||||||
Belk, Inc. | ||||||||
8.80% (3 Month USD LIBOR + 6.75%, Rate Floor: 7.75%) due 07/31/25 | 74,961 | 51,864 | ||||||
CPI Acquisition, Inc. | ||||||||
6.71% (3 Month USD LIBOR + 4.50%, Rate Floor: 6.50%) due 08/17/22 | 41,839 | 33,471 | ||||||
Total Consumer, Cyclical | 8,287,023 | |||||||
Industrial - 17.7% | ||||||||
WP CPP Holdings LLC | ||||||||
5.68% (3 Month USD LIBOR + 3.75%, Rate Floor: 4.75%) due 04/30/25 | 634,797 | 629,243 |
60 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2019 |
SERIES F (FLOATING RATE STRATEGIES SERIES) |
| Face | Value | ||||||
DG Investment Intermediate Holdings 2, Inc. | ||||||||
4.80% (1 Month USD LIBOR + 3.00%, Rate Floor: 3.75%) due 02/03/25 | $ | 629,523 | $ | 626,376 | ||||
Charter Nex US, Inc. | ||||||||
4.80% (1 Month USD LIBOR + 3.00%, Rate Floor: 4.00%) due 05/16/24 | 514,085 | 511,515 | ||||||
5.30% (1 Month USD LIBOR + 3.50%, Rate Floor: 3.50%) due 05/16/24 | 99,500 | 99,997 | ||||||
Hillman Group, Inc. | ||||||||
5.80% (1 Month USD LIBOR + 4.00%, Rate Floor: 4.00%) due 05/30/25 | 591,000 | 580,362 | ||||||
Altra Industrial Motion Corp. | ||||||||
3.80% (1 Month USD LIBOR + 2.00%, Rate Floor: 2.00%) due 10/01/25 | 577,239 | 578,439 | ||||||
Engineered Machinery Holdings, Inc. | ||||||||
4.94% (3 Month USD LIBOR + 3.00%, Rate Floor: 4.00%) due 07/19/24 | 551,332 | 544,440 | ||||||
Genesee & Wyoming, Inc. | ||||||||
due 12/30/26 | 500,000 | 504,285 | ||||||
TransDigm Group, Inc. | ||||||||
due 05/30/25 | 498,731 | 499,808 | ||||||
USIC Holding, Inc. | ||||||||
5.05% (1 Month USD LIBOR + 3.25%, Rate Floor: 4.25%) due 12/08/23 | 491,433 | 489,285 | ||||||
American Builders & Contractors Supply Co., Inc. | ||||||||
due 01/15/27 | 448,875 | 450,841 | ||||||
BWAY Holding Co. | ||||||||
5.23% (3 Month USD LIBOR + 3.25%, Rate Floor: 3.25%) due 04/03/24 | 438,750 | 436,833 | ||||||
Berry Global, Inc. | ||||||||
4.22% (1 Month USD LIBOR + 2.50%, Rate Floor: 2.50%) due 07/01/26 | 421,512 | 422,216 | ||||||
CPG International LLC | ||||||||
5.93% (6 Month USD LIBOR + 3.75%, Rate Floor: 4.75%) due 05/06/24 | 343,813 | 343,528 | ||||||
American Bath Group LLC | ||||||||
6.05% (1 Month USD LIBOR + 4.25%, Rate Floor: 5.25%) due 09/29/23 | 264,813 | 265,475 | ||||||
VC GB Holdings, Inc. | ||||||||
4.80% (1 Month USD LIBOR + 3.00%, Rate Floor: 4.00%) due 02/28/24 | 267,708 | 265,031 | ||||||
Titan Acquisition Ltd. (Husky) | ||||||||
4.80% (1 Month USD LIBOR + 3.00%, Rate Floor: 3.00%) due 03/28/25 | 196,500 | 192,991 | ||||||
KUEHG Corp. (KinderCare) | ||||||||
5.69% (3 Month USD LIBOR + 3.75%, Rate Floor: 4.75%) due 02/21/25 | 180,213 | 180,626 | ||||||
API Heat Transfer | ||||||||
7.94% (3 Month USD LIBOR + 6.00%, Rate Floor: 7.00%) due 01/01/24††† | 157,854 | 131,808 | ||||||
7.94% (3 Month USD LIBOR + 6.00%, Rate Floor: 7.00%) due 10/02/23††† | 28,163 | 25,347 | ||||||
Bioplan USA, Inc. | ||||||||
6.55% (1 Month USD LIBOR + 4.75%, Rate Floor: 5.75%) due 09/23/21 | 172,717 | 150,264 | ||||||
Hayward Industries, Inc. | ||||||||
5.30% (1 Month USD LIBOR + 3.50%, Rate Floor: 3.50%) due 08/05/24 | 115,020 | 113,985 | ||||||
Reece Ltd. | ||||||||
due 01/04/27††† | 99,750 | 99,999 | ||||||
Total Industrial | 8,142,694 | |||||||
Consumer, Non-cyclical - 16.6% | ||||||||
PAREXEL International Corp. | ||||||||
4.55% (1 Month USD LIBOR + 2.75%, Rate Floor: 2.75%) due 09/27/24 | 669,051 | 655,429 | ||||||
Aspen Dental | ||||||||
4.55% (1 Month USD LIBOR + 2.75%, Rate Floor: 2.75%) due 04/30/25 | 640,497 | 640,900 | ||||||
IQVIA Holdings, Inc. | ||||||||
3.69% (3 Month USD LIBOR + 1.75%, Rate Floor: 1.75%) due 06/11/25 | 595,466 | 598,074 | ||||||
Hearthside Group Holdings LLC | ||||||||
5.49% (1 Month USD LIBOR + 3.69%, Rate Floor: 3.69%) due 05/23/25 | 541,750 | 535,249 | ||||||
Endo Luxembourg Finance Co. | ||||||||
6.06% (1 Month USD LIBOR + 4.25%, Rate Floor: 5.00%) due 04/29/24 | 539,072 | 514,814 | ||||||
BRP, Inc. | ||||||||
3.80% (1 Month USD LIBOR + 2.00%, Rate Floor: 2.75%) due 05/23/25 | 491,755 | 492,984 | ||||||
JBS USA Lux SA | ||||||||
3.80% (1 Month USD LIBOR + 2.00%, Rate Floor: 2.00%) due 05/01/26 | 473,348 | 476,107 | ||||||
US Foods, Inc. | ||||||||
3.80% (1 Month USD LIBOR + 2.00%, Rate Floor: 2.00%) due 09/14/26 | 448,875 | 450,419 | ||||||
PPDI (Pharmaceutical Product Development, Inc.) | ||||||||
4.30% (1 Month USD LIBOR + 2.50%, Rate Floor: 3.50%) due 08/18/22 | 435,190 | 437,218 | ||||||
Syneos Health, Inc. | ||||||||
3.80% (1 Month USD LIBOR + 2.00%, Rate Floor: 2.00%) due 08/01/24 | 380,133 | 382,034 | ||||||
Hostess Brands LLC | ||||||||
due 08/04/25 | 349,125 | 350,260 | ||||||
Dole Food Company, Inc. | ||||||||
4.53% (1 Month USD LIBOR + 2.75%, Rate Floor: 3.75%) due 04/06/24 | 336,538 | 335,576 | ||||||
Valeant Pharmaceuticals International, Inc. | ||||||||
4.49% (1 Month USD LIBOR + 2.75%, Rate Floor: 2.75%) due 11/27/25 | 318,750 | 320,226 | ||||||
Albertson’s LLC | ||||||||
4.55% (1 Month USD LIBOR + 2.75%, Rate Floor: 3.50%) due 08/17/26 | 291,014 | 293,351 | ||||||
Springs Window Fashions | ||||||||
6.05% (1 Month USD LIBOR + 4.25%, Rate Floor: 4.25%) due 06/15/25 | 197,000 | 196,015 | ||||||
10.30% (1 Month USD LIBOR + 8.50%, Rate Floor: 8.50%) due 06/15/26 | 100,000 | 94,250 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 61 |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2019 |
SERIES F (FLOATING RATE STRATEGIES SERIES) |
| Face | Value | ||||||
Diamond (BC) BV | ||||||||
4.93% (3 Month USD LIBOR + 3.00%, Rate Floor: 3.00%) due 09/06/24 | $ | 294,000 | $ | 287,238 | ||||
Sigma Holding BV (Flora Food) | ||||||||
5.09% (3 Month USD LIBOR + 3.00%, Rate Floor: 3.00%) due 07/02/25 | 246,250 | 246,250 | ||||||
BCPE Eagle Buyer LLC | ||||||||
6.05% (1 Month USD LIBOR + 4.25%, Rate Floor: 5.25%) due 03/18/24 | 195,477 | 187,781 | ||||||
Immucor, Inc. | ||||||||
6.94% (3 Month USD LIBOR + 5.00%, Rate Floor: 6.00%) due 06/15/21 | 146,250 | 145,564 | ||||||
CTI Foods Holding Co. LLC | ||||||||
8.91% (3 Month USD LIBOR + 7.00%, Rate Floor: 8.00%) due 05/03/24†††,1 | 11,111 | 11,111 | ||||||
Total Consumer, Non-cyclical | 7,650,850 | |||||||
Communications - 13.2% | ||||||||
Telenet Financing USD LLC | ||||||||
3.99% (1 Month USD LIBOR + 2.25%, Rate Floor: 2.25%) due 08/17/26 | 600,000 | 602,874 | ||||||
GTT Communications, Inc. | ||||||||
4.55% (1 Month USD LIBOR + 2.75%, Rate Floor: 2.75%) due 05/31/25 | 640,250 | 532,951 | ||||||
CSC Holdings, LLC | ||||||||
3.99% (1 Month USD LIBOR + 2.25%, Rate Floor: 2.25%) due 07/17/25 | 514,922 | 515,210 | ||||||
WMG Acquisition Corp. | ||||||||
3.92% (1 Month USD LIBOR + 2.13%, Rate Floor: 2.13%) due 11/01/23 | 500,000 | 502,300 | ||||||
SFR Group S.A. | ||||||||
5.43% (1 Month USD LIBOR + 3.69%, Rate Floor: 3.69%) due 01/31/26 | 486,325 | 486,325 | ||||||
McGraw-Hill Global Education Holdings LLC | ||||||||
5.80% (1 Month USD LIBOR + 4.00%, Rate Floor: 5.00%) due 05/04/22 | 480,577 | 458,283 | ||||||
Ziggo Secured Finance BV | ||||||||
4.24% (1 Month USD LIBOR + 2.50%, Rate Floor: 2.50%) due 04/15/25 | 450,000 | 451,183 | ||||||
Cengage Learning Acquisitions, Inc. | ||||||||
6.05% (1 Month USD LIBOR + 4.25%, Rate Floor: 5.25%) due 06/07/23 | 437,435 | 416,657 | ||||||
ProQuest, LLC | ||||||||
due 10/23/26 | 300,000 | 301,689 | ||||||
Sprint Communications, Inc. | ||||||||
4.31% (1 Month USD LIBOR + 2.50%, Rate Floor: 3.25%) due 02/02/24 | 291,750 | 288,905 | ||||||
Internet Brands, Inc. | ||||||||
5.55% (1 Month USD LIBOR + 3.75%, Rate Floor: 3.75%) due 09/13/24 | 249,887 | 250,165 | ||||||
Radiate HoldCo LLC | ||||||||
4.80% (1 Month USD LIBOR + 3.00%, Rate Floor: 3.75%) due 02/01/24 | 221,562 | 222,227 | ||||||
Virgin Media Bristol LLC | ||||||||
4.24% (1 Month USD LIBOR + 2.50%, Rate Floor: 2.50%) due 01/31/28 | 215,406 | 216,619 | ||||||
Altice US Finance I Corp. | ||||||||
3.99% (1 Month USD LIBOR + 2.25%, Rate Floor: 2.25%) due 01/15/26 | 198,500 | 198,500 | ||||||
Charter Communications Operating, LLC | ||||||||
3.55% (1 Month USD LIBOR + 1.75%, Rate Floor: 1.75%) due 02/01/27 | 196,009 | 197,112 | ||||||
Market Track LLC | ||||||||
6.18% (3 Month USD LIBOR + 4.25%, Rate Floor: 5.25%) due 06/05/24††† | 195,500 | 173,995 | ||||||
Authentic Brands | ||||||||
5.30% (1 Month USD LIBOR + 3.50%, Rate Floor: 4.50%) due 09/27/24 | 168,827 | 169,178 | ||||||
Liberty Cablevision Of Puerto Rico LLC | ||||||||
6.74% (1 Month USD LIBOR + 5.00%, Rate Floor: 5.00%) due 10/15/26 | 100,000 | 101,125 | ||||||
Total Communications | 6,085,298 | |||||||
Technology - 9.3% | ||||||||
MACOM Technology Solutions Holdings, Inc. | ||||||||
4.05% (1 Month USD LIBOR + 2.25%, Rate Floor: 3.00%) due 05/17/24 | 689,394 | 654,924 | ||||||
Neustar, Inc. | ||||||||
5.30% (1 Month USD LIBOR + 3.50%, Rate Floor: 4.50%) due 08/08/24 | 540,327 | 496,965 | ||||||
Blackhawk Network | ||||||||
4.80% (1 Month USD LIBOR + 3.00%, Rate Floor: 3.00%) due 06/16/25 | 490,510 | 490,000 | ||||||
Go Daddy Operating Company LLC | ||||||||
3.55% (1 Month USD LIBOR + 1.75%, Rate Floor: 1.75%) due 02/15/24 | 444,377 | 446,599 | ||||||
LANDesk Group, Inc. | ||||||||
5.97% (1 Month USD LIBOR + 4.25%, Rate Floor: 5.25%) due 01/20/24 | 282,198 | 281,845 | ||||||
Peak 10 Holding Corp. | ||||||||
5.44% (3 Month USD LIBOR + 3.50%, Rate Floor: 3.50%) due 08/01/24 | 279,286 | 231,807 | ||||||
Solera LLC | ||||||||
4.55% (1 Month USD LIBOR + 2.75%, Rate Floor: 2.75%) due 03/03/23 | 214,465 | 214,667 | ||||||
TIBCO Software, Inc. | ||||||||
5.71% (1 Month USD LIBOR + 4.00%, Rate Floor: 4.00%) due 06/30/26 | 199,500 | 200,186 | ||||||
Aspect Software, Inc. | ||||||||
7.21% (3 Month USD LIBOR + 5.00%, Rate Floor: 6.00%) due 01/15/24 | 213,940 | 197,628 | ||||||
Cvent, Inc. | ||||||||
5.55% (1 Month USD LIBOR + 3.75%, Rate Floor: 4.75%) due 11/29/24 | 196,994 | 196,403 | ||||||
Greenway Health LLC | ||||||||
5.69% (3 Month USD LIBOR + 3.75%, Rate Floor: 4.75%) due 02/16/24 | 196,474 | 174,861 | ||||||
Micron Technology, Inc. | ||||||||
3.80% (1 Month USD LIBOR + 2.00%, Rate Floor: 2.00%) due 05/29/25 | 172,467 | 173,330 | ||||||
EIG Investors Corp. |
62 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2019 |
SERIES F (FLOATING RATE STRATEGIES SERIES) |
| Face | Value | ||||||
5.67% (3 Month USD LIBOR + 3.75%, Rate Floor: 4.75%) due 02/09/23 | $ | 152,958 | $ | 150,893 | ||||
Emerald TopCo, Inc. (Press Ganey) | ||||||||
5.30% (1 Month USD LIBOR + 3.50%, Rate Floor: 3.50%) due 07/24/26 | 149,625 | 150,327 | ||||||
Optiv, Inc. | ||||||||
5.05% (1 Month USD LIBOR + 3.25%, Rate Floor: 4.25%) due 02/01/24 | 140,238 | 122,123 | ||||||
Brave Parent Holdings, Inc. | ||||||||
5.93% (3 Month USD LIBOR + 4.00%, Rate Floor: 4.00%) due 04/18/25 | 98,747 | 96,196 | ||||||
Total Technology | 4,278,754 | |||||||
Financial - 7.7% | ||||||||
Trans Union LLC | ||||||||
3.55% (1 Month USD LIBOR + 1.75%, Rate Floor: 1.75%) due 11/16/26 | 605,194 | 607,258 | ||||||
National Financial Partners Corp. | ||||||||
4.80% (1 Month USD LIBOR + 3.00%, Rate Floor: 3.00%) due 01/08/24 | 568,887 | 566,043 | ||||||
HUB International Ltd. | ||||||||
4.69% (3 Month USD LIBOR + 2.75%, Rate Floor: 2.75%) due 04/25/25 | 497,475 | 496,818 | ||||||
Delos Finance S.A.R.L | ||||||||
due 10/06/23 | 490,000 | 491,632 | ||||||
Capital Automotive L.P. | ||||||||
4.30% (1 Month USD LIBOR + 2.50%, Rate Floor: 3.50%) due 03/25/24 | 428,332 | 429,270 | ||||||
LPL Holdings, Inc. | ||||||||
3.54% (1 Month USD LIBOR + 1.75%, Rate Floor: 1.75%) due 11/12/26 | 355,775 | 357,109 | ||||||
USI, Inc. | ||||||||
4.94% (3 Month USD LIBOR + 3.00%, Rate Floor: 3.00%) due 05/16/24 | 352,391 | 352,039 | ||||||
Aretec Group, Inc. | ||||||||
6.05% (1 Month USD LIBOR + 4.25%, Rate Floor: 4.25%) due 10/01/25 | 247,500 | 243,943 | ||||||
Total Financial | 3,544,112 | |||||||
Basic Materials - 6.7% | ||||||||
LTI Holdings, Inc. | ||||||||
5.30% (1 Month USD LIBOR + 3.50%, Rate Floor: 3.50%) due 09/06/25 | 691,250 | 618,917 | ||||||
HB Fuller Co. | ||||||||
3.76% (1 Month USD LIBOR + 2.00%, Rate Floor: 2.00%) due 10/21/24 | 547,450 | 548,704 | ||||||
Messer Industries USA, Inc. | ||||||||
4.44% (3 Month USD LIBOR + 2.50%, Rate Floor: 2.50%) due 03/01/26 | 496,877 | 499,222 | ||||||
PQ Corp. | ||||||||
4.43% (3 Month USD LIBOR + 2.50%, Rate Floor: 2.50%) due 02/10/25 | 491,144 | 493,512 | ||||||
GrafTech Finance, Inc. | ||||||||
5.30% (1 Month USD LIBOR + 3.50%, Rate Floor: 4.50%) due 02/12/25 | 475,278 | 473,495 | ||||||
Vectra Co. | ||||||||
5.05% (1 Month USD LIBOR + 3.25%, Rate Floor: 3.25%) due 03/08/25 | 443,250 | 438,543 | ||||||
Total Basic Materials | 3,072,393 | |||||||
Energy - 0.4% | ||||||||
Ultra Petroleum, Inc. | ||||||||
5.80% (1 Month USD LIBOR + 4.00%, Rate Floor: 5.00%)(in-kind rate was 0.25%) due 04/12/245 | 325,900 | 191,613 | ||||||
Total Senior Floating Rate Interests | ||||||||
(Cost $41,990,793) | 41,252,737 | |||||||
CORPORATE BONDS†† - 2.2% | ||||||||
Industrial - 1.1% | ||||||||
ADT Security Corp. | ||||||||
6.25% due 10/15/21 | 500,000 | 527,500 | ||||||
Communications - 1.1% | ||||||||
Sprint Communications, Inc. | ||||||||
7.00% due 03/01/206 | 500,000 | 502,660 | ||||||
Total Corporate Bonds | ||||||||
(Cost $1,014,729) | 1,030,160 | |||||||
Total Investments - 105.2% | ||||||||
(Cost $49,221,286) | $ | 48,439,850 | ||||||
Other Assets & Liabilities, net - (5.2)% | (2,392,605 | ) | ||||||
Total Net Assets - 100.0% | $ | 46,047,245 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 63 |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2019 |
SERIES F (FLOATING RATE STRATEGIES SERIES) |
* | Non-income producing security. |
† | Value determined based on Level 1 inputs — See Note 4. |
†† | Value determined based on Level 2 inputs, unless otherwise noted — See Note 4. |
††† | Value determined based on Level 3 inputs — See Note 4. |
1 | Security was fair valued by the Valuation Committee at December 31, 2019. The total market value of fair valued securities amounts to $18,519, (cost $18,698) or less than 0.1% of total net assets. |
2 | Affiliated issuer. |
3 | Rate indicated is the 7-day yield as of December 31, 2019. |
4 | Variable rate security. Rate indicated is the rate effective at December 31, 2019. In some instances, the effective rate is limited by a minimum rate floor or a maximum rate cap established by the issuer. The settlement status of a position may also impact the effective rate indicated. In some cases, a position may be unsettled at period end and may not have a stated effective rate. In instances where multiple underlying reference rates and spread amounts are shown, the effective rate is based on a weighted average. |
5 | Payment-in-kind security. |
6 | Security is a 144A or Section 4(a)(2) security. These securities have been determined to be liquid under guidelines established by the Board of Trustees. The total market value of 144A or Section 4(a)(2) securities is $502,660 (cost $502,329), or 1.1% of total net assets. |
LIBOR — London Interbank Offered Rate | |
See Sector Classification in Other Information section. |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2019 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stocks | $ | — | $ | 27,218 | $ | 7,408 | $ | 34,626 | ||||||||
Preferred Stocks | — | 26,455 | — | 26,455 | ||||||||||||
Money Market Fund | 6,095,872 | — | — | 6,095,872 | ||||||||||||
Senior Floating Rate Interests | — | 40,810,477 | 442,260 | 41,252,737 | ||||||||||||
Corporate Bonds | — | 1,030,160 | — | 1,030,160 | ||||||||||||
Total Assets | $ | 6,095,872 | $ | 41,894,310 | $ | 449,668 | $ | 48,439,850 |
Investments in Securities (Liabilities) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Unfunded Loan Commitments (Note 8) | $ | — | $ | — | $ | 1,634 | $ | 1,634 |
64 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2019 |
SERIES F (FLOATING RATE STRATEGIES SERIES) |
Affiliated Transactions
Investments representing 5% or more of the outstanding voting shares of a company, or control of or by, or common control under Guggenheim Investments, result in that company being considered an affiliated issuer, as defined in the 1940 Act.
Transactions during the year ended December 31, 2019, in which the company is an affiliated issuer, were as follows:
Security Name | Value | Additions | Reductions | Realized | Change in | Value | Shares/Face | Investment | ||||||||||||||||||||||||
Common Stocks | ||||||||||||||||||||||||||||||||
Aspect Software, Inc.* | $ | — | ** | $ | — | $ | — | $ | — | $ | — | $ | — | — | $ | — | ||||||||||||||||
BP Holdco LLC*,1 | — | 4,099 | — | — | — | 4,099 | 11,609 | — | ||||||||||||||||||||||||
Senior Floating Rate Interests | ||||||||||||||||||||||||||||||||
Aspect Software, Inc. 7.21% (3 Month USD LIBOR + 5.00%, Rate Floor: 6.00%) due 01/15/242 | 263,266 | — | (216,601 | ) | (100,587 | ) | 53,922 | — | — | 8,011 | ||||||||||||||||||||||
Warrants | ||||||||||||||||||||||||||||||||
Aspect Software, Inc.* | — | ** | — | — | — | — | — | — | — | |||||||||||||||||||||||
$ | 263,266 | $ | 4,099 | $ | (216,601 | ) | $ | (100,587 | ) | $ | 53,922 | $ | 4,099 | $ | 8,011 |
* | Non-income producing security. |
** | Market value is less than $1 |
1 | Security was fair valued by the Valuation Committee at December 31, 2019. The total market value of fair valued and affiliated securities amounts to $4,099, (cost $4,099) or less than 0.1% of total net assets. |
2 | Variable rate security. Rate indicated is the rate effective at December 31, 2019. In some instances, the effective rate is limited by a minimum rate floor or a maximum rate cap established by the issuer. The settlement status of a position may also impact the effective rate indicated. In some cases, a position may be unsettled at period end and may not have a stated effective rate. In instances where multiple underlying reference rates and spread amounts are shown, the effective rate is based on a weighted average. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 65 |
SERIES F (FLOATING RATE STRATEGIES SERIES) |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2019 |
Assets: | ||||
Investments in unaffiliated issuers, at value (cost $49,217,187) | $ | 48,435,751 | ||
Investments in affiliated issuers, at value (cost $4,099) | 4,099 | |||
Cash | 141,078 | |||
Prepaid expenses | 9,929 | |||
Receivables: | ||||
Securities sold | 407,481 | |||
Interest | 112,878 | |||
Fund shares sold | 291 | |||
Total assets | 49,111,507 | |||
Liabilities: | ||||
Unfunded loan commitments, at value (Note 8) (commitment fees received $864) | 1,634 | |||
Payable for: | ||||
Securities purchased | 2,898,250 | |||
Fund shares redeemed | 65,316 | |||
Management fees | 11,504 | |||
Distribution and service fees | 9,524 | |||
Fund accounting/administration fees | 3,048 | |||
Trustees’ fees* | 2,430 | |||
Transfer agent/maintenance fees | 2,281 | |||
Miscellaneous | 70,275 | |||
Total liabilities | 3,064,262 | |||
Commitments and contingent liabilities (Note 14) | — | |||
Net assets | $ | 46,047,245 | ||
Net assets consist of: | ||||
Paid in capital | $ | 46,127,881 | ||
Total distributable earnings (loss) | (80,636 | ) | ||
Net assets | $ | 46,047,245 | ||
Capital shares outstanding | 1,773,611 | |||
Net asset value per share | $ | 25.96 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2019 |
Investment Income: | ||||
Interest from securities of unaffiliated issuers | $ | 2,874,900 | ||
Interest from securities of affiliated issuers | 8,011 | |||
Total investment income | 2,882,911 | |||
Expenses: | ||||
Management fees | 353,607 | |||
Distribution and service fees | 136,003 | |||
Transfer agent/maintenance fees | 25,372 | |||
Professional fees | 67,586 | |||
Fund accounting/administration fees | 43,521 | |||
Custodian fees | 37,474 | |||
Trustees’ fees* | 19,690 | |||
Miscellaneous | 65,830 | |||
Total expenses | 749,083 | |||
Less: | ||||
Expenses reimbursed by Adviser | (4,730 | ) | ||
Expenses waived by Adviser | (88,262 | ) | ||
Earnings credits applied | (2,247 | ) | ||
Total waived/reimbursed expenses | (95,239 | ) | ||
Net expenses | 653,844 | |||
Net investment income | 2,229,067 | |||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments in unaffiliated issuers | (571,357 | ) | ||
Investments in affiliated issuers | (100,587 | ) | ||
Net realized loss | (671,944 | ) | ||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments in unaffiliated issuers | 2,325,030 | |||
Investments in affiliated issuers | 53,922 | |||
Net change in unrealized appreciation (depreciation) | 2,378,952 | |||
Net realized and unrealized gain | 1,707,008 | |||
Net increase in net assets resulting from operations | $ | 3,936,075 |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
66 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SERIES F (FLOATING RATE STRATEGIES SERIES) |
STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | ||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income | $ | 2,229,067 | $ | 2,561,613 | ||||
Net realized loss on investments | (671,944 | ) | (461,830 | ) | ||||
Net change in unrealized appreciation (depreciation) on investments | 2,378,952 | (2,843,843 | ) | |||||
Net increase (decrease) in net assets resulting from operations | 3,936,075 | (744,060 | ) | |||||
Distributions to shareholders | (2,678,923 | ) | (1,907,470 | ) | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 16,078,068 | 56,864,387 | ||||||
Distributions reinvested | 2,678,923 | 1,907,470 | ||||||
Cost of shares redeemed | (32,764,760 | ) | (48,360,750 | ) | ||||
Net increase (decrease) from capital share transactions | (14,007,769 | ) | 10,411,107 | |||||
Net increase (decrease) in net assets | (12,750,617 | ) | 7,759,577 | |||||
Net assets: | ||||||||
Beginning of year | 58,797,862 | 51,038,285 | ||||||
End of year | $ | 46,047,245 | $ | 58,797,862 | ||||
Capital share activity: | ||||||||
Shares sold | 615,568 | 2,158,223 | ||||||
Shares issued from reinvestment of distributions | 105,511 | 73,648 | ||||||
Shares redeemed | (1,271,092 | ) | (1,851,912 | ) | ||||
Net increase (decrease) in shares | (550,013 | ) | 379,959 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 67 |
SERIES F (FLOATING RATE STRATEGIES SERIES) |
FINANCIAL HIGHLIGHTS |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 25.30 | $ | 26.26 | $ | 26.22 | $ | 25.72 | $ | 26.24 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | 1.06 | 1.01 | .91 | 1.05 | .97 | |||||||||||||||
Net gain (loss) on investments (realized and unrealized) | .85 | (1.21 | ) | (.02 | ) | 1.09 | (.77 | ) | ||||||||||||
Total from investment operations | 1.91 | (.20 | ) | .89 | 2.14 | .20 | ||||||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | (1.25 | ) | (.76 | ) | (.85 | ) | (1.56 | ) | (.67 | ) | ||||||||||
Net realized gains | — | — | — | (.08 | ) | (.05 | ) | |||||||||||||
Total distributions | (1.25 | ) | (.76 | ) | (.85 | ) | (1.64 | ) | (.72 | ) | ||||||||||
Net asset value, end of period | $ | 25.96 | $ | 25.30 | $ | 26.26 | $ | 26.22 | $ | 25.72 | ||||||||||
| ||||||||||||||||||||
Total Returnb | 7.60 | % | (0.84 | %) | 3.46 | % | 8.56 | % | 0.73 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 46,047 | $ | 58,798 | $ | 51,038 | $ | 53,245 | $ | 48,598 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | 4.10 | % | 3.85 | % | 3.44 | % | 4.06 | % | 3.66 | % | ||||||||||
Total expenses | 1.38 | % | 1.26 | % | 1.28 | % | 1.22 | % | 1.27 | % | ||||||||||
Net expensesc,d,e | 1.21 | % | 1.16 | % | 1.18 | % | 1.18 | % | 1.17 | % | ||||||||||
Portfolio turnover rate | 28 | % | 80 | % | 57 | % | 71 | % | 73 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not take into account any of the expenses associated with an investment in variable insurance products. If total return had taken into account these expenses, performance would have been lower. Shares of a series of Guggenheim Variable Funds Trust are available only through the purchase of such products. |
c | Net expense information reflects the expense ratios after expense waivers and reimbursements, as applicable. |
d | Net expenses may include expenses that are excluded from the expense limitation agreement. Excluding these expenses, the net expense ratios for the years would be: |
12/31/19 | 12/31/18 | 12/31/17 | 12/31/16 | 12/31/15 | |
1.15% | 1.15% | 1.15% | 1.15% | 1.15% |
e | The portion of the ratios of net expenses to average net assets attributable to recoupments of prior fee reductions or expense reimbursements for the years was as follows: |
12/31/19 | 12/31/18 | 12/31/17 | 12/31/16 | |
— | 0.00%* | 0.01% | — |
* | Less than 0.01% |
68 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
MANAGERS’ COMMENTARY (Unaudited) | December 31, 2019 |
To Our Shareholders:
The Series J (StylePlusTM—Mid Growth Series) (the “Fund”) is managed by a team of seasoned professionals, including Farhan Sharaff, Senior Managing Director and Assistant Chief Investment Officer, Equities; Jayson Flowers, Senior Managing Director and Portfolio Manager; Qi Yan, Managing Director and Portfolio Manager; and Adam J. Bloch, Managing Director and Portfolio Manager. In the following paragraphs, the investment team discusses performance for the fiscal year ended December 31, 2019.
For the year ended December 31, 2019, Series J (StylePlus—Mid Growth Series) returned 32.70%, compared with the 35.47% return of its benchmark, the Russell Midcap® Growth Index.
Investment Approach
Through a combination of actively managed individual equity, passive equity, and actively managed fixed income, the Fund seeks to exceed the total return of the Russell Midcap Growth Index. The actively managed equity and fixed income components seek to provide multiple sources of outperformance and take advantage of Guggenheim’s competencies in both fixed income and systematic stock selection.
The active and passive decisions seek to add value by tactically allocating to actively managed equity through quantitative selection models when stock picking opportunities are high. During periods when Guggenheim views these opportunities to be less attractive, the Fund seeks to increase its passive exposure to equities and the allocation to fixed income securities. The prospective return during such periods is the equity index plus an “alpha” component coming from the yield of the fixed income overlay.
Performance Review
Over the period, from 15-25% of the total equity position was allocated to actively managed equity and 75-85% to passive equity. Remaining Fund assets were invested in the Guggenheim Strategy Funds, short-term fixed income investment companies advised by Guggenheim Investments, and the Guggenheim Ultra Short Duration Fund, whose objective is to seek a high level of income consistent with the preservation of capital.
The Fund underperformed the Russell Midcap Growth Index for the year ended December 31, 2019 by 277 basis points net of fees. The actively managed equity sleeve detracted from performance on a relative basis. The passive equity position, maintained through swap agreements and futures contracts, contributed to performance for the period.
The fixed income sleeve comprised investments in certain of the underlying series of Guggenheim Funds Trust and Guggenheim Strategy Funds Trust, specifically Guggenheim Ultra Short Duration, Guggenheim Strategy Fund II, Guggenheim Strategy Fund III, and Guggenheim Variable Insurance Strategy Fund III, (collectively, the “Short Term Investment Vehicles”), each of which are open-end management investment companies managed by Guggenheim Investments. The Short Term Investment Vehicles, which launched on March 11, 2014, are offered as short term investment options only to mutual funds, trusts, and other accounts managed by Guggenheim Investments and/or its affiliates, and are not available to the public, with the exception of Guggenheim Ultra Short Duration Fund, which is available to the public. Guggenheim Strategy Fund II, Guggenheim Strategy Fund III, and Guggenheim Variable Insurance Strategy Fund III do not charge an investment management fee. Guggenheim Ultra Short Duration Fund charges an investment management fee but that fee is waived by the respective investee fund. For the one-year period ended December 31, 2019, investment in the Short Term Investment Vehicles benefited Fund performance.
Performance displayed represents past performance which is no guarantee of future results.
The opinions and forecast expressed may not actually come to pass. This information is subject to change at any time, based on market and other conditions, and should not be construed as a recommendation of any specific security or strategy.
THE GUGGENHEIM FUNDS ANNUAL REPORT | 69 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2019 |
SERIES J (STYLEPLUS—MID GROWTH SERIES)
OBJECTIVE: Seeks long-term growth of capital.
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments, investments in Guggenheim Strategy Funds Trust mutual funds, or investments in Guggenheim Ultra Short Duration Fund.
Inception Date: October 1, 1992 |
Ten Largest Holdings (% of Total Net Assets) | |
Guggenheim Variable Insurance Strategy Fund III | 31.9% |
Guggenheim Strategy Fund III | 25.9% |
Guggenheim Ultra Short Duration Fund — Institutional Class | 9.6% |
Guggenheim Strategy Fund II | 6.6% |
iShares S&P MidCap 400 Growth Index Fund | 0.7% |
Hill-Rom Holdings, Inc. | 0.3% |
Old Dominion Freight Line, Inc. | 0.3% |
Gentex Corp. | 0.3% |
Service Corporation International | 0.3% |
Molina Healthcare, Inc. | 0.3% |
Top Ten Total | 76.2% |
“Ten Largest Holdings” excludes any temporary cash or derivative investments. |
70 | THE GUGGENHEIM FUNDS ANNUAL REPORT |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2019 |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2019
| 1 Year | 5 Year | 10 Year |
Series J (StylePlus—Mid Growth Series) | 32.70% | 10.78% | 12.97% |
Russell Midcap Growth Index | 35.47% | 11.60% | 14.24% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The Russell Midcap Growth Index is an unmanaged index and, unlike the Fund, has no management fees or operating expenses to reduce its reported return. |
† | Performance figures do not reflect fees and expenses associated with an investment in variable insurance products. If returns had taken into account these fees and expenses, performance would have been lower. Shares of a series of Guggenheim Variable Funds Trust are available only through the purchase of such products. |
THE GUGGENHEIM FUNDS ANNUAL REPORT | 71 |
SCHEDULE OF INVESTMENTS | December 31, 2019 |
SERIES J (STYLEPLUS—MID GROWTH SERIES) |
| Shares | Value | ||||||
COMMON STOCKS† - 21.4% | ||||||||
Consumer, Non-cyclical - 6.8% | ||||||||
Hill-Rom Holdings, Inc. | 4,935 | $ | 560,270 | |||||
Service Corporation International | 10,852 | 499,518 | ||||||
Molina Healthcare, Inc.* | 3,650 | 495,269 | ||||||
Post Holdings, Inc.* | 4,398 | 479,822 | ||||||
PRA Health Sciences, Inc.* | 3,393 | 377,132 | ||||||
Bio-Rad Laboratories, Inc. — Class A* | 974 | 360,409 | ||||||
Hologic, Inc.* | 5,860 | 305,951 | ||||||
Baxter International, Inc. | 3,595 | 300,614 | ||||||
Zimmer Biomet Holdings, Inc. | 1,869 | 279,752 | ||||||
McKesson Corp. | 1,968 | 272,214 | ||||||
Integra LifeSciences Holdings Corp.* | 4,641 | 270,477 | ||||||
Encompass Health Corp. | 3,894 | 269,737 | ||||||
Bio-Techne Corp. | 1,206 | 264,729 | ||||||
Masimo Corp.* | 1,618 | 255,741 | ||||||
Sabre Corp. | 11,366 | 255,053 | ||||||
Aaron’s, Inc. | 4,374 | 249,799 | ||||||
Regeneron Pharmaceuticals, Inc.* | 631 | 236,928 | ||||||
H&R Block, Inc. | 10,008 | 234,988 | ||||||
West Pharmaceutical Services, Inc. | 1,563 | 234,966 | ||||||
Universal Health Services, Inc. — Class B | 1,611 | 231,114 | ||||||
Helen of Troy Ltd.* | 1,279 | 229,951 | ||||||
Haemonetics Corp.* | 1,997 | 229,455 | ||||||
STERIS plc | 1,419 | 216,284 | ||||||
Exelixis, Inc.* | 12,075 | 212,762 | ||||||
NuVasive, Inc.* | 2,746 | 212,376 | ||||||
Globus Medical, Inc. — Class A* | 3,528 | 207,729 | ||||||
ICU Medical, Inc.* | 1,110 | 207,703 | ||||||
Charles River Laboratories International, Inc.* | 1,315 | 200,880 | ||||||
LivaNova plc* | 2,545 | 191,969 | ||||||
Catalent, Inc.* | 3,384 | 190,519 | ||||||
Henry Schein, Inc.* | 2,855 | 190,486 | ||||||
Humana, Inc. | 518 | 189,857 | ||||||
Kimberly-Clark Corp. | 1,380 | 189,819 | ||||||
Penumbra, Inc.* | 1,137 | 186,775 | ||||||
Alexion Pharmaceuticals, Inc.* | 1,670 | 180,610 | ||||||
ASGN, Inc.* | 2,405 | 170,683 | ||||||
Robert Half International, Inc. | 2,606 | 164,569 | ||||||
Kellogg Co. | 2,271 | 157,062 | ||||||
Syneos Health, Inc.* | 2,584 | 153,683 | ||||||
HealthEquity, Inc.* | 2,059 | 152,510 | ||||||
Avanos Medical, Inc.* | 4,479 | 150,942 | ||||||
Varian Medical Systems, Inc.* | 876 | 124,401 | ||||||
HCA Healthcare, Inc. | 829 | 122,535 | ||||||
Incyte Corp.* | 1,337 | 116,747 | ||||||
Total Consumer, Non-cyclical | 10,784,790 | |||||||
Industrial - 5.0% | ||||||||
Old Dominion Freight Line, Inc. | 2,904 | 551,121 | ||||||
Gentex Corp. | 18,275 | 529,609 | ||||||
ITT, Inc. | 6,313 | 466,594 | ||||||
Crane Co. | 5,281 | 456,173 | ||||||
Kennametal, Inc. | 12,133 | 447,586 | ||||||
Lincoln Electric Holdings, Inc. | 4,491 | 434,415 | ||||||
Regal Beloit Corp. | 5,005 | 428,478 | ||||||
Landstar System, Inc. | 3,307 | 376,568 | ||||||
Trimble, Inc.* | 8,977 | 374,251 | ||||||
Carlisle Companies, Inc. | 2,204 | 356,695 | ||||||
FedEx Corp. | 2,077 | 314,063 | ||||||
National Instruments Corp. | 6,829 | 289,140 | ||||||
Littelfuse, Inc. | 1,485 | 284,080 | ||||||
Expeditors International of Washington, Inc. | 3,561 | 277,830 | ||||||
Woodward, Inc. | 2,290 | 271,228 | ||||||
J.B. Hunt Transport Services, Inc. | 2,322 | 271,163 | ||||||
Kansas City Southern | 1,770 | 271,093 | ||||||
Kirby Corp.* | 2,951 | 264,203 | ||||||
Hubbell, Inc. | 1,502 | 222,026 | ||||||
Curtiss-Wright Corp. | 1,526 | 214,998 | ||||||
Garmin Ltd. | 1,644 | 160,389 | ||||||
Mettler-Toledo International, Inc.* | 187 | 148,343 | ||||||
XPO Logistics, Inc.* | 1,802 | 143,620 | ||||||
Waters Corp.* | 576 | 134,582 | ||||||
Masco Corp. | 2,513 | 120,599 | ||||||
Agilent Technologies, Inc. | 1,325 | 113,036 | ||||||
Total Industrial | 7,921,883 | |||||||
Consumer, Cyclical - 3.3% | ||||||||
Wyndham Hotels & Resorts, Inc. | 7,721 | 484,956 | ||||||
Domino’s Pizza, Inc. | 1,474 | 433,032 | ||||||
MSC Industrial Direct Company, Inc. — Class A | 4,886 | 383,404 | ||||||
Wyndham Destinations, Inc. | 7,260 | 375,269 | ||||||
Pool Corp. | 1,692 | 359,347 | ||||||
Cracker Barrel Old Country Store, Inc. | 2,329 | 358,061 | ||||||
Aptiv plc | 3,456 | 328,216 | ||||||
Deckers Outdoor Corp.* | 1,717 | 289,933 | ||||||
Dunkin’ Brands Group, Inc. | 3,060 | 231,152 | ||||||
Five Below, Inc.* | 1,677 | 214,421 | ||||||
Tempur Sealy International, Inc.* | 2,164 | 188,398 | ||||||
Six Flags Entertainment Corp. | 3,850 | 173,673 | ||||||
AutoZone, Inc.* | 145 | 172,740 | ||||||
GrubHub, Inc.* | 3,072 | 149,422 | ||||||
Carter’s, Inc. | 1,333 | 145,750 | ||||||
Hanesbrands, Inc. | 9,680 | 143,748 | ||||||
Scientific Games Corp. — Class A* | 4,802 | 128,598 | ||||||
Jack in the Box, Inc. | 1,626 | 126,877 | ||||||
Hasbro, Inc. | 1,186 | 125,254 | ||||||
Mattel, Inc.* | 9,004 | 122,004 | ||||||
Eldorado Resorts, Inc.* | 2,003 | 119,459 | ||||||
Williams-Sonoma, Inc. | 1,503 | 110,380 | ||||||
Total Consumer, Cyclical | 5,164,094 | |||||||
Communications - 1.8% | ||||||||
AMC Networks, Inc. — Class A* | 9,418 | 372,011 | ||||||
Ciena Corp.* | 8,360 | 356,888 | ||||||
FactSet Research Systems, Inc. | 1,046 | 280,642 | ||||||
eBay, Inc. | 7,763 | 280,322 | ||||||
Yelp, Inc. — Class A* | 7,436 | 258,996 | ||||||
InterDigital, Inc. | 4,653 | 253,542 | ||||||
John Wiley & Sons, Inc. — Class A | 5,022 | 243,668 |
72 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2019 |
SERIES J (STYLEPLUS—MID GROWTH SERIES) |
| Shares | Value | ||||||
New York Times Co. — Class A | 6,707 | $ | 215,764 | |||||
Viavi Solutions, Inc.* | 12,973 | 194,595 | ||||||
Fox Corp. — Class A | 4,389 | 162,700 | ||||||
Expedia Group, Inc. | 1,340 | 144,908 | ||||||
Etsy, Inc.* | 3,078 | 136,355 | ||||||
Total Communications | 2,900,391 | |||||||
Technology - 1.8% | ||||||||
Teradyne, Inc. | 4,590 | 312,992 | ||||||
Cerner Corp. | 4,254 | 312,201 | ||||||
Teradata Corp.* | 10,740 | 287,510 | ||||||
Fair Isaac Corp.* | 585 | 219,188 | ||||||
Seagate Technology plc | 3,662 | 217,889 | ||||||
Silicon Laboratories, Inc.* | 1,775 | 205,865 | ||||||
CDK Global, Inc. | 3,333 | 182,248 | ||||||
Cree, Inc.* | 3,729 | 172,094 | ||||||
Skyworks Solutions, Inc. | 1,374 | 166,089 | ||||||
Citrix Systems, Inc. | 1,408 | 156,147 | ||||||
Tyler Technologies, Inc.* | 495 | 148,510 | ||||||
Semtech Corp.* | 2,688 | 142,195 | ||||||
Synaptics, Inc.* | 2,064 | 135,749 | ||||||
NetApp, Inc. | 2,101 | 130,787 | ||||||
Total Technology | 2,789,464 | |||||||
Financial - 1.1% | ||||||||
Northern Trust Corp. | 2,652 | 281,748 | ||||||
Medical Properties Trust, Inc. REIT | 12,692 | 267,928 | ||||||
Weingarten Realty Investors REIT | 7,116 | 222,304 | ||||||
Brixmor Property Group, Inc. REIT | 7,128 | 154,036 | ||||||
Park Hotels & Resorts, Inc. REIT | 4,491 | 116,182 | ||||||
Commerce Bancshares, Inc. | 1,614 | 109,655 | ||||||
Brown & Brown, Inc. | 2,685 | 106,004 | ||||||
Cousins Properties, Inc. REIT | 2,524 | 103,989 | ||||||
First Financial Bankshares, Inc. | 2,948 | 103,475 | ||||||
Hanover Insurance Group, Inc. | 750 | 102,502 | ||||||
National Retail Properties, Inc. REIT | 1,811 | 97,106 | ||||||
Total Financial | 1,664,929 | |||||||
Energy - 1.0% | ||||||||
Devon Energy Corp. | 12,336 | 320,366 | ||||||
Marathon Oil Corp. | 19,431 | 263,873 | ||||||
HollyFrontier Corp. | 3,175 | 161,004 | ||||||
Matador Resources Co.* | 8,296 | 149,079 | ||||||
Apache Corp. | 5,548 | 141,973 | ||||||
Cimarex Energy Co. | 2,638 | 138,469 | ||||||
Southwestern Energy Co.* | 56,999 | 137,938 | ||||||
Murphy Oil Corp. | 4,505 | 120,734 | ||||||
CNX Resources Corp.* | 12,613 | 111,625 | ||||||
Total Energy | 1,545,061 | |||||||
Utilities - 0.5% | ||||||||
UGI Corp. | 7,724 | 348,816 | ||||||
National Fuel Gas Co. | 5,301 | 246,708 | ||||||
Aqua America, Inc. | 2,942 | 138,097 | ||||||
NRG Energy, Inc. | 3,066 | 121,874 | ||||||
Total Utilities | 855,495 | |||||||
Basic Materials - 0.1% | ||||||||
Chemours Co. | 6,677 | 120,787 | ||||||
RPM International, Inc. | 1,364 | 104,701 | ||||||
Total Basic Materials | 225,488 | |||||||
Total Common Stocks | ||||||||
(Cost $31,223,248) | 33,851,595 | |||||||
EXCHANGE-TRADED FUNDS† - 0.7% | ||||||||
iShares S&P MidCap 400 Growth Index Fund | 4,583 | 1,091,258 | ||||||
Total Exchange-Traded Funds | ||||||||
(Cost $1,090,208) | 1,091,258 | |||||||
MUTUAL FUNDS† - 74.0% | ||||||||
Guggenheim Variable Insurance Strategy Fund III1 | 2,028,829 | 50,233,799 | ||||||
Guggenheim Strategy Fund III1 | 1,652,444 | 40,848,416 | ||||||
Guggenheim Ultra Short Duration Fund — Institutional Class1 | 1,520,772 | 15,131,682 | ||||||
Guggenheim Strategy Fund II1 | 422,109 | 10,442,989 | ||||||
Total Mutual Funds | ||||||||
(Cost $117,545,220) | 116,656,886 | |||||||
MONEY MARKET FUND† - 3.6% | ||||||||
Dreyfus Treasury Securities Cash Management Fund — Institutional Shares 1.44%2 | 5,677,118 | 5,677,118 | ||||||
Total Money Market Fund | ||||||||
(Cost $5,677,118) | 5,677,118 | |||||||
Total Investments - 99.7% | ||||||||
(Cost $155,535,794) | $ | 157,276,857 | ||||||
Other Assets & Liabilities, net - 0.3% | 397,869 | |||||||
Total Net Assets - 100.0% | $ | 157,674,726 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 73 |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2019 |
SERIES J (STYLEPLUS—MID GROWTH SERIES) |
Futures Contracts | ||||||||||||||||
Description | Number of | Expiration | Notional | Value and | ||||||||||||
Equity Futures Contracts Purchased† | ||||||||||||||||
S&P MidCap 400 Index Mini Futures Contracts | 5 | Mar 2020 | $ | 1,032,150 | $ | 11,259 | ||||||||||
NASDAQ-100 Index Mini Futures Contracts | 2 | Mar 2020 | 349,910 | 5,691 | ||||||||||||
S&P 500 Index Mini Futures Contracts | 2 | Mar 2020 | 322,950 | 3,163 | ||||||||||||
$ | 1,705,010 | $ | 20,113 |
Total Return Swap Agreements | |||||||||||||||||||
Counterparty | Index | Financing | Payment | Maturity | Units | Notional | Value and | ||||||||||||
OTC Equity Index Swap Agreements†† | |||||||||||||||||||
Wells Fargo Bank, N.A. | Russell MidCap Growth Index | 2.19% (3 Month USD LIBOR + 0.13%) | At Maturity | 01/02/20 | 99,077 | $ | 121,802,192 | $ | 12,002,584 |
* | Non-income producing security. |
** | Includes cumulative appreciation (depreciation). Variation margin is reported within the Statement of Assets and Liabilities. |
† | Value determined based on Level 1 inputs — See Note 4. |
†† | Value determined based on Level 2 inputs — See Note 4. |
1 | Affiliated issuer. |
2 | Rate indicated is the 7-day yield as of December 31, 2019. |
LIBOR - London Interbank Offered Rate | |
plc — Public Limited Company | |
REIT — Real Estate Investment Trust | |
See Sector Classification in Other Information section. |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2019 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stocks | $ | 33,851,595 | $ | — | $ | — | $ | 33,851,595 | ||||||||
Exchange-Traded Funds | 1,091,258 | — | — | 1,091,258 | ||||||||||||
Mutual Funds | 116,656,886 | — | — | 116,656,886 | ||||||||||||
Money Market Fund | 5,677,118 | — | — | 5,677,118 | ||||||||||||
Equity Futures Contracts** | 20,113 | — | — | 20,113 | ||||||||||||
Equity Index Swap Agreements** | — | 12,002,584 | — | 12,002,584 | ||||||||||||
Total Assets | $ | 157,296,970 | $ | 12,002,584 | $ | — | $ | 169,299,554 |
** | This derivative is reported as unrealized appreciation/depreciation at period end. |
74 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2019 |
SERIES J (STYLEPLUS—MID GROWTH SERIES) |
Affiliated Transactions
Investments representing 5% or more of the outstanding voting shares of a company, or control of or by, or common control under Guggenheim Investments (“GI”), result in that company being considered an affiliated issuer, as defined in the 1940 Act.
The Fund may invest in certain of the underlying series of Guggenheim Strategy Funds Trust, including Guggenheim Strategy Fund II, Guggenheim Strategy Fund III, and Guggenheim Variable Insurance Strategy Fund III, (collectively, the “Short Term Investment Vehicles”), each of which are open-end management investment companies managed by GI. The Short Term Investment Vehicles, which launched on March 11, 2014, are offered as short term investment options only to mutual funds, trusts, and other accounts managed by GI and/or its affiliates, and are not available to the public. The Short Term Investment Vehicles pay no investment management fees. The Short Term Investment Vehicles’ annual report on Form N-CSR dated September 30, 2019, is available publicly or upon request. This information is available from the EDGAR database on the SEC’s website at https://www.sec.gov/Archives/edgar/data/1601445/000089180419000405/gug78512-ncsr.htm.
Transactions during the year ended December 31, 2019, in which the company is an affiliated issuer, were as follows:
Security Name | Value | Additions | Reductions | Realized | Change in | Value | Shares | Investment | ||||||||||||||||||||||||
Mutual Funds | ||||||||||||||||||||||||||||||||
Guggenheim Strategy Fund II | $ | 6,588,834 | $ | 3,887,176 | $ | — | $ | — | $ | (33,021 | ) | $ | 10,442,989 | 422,109 | $ | 280,423 | ||||||||||||||||
Guggenheim Strategy Fund III | 39,792,573 | 1,171,452 | — | — | (115,609 | ) | 40,848,416 | 1,652,444 | 1,174,873 | |||||||||||||||||||||||
Guggenheim Ultra Short Duration Fund — Institutional Class | 3,167,024 | 31,173,423 | (19,204,965 | ) | (671 | ) | (3,129 | ) | 15,131,682 | 1,520,772 | 385,167 | |||||||||||||||||||||
Guggenheim Variable Insurance Strategy Fund III | 48,939,224 | 1,274,981 | — | — | 19,594 | 50,233,799 | 2,028,829 | 1,273,456 | ||||||||||||||||||||||||
$ | 98,487,655 | $ | 37,507,032 | $ | (19,204,965 | ) | $ | (671 | ) | $ | (132,165 | ) | $ | 116,656,886 | $ | 3,113,919 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 75 |
SERIES J (STYLEPLUS—MID GROWTH SERIES) |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2019 |
Assets: | ||||
Investments in unaffiliated issuers, at value (cost $37,990,574) | $ | 40,619,971 | ||
Investments in affiliated issuers, at value (cost $117,545,220) | 116,656,886 | |||
Cash | 4,450 | |||
Segregated cash with broker | 63,000 | |||
Unrealized appreciation on OTC swap agreements | 12,002,584 | |||
Prepaid expenses | 4,858 | |||
Receivables: | ||||
Dividends | 236,409 | |||
Fund shares sold | 18,249 | |||
Interest | 6,427 | |||
Total assets | 169,612,834 | |||
Liabilities: | ||||
Segregated cash due to broker | 11,080,000 | |||
Payable for: | ||||
Swap settlement | 345,409 | |||
Securities purchased | 211,295 | |||
Fund shares redeemed | 107,508 | |||
Management fees | 52,025 | |||
Distribution and service fees | 32,195 | |||
Fund accounting/administration fees | 10,303 | |||
Trustees’ fees* | 3,488 | |||
Variation margin on futures contracts | 2,580 | |||
Transfer agent/maintenance fees | 2,253 | |||
Miscellaneous | 91,052 | |||
Total liabilities | 11,938,108 | |||
Commitments and contingent liabilities (Note 14) | — | |||
Net assets | $ | 157,674,726 | ||
Net assets consist of: | ||||
Paid in capital | $ | 134,138,382 | ||
Total distributable earnings (loss) | 23,536,344 | |||
Net assets | $ | 157,674,726 | ||
Capital shares outstanding | 2,695,876 | |||
Net asset value per share | $ | 58.49 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2019 |
Investment Income: | ||||
Dividends from securities of unaffiliated issuers | $ | 430,789 | ||
Dividends from securities of affiliated issuers | 3,113,919 | |||
Interest | 122,397 | |||
Total investment income | 3,667,105 | |||
Expenses: | ||||
Management fees | 1,150,832 | |||
Distribution and service fees | 383,611 | |||
Transfer agent/maintenance fees | 25,086 | |||
Interest expense | 129,659 | |||
Fund accounting/administration fees | 122,757 | |||
Professional fees | 60,956 | |||
Trustees’ fees* | 22,584 | |||
Custodian fees | 18,544 | |||
Miscellaneous | 86,544 | |||
Total expenses | 2,000,573 | |||
Less: | ||||
Expenses reimbursed by Adviser | (155 | ) | ||
Expenses waived by Adviser | (466,849 | ) | ||
Earnings credits applied | (2,508 | ) | ||
Total waived/reimbursed expenses | (469,512 | ) | ||
Net expenses | 1,531,061 | |||
Net investment income | 2,136,044 | |||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments in unaffiliated issuers | 1,183,922 | |||
Investments in affiliated issuers | (671 | ) | ||
Swap agreements | 7,853,670 | |||
Futures contracts | 981,733 | |||
Net realized gain | 10,018,654 | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments in unaffiliated issuers | 6,235,203 | |||
Investments in affiliated issuers | (132,165 | ) | ||
Swap agreements | 24,556,084 | |||
Futures contracts | 34,270 | |||
Net change in unrealized appreciation (depreciation) | 30,693,392 | |||
Net realized and unrealized gain | 40,712,046 | |||
Net increase in net assets resulting from operations | $ | 42,848,090 |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
76 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SERIES J (STYLEPLUS—MID GROWTH SERIES) |
STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | ||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income | $ | 2,136,044 | $ | 2,875,192 | ||||
Net realized gain on investments | 10,018,654 | 17,850,768 | ||||||
Net change in unrealized appreciation (depreciation) on investments | 30,693,392 | (28,579,475 | ) | |||||
Net increase (decrease) in net assets resulting from operations | 42,848,090 | (7,853,515 | ) | |||||
Distributions to shareholders | (15,157,609 | ) | (21,135,811 | ) | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 2,722,984 | 5,267,526 | ||||||
Distributions reinvested | 15,157,609 | 21,135,811 | ||||||
Cost of shares redeemed | (25,012,530 | ) | (48,194,906 | ) | ||||
Net decrease from capital share transactions | (7,131,937 | ) | (21,791,569 | ) | ||||
Net increase (decrease) in net assets | 20,558,544 | (50,780,895 | ) | |||||
Net assets: | ||||||||
Beginning of year | 137,116,182 | 187,897,077 | ||||||
End of year | $ | 157,674,726 | $ | 137,116,182 | ||||
Capital share activity: | ||||||||
Shares sold | 48,009 | 87,944 | ||||||
Shares issued from reinvestment of distributions | 270,623 | 371,390 | ||||||
Shares redeemed | (435,155 | ) | (787,947 | ) | ||||
Net decrease in shares | (116,523 | ) | (328,613 | ) |
SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 77 |
SERIES J (STYLEPLUS—MID GROWTH SERIES) |
FINANCIAL HIGHLIGHTS |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 48.75 | $ | 59.82 | $ | 48.43 | $ | 45.15 | $ | 49.12 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | .79 | .97 | .67 | .52 | .31 | |||||||||||||||
Net gain (loss) on investments (realized and unrealized) | 14.90 | (4.08 | ) | 11.22 | 3.37 | (.10 | ) | |||||||||||||
Total from investment operations | 15.69 | (3.11 | ) | 11.89 | 3.89 | .21 | ||||||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | (.49 | ) | (.83 | ) | (.50 | ) | (.33 | ) | (.56 | ) | ||||||||||
Net realized gains | (5.46 | ) | (7.13 | ) | — | (.28 | ) | (3.62 | ) | |||||||||||
Total distributions | (5.95 | ) | (7.96 | ) | (.50 | ) | (.61 | ) | (4.18 | ) | ||||||||||
Net asset value, end of period | $ | 58.49 | $ | 48.75 | $ | 59.82 | $ | 48.43 | $ | 45.15 | ||||||||||
| ||||||||||||||||||||
Total Returnb | 32.70 | % | (7.10 | %) | 24.67 | % | 8.65 | % | (0.08 | %) | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 157,675 | $ | 137,116 | $ | 187,897 | $ | 166,814 | $ | 148,009 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | 1.39 | % | 1.64 | % | 1.25 | % | 1.14 | % | 0.63 | % | ||||||||||
Total expensesc | 1.30 | % | 1.28 | % | 1.14 | % | 0.95 | % | 0.97 | % | ||||||||||
Net expensesd,e | 1.00 | % | 1.01 | % | 0.94 | % | 0.95 | % | 0.97 | % | ||||||||||
Portfolio turnover rate | 57 | % | 66 | % | 49 | % | 57 | % | 70 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not take into account any of the expenses associated with an investment in variable insurance products. If total return had taken into account these expenses, performance would have been lower. Shares of a series of Guggenheim Variable Funds Trust are available only through the purchase of such products. |
c | Does not include expenses of the underlying funds in which the Fund invests. |
d | Net expense information reflects the expense ratios after expense waivers and reimbursements, as applicable. |
e | Net expense may include expenses that are excluded from the expense limitation agreement. Excluding these expenses, the expense ratios for the years would be: |
12/31/19 | 12/31/18 | 12/31/17 | 12/31/16 | 12/31/15 | |
0.92% | 0.94% | 0.92% | 0.95% | 0.97% |
78 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
MANAGERS’ COMMENTARY (Unaudited) | December 31, 2019 |
To Our Shareholders:
The Series N (Managed Asset Allocation Series) (the “Fund”) is managed by a team of seasoned professionals, including Michael P. Byrum, CFA, Portfolio Manager; Ryan Harder, CFA, Portfolio Manager; and Matthew Wu, Ph.D., CFA, Portfolio Manager. In the following paragraphs, the investment team discusses the market environment and performance of the Fund for the fiscal year ended December 31, 2019.
For the year ended December 31, 2019, Series N (Managed Asset Allocation Series) returned 20.11%, compared with its weighted benchmark that is 60% S&P 500® Index and 40% Bloomberg Barclays U.S. Aggregate Bond Index, which returned 22.18%. The S&P 500 Index returned 31.49% over the year and the Bloomberg Barclays U.S. Aggregate Bond Index returned 8.72%.
The year 2019 saw equity markets strongly rebound after a sell-off in 2018. Also helping markets hit record highs was the U.S. Federal Reserve changing its monetary policy into an easing stance, and the U.S. and China finally reaching a Phase One trade agreement. Bond yields also broke analysts’ initial predictions of turning up, and actually fell over the period.
In contrast to year 2018, all the Fund’s core holdings delivered positive returns.
ETFs and futures contracts on the S&P 500 Index and the Russell 2000 Index delivered the largest gains, while 2-year and 10-year Treasury futures contributed the least to performance.
Performance displayed represents past performance which is no guarantee of future results.
The opinions and forecast expressed may not actually come to pass. This information is subject to change at any time, based on market and other conditions, and should not be construed as a recommendation of any specific security or strategy.
THE GUGGENHEIM FUNDS ANNUAL REPORT | 79 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2019 |
SERIES N (MANAGED ASSET ALLOCATION SERIES)
OBJECTIVE: Seeks to provide growth of capital and, secondarily, preservation of capital.
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments, investments in Guggenheim Strategy Funds Trust mutual funds, or investments in Guggenheim Ultra Short Duration Fund.
Inception Date: June 1, 1995 |
Ten Largest Holdings (% of Total Net Assets) | |
Vanguard S&P 500 ETF | 18.0% |
SPDR S&P 500 ETF Trust | 17.3% |
iShares Core U.S. Aggregate Bond ETF | 15.5% |
iShares iBoxx $ Investment Grade Corporate Bond ETF | 7.7% |
Guggenheim Strategy Fund III | 7.3% |
Guggenheim Variable Insurance Strategy Fund III | 6.4% |
iShares Core S&P Mid-Capital ETF | 5.4% |
iShares 7-10 Year Treasury Bond ETF | 4.8% |
iShares 1-3 Year Treasury Bond ETF | 4.6% |
iShares MSCI EAFE ETF | 4.5% |
Top Ten Total | 91.5% |
“Ten Largest Holdings” excludes any temporary cash or derivative investments. |
80 | THE GUGGENHEIM FUNDS ANNUAL REPORT |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2019 |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2019
| 1 Year | 5 Year | 10 Year |
Series N (Managed Asset Allocation Series) | 20.11% | 6.97% | 7.98% |
Blended Index** | 22.18% | 8.37% | 9.77% |
Bloomberg Barclays U.S. Aggregate Bond Index | 8.72% | 3.05% | 3.75% |
S&P 500 Index | 31.49% | 11.70% | 13.56% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The S&P 500 Index and Bloomberg Barclays U.S. Aggregate Bond Index are unmanaged indices and, unlike the Fund, have no management fees or operating expenses to reduce their reported returns. |
** | The Blended Index is 60% S&P 500 Index and 40% Bloomberg Barclays U.S. Aggregate Bond Index. |
† | Performance figures do not reflect fees and expenses associated with an investment in variable insurance products. If returns had taken into account these fees and expenses, performance would have been lower. Shares of a series of Guggenheim Variable Funds Trust are available only through the purchase of such products. |
THE GUGGENHEIM FUNDS ANNUAL REPORT | 81 |
SCHEDULE OF INVESTMENTS | December 31, 2019 |
SERIES N (MANAGED ASSET ALLOCATION SERIES) |
| Shares | Value | ||||||
EXCHANGE-TRADED FUNDS† - 77.8% | ||||||||
Vanguard S&P 500 ETF | 28,055 | $ | 8,298,669 | |||||
SPDR S&P 500 ETF Trust | 24,784 | 7,976,978 | ||||||
iShares Core U.S. Aggregate Bond ETF | 63,746 | 7,163,138 | ||||||
iShares iBoxx $ Investment Grade Corporate Bond ETF | 27,824 | 3,560,359 | ||||||
iShares Core S&P Mid-Capital ETF | 12,226 | 2,516,355 | ||||||
iShares 7-10 Year Treasury Bond ETF | 20,335 | 2,241,324 | ||||||
iShares 1-3 Year Treasury Bond ETF | 25,124 | 2,126,244 | ||||||
iShares MSCI EAFE ETF | 29,714 | 2,063,340 | ||||||
iShares Core S&P 500 ETF | 2 | 647 | ||||||
Total Exchange-Traded Funds | ||||||||
(Cost $24,879,497) | 35,947,054 | |||||||
MUTUAL FUNDS† - 19.9% | ||||||||
Guggenheim Strategy Fund III1 | 136,905 | 3,384,297 | ||||||
Guggenheim Variable Insurance Strategy Fund III1 | 119,745 | 2,964,889 | ||||||
Guggenheim Strategy Fund II1 | 73,549 | 1,819,612 | ||||||
Guggenheim Ultra Short Duration Fund — Institutional Class1 | 102,762 | 1,022,480 | ||||||
Total Mutual Funds | ||||||||
(Cost $9,260,050) | 9,191,278 | |||||||
MONEY MARKET FUND† - 1.2% | ||||||||
Dreyfus Treasury Securities Cash Management Fund — Institutional Shares 1.44%2 | 576,534 | 576,534 | ||||||
Total Money Market Fund | ||||||||
(Cost $576,534) | 576,534 | |||||||
Face | ||||||||
U.S. TREASURY BILLS†† - 1.0% | ||||||||
U.S. Treasury Bills | ||||||||
1.47% due 02/04/203,4 | $ | 469,000 | 468,327 | |||||
Total U.S. Treasury Bills | ||||||||
(Cost $468,336) | 468,327 | |||||||
Total Investments - 99.9% | ||||||||
(Cost $35,184,417) | $ | 46,183,193 | ||||||
Other Assets & Liabilities, net - 0.1% | 35,346 | |||||||
Total Net Assets - 100.0% | $ | 46,218,539 |
Futures Contracts | ||||||||||||||||
Description | Number of | Expiration | Notional | Value and | ||||||||||||
Equity Futures Contracts Purchased† | ||||||||||||||||
MSCI EAFE Index Futures Contracts | 52 | Mar 2020 | $ | 5,294,380 | $ | 35,170 | ||||||||||
Russell 2000 Index Mini Futures Contracts | 25 | Mar 2020 | 2,087,250 | 26,305 | ||||||||||||
S&P 500 Index Mini Futures Contracts | 5 | Mar 2020 | 807,375 | 14,585 | ||||||||||||
S&P MidCap 400 Index Mini Futures Contracts | 2 | Mar 2020 | 412,860 | 4,747 | ||||||||||||
CAC 40 10 Euro Index Futures Contracts†† | 4 | Jan 2020 | 269,014 | 3,107 | ||||||||||||
Hang Seng Index Futures Contracts†† | 1 | Jan 2020 | 181,479 | 1,599 | ||||||||||||
Nikkei 225 (CME) Index Futures Contracts | 1 | Mar 2020 | 117,375 | 546 | ||||||||||||
$ | 9,169,733 | $ | 86,059 | |||||||||||||
Currency Futures Contracts Purchased† | ||||||||||||||||
Japanese Yen Futures Contracts | 1 | Mar 2020 | $ | 115,487 | $ | (377 | ) | |||||||||
Interest Rate Futures Contracts Purchased† | ||||||||||||||||
U.S. Treasury 2 Year Note Futures Contracts | 7 | Mar 2020 | 1,507,953 | (2,708 | ) | |||||||||||
U.S. Treasury 10 Year Note Futures Contracts | 28 | Mar 2020 | 3,591,438 | (44,696 | ) | |||||||||||
$ | 5,099,391 | $ | (47,404 | ) | ||||||||||||
Equity Futures Contracts Sold Short†† | ||||||||||||||||
DAX Index Futures Contracts | 1 | Mar 2020 | 368,910 | 5,501 | ||||||||||||
SPI 200 Index Futures Contracts | 1 | Mar 2020 | 116,316 | 1,034 | ||||||||||||
FTSE 100 Index Futures Contracts | 1 | Mar 2020 | 99,550 | (3,940 | ) | |||||||||||
$ | 584,776 | $ | 2,595 |
82 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2019 |
SERIES N (MANAGED ASSET ALLOCATION SERIES) |
** | Includes cumulative appreciation (depreciation). Variation margin is reported within the Statement of Assets and Liabilities. |
† | Value determined based on Level 1 inputs, unless otherwise noted — See Note 4. |
†† | Value determined based on Level 2 inputs — See Note 4. |
1 | Affiliated issuer. |
2 | Rate indicated is the 7-day yield as of December 31, 2019. |
3 | All or a portion of this security is pledged as futures collateral at December 31, 2019. |
4 | Rate indicated is the effective yield at the time of purchase. |
CME — Chicago Mercantile Exchange | |
See Sector Classification in Other Information section. |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2019 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Exchange-Traded Funds | $ | 35,947,054 | $ | — | $ | — | $ | 35,947,054 | ||||||||
Mutual Funds | 9,191,278 | — | — | 9,191,278 | ||||||||||||
Money Market Fund | 576,534 | — | — | 576,534 | ||||||||||||
U.S. Treasury Bills | — | 468,327 | — | 468,327 | ||||||||||||
Equity Futures Contracts** | 81,353 | 11,241 | — | 92,594 | ||||||||||||
Total Assets | $ | 45,796,219 | $ | 479,568 | $ | — | $ | 46,275,787 |
Investments in Securities (Liabilities) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Interest Rate Futures Contracts** | $ | 47,404 | $ | — | $ | — | $ | 47,404 | ||||||||
Equity Futures Contracts** | — | 3,940 | — | 3,940 | ||||||||||||
Currency Futures Contracts** | 377 | — | — | 377 | ||||||||||||
Total Liabilities | $ | 47,781 | $ | 3,940 | $ | — | $ | 51,721 |
** | This derivative is reported as unrealized appreciation/depreciation at period end. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 83 |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2019 |
SERIES N (MANAGED ASSET ALLOCATION SERIES) |
Affiliated Transactions
Investments representing 5% or more of the outstanding voting shares of a company, or control of or by, or common control under Guggenheim Investments (“GI”), result in that company being considered an affiliated issuer, as defined in the 1940 Act.
The Fund may invest in certain of the underlying series of Guggenheim Strategy Funds Trust, including Guggenheim Strategy Fund II, Guggenheim Strategy Fund III, and Guggenheim Variable Insurance Strategy Fund III, (collectively, the “Short Term Investment Vehicles”), each of which are open-end management investment companies managed by GI. The Short Term Investment Vehicles, which launched on March 11, 2014, are offered as short term investment options only to mutual funds, trusts, and other accounts managed by GI and/or its affiliates, and are not available to the public. The Short Term Investment Vehicles pay no investment management fees. The Short Term Investment Vehicles’ annual report on Form N-CSR dated September 30, 2019, is available publicly or upon request. This information is available from the EDGAR database on the SEC’s website at https://www.sec.gov/Archives/edgar/data/1601445/000089180419000405/gug78512-ncsr.htm.
Transactions during the year ended December 31, 2019, in which the company is an affiliated issuer, were as follows:
Security Name | Value | Additions | Reductions | Realized | Change in | Value | Shares | Investment | ||||||||||||||||||||||||
Mutual Funds | ||||||||||||||||||||||||||||||||
Guggenheim Strategy Fund II | $ | 1,773,302 | $ | 52,166 | $ | — | $ | — | $ | (5,856 | ) | $ | 1,819,612 | 73,549 | $ | 52,283 | ||||||||||||||||
Guggenheim Strategy Fund III | 5,183,918 | 109,878 | (1,900,000 | ) | (8,380 | ) | (1,119 | ) | 3,384,297 | 136,905 | 110,419 | |||||||||||||||||||||
Guggenheim Ultra Short Duration Fund — Institutional Class | 998,067 | 25,444 | — | — | (1,031 | ) | 1,022,480 | 102,762 | 25,501 | |||||||||||||||||||||||
Guggenheim Variable Insurance Strategy Fund III | 6,071,540 | 91,265 | (3,200,000 | ) | (28,802 | ) | 30,886 | 2,964,889 | 119,745 | 91,261 | ||||||||||||||||||||||
$ | 14,026,827 | $ | 278,753 | $ | (5,100,000 | ) | $ | (37,182 | ) | $ | 22,880 | $ | 9,191,278 | $ | 279,464 |
84 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SERIES N (MANAGED ASSET ALLOCATION SERIES) |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2019 |
Assets: | ||||
Investments in unaffiliated issuers, at value (cost $25,924,367) | $ | 36,991,915 | ||
Investments in affiliated issuers, at value (cost $9,260,050) | 9,191,278 | |||
Prepaid expenses | 3,487 | |||
Receivables: | ||||
Securities sold | 150,303 | |||
Dividends | 55,941 | |||
Variation margin on futures contracts | 32,460 | |||
Fund shares sold | 5,147 | |||
Interest | 462 | |||
Total assets | 46,430,993 | |||
Liabilities: | ||||
Overdraft due to custodian bank | 190 | |||
Payable for: | ||||
Securities purchased | 116,757 | |||
Professional fees | 27,990 | |||
Fund shares redeemed | 18,067 | |||
Management fees | 14,878 | |||
Printing fees | 11,097 | |||
Distribution and service fees | 9,430 | |||
Fund accounting/administration fees | 3,017 | |||
Trustees’ fees* | 2,560 | |||
Transfer agent/maintenance fees | 2,290 | |||
Miscellaneous | 6,178 | |||
Total liabilities | 212,454 | |||
Commitments and contingent liabilities (Note 14) | — | |||
Net assets | $ | 46,218,539 | ||
Net assets consist of: | ||||
Paid in capital | $ | 32,052,128 | ||
Total distributable earnings (loss) | 14,166,411 | |||
Net assets | $ | 46,218,539 | ||
Capital shares outstanding | 1,442,214 | |||
Net asset value per share | $ | 32.05 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2019 |
Investment Income: | ||||
Dividends from securities of unaffiliated issuers | $ | 813,841 | ||
Dividends from securities of affiliated issuers | 279,464 | |||
Interest | 18,763 | |||
Total investment income | 1,112,068 | |||
Expenses: | ||||
Management fees | 181,327 | |||
Distribution and service fees | 113,329 | |||
Transfer agent/maintenance fees | 25,101 | |||
Professional fees | 46,620 | |||
Fund accounting/administration fees | 36,266 | |||
Trustees’ fees* | 19,292 | |||
Custodian fees | 5,103 | |||
Miscellaneous | 29,016 | |||
Total expenses | 456,054 | |||
Less: | ||||
Expenses waived by Adviser | (2,525 | ) | ||
Net expenses | 453,529 | |||
Net investment income | 658,539 | |||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments in unaffiliated issuers | 829,202 | |||
Investments in affiliated issuers | (37,182 | ) | ||
Futures contracts | 1,870,922 | |||
Foreign currency transactions | 419 | |||
Net realized gain | 2,663,361 | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments in unaffiliated issuers | 4,743,259 | |||
Investments in affiliated issuers | 22,880 | |||
Futures contracts | 131,710 | |||
Foreign currency translations | (29 | ) | ||
Net change in unrealized appreciation (depreciation) | 4,897,820 | |||
Net realized and unrealized gain | 7,561,181 | |||
Net increase in net assets resulting from operations | $ | 8,219,720 |
* | 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 | 85 |
SERIES N (MANAGED ASSET ALLOCATION SERIES) |
STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | ||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income | $ | 658,539 | $ | 746,977 | ||||
Net realized gain on investments | 2,663,361 | 1,116,990 | ||||||
Net change in unrealized appreciation (depreciation) on investments | 4,897,820 | (4,463,545 | ) | |||||
Net increase (decrease) in net assets resulting from operations | 8,219,720 | (2,599,578 | ) | |||||
Distributions to shareholders | (1,105,138 | ) | (4,136,596 | ) | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 1,782,394 | 3,247,235 | ||||||
Distributions reinvested | 1,105,138 | 4,136,596 | ||||||
Cost of shares redeemed | (6,419,274 | ) | (9,092,113 | ) | ||||
Net decrease from capital share transactions | (3,531,742 | ) | (1,708,282 | ) | ||||
Net increase (decrease) in net assets | 3,582,840 | (8,444,456 | ) | |||||
Net assets: | ||||||||
Beginning of year | 42,635,699 | 51,080,155 | ||||||
End of year | $ | 46,218,539 | $ | 42,635,699 | ||||
Capital share activity: | ||||||||
Shares sold | 59,756 | 103,799 | ||||||
Shares issued from reinvestment of distributions | 36,365 | 140,034 | ||||||
Shares redeemed | (213,259 | ) | (297,082 | ) | ||||
Net decrease in shares | (117,138 | ) | (53,249 | ) |
86 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SERIES N (MANAGED ASSET ALLOCATION SERIES) |
FINANCIAL HIGHLIGHTS |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 27.34 | $ | 31.68 | $ | 28.74 | $ | 27.43 | $ | 27.67 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | .44 | .47 | .39 | .40 | .32 | |||||||||||||||
Net gain (loss) on investments (realized and unrealized) | 5.02 | (2.08 | ) | 3.68 | 1.78 | (.28 | ) | |||||||||||||
Total from investment operations | 5.46 | (1.61 | ) | 4.07 | 2.18 | .04 | ||||||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | (.51 | ) | (.44 | ) | (.46 | ) | (.33 | ) | (.28 | ) | ||||||||||
Net realized gains | (.24 | ) | (2.29 | ) | (.67 | ) | (.54 | ) | — | |||||||||||
Total distributions | (.75 | ) | (2.73 | ) | (1.13 | ) | (.87 | ) | (.28 | ) | ||||||||||
Net asset value, end of period | $ | 32.05 | $ | 27.34 | $ | 31.68 | $ | 28.74 | $ | 27.43 | ||||||||||
| ||||||||||||||||||||
Total Returnb | 20.11 | % | (5.73 | %) | 14.39 | % | 8.01 | % | 0.11 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 46,219 | $ | 42,636 | $ | 51,080 | $ | 52,840 | $ | 52,629 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | 1.45 | % | 1.53 | % | 1.29 | % | 1.42 | % | 1.14 | % | ||||||||||
Total expensesc | 1.01 | % | 0.99 | % | 0.98 | % | 0.92 | % | 0.94 | % | ||||||||||
Net expensesd | 1.00 | % | 0.99 | % | 0.98 | % | 0.92 | % | 0.94 | % | ||||||||||
Portfolio turnover rate | 14 | % | 4 | % | 1 | % | 6 | % | 3 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not take into account any of the expenses associated with an investment in variable insurance products. If total return had taken into account these expenses, performance would have been lower. Shares of a series of Guggenheim Variable Funds Trust are available only through the purchase of such products. |
c | Does not include expenses of the underlying funds in which the Fund invests. |
d | Net expense information reflects the expense ratios after expense waivers and reimbursements, as applicable. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 87 |
MANAGERS’ COMMENTARY (Unaudited) | December 31, 2019 |
To Our Shareholders:
The Series O (All Cap Value Series) (the “Fund”) is managed by a team of seasoned professionals led by James Schier, CFA, Senior Managing Director and Portfolio Manager; David Toussaint, CFA, CPA, Managing Director and Portfolio Manager; Farhan Sharaff, Senior Managing Director, Assistant Chief Investment Officer, Equities, and Portfolio Manager; Gregg Strohkorb, CFA, Director Portfolio Manager; and Burak Hurmeydan, Ph.D., Director and Portfolio Manager. In the following paragraphs, the investment team discusses the market environment and performance of the Fund for the fiscal year ended December 31, 2019.
For the year ended December 31, 2019, Series O (All Cap Value Series) returned 23.74%, compared with the 26.26% return of its benchmark, the Russell 3000® Value Index.
Strategy and Market Overview
Our investment approach focuses on understanding how companies make money and how easily companies can improve returns, maintain existing high levels of profitability, or benefit from change that occurs within the industries in which they operate. In today’s rapidly changing environment marked by very sharp and quick, but constrained volatility, our long-term orientation and discipline are a competitive advantage. This should become especially critical when the environment of indiscriminant valuation expansion subsides, and fundamentals once again become a more dominant factor in the market.
Performance Review
The Fund underperformed the index over the one-year period, mostly due to the Fund’s deeper value bias and size bias relative to the benchmark. The growth investing style has strongly outperformed value for the last several years, but value gained some ground in the late third and early fourth quarters of 2019. The Fund’s holdings tend toward smaller capitalization relative to the benchmark, at a time when larger cap companies outperformed.
Stock selection was slightly positive in the Fund’s showing relative to the benchmark, with sector allocation providing an additional contribution to results.
The Fund benefited from its overweight and selection in the strong-performing Information Technology sector, where its largest individual contributor was Apple, Inc., a stock not included in the index, followed by Infinera. Other individual holdings that made strong contributions were Reliance Steel & Aluminum Co. in the Materials sector and Tyson Foods, Inc. in the Consumer Staples sector. Both were the best-returning holdings in their respective sectors for the period. Also highlighting the positive side was selection in the Financial sector, where the Fund has large positions in money-center and regional U.S. banks.
Selection in the Energy, Health Care, and Utilities sectors detracted from performance. Oil prices softened over the period as economic uncertainty surrounding the trade dispute was especially magnified in smaller exploration and production companies. Fund holdings in Range Resources Corp. and Whiting Petroleum Corp. declined significantly in response. Strong performance from Scorpio Tankers and overweights in integrated oil company Hess Corp. and transporter Kinder Morgan, Inc. were sector bright spots.
Relative performance in Health Care was driven by poor performance among the Fund’s pharmaceutical and biotech holdings and in Utilities by an overweight to Exelon Corp. which was a relatively poor performer and not owning strong performers NextEra Energy and Southern Company. The Fund was also penalized for not having a position in strong Communications Services performer AT&T, Inc.
Portfolio Positioning
While this strategy is balanced relative to the benchmark, it does possess defensive characteristics, such as having an overweight in the Utilities sector.
The largest relative sector exposures for the year were an underweight in Communications Services and an overweight in Financials and Information Technology.
88 | THE GUGGENHEIM FUNDS ANNUAL REPORT |
MANAGERS’ COMMENTARY (Unaudited)(concluded) | December 31, 2019 |
Portfolio and Market Outlook
The market volatility late in the year caused sudden changes in the market. The perception of a friendlier environment from the U.S. Federal Reserve and continued hope that trade issues can be relatively quickly and favorably resolved has created an environment where the market is beginning to treat earnings disappointments and reduced outlooks in a less harsh manner since these are being viewed as more temporary issues. The total return potential for stocks now seems more favorable than it was just a few months ago, and the market appears to have begun the early phase of a calculated rebound that may have some duration in time and level.
The Fund has a value bias compared with the benchmark and is positioned favorably as the value investing style continues to improve. We continue to find niche companies with what we believe to be attractive growth opportunities, and, as such, are constructive on the outlook.
Performance displayed represents past performance which is no guarantee of future results.
The opinions and forecast expressed may not actually come to pass. This information is subject to change at any time, based on market and other conditions, and should not be construed as a recommendation of any specific security or strategy.
THE GUGGENHEIM FUNDS ANNUAL REPORT | 89 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2019 |
SERIES O (ALL CAP VALUE SERIES)
OBJECTIVE: Seeks long-term growth of capital.
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments.
Inception Date: June 1, 1995 |
Ten Largest Holdings (% of Total Net Assets) | |
Chevron Corp. | 2.8% |
Bank of America Corp. | 2.7% |
Citigroup, Inc. | 2.0% |
iShares Russell 1000 Value ETF | 2.0% |
JPMorgan Chase & Co. | 2.0% |
Intel Corp. | 2.0% |
Zions Bancorp North America | 1.6% |
Verizon Communications, Inc. | 1.6% |
Pfizer, Inc. | 1.5% |
OGE Energy Corp. | 1.5% |
Top Ten Total | 19.7% |
“Ten Largest Holdings” excludes any temporary cash investments. |
90 | THE GUGGENHEIM FUNDS ANNUAL REPORT |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2019 |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2019
| 1 Year | 5 Year | 10 Year |
Series O (All Cap Value Series) | 23.74% | 8.22% | 10.61% |
Russell 3000 Value Index | 26.26% | 8.20% | 11.71% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The Russell 3000 Value Index is an unmanaged index and, unlike the Fund, has no management fees or operating expenses to reduce its reported return. |
† | Performance figures do not reflect fees and expenses associated with an investment in variable insurance products. If returns had taken into account these fees and expenses, performance would have been lower. Shares of a series of Guggenheim Variable Funds Trust are available only through the purchase of such products. |
THE GUGGENHEIM FUNDS ANNUAL REPORT | 91 |
SCHEDULE OF INVESTMENTS | December 31, 2019 |
SERIES O (ALL CAP VALUE SERIES) |
| Shares | Value | ||||||
COMMON STOCKS† - 97.5% | ||||||||
Financial - 32.3% | ||||||||
Bank of America Corp. | 83,325 | $ | 2,934,707 | |||||
Citigroup, Inc. | 27,506 | 2,197,454 | ||||||
JPMorgan Chase & Co. | 15,166 | 2,114,141 | ||||||
Zions Bancorp North America | 33,481 | 1,738,334 | ||||||
Berkshire Hathaway, Inc. — Class B* | 6,868 | 1,555,602 | ||||||
Wells Fargo & Co. | 28,096 | 1,511,565 | ||||||
Voya Financial, Inc. | 24,286 | 1,480,960 | ||||||
Equity Commonwealth REIT | 41,909 | 1,375,873 | ||||||
Truist Financial Corp. | 20,656 | 1,163,346 | ||||||
KeyCorp | 49,889 | 1,009,753 | ||||||
Alleghany Corp.* | 1,206 | 964,281 | ||||||
Allstate Corp. | 8,262 | 929,062 | ||||||
Axis Capital Holdings Ltd. | 14,954 | 888,866 | ||||||
Prudential Financial, Inc. | 8,626 | 808,601 | ||||||
MetLife, Inc. | 15,334 | 781,574 | ||||||
Hartford Financial Services Group, Inc. | 11,654 | 708,214 | ||||||
Principal Financial Group, Inc. | 12,855 | 707,025 | ||||||
Willis Towers Watson plc | 3,446 | 695,885 | ||||||
Morgan Stanley | 13,028 | 665,991 | ||||||
Medical Properties Trust, Inc. REIT | 30,988 | 654,157 | ||||||
Radian Group, Inc. | 24,321 | 611,916 | ||||||
Howard Hughes Corp.* | 4,586 | 581,505 | ||||||
Old Republic International Corp. | 25,703 | 574,976 | ||||||
Alexandria Real Estate Equities, Inc. REIT | 3,552 | 573,932 | ||||||
Physicians Realty Trust REIT | 29,711 | 562,726 | ||||||
Loews Corp. | 10,075 | 528,837 | ||||||
Sun Communities, Inc. REIT | 3,225 | 484,073 | ||||||
Marsh & McLennan Companies, Inc. | 4,014 | 447,200 | ||||||
First Horizon National Corp. | 26,668 | 441,622 | ||||||
Charles Schwab Corp. | 9,212 | 438,122 | ||||||
Pinnacle Financial Partners, Inc. | 6,806 | 435,584 | ||||||
Regions Financial Corp. | 25,276 | 433,736 | ||||||
Cousins Properties, Inc. REIT | 9,241 | 380,729 | ||||||
Umpqua Holdings Corp. | 21,084 | 373,187 | ||||||
American International Group, Inc. | 6,394 | 328,204 | ||||||
IBERIABANK Corp. | 3,916 | 293,034 | ||||||
BOK Financial Corp. | 3,260 | 284,924 | ||||||
WSFS Financial Corp. | 6,188 | 272,210 | ||||||
VICI Properties, Inc. REIT | 10,586 | 270,472 | ||||||
Prosperity Bancshares, Inc. | 3,733 | 268,365 | ||||||
Camden Property Trust REIT | 2,443 | 259,202 | ||||||
Hilltop Holdings, Inc. | 10,087 | 251,469 | ||||||
Redwood Trust, Inc. REIT | 14,098 | 233,181 | ||||||
Stifel Financial Corp. | 3,515 | 213,185 | ||||||
Heartland Financial USA, Inc. | 3,967 | 197,319 | ||||||
First Midwest Bancorp, Inc. | 4,306 | 99,296 | ||||||
Total Financial | 34,724,397 | |||||||
Consumer, Non-cyclical - 14.4% | ||||||||
Pfizer, Inc. | 41,289 | 1,617,703 | ||||||
Johnson & Johnson | 7,572 | 1,104,528 | ||||||
Bunge Ltd. | 18,787 | 1,081,192 | ||||||
HCA Healthcare, Inc. | 6,649 | 982,789 | ||||||
Tyson Foods, Inc. — Class A | 9,842 | 896,016 | ||||||
Ingredion, Inc. | 8,757 | 813,963 | ||||||
Archer-Daniels-Midland Co. | 16,063 | 744,520 | ||||||
Zimmer Biomet Holdings, Inc. | 4,740 | 709,483 | ||||||
Alexion Pharmaceuticals, Inc.* | 5,760 | 622,944 | ||||||
Encompass Health Corp. | 8,850 | 613,039 | ||||||
Merck & Company, Inc. | 6,587 | 599,088 | ||||||
Quest Diagnostics, Inc. | 5,569 | 594,714 | ||||||
Procter & Gamble Co. | 4,471 | 558,428 | ||||||
Medtronic plc | 4,628 | 525,047 | ||||||
McKesson Corp. | 3,764 | 520,636 | ||||||
Biogen, Inc.* | 1,578 | 468,240 | ||||||
Central Garden & Pet Co. — Class A* | 15,532 | 456,019 | ||||||
Humana, Inc. | 1,232 | 451,553 | ||||||
United Therapeutics Corp.* | 4,738 | 417,323 | ||||||
Amgen, Inc. | 1,636 | 394,391 | ||||||
Eagle Pharmaceuticals, Inc.* | 5,616 | 337,409 | ||||||
UnitedHealth Group, Inc. | 1,028 | 302,211 | ||||||
Emergent BioSolutions, Inc.* | 5,533 | 298,505 | ||||||
Premier, Inc. — Class A* | 6,756 | 255,917 | ||||||
TreeHouse Foods, Inc.* | 1,614 | 78,279 | ||||||
Total Consumer, Non-cyclical | 15,443,937 | |||||||
Industrial - 8.1% | ||||||||
Owens Corning | 12,274 | 799,283 | ||||||
Valmont Industries, Inc. | 4,528 | 678,204 | ||||||
Knight-Swift Transportation Holdings, Inc. | 17,175 | 615,552 | ||||||
Eaton Corporation plc | 6,391 | 605,356 | ||||||
MDU Resources Group, Inc. | 20,185 | 599,696 | ||||||
FedEx Corp. | 3,877 | 586,241 | ||||||
Johnson Controls International plc | 13,810 | 562,205 | ||||||
General Electric Co. | 39,208 | 437,561 | ||||||
Graphic Packaging Holding Co. | 20,768 | 345,787 | ||||||
Jacobs Engineering Group, Inc. | 3,679 | 330,485 | ||||||
FLIR Systems, Inc. | 6,303 | 328,197 | ||||||
US Concrete, Inc.* | 6,968 | 290,287 | ||||||
Rexnord Corp.* | 8,337 | 271,953 | ||||||
Advanced Energy Industries, Inc.* | 3,763 | 267,926 | ||||||
Plexus Corp.* | 3,470 | 266,982 | ||||||
Crane Co. | 3,080 | 266,050 | ||||||
PGT Innovations, Inc.* | 17,680 | 263,609 | ||||||
Snap-on, Inc. | 1,340 | 226,996 | ||||||
Kennametal, Inc. | 5,690 | 209,904 | ||||||
GATX Corp. | 2,344 | 194,200 | ||||||
Park Aerospace Corp. | 11,271 | 183,379 | ||||||
Dycom Industries, Inc.* | 3,883 | 183,083 | ||||||
Kirby Corp.* | 1,659 | 148,531 | ||||||
EnerSys | 1,195 | 89,422 | ||||||
Total Industrial | 8,750,889 | |||||||
Energy - 8.0% | ||||||||
Chevron Corp. | 24,806 | 2,989,371 | ||||||
ConocoPhillips | 20,031 | 1,302,616 | ||||||
Parsley Energy, Inc. — Class A | 64,634 | 1,222,229 | ||||||
Exxon Mobil Corp. | 14,378 | 1,003,297 | ||||||
Marathon Oil Corp. | 51,739 | 702,615 | ||||||
Cabot Oil & Gas Corp. — Class A | 29,092 | 506,492 | ||||||
Range Resources Corp. | 70,480 | 341,828 |
92 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2019 |
SERIES O (ALL CAP VALUE SERIES) |
| Shares | Value | ||||||
Whiting Petroleum Corp.* | 36,447 | $ | 267,521 | |||||
Oasis Petroleum, Inc.* | 46,749 | 152,402 | ||||||
Antero Resources Corp.* | 30,775 | 87,709 | ||||||
Delek US Holdings, Inc. | 2,184 | 73,229 | ||||||
Total Energy | 8,649,309 | |||||||
Utilities - 8.0% | ||||||||
OGE Energy Corp. | 35,149 | 1,563,076 | ||||||
Exelon Corp. | 23,741 | 1,082,352 | ||||||
Public Service Enterprise Group, Inc. | 18,280 | 1,079,434 | ||||||
AES Corp. | 44,208 | 879,739 | ||||||
Duke Energy Corp. | 8,207 | 748,561 | ||||||
Pinnacle West Capital Corp. | 7,625 | 685,716 | ||||||
Edison International | 8,820 | 665,116 | ||||||
Portland General Electric Co. | 9,436 | 526,435 | ||||||
NiSource, Inc. | 16,523 | 460,000 | ||||||
PPL Corp. | 9,865 | 353,956 | ||||||
Avista Corp. | 6,144 | 295,465 | ||||||
Southwest Gas Holdings, Inc. | 3,787 | 287,699 | ||||||
Total Utilities | 8,627,549 | |||||||
Technology - 7.7% | ||||||||
Intel Corp. | 35,117 | 2,101,752 | ||||||
Micron Technology, Inc.* | 22,842 | 1,228,443 | ||||||
Skyworks Solutions, Inc. | 8,767 | 1,059,755 | ||||||
Apple, Inc. | 3,512 | 1,031,299 | ||||||
Qorvo, Inc.* | 6,818 | 792,456 | ||||||
MACOM Technology Solutions Holdings, Inc.* | 20,811 | 553,573 | ||||||
Super Micro Computer, Inc.* | 19,484 | 468,006 | ||||||
Amdocs Ltd. | 6,058 | 437,327 | ||||||
Lumentum Holdings, Inc.* | 3,315 | 262,879 | ||||||
Evolent Health, Inc. — Class A* | 21,167 | 191,561 | ||||||
CSG Systems International, Inc. | 3,577 | 185,217 | ||||||
Total Technology | 8,312,268 | |||||||
Consumer, Cyclical - 7.2% | ||||||||
Walmart, Inc. | 8,836 | 1,050,070 | ||||||
PVH Corp. | 8,459 | 889,464 | ||||||
Southwest Airlines Co. | 15,677 | 846,245 | ||||||
Lear Corp. | 5,073 | 696,015 | ||||||
Walgreens Boots Alliance, Inc. | 10,837 | 638,950 | ||||||
LKQ Corp.* | 13,820 | 493,374 | ||||||
PACCAR, Inc. | 5,968 | 472,069 | ||||||
UniFirst Corp. | 1,884 | 380,530 | ||||||
Home Depot, Inc. | 1,534 | 334,995 | ||||||
Alaska Air Group, Inc. | 4,939 | 334,617 | ||||||
Carnival Corp. | 6,416 | 326,125 | ||||||
DR Horton, Inc. | 5,871 | 309,695 | ||||||
BorgWarner, Inc. | 5,015 | 217,551 | ||||||
Macy’s, Inc. | 12,693 | 215,781 | ||||||
Skechers U.S.A., Inc. — Class A* | 4,730 | 204,289 | ||||||
Caleres, Inc. | 8,294 | 196,982 | ||||||
Newell Brands, Inc. | 4,736 | 91,026 | ||||||
Total Consumer, Cyclical | 7,697,778 | |||||||
Communications - 6.6% | ||||||||
Verizon Communications, Inc. | 27,789 | 1,706,245 | ||||||
Comcast Corp. — Class A | 28,906 | 1,299,903 | ||||||
NortonLifeLock, Inc. | 40,637 | 1,037,056 | ||||||
Cisco Systems, Inc. | 17,793 | 853,352 | ||||||
Infinera Corp.* | 93,258 | 740,469 | ||||||
Juniper Networks, Inc. | 14,805 | 364,647 | ||||||
Viavi Solutions, Inc.* | 22,862 | 342,930 | ||||||
F5 Networks, Inc.* | 2,282 | 318,681 | ||||||
Ciena Corp.* | 6,045 | 258,061 | ||||||
T-Mobile US, Inc.* | 2,707 | 212,283 | ||||||
Total Communications | 7,133,627 | |||||||
Basic Materials - 5.2% | ||||||||
Freeport-McMoRan, Inc. | 85,838 | 1,126,195 | ||||||
Nucor Corp. | 15,903 | 895,021 | ||||||
Huntsman Corp. | 35,107 | 848,185 | ||||||
Reliance Steel & Aluminum Co. | 6,554 | 784,907 | ||||||
Olin Corp. | 44,043 | 759,742 | ||||||
DuPont de Nemours, Inc. | 7,296 | 468,403 | ||||||
Ashland Global Holdings, Inc. | 4,903 | 375,227 | ||||||
Dow, Inc. | 3,272 | 179,076 | ||||||
Commercial Metals Co. | 5,394 | 120,124 | ||||||
Total Basic Materials | 5,556,880 | |||||||
Total Common Stocks | ||||||||
(Cost $84,929,132) | 104,896,634 | |||||||
RIGHTS††† - 0.0% | ||||||||
Basic Materials - 0.0% | ||||||||
Pan American Silver Corp.*,1 | 40,146 | — | ||||||
Total Rights | ||||||||
(Cost $—) | — | |||||||
EXCHANGE-TRADED FUNDS† - 2.0% | ||||||||
iShares Russell 1000 Value ETF | 15,854 | 2,163,754 | ||||||
Total Exchange-Traded Funds | ||||||||
(Cost $2,041,431) | 2,163,754 | |||||||
MONEY MARKET FUND† - 0.2% | ||||||||
Dreyfus Treasury Securities Cash Management Fund — Institutional Shares 1.44%2 | 250,653 | 250,653 | ||||||
Total Money Market Fund | ||||||||
(Cost $250,653) | 250,653 | |||||||
Total Investments - 99.7% | ||||||||
(Cost $87,221,216) | $ | 107,311,041 | ||||||
Other Assets & Liabilities, net - 0.3% | 322,936 | |||||||
Total Net Assets - 100.0% | $ | 107,633,977 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 93 |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2019 |
SERIES O (ALL CAP VALUE SERIES) |
* | Non-income producing security. |
† | Value determined based on Level 1 inputs — See Note 4. |
††† | Value determined based on Level 3 inputs — See Note 4. |
1 | Security was fair valued by the Valuation Committee at December 31, 2019. The total market value of fair valued securities amounts to $0, (cost $0) or 0.0% of total net assets. |
2 | Rate indicated is the 7-day yield as of December 31, 2019. |
plc — Public Limited Company | |
REIT — Real Estate Investment Trust | |
See Sector Classification in Other Information section. |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2019 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stocks | $ | 104,896,634 | $ | — | $ | — | $ | 104,896,634 | ||||||||
Rights | — | — | — | * | — | |||||||||||
Exchange-Traded Funds | 2,163,754 | — | — | 2,163,754 | ||||||||||||
Money Market Fund | 250,653 | — | — | 250,653 | ||||||||||||
Total Assets | $ | 107,311,041 | $ | — | $ | — | $ | 107,311,041 |
* | Security has a market value of $0 |
94 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SERIES O (ALL CAP VALUE SERIES) |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2019 |
Assets: | ||||
Investments, at value (cost $87,221,216) | $ | 107,311,041 | ||
Prepaid expenses | 4,221 | |||
Receivables: | ||||
Securities sold | 325,316 | |||
Dividends | 132,872 | |||
Interest | 559 | |||
Total assets | 107,774,009 | |||
Liabilities: | ||||
Payable for: | ||||
Printing fees | 32,001 | |||
Management fees | 25,561 | |||
Professional fees | 21,889 | |||
Distribution and service fees | 21,876 | |||
Fund shares redeemed | 17,576 | |||
Fund accounting/administration fees | 7,000 | |||
Trustees’ fees* | 3,089 | |||
Transfer agent/maintenance fees | 2,272 | |||
Miscellaneous | 8,768 | |||
Total liabilities | 140,032 | |||
Commitments and contingent liabilities (Note 14) | — | |||
Net assets | $ | 107,633,977 | ||
Net assets consist of: | ||||
Paid in capital | $ | 81,240,327 | ||
Total distributable earnings (loss) | 26,393,650 | |||
Net assets | $ | 107,633,977 | ||
Capital shares outstanding | 3,272,591 | |||
Net asset value per share | $ | 32.89 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2019 |
Investment Income: | ||||
Dividends (net of foreign withholding tax of $122) | $ | 2,568,605 | ||
Interest | 28,292 | |||
Total investment income | 2,596,897 | |||
Expenses: | ||||
Management fees | 727,530 | |||
Distribution and service fees | 259,831 | |||
Transfer agent/maintenance fees | 25,176 | |||
Fund accounting/administration fees | 83,147 | |||
Professional fees | 51,528 | |||
Trustees’ fees* | 21,253 | |||
Custodian fees | 10,181 | |||
Miscellaneous | 52,442 | |||
Total expenses | 1,231,088 | |||
Less: | ||||
Expenses reimbursed by Adviser | (3,196 | ) | ||
Expenses waived by Adviser | (316,154 | ) | ||
Total waived/reimbursed expenses | (319,350 | ) | ||
Net expenses | 911,738 | |||
Net investment income | 1,685,159 | |||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments | 6,063,349 | |||
Net realized gain | 6,063,349 | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | 14,405,167 | |||
Net change in unrealized appreciation (depreciation) | 14,405,167 | |||
Net realized and unrealized gain | 20,468,516 | |||
Net increase in net assets resulting from operations | $ | 22,153,675 |
* | 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 | 95 |
SERIES O (ALL CAP VALUE SERIES) |
STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | ||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income | $ | 1,685,159 | $ | 1,508,050 | ||||
Net realized gain on investments | 6,063,349 | 10,765,658 | ||||||
Net change in unrealized appreciation (depreciation) on investments | 14,405,167 | (24,181,176 | ) | |||||
Net increase (decrease) in net assets resulting from operations | 22,153,675 | (11,907,468 | ) | |||||
Distributions to shareholders | (9,601,509 | ) | (10,707,235 | ) | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 4,011,293 | 7,428,149 | ||||||
Distributions reinvested | 9,601,509 | 10,707,235 | ||||||
Cost of shares redeemed | (19,446,850 | ) | (27,375,695 | ) | ||||
Net decrease from capital share transactions | (5,834,048 | ) | (9,240,311 | ) | ||||
Net increase (decrease) in net assets | 6,718,118 | (31,855,014 | ) | |||||
Net assets: | ||||||||
Beginning of year | 100,915,859 | 132,770,873 | ||||||
End of year | $ | 107,633,977 | $ | 100,915,859 | ||||
Capital share activity: | ||||||||
Shares sold | 130,063 | 215,525 | ||||||
Shares issued from reinvestment of distributions | 315,943 | 318,383 | ||||||
Shares redeemed | (616,888 | ) | (781,562 | ) | ||||
Net decrease in shares | (170,882 | ) | (247,654 | ) |
96 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SERIES O (ALL CAP VALUE SERIES) |
FINANCIAL HIGHLIGHTS |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 29.31 | $ | 35.97 | $ | 34.05 | $ | 29.30 | $ | 35.35 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | .51 | .43 | .24 | .45 | .43 | |||||||||||||||
Net gain (loss) on investments (realized and unrealized) | 6.19 | (3.83 | ) | 4.51 | 6.01 | (1.80 | ) | |||||||||||||
Total from investment operations | 6.70 | (3.40 | ) | 4.75 | 6.46 | (1.37 | ) | |||||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | (.49 | ) | (.40 | ) | (.38 | ) | (.48 | ) | (.33 | ) | ||||||||||
Net realized gains | (2.63 | ) | (2.86 | ) | (2.45 | ) | (1.23 | ) | (4.35 | ) | ||||||||||
Total distributions | (3.12 | ) | (3.26 | ) | (2.83 | ) | (1.71 | ) | (4.68 | ) | ||||||||||
Net asset value, end of period | $ | 32.89 | $ | 29.31 | $ | 35.97 | $ | 34.05 | $ | 29.30 | ||||||||||
| ||||||||||||||||||||
Total Returnb | 23.74 | % | (10.62 | %) | 14.77 | % | 22.71 | % | (4.70 | %) | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 107,634 | $ | 100,916 | $ | 132,771 | $ | 128,367 | $ | 120,113 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | 1.62 | % | 1.23 | % | 0.69 | % | 1.48 | % | 1.33 | % | ||||||||||
Total expensesc | 1.18 | % | 1.17 | % | 1.11 | % | 0.90 | % | 0.92 | % | ||||||||||
Net expensesd,e,f | 0.88 | % | 0.88 | % | 0.89 | % | 0.90 | % | 0.92 | % | ||||||||||
Portfolio turnover rate | 33 | % | 36 | % | 33 | % | 47 | % | 39 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not take into account any of the expenses associated with an investment in variable insurance products. If total return had taken into account these expenses, performance would have been lower. Shares of a series of Guggenheim Variable Funds Trust are available only through the purchase of such products. |
c | Does not include expenses of the underlying funds in which the Fund invests. |
d | Net expense information reflects the expense ratios after expense waivers and reimbursements, as applicable. |
e | Net expenses may include expenses that are excluded from the expense limitation agreement. Excluding these expenses, the net expense ratios for the years would be: |
12/31/19 | 12/31/18 | 12/31/17 | 12/31/16 | 12/31/15 | |
0.88% | 0.88% | 0.88% | 0.90% | 0.92% |
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 was as follows: |
12/31/19 | 12/31/18 | 12/31/17 | 12/31/16 | |
— | — | 0.00%* | — |
* | Less than 0.01% |
SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 97 |
MANAGERS’ COMMENTARY (Unaudited) | December 31, 2019 |
To Our Shareholders:
The Series P (High Yield Series) (the “Fund”) is managed by a team of seasoned professionals, including B. Scott Minerd, Chairman of Investments and Global Chief Investment Officer; Kevin H. Gundersen, Senior Managing Director and Portfolio Manager; Thomas J. Hauser, Senior Managing Director and Portfolio Manager; and Richard de Wet, Director and Portfolio Manager. In the following paragraphs, the investment team discusses the market environment and performance of the Fund for the fiscal year ended December 31, 2019.
For the year ended December 31, 2019, Series P (High Yield Series) returned 11.59%, compared with the 14.32% return of its benchmark, the Bloomberg Barclays U.S. Corporate High Yield Index.
The high yield market delivered strong performance in 2019 with four straight quarters of positive returns, more than offsetting the negative performance from the fourth quarter of 2018. There was little separation between sector returns except for the sizeable underperformance in Energy with Consumer Cyclicals (+16.7%) and Consumer Non-Cyclicals (+15.8%) among the top performers. In terms of quality, CCC-rated bonds (+9.5%) underperformed higher quality bonds in BB (+15.5%) and B-rated bonds (+14.8%), signaling some investor resistance to owning lower quality bonds at this stage of the cycle.
Fundamental factors underlying the corporate sector are supportive of high yield bonds. Average leverage and interest coverage ratios remain strong coupled with stable corporate earnings. Notably, the trailing 12-month default rate in the ICE BofA Merrill Lynch High Yield Index increased to 2% driven by energy issuers, but remains below the historical average near 4%. The default rate excluding energy remains steady at less than 1%. Despite a positive fundamental backdrop, the high yield market experienced bouts of volatility on the back of concerns over trade, which added some uncertainty. However, fears of an economic slowdown decreased following a series of mid-cycle rate cuts from the U.S. Federal Reserve along with easing measures from other central banks coupled with progress on U.S.-China trade negations.
The Fund invests in non-U.S. dollar denominated assets when the risk-return profile is favorable. Non-U.S. dollar denominated assets comprise less than 2% of the Fund. The Fund uses forward foreign currency exchange contracts to hedge exchange rate risk, which minimizes the effect of currency fluctuations.
Fund relative underperformance over the period was driven by the exposure to bank loans. During the fourth quarter of 2018, bank loans contributed positively to performance, as they experienced a smaller drawdown versus the broader high yield market. However, in 2019 bank loans returned about half of the performance of high yield bonds. In addition, some individual investments in the Energy and Consumer Non-Cyclical sectors underperformed. This was partially offset by strong performance in the Communications sector driven by positive credit outcomes.
The drive to more liquid parts of the bond universe has created better value in middle-market bonds, and therefore can be expected to perform relatively better than large capital structures, all else equal. The Fund is consistently positioned conservatively in terms of duration, with higher exposure to short-dated bonds and floating rate securities (bank loans), which decreases volatility as well as diversifies sources of return. The Fund continues to avoid companies with heavy capital expenditure needs that can impair cash flow generation towards the latter part of the economic cycle. Overall, we remain focused on credit selection, which we believe will become increasingly important to returns in the event of market volatility.
Performance displayed represents past performance which is no guarantee of future results.
The opinions and forecast expressed may not actually come to pass. This information is subject to change at any time, based on market and other conditions, and should not be construed as a recommendation of any specific security or strategy.
98 | THE GUGGENHEIM FUNDS ANNUAL REPORT |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2019 |
SERIES P (HIGH YIELD SERIES)
OBJECTIVE: Seeks high current income. Capital appreciation is a secondary objective.
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments.
Inception Date: August 5, 1996 |
Ten Largest Holdings (% of Total Net Assets) | |
SPDR Bloomberg Barclays Short Term High Yield Bond ETF | 2.0% |
LBC Tank Terminals Holding Netherlands BV, 6.88% | 1.6% |
Indigo Natural Resources LLC, 6.88% | 1.6% |
Fidelity & Guaranty Life Holdings, Inc., 5.50% | 1.5% |
EIG Investors Corp., 10.88% | 1.4% |
Terraform Global Operating LLC, 6.13% | 1.3% |
Hunt Companies, Inc., 6.25% | 1.3% |
Vector Group Ltd., 6.13% | 1.3% |
Grinding Media Inc. / MC Grinding Media Canada Inc., 7.38% | 1.3% |
American Midstream Partners, LP / American Midstream Finance Corp., 9.50% | 1.3% |
Top Ten Total | 14.6% |
“Ten Largest Holdings” excludes any temporary cash or derivative investments. |
THE GUGGENHEIM FUNDS ANNUAL REPORT | 99 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2019 |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2019
| 1 Year | 5 Year | 10 Year |
Series P (High Yield Series) | 11.59% | 5.13% | 6.48% |
Bloomberg Barclays U.S. Corporate High Yield Index | 14.32% | 6.13% | 7.57% |
Portfolio Composition by Quality Rating1 | |
Rating | % of Total |
Fixed Income Instruments | |
A | 0.7% |
BBB | 7.8% |
BB | 48.6% |
B | 28.5% |
CCC | 8.5% |
CC | 0.0%3 |
NR2 | 1.2% |
Other Instruments | 4.7% |
Total Investments | 100.0% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The Bloomberg Barclays U.S. Corporate High Yield Index is an unmanaged index and, unlike the Fund, has no management fees or operating expenses to reduce its reported return. |
† | Performance figures do not reflect fees and expenses associated with an investment in variable insurance products. If returns had taken into account these fees and expenses, performance would have been lower. Shares of a series of Guggenheim Variable Funds Trust are available only through the purchase of such products. |
1 | Source: BlackRock Solutions. Credit quality ratings are measured on a scale that generally ranges from AAA (highest) to D (lowest). All securities except for those labeled “NR” have been rated by Moody’s, Standard & Poor’s (“S&P”), or Fitch, each of which is a Nationally Recognized Statistical Rating Organization (“NRSRO”). For purposes of this presentation, when ratings are available from more than one agency, the highest rating is used. Guggenheim Investments has converted ratings to the equivalent S&P rating. Security ratings are determined at the time of purchase and may change thereafter. |
2 | NR securities do not necessarily indicate low credit quality. |
3 | Value of securities is less than 0.1% of total investments. |
100 | THE GUGGENHEIM FUNDS ANNUAL REPORT |
SCHEDULE OF INVESTMENTS | December 31, 2019 |
SERIES P (HIGH YIELD SERIES) |
| Shares | Value | ||||||
COMMON STOCKS† - 0.9% | ||||||||
Utilities - 0.6% | ||||||||
TexGen Power LLC†† | 7,929 | $ | 292,382 | |||||
Consumer, Non-cyclical - 0.2% | ||||||||
ATD New Holdings, Inc.*,†† | 3,166 | 79,150 | ||||||
Cengage Learning Holdings II, Inc.*,†† | 2,107 | 25,284 | ||||||
Chef Holdings, Inc.*,†††,1 | 75 | 8,766 | ||||||
Spectrum Brands Holdings, Inc. | 6 | 386 | ||||||
Crimson Wine Group Ltd.* | 24 | 177 | ||||||
MEDIQ, Inc.*,†††,1 | 92 | — | ||||||
Total Consumer, Non-cyclical | 113,763 | |||||||
Energy - 0.1% | ||||||||
SandRidge Energy, Inc.* | 14,330 | 60,759 | ||||||
Financial - 0.0% | ||||||||
Jefferies Financial Group, Inc. | 247 | 5,278 | ||||||
Adelphia Recovery Trust*,†††,1 | 5,270 | — | ||||||
Total Financial | 5,278 | |||||||
Industrial - 0.0% | ||||||||
BP Holdco LLC*,†††,1,2 | 523 | 185 | ||||||
Vector Phoenix Holdings, LP*,†††,1 | 523 | 44 | ||||||
Total Industrial | 229 | |||||||
Consumer, Cyclical - 0.0% | ||||||||
Delta Air Lines, Inc. | 1 | 58 | ||||||
Chorus Aviation, Inc. | 3 | 19 | ||||||
Total Consumer, Cyclical | 77 | |||||||
Communications - 0.0% | ||||||||
Aimia, Inc.* | 2 | 6 | ||||||
Total Common Stocks | ||||||||
(Cost $1,173,660) | 472,494 | |||||||
PREFERRED STOCKS†† - 0.3% | ||||||||
Financial - 0.3% | ||||||||
American Equity Investment Life Holding Co.* | 6,000 | 154,500 | ||||||
Industrial - 0.0% | ||||||||
U.S. Shipping Corp.*,†††,1 | 24,529 | — | ||||||
Total Preferred Stocks | ||||||||
(Cost $775,000) | 154,500 | |||||||
EXCHANGE-TRADED FUNDS† - 2.0% | ||||||||
SPDR Bloomberg Barclays Short Term High Yield Bond ETF | 40,000 | 1,077,600 | ||||||
Total Exchange-Traded Funds | ||||||||
(Cost $1,085,477) | 1,077,600 | |||||||
MONEY MARKET FUND† - 1.6% | ||||||||
Dreyfus Treasury Securities Cash Management Fund — Institutional Shares 1.44%5 | 863,166 | 863,166 | ||||||
Total Money Market Fund | ||||||||
(Cost $863,166) | 863,166 | |||||||
Face | ||||||||
CORPORATE BONDS†† - 86.5% | ||||||||
Financial - 17.1% | ||||||||
Jefferies Finance LLC / JFIN Company-Issuer Corp. | ||||||||
6.25% due 06/03/266 | 500,000 | 523,750 | ||||||
7.25% due 08/15/246 | 500,000 | 515,000 | ||||||
Fidelity & Guaranty Life Holdings, Inc. | ||||||||
5.50% due 05/01/256 | 750,000 | 798,750 | ||||||
Hunt Companies, Inc. | ||||||||
6.25% due 02/15/266 | 725,000 | 715,937 | ||||||
Icahn Enterprises, LP / Icahn Enterprises Finance Corp. | ||||||||
5.88% due 02/01/227 | 700,000 | 700,875 | ||||||
Quicken Loans, Inc. | ||||||||
5.25% due 01/15/286 | 650,000 | 672,750 | ||||||
LoanCore Capital Markets LLC / JLC Finance Corp. | ||||||||
6.88% due 06/01/206 | 650,000 | 650,000 | ||||||
Springleaf Finance Corp. | ||||||||
7.13% due 03/15/26 | 150,000 | 173,430 | ||||||
6.13% due 03/15/24 | 150,000 | 164,250 | ||||||
6.63% due 01/15/28 | 50,000 | 56,440 | ||||||
5.38% due 11/15/29 | 50,000 | 52,190 | ||||||
AmWINS Group, Inc. | ||||||||
7.75% due 07/01/266 | 400,000 | 442,052 | ||||||
Newmark Group, Inc. | ||||||||
6.13% due 11/15/23 | 400,000 | 441,123 | ||||||
Wilton Re Finance LLC | ||||||||
5.88% due 03/30/334,6 | 400,000 | 409,713 | ||||||
American Equity Investment Life Holding Co. | ||||||||
5.00% due 06/15/27 | 350,000 | 373,678 | ||||||
Kennedy-Wilson, Inc. | ||||||||
5.88% due 04/01/24 | 352,000 | 360,800 | ||||||
NFP Corp. | ||||||||
6.88% due 07/15/256 | 200,000 | 200,500 | ||||||
8.00% due 07/15/256 | 150,000 | 153,000 | ||||||
Greystar Real Estate Partners LLC | ||||||||
5.75% due 12/01/256 | 275,000 | 285,313 | ||||||
Goldman Sachs Group, Inc. | ||||||||
5.30%3,4 | 250,000 | 268,750 | ||||||
USI, Inc. | ||||||||
6.88% due 05/01/256 | 225,000 | 229,995 | ||||||
Assurant, Inc. | ||||||||
7.00% due 03/27/484 | 200,000 | 224,000 | ||||||
Iron Mountain, Inc. | ||||||||
4.88% due 09/15/296 | 200,000 | 203,160 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 101 |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2019 |
SERIES P (HIGH YIELD SERIES) |
Face | Value | |||||||
Oxford Finance LLC / Oxford Finance Company-Issuer II, Inc. | ||||||||
6.38% due 12/15/226 | 192,000 | $ | 197,520 | |||||
CNO Financial Group, Inc. | ||||||||
5.25% due 05/30/29 | 150,000 | 167,438 | ||||||
Alliant Holdings Intermediate LLC / Alliant Holdings Company-Issuer | ||||||||
6.75% due 10/15/276 | 125,000 | 133,869 | ||||||
LPL Holdings, Inc. | ||||||||
4.63% due 11/15/276 | 100,000 | 102,000 | ||||||
Equinix, Inc. | ||||||||
5.88% due 01/15/26 | 50,000 | 53,063 | ||||||
Total Financial | 9,269,346 | |||||||
Communications - 14.3% | ||||||||
Altice France S.A. | ||||||||
7.38% due 05/01/266 | 600,000 | 644,184 | ||||||
8.13% due 02/01/276 | 250,000 | 281,562 | ||||||
Level 3 Financing, Inc. | ||||||||
3.88% due 11/15/296 | 350,000 | 352,625 | ||||||
4.63% due 09/15/276 | 175,000 | 179,165 | ||||||
5.38% due 01/15/24 | 150,000 | 152,438 | ||||||
5.25% due 03/15/26 | 100,000 | 104,000 | ||||||
5.63% due 02/01/23 | 40,000 | 40,120 | ||||||
CCO Holdings LLC / CCO Holdings Capital Corp. | ||||||||
4.75% due 03/01/306 | 600,000 | 610,818 | ||||||
5.38% due 06/01/296 | 200,000 | 214,000 | ||||||
EIG Investors Corp. | ||||||||
10.88% due 02/01/24 | 767,000 | 765,083 | ||||||
Virgin Media Secured Finance plc | ||||||||
5.50% due 05/15/296 | 600,000 | 635,250 | ||||||
Sprint Communications, Inc. | ||||||||
7.00% due 03/01/206 | 550,000 | 552,926 | ||||||
Cengage Learning, Inc. | ||||||||
9.50% due 06/15/246 | 535,000 | 462,775 | ||||||
Ziggo BV | ||||||||
5.50% due 01/15/276 | 300,000 | 318,750 | ||||||
4.88% due 01/15/306 | 100,000 | 103,231 | ||||||
Sirius XM Radio, Inc. | ||||||||
4.63% due 07/15/246 | 200,000 | 210,000 | ||||||
5.50% due 07/01/296 | 175,000 | 189,217 | ||||||
CSC Holdings LLC | ||||||||
6.50% due 02/01/296,7 | 325,000 | 362,375 | ||||||
McGraw-Hill Global Education Holdings LLC / McGraw-Hill Global Education Finance | ||||||||
7.88% due 05/15/246 | 411,000 | 353,460 | ||||||
Telenet Finance Luxembourg Note | ||||||||
5.50% due 03/01/28 | 200,000 | 213,500 | ||||||
Ziggo Bond Company BV | ||||||||
5.88% due 01/15/256 | 200,000 | 206,126 | ||||||
Houghton Mifflin Harcourt Publishers, Inc. | ||||||||
9.00% due 02/15/256 | 200,000 | 205,000 | ||||||
MDC Partners, Inc. | ||||||||
6.50% due 05/01/246 | 174,000 | 157,470 | ||||||
Midcontinent Communications / Midcontinent Finance Corp. | ||||||||
5.38% due 08/15/276 | 125,000 | 132,187 | ||||||
GrubHub Holdings, Inc. | ||||||||
5.50% due 07/01/276 | 128,000 | 119,846 | ||||||
Cogent Communications Group, Inc. | ||||||||
5.38% due 03/01/226 | 100,000 | 104,500 | ||||||
Outfront Media Capital LLC / Outfront Media Capital Corp. | ||||||||
4.63% due 03/15/306 | 50,000 | 50,875 | ||||||
Match Group, Inc. | ||||||||
5.63% due 02/15/296 | 45,000 | 47,925 | ||||||
Total Communications | 7,769,408 | |||||||
Consumer, Non-cyclical - 13.3% | ||||||||
Vector Group Ltd. | ||||||||
6.13% due 02/01/256 | 725,000 | 713,219 | ||||||
Midas Intermediate Holdco II LLC / Midas Intermediate Holdco II Finance, Inc. | ||||||||
7.88% due 10/01/226 | 725,000 | 661,562 | ||||||
FAGE International S.A. / FAGE USA Dairy Industry, Inc. | ||||||||
5.63% due 08/15/266 | 660,000 | 607,200 | ||||||
Tenet Healthcare Corp. | ||||||||
5.13% due 11/01/276 | 250,000 | 264,062 | ||||||
6.25% due 02/01/276 | 150,000 | 161,438 | ||||||
5.13% due 05/01/25 | 100,000 | 103,000 | ||||||
Harsco Corp. | ||||||||
5.75% due 07/31/276 | 452,000 | 481,954 | ||||||
Par Pharmaceutical, Inc. | ||||||||
7.50% due 04/01/276 | 375,000 | 373,125 | ||||||
Nathan’s Famous, Inc. | ||||||||
6.63% due 11/01/256 | 350,000 | 357,000 | ||||||
Beverages & More, Inc. | ||||||||
11.50% due 06/15/228 | 450,000 | 308,250 | ||||||
Endo Dac / Endo Finance LLC / Endo Finco, Inc. | ||||||||
5.88% due 10/15/246 | 150,000 | 145,500 | ||||||
6.00% due 07/15/236 | 200,000 | 144,500 | ||||||
HCA, Inc. | ||||||||
5.88% due 02/01/29 | 250,000 | 289,062 | ||||||
Nielsen Finance LLC / Nielsen Finance Co. | ||||||||
5.00% due 04/15/226 | 275,000 | 276,031 | ||||||
Prime Security Services Borrower LLC / Prime Finance, Inc. | ||||||||
5.25% due 04/15/246,7 | 250,000 | 264,500 | ||||||
Bausch Health Companies, Inc. | ||||||||
6.50% due 03/15/226 | 150,000 | 153,375 | ||||||
5.75% due 08/15/276 | 100,000 | 108,500 | ||||||
KeHE Distributors LLC / KeHE Finance Corp. | ||||||||
8.63% due 10/15/266 | 225,000 | 235,687 | ||||||
Centene Corp. | ||||||||
4.25% due 12/15/276 | 125,000 | 128,594 | ||||||
5.38% due 06/01/266 | 100,000 | 106,125 | ||||||
C&S Group Enterprises LLC | ||||||||
5.38% due 07/15/226 | 225,000 | 227,250 |
102 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2019 |
SERIES P (HIGH YIELD SERIES) |
Face | Value | |||||||
Flexi-Van Leasing, Inc. | ||||||||
10.00% due 02/15/236 | 225,000 | $ | 213,188 | |||||
DaVita, Inc. | ||||||||
5.00% due 05/01/25 | 200,000 | 205,750 | ||||||
AMN Healthcare, Inc. | ||||||||
4.63% due 10/01/276 | 200,000 | 200,500 | ||||||
Avanos Medical, Inc. | ||||||||
6.25% due 10/15/22 | 150,000 | 152,063 | ||||||
Carriage Services, Inc. | ||||||||
6.63% due 06/01/266 | 125,000 | 133,125 | ||||||
Charles River Laboratories International, Inc. | ||||||||
4.25% due 05/01/286 | 100,000 | 101,875 | ||||||
Sotheby’s | ||||||||
7.38% due 10/15/276 | 75,000 | 75,937 | ||||||
United Rentals North America, Inc. | ||||||||
3.88% due 11/15/27 | 50,000 | 51,048 | ||||||
Total Consumer, Non-cyclical | 7,243,420 | |||||||
Industrial - 11.9% | ||||||||
Grinding Media Inc. / MC Grinding Media Canada Inc. | ||||||||
7.38% due 12/15/236 | 700,000 | 713,125 | ||||||
Great Lakes Dredge & Dock Corp. | ||||||||
8.00% due 05/15/22 | 626,000 | 661,995 | ||||||
Standard Industries, Inc. | ||||||||
4.75% due 01/15/286 | 400,000 | 410,000 | ||||||
5.38% due 11/15/246 | 150,000 | 154,125 | ||||||
Masonite International Corp. | ||||||||
5.38% due 02/01/286 | 250,000 | 264,062 | ||||||
5.75% due 09/15/266 | 200,000 | 212,500 | ||||||
Amsted Industries, Inc. | ||||||||
5.63% due 07/01/276 | 200,000 | 212,000 | ||||||
4.63% due 05/15/306 | 200,000 | 201,446 | ||||||
Cleaver-Brooks, Inc. | ||||||||
7.88% due 03/01/236 | 400,000 | 399,000 | ||||||
Reynolds Group Issuer, Inc. / Reynolds Group Issuer LLC / Reynolds Group Issuer Lu | ||||||||
5.13% due 07/15/236 | 220,000 | 225,225 | ||||||
5.75% due 10/15/20 | 106,602 | 106,735 | ||||||
5.50% (3 Month USD LIBOR + 3.50%) due 07/15/216,9 | 50,000 | 50,063 | ||||||
Ardagh Packaging Finance plc / Ardagh Holdings USA, Inc. | ||||||||
5.25% due 08/15/276 | 350,000 | 368,382 | ||||||
Signature Aviation US Holdings, Inc. | ||||||||
4.00% due 03/01/286 | 300,000 | 295,890 | ||||||
Trinity Industries, Inc. | ||||||||
4.55% due 10/01/24 | 275,000 | 284,212 | ||||||
Intertape Polymer Group, Inc. | ||||||||
7.00% due 10/15/266 | 250,000 | 264,375 | ||||||
JELD-WEN, Inc. | ||||||||
4.88% due 12/15/276 | 250,000 | 255,625 | ||||||
Berry Global, Inc. | ||||||||
4.88% due 07/15/266 | 200,000 | 210,940 | ||||||
New Enterprise Stone & Lime Company, Inc. | ||||||||
6.25% due 03/15/266 | 175,000 | 183,312 | ||||||
EnPro Industries, Inc. | ||||||||
5.75% due 10/15/26 | 170,000 | 181,050 | ||||||
American Woodmark Corp. | ||||||||
4.88% due 03/15/266 | 134,000 | 137,350 | ||||||
Silgan Holdings, Inc. | ||||||||
4.13% due 02/01/286 | 125,000 | 125,037 | ||||||
Swissport Financing S.a r.l. | ||||||||
5.25% due 08/14/24 | EUR 100,000 | 119,152 | ||||||
Netflix, Inc. | ||||||||
3.63% due 01/15/30 | EUR 100,000 | 115,702 | ||||||
Summit Materials LLC / Summit Materials Finance Corp. | ||||||||
6.50% due 03/15/276 | 100,000 | 107,500 | ||||||
EnerSys | ||||||||
4.38% due 12/15/276 | 100,000 | 98,760 | ||||||
TransDigm, Inc. | ||||||||
6.25% due 03/15/266 | 50,000 | 54,131 | ||||||
Sealed Air Corp. | ||||||||
4.00% due 12/01/276 | 50,000 | 50,625 | ||||||
Total Industrial | 6,462,319 | |||||||
Consumer, Cyclical - 11.2% | ||||||||
LBC Tank Terminals Holding Netherlands BV | ||||||||
6.88% due 05/15/236 | 875,000 | 884,844 | ||||||
Suburban Propane Partners, LP/Suburban Energy Finance Corp. | ||||||||
5.88% due 03/01/27 | 275,000 | 286,000 | ||||||
5.75% due 03/01/25 | 200,000 | 205,500 | ||||||
5.50% due 06/01/24 | 150,000 | 154,125 | ||||||
AMC Entertainment Holdings, Inc. | ||||||||
6.13% due 05/15/27 | 375,000 | 342,187 | ||||||
5.88% due 11/15/26 | 150,000 | 135,188 | ||||||
Wabash National Corp. | ||||||||
5.50% due 10/01/256 | 455,000 | 455,000 | ||||||
Williams Scotsman International, Inc. | ||||||||
6.88% due 08/15/236 | 325,000 | 342,062 | ||||||
7.88% due 12/15/226 | 64,000 | 66,720 | ||||||
Wynn Las Vegas LLC / Wynn Las Vegas Capital Corp. | ||||||||
5.50% due 03/01/256 | 350,000 | 374,500 | ||||||
JB Poindexter & Company, Inc. | ||||||||
7.13% due 04/15/266 | 300,000 | 316,500 | ||||||
Sabre GLBL, Inc. | ||||||||
5.38% due 04/15/236 | 300,000 | 307,350 | ||||||
Superior Plus, LP / Superior General Partner, Inc. | ||||||||
7.00% due 07/15/266 | 250,000 | 268,438 | ||||||
Titan International, Inc. | ||||||||
6.50% due 11/30/23 | 300,000 | 256,500 | ||||||
VOC Escrow Ltd. | ||||||||
5.00% due 02/15/286 | 200,000 | 209,500 | ||||||
Anixter, Inc. | ||||||||
6.00% due 12/01/25 | 200,000 | 208,000 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 103 |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2019 |
SERIES P (HIGH YIELD SERIES) |
Face | Value | |||||||
Boyne USA, Inc. | ||||||||
7.25% due 05/01/256 | 150,000 | $ | 163,125 | |||||
MGM Resorts International | ||||||||
5.50% due 04/15/27 | 125,000 | 138,750 | ||||||
Panther BF Aggregator 2, LP / Panther Finance Company, Inc. | ||||||||
8.50% due 05/15/276 | 125,000 | 132,813 | ||||||
Live Nation Entertainment, Inc. | ||||||||
4.75% due 10/15/276 | 125,000 | 129,375 | ||||||
Lithia Motors, Inc. | ||||||||
4.63% due 12/15/276 | 125,000 | 128,482 | ||||||
Party City Holdings, Inc. | ||||||||
6.63% due 08/01/266 | 176,000 | 124,080 | ||||||
Cedar Fair, LP | ||||||||
5.25% due 07/15/296 | 100,000 | 107,750 | ||||||
Allison Transmission, Inc. | ||||||||
4.75% due 10/01/276 | 100,000 | 103,750 | ||||||
American Builders & Contractors Supply Company, Inc. | ||||||||
4.00% due 01/15/286 | 100,000 | 101,500 | ||||||
1011778 BC ULC / New Red Finance, Inc. | ||||||||
3.88% due 01/15/286 | 100,000 | 100,250 | ||||||
Beacon Roofing Supply, Inc. | ||||||||
4.50% due 11/15/266 | 50,000 | 51,500 | ||||||
Total Consumer, Cyclical | 6,093,789 | |||||||
Energy - 9.9% | ||||||||
Indigo Natural Resources LLC | ||||||||
6.88% due 02/15/266 | 925,000 | 869,500 | ||||||
American Midstream Partners, LP / American Midstream Finance Corp. | ||||||||
9.50% due 12/15/216 | 755,000 | 709,700 | ||||||
Exterran Energy Solutions, LP / EES Finance Corp. | ||||||||
8.13% due 05/01/25 | 525,000 | 517,125 | ||||||
Unit Corp. | ||||||||
6.63% due 05/15/21 | 652,000 | 358,600 | ||||||
PDC Energy, Inc. | ||||||||
6.13% due 09/15/24 | 250,000 | 253,125 | ||||||
5.75% due 05/15/26 | 100,000 | 99,750 | ||||||
NuStar Logistics, LP | ||||||||
5.63% due 04/28/27 | 200,000 | 205,500 | ||||||
6.00% due 06/01/26 | 100,000 | 105,750 | ||||||
Antero Midstream Partners, LP / Antero Midstream Finance Corp. | ||||||||
5.75% due 01/15/286 | 350,000 | 304,500 | ||||||
Range Resources Corp. | ||||||||
5.00% due 03/15/23 | 200,000 | 183,964 | ||||||
5.88% due 07/01/22 | 100,000 | 99,250 | ||||||
Antero Resources Corp. | ||||||||
5.13% due 12/01/22 | 300,000 | 267,750 | ||||||
Summit Midstream Holdings LLC / Summit Midstream Finance Corp. | ||||||||
5.75% due 04/15/25 | 350,000 | 267,312 | ||||||
Global Partners, LP / GLP Finance Corp. | ||||||||
7.00% due 08/01/276 | 200,000 | 212,500 | ||||||
SRC Energy, Inc. | ||||||||
6.25% due 12/01/25 | 200,000 | 201,500 | ||||||
CNX Resources Corp. | ||||||||
5.88% due 04/15/22 | 163,000 | 163,114 | ||||||
Crestwood Midstream Partners, LP / Crestwood Midstream Finance Corp. | ||||||||
5.63% due 05/01/276 | 150,000 | 152,063 | ||||||
Pattern Energy Group, Inc. | ||||||||
5.88% due 02/01/246 | 125,000 | 128,594 | ||||||
Basic Energy Services, Inc. | ||||||||
10.75% due 10/15/238 | 175,000 | 125,125 | ||||||
Bruin E&P Partners LLC | ||||||||
8.88% due 08/01/238 | 139,000 | 90,350 | ||||||
Viper Energy Partners, LP | ||||||||
5.38% due 11/01/276 | 50,000 | 52,000 | ||||||
Legacy Reserves, LP / Legacy Reserves Finance Corp. | ||||||||
due 09/20/2310 | 580,000 | 11,600 | ||||||
Total Energy | 5,378,672 | |||||||
Technology - 3.2% | ||||||||
NCR Corp. | ||||||||
6.38% due 12/15/23 | 500,000 | 512,500 | ||||||
6.13% due 09/01/296 | 300,000 | 325,536 | ||||||
MSCI, Inc. | ||||||||
4.00% due 11/15/296,7 | 375,000 | 380,156 | ||||||
TIBCO Software, Inc. | ||||||||
11.38% due 12/01/216 | 275,000 | 284,983 | ||||||
Qorvo, Inc. | ||||||||
4.38% due 10/15/296 | 150,000 | 157,125 | ||||||
CDK Global, Inc. | ||||||||
5.25% due 05/15/296 | 100,000 | 107,250 | ||||||
Total Technology | 1,767,550 | |||||||
Utilities - 3.0% | ||||||||
Terraform Global Operating LLC | ||||||||
6.13% due 03/01/266 | 695,000 | 722,800 | ||||||
AmeriGas Partners, LP / AmeriGas Finance Corp. | ||||||||
5.75% due 05/20/27 | 300,000 | 329,250 | ||||||
5.50% due 05/20/25 | 200,000 | 216,000 | ||||||
Clearway Energy Operating LLC | ||||||||
5.75% due 10/15/25 | 250,000 | 263,125 | ||||||
DPL, Inc. | ||||||||
7.25% due 10/15/21 | 72,000 | 75,600 | ||||||
Total Utilities | 1,606,775 | |||||||
Basic Materials - 2.6% | ||||||||
Neon Holdings, Inc. | ||||||||
10.13% due 04/01/266 | 225,000 | 223,875 | ||||||
Alcoa Nederland Holding BV | ||||||||
7.00% due 09/30/266 | 200,000 | 218,260 | ||||||
Compass Minerals International, Inc. | �� | |||||||
6.75% due 12/01/276 | 175,000 | 185,937 | ||||||
Kaiser Aluminum Corp. | ||||||||
4.63% due 03/01/286 | 175,000 | 179,550 |
104 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2019 |
SERIES P (HIGH YIELD SERIES) |
Face | Value | |||||||
Alcoa Nederland Holding BV | ||||||||
6.13% due 05/15/286 | 150,000 | $ | 162,375 | |||||
Novelis Corp. | ||||||||
5.88% due 09/30/266 | 150,000 | 159,616 | ||||||
United States Steel Corp. | ||||||||
6.88% due 08/15/257 | 150,000 | 140,045 | ||||||
Valvoline, Inc. | ||||||||
5.50% due 07/15/24 | 100,000 | 103,750 | ||||||
Mirabela Nickel Ltd. | ||||||||
due 06/24/198,10 | 390,085 | 19,504 | ||||||
Total Basic Materials | 1,392,912 | |||||||
Total Corporate Bonds | ||||||||
(Cost $47,699,257) | 46,984,191 | |||||||
SENIOR FLOATING RATE INTERESTS††,9 - 9.9% | ||||||||
Consumer, Non-cyclical - 2.5% | ||||||||
Endo Luxembourg Finance Co. | ||||||||
due 04/29/24 | 249,361 | 238,139 | ||||||
Cambrex Corp. | ||||||||
6.70% (3 Month USD LIBOR + 5.00%, Rate Floor: 6.00%) due 12/04/26 | 200,000 | 199,000 | ||||||
ScribeAmerica Intermediate Holdco LLC (Healthchannels) | ||||||||
6.24% (1 Month USD LIBOR + 4.50%, Rate Floor: 4.50%) due 04/03/25 | 196,747 | 192,812 | ||||||
Hearthside Group Holdings LLC | ||||||||
5.49% (1 Month USD LIBOR + 3.69%, Rate Floor: 3.69%) due 05/23/25 | 147,750 | 145,977 | ||||||
Diamond (BC) BV | ||||||||
4.93% (3 Month USD LIBOR + 3.00%, Rate Floor: 3.00%) due 09/06/24 | 148,485 | 145,070 | ||||||
Springs Window Fashions | ||||||||
10.30% (1 Month USD LIBOR + 8.50%, Rate Floor: 8.50%) due 06/15/26 | 150,000 | 141,375 | ||||||
Give and Go Prepared Foods Corp. | ||||||||
6.19% (3 Month USD LIBOR + 4.25%, Rate Floor: 5.25%) due 07/29/23 | 127,400 | 121,030 | ||||||
CPI Holdco LLC | ||||||||
6.19% (3 Month USD LIBOR + 4.25%, Rate Floor: 4.25%) due 11/04/26††† | 100,000 | 100,250 | ||||||
Albertson’s LLC | ||||||||
4.55% (1 Month USD LIBOR + 2.75%, Rate Floor: 3.50%) due 11/17/25 | 56,531 | 56,993 | ||||||
CTI Foods Holding Co. LLC | ||||||||
8.91% (3 Month USD LIBOR + 7.00%, Rate Floor: 8.00%) due 05/03/24†††,1 | 41,665 | 41,665 | ||||||
Total Consumer, Non-cyclical | 1,382,311 | |||||||
Communications - 2.2% | ||||||||
Cengage Learning Acquisitions, Inc. | ||||||||
6.05% (1 Month USD LIBOR + 4.25%, Rate Floor: 5.25%) due 06/07/23 | 350,729 | 334,069 | ||||||
McGraw-Hill Global Education Holdings LLC | ||||||||
5.80% (1 Month USD LIBOR + 4.00%, Rate Floor: 5.00%) due 05/04/22 | 241,620 | 230,411 | ||||||
Resource Label Group LLC | ||||||||
10.60% (3 Month USD LIBOR + 8.50%, Rate Floor: 9.50%) due 11/26/23††† | 250,000 | 207,500 | ||||||
GTT Communications, Inc. | ||||||||
4.55% (1 Month USD LIBOR + 2.75%, Rate Floor: 2.75%) due 05/31/25 | 197,000 | 163,985 | ||||||
Liberty Cablevision Of Puerto Rico LLC | ||||||||
6.74% (1 Month USD LIBOR + 5.00%, Rate Floor: 5.00%) due 10/15/26 | 100,000 | 101,125 | ||||||
Houghton Mifflin Co. | ||||||||
8.04% (1 Month USD LIBOR + 6.25%, Rate Floor: 7.25%) due 11/22/24 | 100,000 | 99,333 | ||||||
Imagine Print Solutions LLC | ||||||||
6.55% (1 Month USD LIBOR + 4.75%, Rate Floor: 5.75%) due 06/21/22 | 194,500 | 67,588 | ||||||
Total Communications | 1,204,011 | |||||||
Consumer, Cyclical - 2.1% | ||||||||
Power Solutions (Panther) | ||||||||
5.30% (1 Month USD LIBOR + 3.50%, Rate Floor: 3.50%) due 04/30/26 | 224,438 | 224,859 | ||||||
BBB Industries, LLC | ||||||||
6.30% (1 Month USD LIBOR + 4.50%, Rate Floor: 4.50%) due 08/01/25 | 158,025 | 153,548 | ||||||
Prime Security Services Borrower LLC (ADT) | ||||||||
4.94% (1 Month USD LIBOR + 3.25%, Rate Floor: 4.25%) due 09/23/26 | 149,625 | 149,924 | ||||||
Playtika Holding Corp. | ||||||||
7.80% (1 Month USD LIBOR + 6.00%, Rate Floor: 7.00%) due 12/09/24 | 125,000 | 126,188 | ||||||
WIRB - Copernicus Group, Inc. | ||||||||
due 12/12/26 | 100,000 | 100,000 | ||||||
PT Intermediate Holdings III LLC | ||||||||
7.44% (3 Month USD LIBOR + 5.50%, Rate Floor: 6.50%) due 10/15/25††† | 100,000 | 99,500 | ||||||
Sotheby’s | ||||||||
7.24% (1 Month USD LIBOR + 5.50%, Rate Floor: 6.50%) due 01/15/27 | 93,357 | 92,307 | ||||||
Belk, Inc. | ||||||||
8.80% (3 Month USD LIBOR + 6.75%, Rate Floor: 7.75%) due 07/31/25 | 120,069 | 83,073 | ||||||
Blue Nile, Inc. | ||||||||
8.41% (3 Month USD LIBOR + 6.50%, Rate Floor: 7.50%) due 02/17/23††† | 196,875 | 80,719 | ||||||
American Tire Distributors, Inc. | ||||||||
7.93% (3 Month USD LIBOR + 6.00%, Rate Floor: 7.00%) due 09/01/23 | 29,221 | 28,691 | ||||||
9.32% (1 Month USD LIBOR + 7.50% and 3 Month USD LIBOR + 7.50%, Rate Floor: 8.50%) due 09/02/24 | 19,287 | 17,117 | ||||||
Total Consumer, Cyclical | 1,155,926 | |||||||
Technology - 1.4% | ||||||||
Planview, Inc. | ||||||||
7.05% (1 Month USD LIBOR + 5.25%, Rate Floor: 6.25%) due 01/27/23†††,1 | 341,250 | 341,250 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 105 |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2019 |
SERIES P (HIGH YIELD SERIES) |
Face | Value | |||||||
GlobalFoundries, Inc. | ||||||||
6.75% (3 Month USD LIBOR + 4.75%, Rate Floor: 4.75%) due 06/05/26 | 199,000 | $ | 192,284 | |||||
Aston FinCo S.A.R.L. | ||||||||
6.26% (3 Month USD LIBOR + 4.25%, Rate Floor: 4.25%) due 10/09/26 | 100,000 | 99,000 | ||||||
Cvent, Inc. | ||||||||
5.55% (1 Month USD LIBOR + 3.75%, Rate Floor: 4.75%) due 11/29/24 | 98,744 | 98,447 | ||||||
Aspect Software, Inc. | ||||||||
7.21% (3 Month USD LIBOR + 5.00%, Rate Floor: 6.00%) due 01/15/24 | 9,632 | 8,898 | ||||||
Total Technology | 739,879 | |||||||
Industrial - 1.1% | ||||||||
Diversitech Holdings, Inc. | ||||||||
9.44% (3 Month USD LIBOR + 7.50%, Rate Floor: 8.50%) due 06/02/25††† | 200,000 | 195,000 | ||||||
Reece Ltd. | ||||||||
3.95% (3 Month USD LIBOR + 2.00%, Rate Floor: 2.00%) due 01/04/27††† | 149,625 | 149,999 | ||||||
STS Operating, Inc. (SunSource) | ||||||||
6.05% (1 Month USD LIBOR + 4.25%, Rate Floor: 5.25%) due 12/11/24 | 123,116 | 121,525 | ||||||
YAK MAT (YAK ACCESS LLC) | ||||||||
11.79% (1 Month USD LIBOR + 10.00%, Rate Floor: 10.00%) due 07/10/26 | 125,000 | 108,959 | ||||||
Total Industrial | 575,483 | |||||||
Basic Materials - 0.4% | ||||||||
GrafTech Finance, Inc. | ||||||||
5.30% (1 Month USD LIBOR + 3.50%, Rate Floor: 4.50%) due 02/12/25 | 133,686 | 133,184 | ||||||
DCG Acquisition Corp. | ||||||||
6.51% (3 Month USD LIBOR + 4.50%, Rate Floor: 4.50%) due 09/30/26 | 86,095 | 86,311 | ||||||
Total Basic Materials | 219,495 | |||||||
Energy - 0.2% | ||||||||
Permian Production Partners LLC | ||||||||
due 05/20/24†††,10 | 190,000 | 85,500 | ||||||
Total Senior Floating Rate Interests | ||||||||
(Cost $5,817,299) | 5,362,605 | |||||||
Total Investments - 101.2% | ||||||||
(Cost $57,413,859) | $ | 54,914,556 | ||||||
Other Assets & Liabilities, net - (1.2)% | (626,441 | ) | ||||||
Total Net Assets - 100.0% | $ | 54,288,115 |
Forward Foreign Currency Exchange Contracts†† | ||||||||||||||||||||||||
Counterparty | Contracts | Currency | Settlement | Settlement | Value at | Unrealized | ||||||||||||||||||
Bank of America, N.A. | 207,000 | EUR | 01/14/20 | $ | 230,244 | $ | 232,412 | $ | (2,168 | ) |
~ | The face amount is denominated in U.S. dollars unless otherwise indicated. |
* | Non-income producing security. |
† | Value determined based on Level 1 inputs, unless otherwise noted — See Note 4. |
†† | Value determined based on Level 2 inputs, unless otherwise noted — See Note 4. |
††† | Value determined based on Level 3 inputs — See Note 4. |
1 | Security was fair valued by the Valuation Committee at December 31, 2019. The total market value of fair valued securities amounts to $391,910, (cost $1,060,359) or 0.7% of total net assets. |
2 | Affiliated issuer. |
3 | Perpetual maturity. |
4 | Security has a fixed rate coupon which will convert to a floating or variable rate coupon on a future date. |
5 | Rate indicated is the 7-day yield as of December 31, 2019. |
6 | Security is a 144A or Section 4(a)(2) security. These securities have been determined to be liquid under guidelines established by the Board of Trustees. The total market value of 144A or Section 4(a)(2) securities is $33,759,155 (cost $33,294,244), or 62.2% of total net assets. |
7 | All or a portion of this security has been physically segregated or earmarked in connection with reverse repurchase agreements. At December 31, 2019, the total market value of segregated or earmarked security was $1,847,951 — See Note 12. |
8 | Security is a 144A or Section 4(a)(2) security. These securities have been determined to be illiquid and restricted under guidelines established by the Board of Trustees. The total market value of 144A or Section 4(a)(2) illiquid and restricted securities is $543,229 (cost $1,069,812), or 1.0% of total net assets — See Note 9. |
9 | Variable rate security. Rate indicated is the rate effective at December 31, 2019. In some instances, the effective rate is limited by a minimum rate floor or a maximum rate cap established by the issuer. The settlement status of a position may also impact the effective rate indicated. In some cases, a position may be unsettled at period end and may not have a stated effective rate. In instances where multiple underlying reference rates and spread amounts are shown, the effective rate is based on a weighted average. |
10 | Security is in default of interest and/or principal obligations. |
EUR — Euro | |
LIBOR — London Interbank Offered Rate | |
plc — Public Limited Company | |
See Sector Classification in Other Information section. |
106 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2019 |
SERIES P (HIGH YIELD SERIES) |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2019 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stocks | $ | 66,683 | $ | 396,816 | $ | 8,995 | $ | 472,494 | ||||||||
Preferred Stocks | — | 154,500 | — | * | 154,500 | |||||||||||
Exchange-Traded Funds | 1,077,600 | — | — | 1,077,600 | ||||||||||||
Money Market Fund | 863,166 | — | — | 863,166 | ||||||||||||
Corporate Bonds | — | 46,984,191 | — | 46,984,191 | ||||||||||||
Senior Floating Rate Interests | — | 4,061,222 | 1,301,383 | 5,362,605 | ||||||||||||
Total Assets | $ | 2,007,449 | $ | 51,596,729 | $ | 1,310,378 | $ | 54,914,556 |
Investments in Securities (Liabilities) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Forward Foreign Currency Exchange Contracts** | $ | — | $ | 2,168 | $ | — | $ | 2,168 | ||||||||
Unfunded Loan Commitments (Note 8) | — | — | 6,310 | 6,310 | ||||||||||||
Total Liabilities | $ | — | $ | 2,168 | $ | 6,310 | $ | 8,478 |
* | Security has a market value of $0. |
** | This derivative is reported as unrealized appreciation/depreciation at period end. |
The Fund may hold assets and/or liabilities in which the fair value approximates the carrying amount for financial statement purposes. As of the period end, reverse repurchase agreements of $1,484,224 are categorized as Level 2 within the disclosure hierarchy — See Note 12.
The following is a summary of significant unobservable inputs used in the fair valuations of assets and liabilities categorized within Level 3 of the fair value hierarchy:
Category | Ending Balance at | Valuation | Unobservable | Input | Weighted | |||||||||
Assets: | ||||||||||||||
Common Stocks | $ | 8,995 | Enterprise Value | Valuation Multiple | 1.8x-8.9x | 8.8x | ||||||||
Senior Floating Rate Interests | 41,665 | Option Adjusted Spread off prior month broker quote | Broker Quote | — | — | |||||||||
Senior Floating Rate Interests | 341,250 | Model Price | Liquidation Value | — | — | |||||||||
Senior Floating Rate Interests | 918,468 | Third Party Pricing | Broker Quote | — | — | |||||||||
Total Assets | $ | 1,310,378 | ||||||||||||
Liabilities: | ||||||||||||||
Unfunded Loan Commitments | $ | 6,310 | Model Price | Purchase Price | — | — |
* Inputs are weighted by the fair value of the instruments.
Significant changes in a quote, liquidation value or valuation multiple would generally result in significant changes in the fair value of the security. Any remaining Level 3 securities held by the Fund and excluded from the table above, were not considered material to the Fund.
The Fund’s fair valuation leveling guidelines were recently revised to classify a single daily broker quote, or a vendor price based on a single daily or monthly broker quote, as Level 3 rather than Level 2, if such a quote or price cannot be supported with other available market information.
SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 107 |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2019 |
SERIES P (HIGH YIELD SERIES) |
Transfers between Level 2 and Level 3 may occur as markets fluctuate and/or the availability of data used in an investment’s valuation changes. For the year ended December 31, 2019, the Fund had securities with a total value of $483,219 transfer into Level 3 from Level 2 due to lack of observable inputs and had securities with a total market value of $79,150 transfer out of Level 3 to Level 2 due to the availability of current and reliable market-based data provided by a third-party pricing service which utilizes significant observable inputs.
Summary of Fair Value Level 3 Activity
Following is a reconciliation of Level 3 assets for which significant unobservable inputs were used to determine fair value for the year ended December 31, 2019:
Assets | Liabilities | |||||||||||||||
Senior Floating | Common Stocks | Total Assets | Unfunded Loan | |||||||||||||
Beginning Balance | $ | 850,251 | $ | 53,822 | $ | 904,073 | $ | (20,951 | ) | |||||||
Purchases/(Receipts) | 582,875 | 9,667 | 592,542 | (467 | ) | |||||||||||
(Sales, maturities and paydowns)/Fundings | (521,284 | ) | (316 | ) | (521,600 | ) | — | |||||||||
Amortization of discount/premiums | 3,644 | — | 3,644 | — | ||||||||||||
Total realized gains or losses included in earnings | 1,313 | (921,943 | ) | (920,630 | ) | 89 | ||||||||||
Total change in unrealized appreciation (depreciation) included in earnings | (98,635 | ) | 946,915 | 848,280 | 15,019 | |||||||||||
Transfers into Level 3 | 483,219 | — | 483,219 | — | ||||||||||||
Transfers out of Level 3 | — | (79,150 | ) | (79,150 | ) | — | ||||||||||
Ending Balance | $ | 1,301,383 | $ | 8,995 | $ | 1,310,378 | $ | (6,310 | ) | |||||||
Net change in unrealized appreciation (depreciation) for investments in Level 3 securities still held at December 31, 2019 | $ | (98,614 | ) | $ | (672 | ) | $ | (99,286 | ) | $ | 15,019 |
Affiliated Transactions
Investments representing 5% or more of the outstanding voting shares of a company, or control of or by, or common control under Guggenheim Investments, result in that company being considered an affiliated issuer, as defined in the 1940 Act.
Transactions during the year ended December 31, 2019, in which the company is an affiliated issuer, were as follows:
Security Name | Value | Additions | Reductions | Realized | Change in | Value | Shares/ | Investment | ||||||||||||||||||||||||
Common Stocks | ||||||||||||||||||||||||||||||||
Aspect Software Inc.* | $ | — | ** | $ | — | $ | — | $ | (922,259 | ) | $ | 922,259 | $ | — | — | $ | — | |||||||||||||||
BP Holdco LLC*,1 | — | 185 | — | — | — | 185 | 523 | — | ||||||||||||||||||||||||
Senior Floating Rate Interests | ||||||||||||||||||||||||||||||||
Aspect Software, Inc. 7.21% (3 Month USD LIBOR + 5.00%, Rate Floor: 6.00%) due 01/15/242 | 11,930 | — | (9,845 | ) | (4,529 | ) | 2,444 | — | — | 361 | ||||||||||||||||||||||
Warrants | ||||||||||||||||||||||||||||||||
Aspect Software, Inc.* | — | ** | — | — | — | — | — | — | — | |||||||||||||||||||||||
$ | 11,930 | $ | 185 | $ | (9,845 | ) | $ | (926,788 | ) | $ | 924,703 | $ | 185 | $ | 361 |
* | Non-income producing security. |
** | Market value is less than $1. |
1 | Security was fair valued by the Valuation Committee at December 31, 2019. The total market value of fair valued and affiliated securities amounts to $185, (cost $185) or less than 0.1% of total net assets. |
2 | Variable rate security. Rate indicated is the rate effective at December 31, 2019. In some instances, the effective rate is limited by a minimum rate floor or a maximum rate cap established by the issuer. The settlement status of a position may also impact the effective rate indicated. In some cases, a position may be unsettled at period end and may not have a stated effective rate. In instances where multiple underlying reference rates and spread amounts are shown, the effective rate is based on a weighted average. |
108 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SERIES P (HIGH YIELD SERIES) |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2019 |
Assets: | ||||
Investments in unaffiliated issuers, at value (cost $57,413,674) | $ | 54,914,371 | ||
Investments in affiliated issuers, at value (cost $185) | 185 | |||
Cash | 9,262 | |||
Prepaid expenses | 4,486 | |||
Receivables: | ||||
Interest | 774,759 | |||
Securities sold | 523,256 | |||
Fund shares sold | 1,917 | |||
Foreign tax reclaims | 1,326 | |||
Total assets | 56,229,562 | |||
Liabilities: | ||||
Unfunded loan commitments, at value (Note 8) (commitment fees received $75,378) | 6,310 | |||
Reverse repurchase agreements (Note 12) | 1,484,224 | |||
Unrealized depreciation on forward foreign currency exchange contracts | 2,168 | |||
Payable for: | ||||
Securities purchased | 339,125 | |||
Fund shares redeemed | 12,252 | |||
Distribution and service fees | 11,061 | |||
Management fees | 5,711 | |||
Fund accounting/administration fees | 3,540 | |||
Trustees’ fees* | 2,700 | |||
Transfer agent/maintenance fees | 2,233 | |||
Miscellaneous | 72,123 | |||
Total liabilities | 1,941,447 | |||
Commitments and contingent liabilities (Note 14) | — | |||
Net assets | $ | 54,288,115 | ||
Net assets consist of: | ||||
Paid in capital | $ | 59,283,572 | ||
Total distributable earnings (loss) | (4,995,457 | ) | ||
Net assets | $ | 54,288,115 | ||
Capital shares outstanding | 1,912,166 | |||
Net asset value per share | $ | 28.39 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2019 |
Investment Income: | ||||
Dividends from securities of unaffiliated issuers | $ | 102,170 | ||
Interest from securities of unaffiliated issuers | 3,641,909 | |||
Interest from securities of affiliated issuers | 361 | |||
Total investment income | 3,744,440 | |||
Expenses: | ||||
Management fees | 321,732 | |||
Distribution and service fees | 134,054 | |||
Transfer agent/maintenance fees | 25,142 | |||
Professional fees | 62,101 | |||
Fund accounting/administration fees | 42,898 | |||
Custodian fees | 20,920 | |||
Trustees’ fees* | 19,576 | |||
Interest expense | 12,643 | |||
Miscellaneous | 63,138 | |||
Total expenses | 702,204 | |||
Less: | ||||
Expenses reimbursed by Adviser | (789 | ) | ||
Expenses waived by Adviser | (111,321 | ) | ||
Earnings credits applied | (1,984 | ) | ||
Total waived/reimbursed expenses | (114,094 | ) | ||
Net expenses | 588,110 | |||
Net investment income | 3,156,330 | |||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments in unaffiliated issuers | (1,528,901 | ) | ||
Investments in affiliated issuers | (926,788 | ) | ||
Forward foreign currency exchange contracts | (12,449 | ) | ||
Foreign currency transactions | (589 | ) | ||
Net realized loss | (2,468,727 | ) | ||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments in unaffiliated issuers | 4,213,279 | |||
Investments in affiliated issuers | 924,703 | |||
Forward foreign currency exchange contracts | 5,030 | |||
Foreign currency translations | 71 | |||
Net change in unrealized appreciation (depreciation) | 5,143,083 | |||
Net realized and unrealized gain | 2,674,356 | |||
Net increase in net assets resulting from operations | $ | 5,830,686 |
* | 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 | 109 |
SERIES P (HIGH YIELD SERIES) |
STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | ||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income | $ | 3,156,330 | $ | 4,018,920 | ||||
Net realized loss on investments | (2,468,727 | ) | (1,400,353 | ) | ||||
Net change in unrealized appreciation (depreciation) on investments | 5,143,083 | (5,126,574 | ) | |||||
Net increase (decrease) in net assets resulting from operations | 5,830,686 | (2,508,007 | ) | |||||
Distributions to shareholders | (4,081,160 | ) | (5,180,373 | ) | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 15,085,511 | 20,015,580 | ||||||
Distributions reinvested | 4,081,160 | 5,180,373 | ||||||
Cost of shares redeemed | (19,132,137 | ) | (44,275,141 | ) | ||||
Net increase (decrease) from capital share transactions | 34,534 | (19,079,188 | ) | |||||
Net increase (decrease) in net assets | 1,784,060 | (26,767,568 | ) | |||||
Net assets: | ||||||||
Beginning of year | 52,504,055 | 79,271,623 | ||||||
End of year | $ | 54,288,115 | $ | 52,504,055 | ||||
Capital share activity: | ||||||||
Shares sold | 529,015 | 657,221 | ||||||
Shares issued from reinvestment of distributions | 148,244 | 181,005 | ||||||
Shares redeemed | (673,296 | ) | (1,476,612 | ) | ||||
Net increase (decrease) in shares | 3,963 | (638,386 | ) |
110 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SERIES P (HIGH YIELD SERIES) |
FINANCIAL HIGHLIGHTS |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 27.51 | $ | 31.13 | $ | 30.82 | $ | 28.63 | $ | 33.87 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | 1.68 | 1.79 | 1.81 | 1.91 | 2.17 | |||||||||||||||
Net gain (loss) on investments (realized and unrealized) | 1.45 | (2.99 | ) | .09 | 2.93 | (3.23 | ) | |||||||||||||
Total from investment operations | 3.13 | (1.20 | ) | 1.90 | 4.84 | (1.06 | ) | |||||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | (2.25 | ) | (2.42 | ) | (1.59 | ) | (2.65 | ) | (3.49 | ) | ||||||||||
Net realized gains | — | — | — | — | (.69 | ) | ||||||||||||||
Total distributions | (2.25 | ) | (2.42 | ) | (1.59 | ) | (2.65 | ) | (4.18 | ) | ||||||||||
Net asset value, end of period | $ | 28.39 | $ | 27.51 | $ | 31.13 | $ | 30.82 | $ | 28.63 | ||||||||||
| ||||||||||||||||||||
Total Returnb | 11.59 | % | (4.16 | %) | 6.23 | % | 17.52 | % | (3.95 | %) | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 54,288 | $ | 52,504 | $ | 79,272 | $ | 95,760 | $ | 66,908 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | 5.89 | % | 5.98 | % | 5.79 | % | 6.46 | % | 6.69 | % | ||||||||||
Total expensesc | 1.31 | % | 1.42 | % | 1.40 | % | 1.17 | % | 1.19 | % | ||||||||||
Net expensesd,e,f | 1.10 | % | 1.26 | % | 1.33 | % | 1.13 | % | 1.15 | % | ||||||||||
Portfolio turnover rate | 58 | % | 51 | % | 76 | % | 84 | % | 101 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not take into account any of the expenses associated with an investment in variable insurance products. If total return had taken into account these expenses, performance would have been lower. Shares of a series of Guggenheim Variable Funds Trust are available only through the purchase of such products. |
c | Does not include expenses of the underlying funds in which the Fund invests. |
d | Net expense information reflects the expense ratios after expense waivers and reimbursements, as applicable. |
e | Net expenses may include expenses that are excluded from the expense limitation agreement. Excluding these expenses, the net expense ratios for the years would be: |
12/31/19 | 12/31/18 | 12/31/17 | 12/31/16 | 12/31/15 | |
1.07% | 1.07% | 1.07% | 1.07% | 1.07% |
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 was as follows: |
12/31/19 | 12/31/18 | 12/31/17 | 12/31/16 | |
— | —* | 0.02% | — |
* | Less than 0.01% |
SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 111 |
MANAGERS’ COMMENTARY (Unaudited) | December 31, 2019 |
To Our Shareholders:
The Series Q (Small Cap Value Series) (the “Fund”) is managed by a team of seasoned professionals led by David Toussaint, CFA, CPA, Managing Director and Portfolio Manager; James Schier, CFA, Senior Managing Director and Portfolio Manager; Farhan Sharaff, Senior Managing Director, Assistant Chief Investment Officer, Equities, and Portfolio Manager; Gregg Strohkorb, CFA, Director and Portfolio Manager; and Burak Hurmeydan, Ph.D., Director and Portfolio Manager. In the following paragraphs, the investment team discusses the market environment and performance of the Fund for the fiscal year ended December 31, 2019.
For the year ended December 31, 2019, Series Q (Small Cap Value Series) returned 22.58%, compared with the 22.39% return of its benchmark, the Russell 2000® Value Index.
Strategy and Market Overview
Our investment approach focuses on understanding how companies make money and how easily companies can improve returns, maintain existing high levels of profitability, or benefit from change that occurs within the industries in which they operate. In today’s rapidly changing environment marked by very sharp and quick, but constrained volatility, our long-term orientation and discipline are a competitive advantage. This should become especially critical when the environment of indiscriminant valuation expansion subsides, and fundamentals once again become a more dominant factor in the market.
Performance Review
The Fund slightly outperformed the index over the one-year period. Although the Fund is balanced in style against the benchmark, it does have a bias to larger companies within the benchmark, which benefited performance.
Stock selection was the major factor behind the Fund’s showing relative to the benchmark, particularly in the Information Technology sector. Top-performing holdings were optical components company Infinera Corp., which benefited from favorable earnings, and Cray (not held at period end), which was acquired by Hewlett Packard Enterprise in 2019.
In the Financial sector, the strategy’s holdings outperformed the broader benchmark’s performance, so the impact was magnified by the sector’s large weighting. An overweighting and positive performance in the Fund’s numerous regional bank holdings benefited the Fund.
Stock selection also helped in the Communications Services sector, where holdings in media companies such as Sinclair Broadcasting Group, Inc., drove results.
Unfavorable stock selection in the Energy sector detracted from performance. Oil prices softened over the period as economic uncertainty surrounding the trade dispute was especially magnified in smaller exploration and production companies. Range Resources Corp., Oasis Petroleum, Inc. and Whiting Petroleum Corp. each declined significantly in response. A sector bright spot for the Fund was Scorpio Tankers, the Fund’s best individual holding on a relative basis.
Stock selection detracted in the Real Estate sector, led by RMR Group, Inc., and in the Materials sector, led by Olin Corp. The strategy has long favored overweighting Utilities and underweighting REITs as a positioning in these interest rate sensitive sectors. While this proved to be highly beneficial during 2018, it was not as effective in the strong equity market of 2019.
Portfolio Positioning
While this strategy is balanced relative to the benchmark, it does possess defensive characteristics in virtue of emphasizing relatively larger companies found in the benchmark as well as an overweight in the Utilities sector.
At the end of the period, the Fund’s largest sector overweights relative to the benchmark were in Information Technology, Materials, and Utilities. The Fund’s largest sector underweights were in Consumer Discretionary and Financials.
112 | THE GUGGENHEIM FUNDS ANNUAL REPORT |
MANAGERS’ COMMENTARY (Unaudited)(concluded) | December 31, 2019 |
Portfolio and Market Outlook
The market volatility late in the year caused sudden changes in the market. The perception of a friendlier environment from the U.S. Federal Reserve and continued hope that trade issues can be relatively quickly and favorably resolved has created an environment where the market is beginning to treat earnings disappointments and reduced outlooks in a less harsh manner since these are being viewed as more temporary issues. The total return potential for stocks now seems more favorable than it was just a few months ago, and the market appears to have begun the early phase of a calculated rebound that may have some duration in time and level.
The Fund has a value bias compared with the benchmark and is positioned favorably as the value investing style continues to improve. We continue to find niche companies with what we believe to be attractive growth opportunities, and, as such, are constructive on the outlook.
Performance displayed represents past performance which is no guarantee of future results.
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 | 113 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2019 |
SERIES Q (SMALL CAP VALUE SERIES)
OBJECTIVE: Seeks long-term capital appreciation.
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments.
Inception Date: May 1, 2000 |
Ten Largest Holdings (% of Total Net Assets) | |
iShares Russell 2000 Value ETF | 4.5% |
Parsley Energy, Inc. — Class A | 2.4% |
Infinera Corp. | 2.1% |
Radian Group, Inc. | 1.9% |
Equity Commonwealth | 1.7% |
MDU Resources Group, Inc. | 1.7% |
Portland General Electric Co. | 1.7% |
Physicians Realty Trust | 1.6% |
MACOM Technology Solutions Holdings, Inc. | 1.5% |
Federal Agricultural Mortgage Corp. — Class C | 1.5% |
Top Ten Total | 20.6% |
“Ten Largest Holdings” excludes any temporary cash investments. |
114 | THE GUGGENHEIM FUNDS ANNUAL REPORT |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2019 |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2019
| 1 Year | 5 Year | 10 Year |
Series Q (Small Cap Value Series) | 22.58% | 5.59% | 9.42% |
Russell 2000 Value Index | 22.39% | 6.99% | 10.56% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The Russell 2000 Value Index is an unmanaged index and, unlike the Fund, has no management fees or operating expenses to reduce its reported return. |
† | Performance figures do not reflect fees and expenses associated with an investment in variable insurance products. If returns had taken into account these fees and expenses, performance would have been lower. Shares of a series of Guggenheim Variable Funds Trust are available only through the purchase of such products. |
THE GUGGENHEIM FUNDS ANNUAL REPORT | 115 |
SCHEDULE OF INVESTMENTS | December 31, 2019 |
SERIES Q (SMALL CAP VALUE SERIES) |
| Shares | Value | ||||||
COMMON STOCKS† - 93.1% | ||||||||
Financial - 35.7% | ||||||||
Radian Group, Inc. | 55,810 | $ | 1,404,179 | |||||
Equity Commonwealth REIT | 39,218 | 1,287,527 | ||||||
Physicians Realty Trust REIT | 62,421 | 1,182,254 | ||||||
Federal Agricultural Mortgage Corp. — Class C | 12,962 | 1,082,327 | ||||||
Umpqua Holdings Corp. | 59,098 | 1,046,035 | ||||||
Axis Capital Holdings Ltd. | 17,543 | 1,042,756 | ||||||
First Horizon National Corp. | 54,535 | 903,100 | ||||||
Pinnacle Financial Partners, Inc. | 13,548 | 867,072 | ||||||
Lexington Realty Trust REIT | 81,504 | 865,573 | ||||||
Investors Bancorp, Inc. | 71,084 | 846,966 | ||||||
Cousins Properties, Inc. REIT | 19,807 | 816,048 | ||||||
Cathay General Bancorp | 21,370 | 813,128 | ||||||
WSFS Financial Corp. | 18,256 | 803,081 | ||||||
Preferred Bank/Los Angeles CA | 13,286 | 798,356 | ||||||
Howard Hughes Corp.* | 6,280 | 796,304 | ||||||
Simmons First National Corp. — Class A | 28,200 | 755,478 | ||||||
CNO Financial Group, Inc. | 40,859 | 740,774 | ||||||
Hanmi Financial Corp. | 35,569 | 711,202 | ||||||
Berkshire Hills Bancorp, Inc. | 21,325 | 701,166 | ||||||
Hilltop Holdings, Inc. | 26,270 | 654,911 | ||||||
First Midwest Bancorp, Inc. | 25,780 | 594,487 | ||||||
BOK Financial Corp. | 6,634 | 579,811 | ||||||
Hancock Whitney Corp. | 13,170 | 577,900 | ||||||
IBERIABANK Corp. | 7,556 | 565,415 | ||||||
Prosperity Bancshares, Inc. | 7,603 | 546,580 | ||||||
Redwood Trust, Inc. REIT | 31,831 | 526,485 | ||||||
Piedmont Office Realty Trust, Inc. — Class A REIT | 22,755 | 506,071 | ||||||
Sunstone Hotel Investors, Inc. REIT | 35,434 | 493,241 | ||||||
Flagstar Bancorp, Inc. | 12,439 | 475,792 | ||||||
Kennedy-Wilson Holdings, Inc. | 20,793 | 463,684 | ||||||
Stifel Financial Corp. | 7,323 | 444,140 | ||||||
PennyMac Mortgage Investment Trust REIT | 18,713 | 417,113 | ||||||
Heartland Financial USA, Inc. | 7,689 | 382,451 | ||||||
Independent Bank Group, Inc. | 6,785 | 376,160 | ||||||
American National Insurance Co. | 3,134 | 368,809 | ||||||
MGIC Investment Corp. | 25,555 | 362,114 | ||||||
RMR Group, Inc. — Class A | 7,220 | 329,521 | ||||||
Third Point Reinsurance Ltd.* | 27,165 | 285,776 | ||||||
Total Financial | 26,413,787 | |||||||
Industrial - 16.1% | ||||||||
MDU Resources Group, Inc. | 42,708 | 1,268,855 | ||||||
Graphic Packaging Holding Co. | 49,979 | 832,150 | ||||||
GATX Corp. | 9,649 | 799,420 | ||||||
Sanmina Corp.* | 21,718 | 743,624 | ||||||
Valmont Industries, Inc. | 4,900 | 733,922 | ||||||
Knight-Swift Transportation Holdings, Inc. | 18,935 | 678,631 | ||||||
Plexus Corp.* | 8,116 | 624,445 | ||||||
US Concrete, Inc.* | 14,795 | 616,360 | ||||||
Rexnord Corp.* | 17,141 | 559,139 | ||||||
PGT Innovations, Inc.* | 36,817 | 548,941 | ||||||
Crane Co. | 6,333 | 547,044 | ||||||
Owens Corning | 8,337 | 542,905 | ||||||
Advanced Energy Industries, Inc.* | 7,576 | 539,411 | ||||||
Kirby Corp.* | 5,289 | 473,524 | ||||||
AquaVenture Holdings Ltd.* | 16,464 | 446,504 | ||||||
Kennametal, Inc. | 11,020 | 406,528 | ||||||
Vishay Intertechnology, Inc. | 17,265 | 367,572 | ||||||
Park Aerospace Corp. | 22,473 | 365,636 | ||||||
Dycom Industries, Inc.* | 7,577 | 357,256 | ||||||
Encore Wire Corp. | 5,174 | 296,988 | ||||||
EnerSys | 2,433 | 182,061 | ||||||
Total Industrial | 11,930,916 | |||||||
Consumer, Non-cyclical - 7.2% | ||||||||
Encompass Health Corp. | 14,281 | 989,245 | ||||||
Central Garden & Pet Co. — Class A* | 32,559 | 955,932 | ||||||
Ingredion, Inc. | 8,743 | 812,662 | ||||||
Eagle Pharmaceuticals, Inc.* | 9,416 | 565,714 | ||||||
Premier, Inc. — Class A* | 13,890 | 526,153 | ||||||
Emergent BioSolutions, Inc.* | 7,378 | 398,043 | ||||||
Perdoceo Education Corp.* | 20,801 | 382,530 | ||||||
Andersons, Inc. | 14,636 | 369,998 | ||||||
AMAG Pharmaceuticals, Inc.* | 25,754 | 313,426 | ||||||
Total Consumer, Non-cyclical | 5,313,703 | |||||||
Consumer, Cyclical - 6.7% | ||||||||
Hawaiian Holdings, Inc. | 31,086 | 910,509 | ||||||
UniFirst Corp. | 3,933 | 794,387 | ||||||
Abercrombie & Fitch Co. — Class A | 31,931 | 552,087 | ||||||
MDC Holdings, Inc. | 13,612 | 519,434 | ||||||
Asbury Automotive Group, Inc.* | 4,199 | 469,406 | ||||||
Caleres, Inc. | 16,301 | 387,149 | ||||||
Wabash National Corp. | 25,239 | 370,761 | ||||||
MasterCraft Boat Holdings, Inc.* | 21,825 | 343,744 | ||||||
Methode Electronics, Inc. | 6,263 | 246,449 | ||||||
Tenneco, Inc. — Class A | 17,087 | 223,840 | ||||||
La-Z-Boy, Inc. | 5,593 | 176,067 | ||||||
Total Consumer, Cyclical | 4,993,833 | |||||||
Communications - 6.5% | ||||||||
Infinera Corp.* | 195,917 | 1,555,581 | ||||||
Viavi Solutions, Inc.* | 58,785 | 881,775 | ||||||
Gray Television, Inc.* | 25,944 | 556,239 | ||||||
Ciena Corp.* | 12,481 | 532,814 | ||||||
Scholastic Corp. | 12,148 | 467,091 | ||||||
InterDigital, Inc. | 5,712 | 311,247 | ||||||
Entercom Communications Corp. — Class A | 57,603 | 267,278 | ||||||
Tribune Publishing Co. | 18,952 | 249,408 | ||||||
Total Communications | 4,821,433 | |||||||
Energy - 5.9% | ||||||||
Parsley Energy, Inc. — Class A | 93,594 | 1,769,863 | ||||||
Range Resources Corp. | 118,684 | 575,617 | ||||||
Oil States International, Inc.* | 30,739 | 501,353 | ||||||
CNX Resources Corp.* | 40,226 | 356,000 | ||||||
Delek US Holdings, Inc. | 10,067 | 337,547 | ||||||
Oasis Petroleum, Inc.* | 96,673 | 315,154 |
116 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2019 |
SERIES Q (SMALL CAP VALUE SERIES) |
| Shares | Value | ||||||
Whiting Petroleum Corp.* | 40,388 | $ | 296,448 | |||||
Gulfport Energy Corp.* | 45,132 | 137,201 | ||||||
Antero Resources Corp.* | 25,278 | 72,042 | ||||||
Total Energy | 4,361,225 | |||||||
Utilities - 5.8% | ||||||||
Portland General Electric Co. | 22,549 | 1,258,009 | ||||||
Black Hills Corp. | 12,958 | 1,017,721 | ||||||
Avista Corp. | 16,495 | 793,244 | ||||||
Southwest Gas Holdings, Inc. | 8,470 | 643,466 | ||||||
ALLETE, Inc. | 6,868 | 557,476 | ||||||
Total Utilities | 4,269,916 | |||||||
Technology - 4.7% | ||||||||
MACOM Technology Solutions Holdings, Inc.* | 41,819 | 1,112,385 | ||||||
Axcelis Technologies, Inc.* | 22,250 | 536,114 | ||||||
Lumentum Holdings, Inc.* | 6,435 | 510,295 | ||||||
Evolent Health, Inc. — Class A* | 43,143 | 390,444 | ||||||
CSG Systems International, Inc. | 6,936 | 359,146 | ||||||
Onto Innovation, Inc.* | 8,929 | 326,266 | ||||||
TiVo Corp. | 25,580 | 216,919 | ||||||
Total Technology | 3,451,569 | |||||||
Basic Materials - 4.5% | ||||||||
Ashland Global Holdings, Inc. | 10,472 | 801,422 | ||||||
Olin Corp. | 46,216 | 797,226 | ||||||
Commercial Metals Co. | 21,704 | 483,348 | ||||||
Reliance Steel & Aluminum Co. | 3,874 | 463,950 | ||||||
Huntsman Corp. | 18,619 | 449,835 | ||||||
Verso Corp. — Class A* | 19,294 | 347,871 | ||||||
Total Basic Materials | 3,343,652 | |||||||
Total Common Stocks | ||||||||
(Cost $64,402,345) | 68,900,034 | |||||||
CONVERTIBLE PREFERRED STOCKS††† - 0.0% | ||||||||
INDUSTRIAL - 0.00% | ||||||||
Thermoenergy Corp.*,1,2 | 116,667 | 341 | ||||||
Total Convertible Preferred Stocks | ||||||||
(Cost $111,409) | 341 | |||||||
RIGHTS††† - 0.0% | ||||||||
BASIC MATERIALS - 0.00% | ||||||||
Pan American Silver Corp.*1 | 81,258 | — | ||||||
Total Rights | ||||||||
(Cost $—) | — | |||||||
EXCHANGE-TRADED FUNDS† - 4.5% | ||||||||
iShares Russell 2000 Value ETF | 25,918 | 3,332,536 | ||||||
Total Exchange-Traded Funds | ||||||||
(Cost $3,106,690) | 3,332,536 | |||||||
MONEY MARKET FUND† - 1.5% | ||||||||
Dreyfus Treasury Securities Cash Management Fund — Institutional Shares 1.44%3 | 1,081,550 | 1,081,550 | ||||||
Total Money Market Fund | ||||||||
(Cost $1,081,550) | 1,081,550 | |||||||
Total Investments - 99.1% | ||||||||
(Cost $68,701,994) | $ | 73,314,461 | ||||||
Other Assets & Liabilities, net - 0.9% | 700,892 | |||||||
Total Net Assets - 100.0% | $ | 74,015,353 |
* | Non-income producing security. |
† | Value determined based on Level 1 inputs — See Note 4. |
††† | Value determined based on Level 3 inputs — See Note 4. |
1 | Security was fair valued by the Valuation Committee at December 31, 2019. The total market value of fair valued securities to $341, (cost $111,409) or less than 0.01% of total net assets. |
2 | PIPE (Private Investment in Public Equity) — Stock issued by a company in the secondary market as a means of raising capital more quickly and less expensively than through registration of a secondary public offering. |
3 | Rate indicated is the 7-day yield as of December 31, 2019. |
REIT — Real Estate Investment Trust | |
See Sector Classification in Other Information section. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 117 |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2019 |
SERIES Q (SMALL CAP VALUE SERIES) |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2019 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stocks | $ | 68,900,034 | $ | — | $ | — | $ | 68,900,034 | ||||||||
Convertible Preferred Stocks | — | — | 341 | 341 | ||||||||||||
Rights | — | — | — | * | — | |||||||||||
Exchange-Traded Funds | 3,332,536 | — | — | 3,332,536 | ||||||||||||
Money Market Fund | 1,081,550 | — | — | 1,081,550 | ||||||||||||
Total Assets | $ | 73,314,120 | $ | — | $ | 341 | $ | 73,314,461 |
* | Security has a market value of $0. |
118 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SERIES Q (SMALL CAP VALUE SERIES) |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2019 |
Assets: | ||||
Investments, at value (cost $68,701,994) | $ | 73,314,461 | ||
Prepaid expenses | 3,807 | |||
Receivables: | ||||
Securities sold | 660,098 | |||
Dividends | 131,463 | |||
Fund shares sold | 31,273 | |||
Interest | 2,407 | |||
Total assets | 74,143,509 | |||
Liabilities: | ||||
Payable for: | ||||
Management fees | 34,090 | |||
Printing fees | 24,244 | |||
Professional fees | 22,693 | |||
Distribution and service fees | 15,041 | |||
Fund shares redeemed | 12,880 | |||
Fund accounting/administration fees | 4,813 | |||
Trustees’ fees* | 3,491 | |||
Transfer agent/maintenance fees | 2,204 | |||
Miscellaneous | 8,700 | |||
Total liabilities | 128,156 | |||
Commitments and contingent liabilities (Note 14) | — | |||
Net assets | $ | 74,015,353 | ||
Net assets consist of: | ||||
Paid in capital | $ | 64,552,521 | ||
Total distributable earnings (loss) | 9,462,832 | |||
Net assets | $ | 74,015,353 | ||
Capital shares outstanding | 1,788,060 | |||
Net asset value per share | $ | 41.39 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2019 |
Investment Income: | ||||
Dividends (net of foreign withholding tax of $302) | $ | 1,356,430 | ||
Interest | 43,476 | |||
Total investment income | 1,399,906 | |||
Expenses: | ||||
Management fees | 540,857 | |||
Distribution and service fees | 180,286 | |||
Transfer agent/maintenance fees | 25,304 | |||
Fund accounting/administration fees | 57,692 | |||
Professional fees | 42,806 | |||
Trustees’ fees* | 19,223 | |||
Custodian fees | 7,026 | |||
Miscellaneous | 55,030 | |||
Total expenses | 928,224 | |||
Less: | ||||
Expenses reimbursed by Adviser | (958 | ) | ||
Expenses waived by Adviser | (106,688 | ) | ||
Earnings credits applied | (307 | ) | ||
Total waived/reimbursed expenses | (107,953 | ) | ||
Net expenses | 820,271 | |||
Net investment income | 579,635 | |||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments | 5,213,071 | |||
Net realized gain | 5,213,071 | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | 8,752,696 | |||
Net change in unrealized appreciation (depreciation) | 8,752,696 | |||
Net realized and unrealized gain | 13,965,767 | |||
Net increase in net assets resulting from operations | $ | 14,545,402 |
* | 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 | 119 |
SERIES Q (SMALL CAP VALUE SERIES) |
STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | ||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income | $ | 579,635 | $ | 611,257 | ||||
Net realized gain on investments | 5,213,071 | 6,571,751 | ||||||
Net change in unrealized appreciation (depreciation) on investments | 8,752,696 | (16,678,682 | ) | |||||
Net increase (decrease) in net assets resulting from operations | 14,545,402 | (9,495,674 | ) | |||||
Distributions to shareholders | (4,786,908 | ) | (8,781,206 | ) | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 3,757,305 | 5,199,979 | ||||||
Distributions reinvested | 4,786,908 | 8,781,206 | ||||||
Cost of shares redeemed | (12,636,580 | ) | (26,081,131 | ) | ||||
Net decrease from capital share transactions | (4,092,367 | ) | (12,099,946 | ) | ||||
Net increase (decrease) in net assets | 5,666,127 | (30,376,826 | ) | |||||
Net assets: | ||||||||
Beginning of year | 68,349,226 | 98,726,052 | ||||||
End of year | $ | 74,015,353 | $ | 68,349,226 | ||||
Capital share activity: | ||||||||
Shares sold | 93,527 | 113,450 | ||||||
Shares issued from reinvestment of distributions | 125,410 | 199,936 | ||||||
Shares redeemed | (319,855 | ) | (575,543 | ) | ||||
Net decrease in shares | (100,918 | ) | (262,157 | ) |
120 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SERIES Q (SMALL CAP VALUE SERIES) |
FINANCIAL HIGHLIGHTS |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 36.18 | $ | 45.89 | $ | 46.02 | $ | 39.71 | $ | 51.73 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | .32 | .30 | .05 | .21 | .12 | |||||||||||||||
Net gain (loss) on investments (realized and unrealized) | 7.62 | (5.28 | ) | 1.58 | 9.76 | (2.87 | ) | |||||||||||||
Total from investment operations | 7.94 | (4.98 | ) | 1.63 | 9.97 | (2.75 | ) | |||||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | (.33 | ) | (.16 | ) | (.17 | ) | (.05 | ) | — | |||||||||||
Net realized gains | (2.40 | ) | (4.57 | ) | (1.59 | ) | (3.61 | ) | (9.27 | ) | ||||||||||
Total distributions | (2.73 | ) | (4.73 | ) | (1.76 | ) | (3.66 | ) | (9.27 | ) | ||||||||||
Net asset value, end of period | $ | 41.39 | $ | 36.18 | $ | 45.89 | $ | 46.02 | $ | 39.71 | ||||||||||
| ||||||||||||||||||||
Total Returnb | 22.58 | % | (12.66 | %) | 3.70 | % | 26.60 | % | (6.62 | %) | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 74,015 | $ | 68,349 | $ | 98,726 | $ | 106,304 | $ | 89,757 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | 0.80 | % | 0.68 | % | 0.11 | % | 0.52 | % | 0.26 | % | ||||||||||
Total expensesc | 1.29 | % | 1.26 | % | 1.23 | % | 1.16 | % | 1.19 | % | ||||||||||
Net expensesd,e,f | 1.14 | % | 1.14 | % | 1.14 | % | 1.16 | % | 1.19 | % | ||||||||||
Portfolio turnover rate | 54 | % | 37 | % | 32 | % | 68 | % | 57 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not take into account any of the expenses associated with an investment in variable insurance products. If total return had taken into account these expenses, performance would have been lower. Shares of a series of Guggenheim Variable Funds Trust are available only through the purchase of such products. |
c | Does not include expenses of the underlying funds in which the Fund invests. |
d | Net expense information reflects the expense ratios after expense waivers and reimbursements, as applicable. |
e | Net expense may include expense that are excluded from the expense limitation agreement. Excluding these expenses, the net expense ratios for the years would be: |
12/31/19 | 12/31/18 | 12/31/17 | 12/31/16 | 12/31/15 | |
1.14% | 1.14% | 1.12% | 1.16% | 1.19% |
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 was a follows: |
12/31/19 | 12/31/18 | 12/31/17 | 12/31/16 | |
— | — | 0.00%* | — |
* | Less than 0.01% |
SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 121 |
MANAGERS’ COMMENTARY (Unaudited) | December 31, 2019 |
To Our Shareholders:
The Series V (SMid Cap Value Series) (the “Fund”) is managed by a team of seasoned professionals led by James Schier, CFA, Senior Managing Director and Portfolio Manager; David Toussaint, CFA, CPA, Managing Director and Portfolio Manager; Farhan Sharaff, Senior Managing Director, Assistant Chief Investment Officer, Equities, and Portfolio Manager; Gregg Strohkorb, CFA, Director Portfolio Manager; and Burak Hurmeydan, Ph.D., Director and Portfolio Manager. In the following paragraphs, the investment team discusses the market environment and performance of the Fund for the fiscal year ended December 31, 2019.
For the year ended December 31, 2019, Series V (SMid Cap Value Series) returned 26.70%, compared with the 23.56% return of its benchmark, the Russell 2500® Value Index.
Strategy and Market Overview
Our investment approach focuses on understanding how companies make money and how easily companies can improve returns, maintain existing high levels of profitability, or benefit from change that occurs within the industries in which they operate. In today’s rapidly changing environment marked by very sharp and quick, but constrained volatility, our long-term orientation and discipline are a competitive advantage. This should become especially critical when the environment of indiscriminant valuation expansion subsides, and fundamentals once again become a more dominant factor in the market.
Performance Review
The Fund outperformed the index over the one-year period. Although the Fund is balanced in style against the benchmark, it does have a bias to larger companies within the benchmark, which benefited performance.
Stock selection was the major factor behind the Fund’s showing relative to the benchmark, particularly in the Information Technology sector. Top-performing holdings were optical components company Infinera Corp., which benefited from new product announcements and favorable earnings, and Cray (not held at period end), which was acquired by Hewlett Packard Enterprise in 2019. The Fund has also focused on companies that stand to benefit by the coming roll-out of 5G networks.
In the Financial sector, the strategy’s holdings outperformed the broader benchmark’s performance, so the impact was magnified by the sector’s large weighting. An overweighting and positive performance in reinsurance benefited performance, as did the Fund’s numerous regional bank holdings.
For many quarters now, the Fund has chosen to carry a significant underweighting in REITs in favor of a significant overweighting in Utilities. But while the Fund was penalized for its overall weighting decisions for the year, its stock-picking was rewarded. Weightings in sub-sectors was the primary contributor in Real Estate, such as in overweighting residential REITs and underweighting retail REITs. In Utilities, AES Corporation was the largest individual contributor, which rose on analyst upgrades, and strong performance from MDU Resources Group, Inc.
Unfavorable stock selection in the Energy sector detracted from performance. Oil prices softened over the period as economic uncertainty surrounding the trade dispute was especially magnified in smaller exploration and production companies. Range Resources Corp., Oasis Petroleum, Inc. and Whiting Petroleum Corp. each declined significantly in response. A sector bright spot for the Fund was Scorpio Tankers, the Fund’s best individual holding on a relative basis.
Stock selection also detracted in the Health Care sector, where gains in Cambrex Corp. and Eagle Pharmaceuticals, Inc. could not offset the poor performance of Evolent Health, Inc.
Portfolio Positioning
While this strategy is balanced relative to the benchmark, it does possess defensive characteristics in virtue of emphasizing relatively larger companies found in the benchmark as well as an overweight in Utilities.
At the end of the period, the Fund’s largest sector overweights relative to the benchmark were in Utilities and Information Technology. The Fund’s largest sector underweights were in Consumer Discretionary, Real Estate, and Communication Services.
122 | THE GUGGENHEIM FUNDS ANNUAL REPORT |
MANAGERS’ COMMENTARY (Unaudited)(concluded) | December 31, 2019 |
Portfolio and Market Outlook
The market volatility late in the year caused sudden changes in the market. The perception of a friendlier environment from the U.S. Federal Reserve and continued hope that trade issues can be relatively quickly and favorably resolved has created an environment where the market is beginning to treat earnings disappointments and reduced outlooks in a less harsh manner since these are being viewed as more temporary issues. The total return potential for stocks now seems more favorable than it was just a few months ago, and the market appears to have begun the early phase of a calculated rebound that may have some duration in time and level.
The Fund has a value bias compared with the benchmark and is positioned favorably as the value investing style continues to improve. We continue to find niche companies with what we believe to be attractive growth opportunities, and, as such, are constructive on the outlook.
Performance displayed represents past performance which is no guarantee of future results.
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 | 123 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2019 |
SERIES V (SMID CAP VALUE SERIES)
OBJECTIVE: Seeks long-term growth of capital.
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments.
Inception Date: May 1, 1997 |
Ten Largest Holdings (% of Total Net Assets) | |
Alleghany Corp. | 2.9% |
OGE Energy Corp. | 2.6% |
Parsley Energy, Inc. — Class A | 2.4% |
Voya Financial, Inc. | 2.2% |
Infinera Corp. | 2.1% |
Willis Towers Watson plc | 2.0% |
Bunge Ltd. | 1.8% |
MDU Resources Group, Inc. | 1.8% |
Radian Group, Inc. | 1.7% |
Equity Commonwealth | 1.7% |
Top Ten Total | 21.2% |
“Ten Largest Holdings” excludes any temporary cash investments. |
124 | THE GUGGENHEIM FUNDS ANNUAL REPORT |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2019 |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2019
| 1 Year | 5 Year | 10 Year |
Series V (SMid Cap Value Series) | 26.70% | 8.17% | 9.78% |
Russell 2500 Value Index | 23.56% | 7.18% | 11.25% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The Russell 2500 Value Index is an unmanaged index and, unlike the Fund, has no management fees or operating expenses to reduce its reported return. |
† | Performance figures do not reflect fees and expenses associated with an investment in variable insurance products. If returns had taken into account these fees and expenses, performance would have been lower. Shares of a series of Guggenheim Variable Funds Trust are available only through the purchase of such products. |
THE GUGGENHEIM FUNDS ANNUAL REPORT | 125 |
SCHEDULE OF INVESTMENTS | December 31, 2019 |
SERIES V (SMID CAP VALUE SERIES) |
| Shares | Value | ||||||
COMMON STOCKS† - 97.0% | ||||||||
Financial - 35.2% | ||||||||
Alleghany Corp.* | 7,036 | $ | 5,625,775 | |||||
Voya Financial, Inc. | 69,329 | 4,227,682 | ||||||
Willis Towers Watson plc | 19,183 | 3,873,815 | ||||||
Radian Group, Inc. | 134,762 | 3,390,612 | ||||||
Equity Commonwealth REIT | 102,443 | 3,363,204 | ||||||
Zions Bancorp North America | 64,704 | 3,359,432 | ||||||
KeyCorp | 163,290 | 3,304,990 | ||||||
Alexandria Real Estate Equities, Inc. REIT | 20,037 | 3,237,579 | ||||||
Physicians Realty Trust REIT | 169,330 | 3,207,110 | ||||||
Axis Capital Holdings Ltd. | 47,582 | 2,828,274 | ||||||
Sun Communities, Inc. REIT | 17,496 | 2,626,150 | ||||||
First Horizon National Corp. | 144,677 | 2,395,851 | ||||||
Pinnacle Financial Partners, Inc. | 36,656 | 2,345,984 | ||||||
Umpqua Holdings Corp. | 122,738 | 2,172,463 | ||||||
Cousins Properties, Inc. REIT | 52,002 | 2,142,482 | ||||||
Howard Hughes Corp.* | 16,561 | 2,099,935 | ||||||
Old Republic International Corp. | 86,150 | 1,927,176 | ||||||
IBERIABANK Corp. | 22,528 | 1,685,770 | ||||||
BOK Financial Corp. | 17,805 | 1,556,157 | ||||||
Camden Property Trust REIT | 14,090 | 1,494,949 | ||||||
WSFS Financial Corp. | 33,950 | 1,493,460 | ||||||
VICI Properties, Inc. REIT | 57,433 | 1,467,413 | ||||||
Prosperity Bancshares, Inc. | 20,404 | 1,466,843 | ||||||
Redwood Trust, Inc. REIT | 84,906 | 1,404,345 | ||||||
Hilltop Holdings, Inc. | 50,937 | 1,269,859 | ||||||
Medical Properties Trust, Inc. REIT | 55,511 | 1,171,837 | ||||||
Stifel Financial Corp. | 18,070 | 1,095,945 | ||||||
Heartland Financial USA, Inc. | 20,686 | 1,028,922 | ||||||
American National Insurance Co. | 8,206 | 965,682 | ||||||
First Midwest Bancorp, Inc. | 23,111 | 532,940 | ||||||
Total Financial | 68,762,636 | |||||||
Industrial - 15.9% | ||||||||
MDU Resources Group, Inc. | 114,994 | 3,416,472 | ||||||
Graphic Packaging Holding Co. | 118,224 | 1,968,430 | ||||||
FLIR Systems, Inc. | 36,274 | 1,888,787 | ||||||
Valmont Industries, Inc. | 12,390 | 1,855,774 | ||||||
Jacobs Engineering Group, Inc. | 20,265 | 1,820,405 | ||||||
Knight-Swift Transportation Holdings, Inc. | 50,395 | 1,806,157 | ||||||
US Concrete, Inc.* | 39,631 | 1,651,027 | ||||||
Rexnord Corp.* | 45,107 | 1,471,391 | ||||||
Owens Corning | 22,445 | 1,461,618 | ||||||
Plexus Corp.* | 18,826 | 1,448,473 | ||||||
Crane Co. | 16,666 | 1,439,609 | ||||||
PGT Innovations, Inc.* | 95,691 | 1,426,753 | ||||||
Advanced Energy Industries, Inc.* | 19,422 | 1,382,846 | ||||||
Johnson Controls International plc | 33,962 | 1,382,593 | ||||||
Snap-on, Inc. | 7,217 | 1,222,560 | ||||||
Kennametal, Inc. | 29,722 | 1,096,444 | ||||||
GATX Corp. | 12,173 | 1,008,533 | ||||||
Park Aerospace Corp. | 59,124 | 961,948 | ||||||
Dycom Industries, Inc.* | 20,190 | 951,958 | ||||||
Kirby Corp.* | 9,262 | 829,227 | ||||||
EnerSys | 6,375 | 477,041 | ||||||
Total Industrial | 30,968,046 | |||||||
Utilities - 8.7% | ||||||||
OGE Energy Corp. | 112,662 | 5,010,079 | ||||||
Portland General Electric Co. | 59,902 | 3,341,933 | ||||||
AES Corp. | 112,763 | 2,243,984 | ||||||
Black Hills Corp. | 24,313 | 1,909,543 | ||||||
Avista Corp. | 35,237 | 1,694,547 | ||||||
Southwest Gas Holdings, Inc. | 22,265 | 1,691,472 | ||||||
Pinnacle West Capital Corp. | 10,966 | 986,172 | ||||||
Total Utilities | 16,877,730 | |||||||
Consumer, Non-cyclical - 8.2% | ||||||||
Bunge Ltd. | 60,124 | 3,460,136 | ||||||
Encompass Health Corp. | 37,624 | 2,606,215 | ||||||
Central Garden & Pet Co. — Class A* | 86,254 | 2,532,417 | ||||||
Ingredion, Inc. | 23,621 | 2,195,572 | ||||||
Eagle Pharmaceuticals, Inc.* | 30,448 | 1,829,316 | ||||||
Emergent BioSolutions, Inc.* | 30,577 | 1,649,629 | ||||||
Premier, Inc. — Class A* | 36,538 | 1,384,059 | ||||||
TreeHouse Foods, Inc.* | 8,669 | 420,447 | ||||||
Total Consumer, Non-cyclical | 16,077,791 | |||||||
Consumer, Cyclical - 7.9% | ||||||||
LKQ Corp.* | 75,146 | 2,682,712 | ||||||
UniFirst Corp. | 10,404 | 2,101,400 | ||||||
PVH Corp. | 19,068 | 2,005,000 | ||||||
DR Horton, Inc. | 37,250 | 1,964,937 | ||||||
Alaska Air Group, Inc. | 27,421 | 1,857,773 | ||||||
BorgWarner, Inc. | 26,067 | 1,130,787 | ||||||
Skechers U.S.A., Inc. — Class A* | 24,575 | 1,061,394 | ||||||
Lear Corp. | 7,697 | 1,056,028 | ||||||
Caleres, Inc. | 43,116 | 1,024,005 | ||||||
Newell Brands, Inc. | 25,126 | 482,922 | ||||||
Total Consumer, Cyclical | 15,366,958 | |||||||
Technology - 5.9% | ||||||||
MACOM Technology Solutions Holdings, Inc.* | 112,355 | 2,988,643 | ||||||
Super Micro Computer, Inc.* | 113,230 | 2,719,785 | ||||||
Qorvo, Inc.* | 12,626 | 1,467,520 | ||||||
Lumentum Holdings, Inc.* | 17,141 | 1,359,281 | ||||||
Evolent Health, Inc. — Class A* | 115,435 | 1,044,687 | ||||||
Skyworks Solutions, Inc. | 8,550 | 1,033,524 | ||||||
CSG Systems International, Inc. | 18,677 | 967,095 | ||||||
Total Technology | 11,580,535 | |||||||
Basic Materials - 5.7% | ||||||||
Ashland Global Holdings, Inc. | 28,424 | 2,175,288 | ||||||
Olin Corp. | 120,136 | 2,072,346 | ||||||
Freeport-McMoRan, Inc. | 156,394 | 2,051,889 | ||||||
Reliance Steel & Aluminum Co. | 16,380 | 1,961,669 | ||||||
Huntsman Corp. | 48,836 | 1,179,878 | ||||||
Nucor Corp. | 16,779 | 944,322 |
126 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2019 |
SERIES V (SMID CAP VALUE SERIES) |
| Shares | Value | ||||||
Commercial Metals Co. | 28,870 | $ | 642,935 | |||||
Total Basic Materials | 11,028,327 | |||||||
Communications - 5.3% | ||||||||
Infinera Corp.* | 513,269 | 4,075,356 | ||||||
NortonLifeLock, Inc. | 118,855 | 3,033,180 | ||||||
Viavi Solutions, Inc.* | 126,644 | 1,899,660 | ||||||
Ciena Corp.* | 33,018 | 1,409,538 | ||||||
Total Communications | 10,417,734 | |||||||
Energy - 4.2% | ||||||||
Parsley Energy, Inc. — Class A | 247,044 | 4,671,602 | ||||||
Range Resources Corp. | 184,618 | 895,397 | ||||||
Delek US Holdings, Inc. | 26,038 | 873,054 | ||||||
Oasis Petroleum, Inc.* | 247,239 | 805,999 | ||||||
Whiting Petroleum Corp.* | 104,217 | 764,953 | ||||||
Antero Resources Corp.* | 64,195 | 182,956 | ||||||
HydroGen Corp.*,†††,1,2 | 672,346 | 1 | ||||||
Total Energy | 8,193,962 | |||||||
Total Common Stocks | ||||||||
(Cost $167,747,532) | 189,273,719 | |||||||
CONVERTIBLE PREFERRED STOCKS†††- 0.0% | ||||||||
Industrial - 0.0% | ||||||||
Thermoenergy Corp.*,1,3 | 308,333 | 901 | ||||||
Total Convertible Preferred Stocks | ||||||||
(Cost $294,438) | 901 | |||||||
RIGHTS††† - 0.0% | ||||||||
Basic Materials - 0.0% | ||||||||
Pan American Silver Corp.*,1 | 220,317 | — | ||||||
Total Rights | ||||||||
(Cost $—) | — | |||||||
MONEY MARKET FUND† - 3.1% | ||||||||
Dreyfus Treasury Securities Cash Management Fund — Institutional Shares 1.44%4 | 6,032,178 | 6,032,178 | ||||||
Total Money Market Fund | ||||||||
(Cost $6,032,178) | 6,032,178 | |||||||
Total Investments - 100.1% | ||||||||
(Cost $174,074,148) | $ | 195,306,798 | ||||||
Other Assets & Liabilities, net - (0.1)% | (99,558 | ) | ||||||
Total Net Assets - 100.0% | $ | 195,207,240 |
* | Non-income producing security. |
† | Value determined based on Level 1 inputs, unless otherwise noted — See Note 4. |
††† | Value determined based on Level 3 inputs — See Note 4. |
1 | Security was fair valued by the Valuation Committee at December 31, 2019. The total market value of fair valued securities amounts to $902, (cost $2,866,013) or less than 0.1% of total net assets. |
2 | Affiliated issuer. |
3 | PIPE (Private Investment in Public Equity) — Stock issued by a company in the secondary market as a means of raising capital more quickly and less expensively than through registration of a secondary public offering. |
4 | Rate indicated is the 7-day yield as of December 31, 2019. |
plc — Public Limited Company | |
REIT — Real Estate Investment Trust | |
See Sector Classification in Other Information section. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 127 |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2019 |
SERIES V (SMID CAP VALUE SERIES) |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2019 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stocks | $ | 189,273,718 | $ | — | $ | 1 | $ | 189,273,719 | ||||||||
Convertible Preferred Stocks | — | — | 901 | 901 | ||||||||||||
Rights | — | — | — | * | — | |||||||||||
Money Market Fund | 6,032,178 | — | — | 6,032,178 | ||||||||||||
Total Assets | $ | 195,305,896 | $ | — | $ | 902 | $ | 195,306,798 |
* | Security has a market value $0. |
Affiliated Transactions
Investments representing 5% or more of the outstanding voting shares of a company, or control of or by, or common control under Guggenheim Investments, result in that company being considered an affiliated issuer, as defined in the 1940 Act.
Transactions during the year ended December 31, 2019, in which the company is an affiliated issuer, were as follows:
Security Name | Value | Additions | Reductions | Realized | Change in | Value | Shares | |||||||||||||||||||||
Common Stock | ||||||||||||||||||||||||||||
HydroGen Corp. *,1 | $ | 1 | $ | — | $ | — | $ | — | $ | — | $ | 1 | 672,346 |
* | Non-income producing security. |
1 | Security was fair valued by the Valuation Committee at December 31, 2019. The total market value of fair valued and affiliated securities amounts to $1, (cost $2,571,575) or less than 0.1% of total net assets. |
128 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SERIES V (SMID CAP VALUE SERIES) |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2019 |
Assets: | ||||
Investments in unaffiliated issuers, at value (cost $171,502,573) | $ | 195,306,797 | ||
Investments in affiliated issuers, at value (cost $2,571,575) | 1 | |||
Prepaid expenses | 5,301 | |||
Receivables: | ||||
Dividends | 290,303 | |||
Interest | 9,008 | |||
Fund shares sold | 4,496 | |||
Foreign tax reclaims | 149 | |||
Total assets | 195,616,055 | |||
Liabilities: | ||||
Payable for: | ||||
Management fees | 64,954 | |||
Distribution and service fees | 39,574 | |||
Printing fees | 33,951 | |||
Professional fees | 22,166 | |||
Fund accounting/administration fees | 12,664 | |||
Fund shares redeemed | 9,773 | |||
Trustees’ fees* | 3,893 | |||
Transfer agent/maintenance fees | 3,313 | |||
Miscellaneous (Note 11) | 218,527 | |||
Total liabilities | 408,815 | |||
Commitments and contingent liabilities (Note 14) | — | |||
Net assets | $ | 195,207,240 | ||
Net assets consist of: | ||||
Paid in capital | $ | 165,999,977 | ||
Total distributable earnings (loss) | 29,207,263 | |||
Net assets | $ | 195,207,240 | ||
Capital shares outstanding | 2,821,539 | |||
Net asset value per share | $ | 69.18 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2019 |
Investment Income: | ||||
Dividends from securities of unaffiliated issuers (net of foreign withholding tax of $669) | $ | 3,508,155 | ||
Interest | 109,854 | |||
Total investment income | 3,618,009 | |||
Expenses: | ||||
Management fees | 1,415,896 | |||
Distribution and service fees | 471,965 | |||
Transfer agent/maintenance fees | 25,206 | |||
Fund accounting/administration fees | 151,030 | |||
Professional fees | 62,491 | |||
Trustees’ fees* | 23,910 | |||
Custodian fees | 8,084 | |||
Miscellaneous | 87,308 | |||
Total expenses | 2,245,890 | |||
Less: | ||||
Expenses reimbursed by Adviser | (3,399 | ) | ||
Expenses waived by Adviser | (527,708 | ) | ||
Earnings credits applied | (4 | ) | ||
Total waived/reimbursed expenses | (531,111 | ) | ||
Net expenses | 1,714,779 | |||
Net investment income | 1,903,230 | |||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments in unaffiliated issuers | 8,101,780 | |||
Net realized gain | 8,101,780 | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments in unaffiliated issuers | 34,429,097 | |||
Net change in unrealized appreciation (depreciation) | 34,429,097 | |||
Net realized and unrealized gain | 42,530,877 | |||
Net increase in net assets resulting from operations | $ | 44,434,107 |
* | 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 | 129 |
SERIES V (SMID CAP VALUE SERIES) |
STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | ||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income | $ | 1,903,230 | $ | 1,532,361 | ||||
Net realized gain on investments | 8,101,780 | 26,927,246 | ||||||
Net change in unrealized appreciation (depreciation) on investments | 34,429,097 | (53,819,261 | ) | |||||
Net increase (decrease) in net assets resulting from operations | 44,434,107 | (25,359,654 | ) | |||||
Distributions to shareholders | (21,621,842 | ) | (31,674,903 | ) | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 5,292,322 | 3,603,028 | ||||||
Distributions reinvested | 21,621,842 | 31,674,903 | ||||||
Cost of shares redeemed | (30,631,827 | ) | (44,347,994 | ) | ||||
Net decrease from capital share transactions | (3,717,663 | ) | (9,070,063 | ) | ||||
Net increase (decrease) in net assets | 19,094,602 | (66,104,620 | ) | |||||
Net assets: | ||||||||
Beginning of year | 176,112,638 | 242,217,258 | ||||||
End of year | $ | 195,207,240 | $ | 176,112,638 | ||||
Capital share activity: | ||||||||
Shares sold | 81,079 | 46,175 | ||||||
Shares issued from reinvestment of distributions | 342,497 | 422,445 | ||||||
Shares redeemed | (456,487 | ) | (555,135 | ) | ||||
Net decrease in shares | (32,911 | ) | (86,515 | ) |
130 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SERIES V (SMID CAP VALUE SERIES) |
FINANCIAL HIGHLIGHTS |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 61.70 | $ | 82.36 | $ | 74.35 | $ | 65.74 | $ | 84.22 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | .68 | .53 | (.16 | ) | .99 | .71 | ||||||||||||||
Net gain (loss) on investments (realized and unrealized) | 15.01 | (9.07 | ) | 10.16 | 15.50 | (5.42 | ) | |||||||||||||
Total from investment operations | 15.69 | (8.54 | ) | 10.00 | 16.49 | (4.71 | ) | |||||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | (.64 | ) | (.49 | ) | (.52 | ) | (.68 | ) | (.51 | ) | ||||||||||
Net realized gains | (7.57 | ) | (11.63 | ) | (1.47 | ) | (7.20 | ) | (13.26 | ) | ||||||||||
Total distributions | (8.21 | ) | (12.12 | ) | (1.99 | ) | (7.88 | ) | (13.77 | ) | ||||||||||
Net asset value, end of period | $ | 69.18 | $ | 61.70 | $ | 82.36 | $ | 74.35 | $ | 65.74 | ||||||||||
| ||||||||||||||||||||
Total Returnb | 26.70 | % | (12.97 | %) | 13.71 | % | 26.75 | % | (6.79 | %) | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 195,207 | $ | 176,113 | $ | 242,217 | $ | 248,062 | $ | 207,393 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | 1.01 | % | 0.68 | % | (0.21 | %) | 1.46 | % | 0.94 | % | ||||||||||
Total expenses | 1.19 | % | 1.19 | % | 1.10 | % | 0.93 | % | 0.95 | % | ||||||||||
Net expensesc,d | 0.91 | % | 0.91 | % | 0.91 | % | 0.93 | % | 0.95 | % | ||||||||||
Portfolio turnover rate | 41 | % | 65 | % | 54 | % | 60 | % | 50 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not take into account any of the expenses associated with an investment in variable insurance products. If total return had taken into account these expenses, performance would have been lower. Shares of a series of Guggenheim Variable Funds Trust are available only through the purchase of such products. |
c | Net expense information reflects the expense ratios after expense waivers and reimbursements, as applicable. |
d | Net expense may include expenses that are excluded from the expense limitation. Excluding these expenses, the net expense ratios for the years would be: |
12/31/19 | 12/31/18 | 12/31/17 | 12/31/16 | 12/31/15 | |
0.91% | 0.91% | 0.89% | 0.93% | 0.95% |
SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 131 |
MANAGERS’ COMMENTARY (Unaudited) | December 31, 2019 |
To Our Shareholders:
The Series X (StylePlusTM—Small Growth Series) (the “Fund”) is managed by a team of seasoned professionals, including Farhan Sharaff, Senior Managing Director and Assistant Chief Investment Officer, Equities; Jayson Flowers, Senior Managing Director and Portfolio Manager; Qi Yan, Managing Director and Portfolio Manager; and Adam J. Bloch, Managing Director and Portfolio Manager. In the following paragraphs, the investment team discusses performance for the fiscal year ended December 31, 2019.
For the year ended December 31, 2019, Series X (StylePlus—Small Growth Series) returned 25.68%, compared with the 28.48% return of its benchmark, the Russell 2000® Growth Index.
Investment Approach
Through a combination of actively managed individual equity, passive equity, and actively managed fixed income, the Fund seeks to exceed the total return of the Russell 2000 Growth Index. The actively managed equity and fixed income components seek to provide multiple sources of outperformance and take advantage of Guggenheim’s competencies in both fixed income and systematic stock selection.
The active and passive decisions seek to add value by tactically allocating to actively managed equity through quantitative selection models when stock picking opportunities are high. During periods when Guggenheim views these opportunities to be less attractive, the Fund seeks to increase its passive exposure to equities and the allocation to fixed income securities. The prospective return during such periods is the equity index plus an “alpha” component coming from the yield of the fixed income overlay.
Performance Review
Over the period, from 15-25% of the total equity position was allocated to actively managed equity and 75-85% to passive equity. Remaining Fund assets were invested in the Guggenheim Strategy Funds, short-term fixed income investment companies advised by Guggenheim Investments, and the Guggenheim Ultra Short Duration Fund, whose objective is to seek a high level of income consistent with the preservation of capital.
The Fund underperformed the Russell 2000 Growth Index for the year ended December 31, 2019 by 280 basis points net of fees. The actively managed equity sleeve detracted from performance on a relative basis. The passive equity position, maintained through swap agreements and futures contracts, contributed to performance for the period.
The fixed income sleeve comprised investments in certain of the underlying series of Guggenheim Funds Trust and Guggenheim Strategy Funds Trust, specifically Guggenheim Ultra Short Duration, Guggenheim Strategy Fund II, Guggenheim Strategy Fund III, and Guggenheim Variable Insurance Strategy Fund III, (collectively, the “Short Term Investment Vehicles”), each of which are open-end management investment companies managed by Guggenheim Investments. The Short Term Investment Vehicles, which launched on March 11, 2014, are offered as short term investment options only to mutual funds, trusts, and other accounts managed by Guggenheim Investments and/or its affiliates, and are not available to the public, with the exception of Guggenheim Ultra Short Duration Fund, which is available to the public. Guggenheim Strategy Fund II, Guggenheim Strategy Fund III, and Guggenheim Variable Insurance Strategy Fund III do not charge an investment management fee. Guggenheim Ultra Short Duration Fund charges an investment management fee but that fee is waived by the respective investee fund. For the one-year period ended December 31, 2019, investment in the Short Term Investment Vehicles benefited Fund performance.
Performance displayed represents past performance which is no guarantee of future results.
The opinions and forecast expressed may not actually come to pass. This information is subject to change at any time, based on market and other conditions, and should not be construed as a recommendation of any specific security or strategy.
132 | THE GUGGENHEIM FUNDS ANNUAL REPORT |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2019 |
SERIES X (STYLEPLUS—SMALL GROWTH SERIES)
OBJECTIVE: Seeks long-term growth of capital.
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments, investments in Guggenheim Strategy Funds Trust mutual funds, or investments in Guggenheim Ultra Short Duration Fund.
Inception Date: October 15, 1997 |
Ten Largest Holdings (% of Total Net Assets) | |
Guggenheim Variable Insurance Strategy Fund III | 31.0% |
Guggenheim Strategy Fund III | 27.5% |
Guggenheim Ultra Short Duration Fund — Institutional Class | 12.0% |
Guggenheim Strategy Fund II | 4.4% |
iShares S&P Small-Capital 600 Growth ETF | 0.6% |
Integer Holdings Corp. | 0.3% |
Viavi Solutions, Inc. | 0.3% |
Allegiant Travel Co. — Class A | 0.3% |
Albany International Corp. — Class A | 0.3% |
Gentherm, Inc. | 0.2% |
Top Ten Total | 76.9% |
“Ten Largest Holdings” excludes any temporary cash or derivative investments. |
THE GUGGENHEIM FUNDS ANNUAL REPORT | 133 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2019 |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2019
| 1 Year | 5 Year | 10 Year |
Series X (StylePlus—Small Growth Series) | 25.68% | 9.09% | 12.95% |
Russell 2000 Growth Index | 28.48% | 9.34% | 13.01% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The Russell 2000 Growth Index is an unmanaged index and, unlike the Fund, has no management fees or operating expenses to reduce its reported return. |
† | Performance figures do not reflect fees and expenses associated with an investment in variable insurance products. If returns had taken into account these fees and expenses, performance would have been lower. Shares of a series of Guggenheim Variable Funds Trust are available only through the purchase of such products. |
134 | THE GUGGENHEIM FUNDS ANNUAL REPORT |
SCHEDULE OF INVESTMENTS | December 31, 2019 |
SERIES X (STYLEPLUS—SMALL GROWTH SERIES) |
| Shares | Value | ||||||
COMMON STOCKS† - 20.3% | ||||||||
Consumer, Non-cyclical - 6.5% | ||||||||
Integer Holdings Corp.* | 1,379 | $ | 110,913 | |||||
AMN Healthcare Services, Inc.* | 1,126 | 70,161 | ||||||
Natus Medical, Inc.* | 2,119 | 69,906 | ||||||
Korn Ferry | 1,534 | 65,042 | ||||||
Luminex Corp. | 2,697 | 62,462 | ||||||
Neogen Corp.* | 877 | 57,233 | ||||||
Varex Imaging Corp.* | 1,742 | 51,929 | ||||||
HMS Holdings Corp.* | 1,731 | 51,238 | ||||||
NeoGenomics, Inc.* | 1,712 | 50,076 | ||||||
Medpace Holdings, Inc.* | 568 | 47,746 | ||||||
CONMED Corp. | 419 | 46,857 | ||||||
Orthofix Medical, Inc.* | 1,012 | 46,734 | ||||||
AngioDynamics, Inc.* | 2,908 | 46,557 | ||||||
Emergent BioSolutions, Inc.* | 844 | 45,534 | ||||||
Monro, Inc. | 579 | 45,278 | ||||||
LHC Group, Inc.* | 328 | 45,185 | ||||||
Merit Medical Systems, Inc.* | 1,418 | 44,270 | ||||||
Xencor, Inc.* | 1,273 | 43,778 | ||||||
BioTelemetry, Inc.* | 939 | 43,476 | ||||||
Supernus Pharmaceuticals, Inc.* | 1,803 | 42,767 | ||||||
Strategic Education, Inc. | 269 | 42,744 | ||||||
Aaron’s, Inc. | 713 | 40,719 | ||||||
B&G Foods, Inc. | 2,248 | 40,306 | ||||||
USANA Health Sciences, Inc.* | 513 | 40,296 | ||||||
Harsco Corp.* | 1,737 | 39,968 | ||||||
Surmodics, Inc.* | 958 | 39,690 | ||||||
Cardiovascular Systems, Inc.* | 813 | 39,504 | ||||||
Medifast, Inc. | 357 | 39,120 | ||||||
Myriad Genetics, Inc.* | 1,408 | 38,340 | ||||||
Innoviva, Inc.* | 2,701 | 38,246 | ||||||
Integra LifeSciences Holdings Corp.* | 634 | 36,949 | ||||||
Ensign Group, Inc. | 808 | 36,659 | ||||||
Enanta Pharmaceuticals, Inc.* | 593 | 36,636 | ||||||
WD-40 Co. | 187 | 36,304 | ||||||
Cardtronics plc — Class A* | 788 | 35,184 | ||||||
Vanda Pharmaceuticals, Inc.* | 2,122 | 34,822 | ||||||
CryoLife, Inc.* | 1,280 | 34,675 | ||||||
Amphastar Pharmaceuticals, Inc.* | 1,751 | 33,777 | ||||||
Corcept Therapeutics, Inc.* | 2,768 | 33,493 | ||||||
ANI Pharmaceuticals, Inc.* | 515 | 31,760 | ||||||
Pacira BioSciences, Inc.* | 701 | 31,755 | ||||||
Eagle Pharmaceuticals, Inc.* | 527 | 31,662 | ||||||
Meridian Bioscience, Inc. | 3,171 | 30,981 | ||||||
Care.com, Inc.* | 1,761 | 26,468 | ||||||
National Beverage Corp.* | 488 | 24,898 | ||||||
OraSure Technologies, Inc.* | 3,094 | 24,845 | ||||||
Phibro Animal Health Corp. — Class A | 983 | 24,408 | ||||||
Avanos Medical, Inc.* | 721 | 24,298 | ||||||
Vector Group Ltd. | 1,784 | 23,888 | ||||||
John B Sanfilippo & Son, Inc. | 256 | 23,368 | ||||||
ICU Medical, Inc.* | 122 | 22,828 | ||||||
Exelixis, Inc.* | 1,151 | 20,281 | ||||||
Spectrum Pharmaceuticals, Inc.* | 3,597 | 13,093 | ||||||
Total Consumer, Non-cyclical | 2,159,107 | |||||||
Consumer, Cyclical - 4.2% | ||||||||
Allegiant Travel Co. — Class A | 538 | 93,634 | ||||||
Gentherm, Inc.* | 1,851 | 82,166 | ||||||
MSC Industrial Direct Company, Inc. — Class A | 941 | 73,840 | ||||||
Asbury Automotive Group, Inc.* | 631 | 70,540 | ||||||
Standard Motor Products, Inc. | 1,325 | 70,516 | ||||||
Wolverine World Wide, Inc. | 2,025 | 68,323 | ||||||
Cracker Barrel Old Country Store, Inc. | 404 | 62,111 | ||||||
Dorman Products, Inc.* | 815 | 61,712 | ||||||
UniFirst Corp. | 304 | 61,402 | ||||||
Wyndham Destinations, Inc. | 1,023 | 52,879 | ||||||
Wyndham Hotels & Resorts, Inc. | 831 | 52,195 | ||||||
Crocs, Inc.* | 1,220 | 51,106 | ||||||
iRobot Corp.* | 1,000 | 50,630 | ||||||
Fox Factory Holding Corp.* | 716 | 49,812 | ||||||
Steven Madden Ltd. | 954 | 41,032 | ||||||
Cavco Industries, Inc.* | 197 | 38,490 | ||||||
Sleep Number Corp.* | 741 | 36,487 | ||||||
RH* | 161 | 34,374 | ||||||
Kontoor Brands, Inc. | 791 | 33,214 | ||||||
Dine Brands Global, Inc. | 384 | 32,072 | ||||||
Dave & Buster’s Entertainment, Inc. | 754 | 30,288 | ||||||
Shake Shack, Inc. — Class A* | 505 | 30,083 | ||||||
Oxford Industries, Inc. | 355 | 26,774 | ||||||
Six Flags Entertainment Corp. | 565 | 25,487 | ||||||
Tempur Sealy International, Inc.* | 286 | 24,899 | ||||||
Wingstop, Inc. | 263 | 22,678 | ||||||
Deckers Outdoor Corp.* | 130 | 21,952 | ||||||
Movado Group, Inc. | 973 | 21,153 | ||||||
Hawaiian Holdings, Inc. | 674 | 19,741 | ||||||
Children’s Place, Inc. | 315 | 19,694 | ||||||
Jack in the Box, Inc. | 244 | 19,039 | ||||||
Scientific Games Corp. — Class A* | 699 | 18,719 | ||||||
Total Consumer, Cyclical | 1,397,042 | |||||||
Industrial - 3.6% | ||||||||
Albany International Corp. — Class A | 1,167 | 88,599 | ||||||
Applied Industrial Technologies, Inc. | 1,230 | 82,029 | ||||||
Aerojet Rocketdyne Holdings, Inc.* | 1,720 | 78,535 | ||||||
Crane Co. | 856 | 73,941 | ||||||
Regal Beloit Corp. | 859 | 73,539 | ||||||
Hub Group, Inc. — Class A* | 1,394 | 71,498 | ||||||
Matson, Inc. | 1,733 | 70,706 | ||||||
Lincoln Electric Holdings, Inc. | 710 | 68,678 | ||||||
Kennametal, Inc. | 1,798 | 66,328 | ||||||
Heartland Express, Inc. | 3,132 | 65,929 | ||||||
Forward Air Corp. | 892 | 62,395 | ||||||
Landstar System, Inc. | 484 | 55,113 | ||||||
Proto Labs, Inc.* | 414 | 42,042 | ||||||
Knowles Corp.* | 1,833 | 38,768 | ||||||
Kirby Corp.* | 384 | 34,380 | ||||||
National Presto Industries, Inc. | 384 | 33,942 | ||||||
ESCO Technologies, Inc. | 366 | 33,855 | ||||||
AZZ, Inc. | 719 | 33,038 | ||||||
Mesa Laboratories, Inc. | 102 | 25,439 | ||||||
PGT Innovations, Inc.* | 1,687 | 25,153 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 135 |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2019 |
SERIES X (STYLEPLUS—SMALL GROWTH SERIES) |
| Shares | Value | ||||||
Fabrinet* | 350 | $ | 22,694 | |||||
US Ecology, Inc. | 376 | 21,774 | ||||||
OSI Systems, Inc.* | 215 | 21,659 | ||||||
Total Industrial | 1,190,034 | |||||||
Technology - 1.7% | ||||||||
Omnicell, Inc.* | 831 | 67,909 | ||||||
Brooks Automation, Inc. | 1,294 | 54,296 | ||||||
Diodes, Inc.* | 902 | 50,846 | ||||||
NextGen Healthcare, Inc.* | 2,737 | 43,984 | ||||||
Axcelis Technologies, Inc.* | 1,783 | 42,961 | ||||||
Computer Programs & Systems, Inc. | 1,516 | 40,022 | ||||||
KEMET Corp. | 1,312 | 35,490 | ||||||
CTS Corp. | 1,126 | 33,791 | ||||||
MicroStrategy, Inc. — Class A* | 227 | 32,377 | ||||||
Cabot Microelectronics Corp. | 222 | 32,039 | ||||||
Teradata Corp.* | 1,072 | 28,698 | ||||||
Onto Innovation, Inc.* | 725 | 26,492 | ||||||
Unisys Corp.* | 2,138 | 25,357 | ||||||
CSG Systems International, Inc. | 435 | 22,524 | ||||||
Progress Software Corp. | 509 | 21,149 | ||||||
Total Technology | 557,935 | |||||||
Communications - 1.6% | ||||||||
Viavi Solutions, Inc.* | 6,704 | 100,560 | ||||||
HealthStream, Inc.* | 2,304 | 62,669 | ||||||
Cogent Communications Holdings, Inc. | 864 | 56,860 | ||||||
Stamps.com, Inc.* | 645 | 53,870 | ||||||
Shutterstock, Inc.* | 1,198 | 51,370 | ||||||
AMC Networks, Inc. — Class A* | 1,235 | 48,783 | ||||||
Iridium Communications, Inc.* | 1,709 | 42,110 | ||||||
InterDigital, Inc. | 693 | 37,761 | ||||||
Yelp, Inc. — Class A* | 960 | 33,437 | ||||||
ATN International, Inc. | 392 | 21,713 | ||||||
Total Communications | 509,133 | |||||||
Financial - 1.3% | ||||||||
TrustCo Bank Corp. NY | 6,915 | 59,953 | ||||||
American Equity Investment Life Holding Co. | 1,859 | 55,640 | ||||||
Westamerica Bancorporation | 767 | 51,980 | ||||||
Glacier Bancorp, Inc. | 960 | 44,150 | ||||||
Waddell & Reed Financial, Inc. — Class A | 2,470 | 41,299 | ||||||
Redwood Trust, Inc. REIT | 2,147 | 35,511 | ||||||
RLI Corp. | 393 | 35,378 | ||||||
HCI Group, Inc. | 550 | 25,107 | ||||||
Community Bank System, Inc. | 307 | 21,778 | ||||||
Old National Bancorp | 1,182 | 21,619 | ||||||
First BanCorp | 1,991 | 21,085 | ||||||
Independent Bank Corp. | 245 | 20,396 | ||||||
Total Financial | 433,896 | |||||||
Energy - 1.2% | ||||||||
Bonanza Creek Energy, Inc.* | 2,248 | 52,468 | ||||||
ProPetro Holding Corp.* | 4,621 | 51,986 | ||||||
Penn Virginia Corp.* | 1,495 | 45,373 | ||||||
Matador Resources Co.* | 2,202 | 39,570 | ||||||
Talos Energy, Inc.* | 1,205 | 36,331 | ||||||
RPC, Inc. | 6,554 | 34,343 | ||||||
CONSOL Energy, Inc.* | 2,079 | 30,166 | ||||||
Apergy Corp.* | 888 | 29,997 | ||||||
DMC Global, Inc. | 648 | 29,121 | ||||||
Southwestern Energy Co.* | 11,245 | 27,213 | ||||||
Archrock, Inc. | 2,489 | 24,990 | ||||||
Total Energy | 401,558 | |||||||
Basic Materials - 0.2% | ||||||||
Quaker Chemical Corp. | 240 | 39,485 | ||||||
Rogers Corp.* | 233 | 29,062 | ||||||
Total Basic Materials | 68,547 | |||||||
Total Common Stocks | ||||||||
(Cost $6,402,390) | 6,717,252 | |||||||
EXCHANGE-TRADED FUNDS† - 0.6% | ||||||||
iShares S&P Small-Capital 600 Growth ETF | 1,000 | 193,300 | ||||||
Total Exchange-Traded Funds | ||||||||
(Cost $194,118) | 193,300 | |||||||
MUTUAL FUNDS† - 74.9% | ||||||||
Guggenheim Variable Insurance Strategy Fund III1 | 412,877 | 10,222,838 | ||||||
Guggenheim Strategy Fund III1 | 367,349 | 9,080,856 | ||||||
Guggenheim Ultra Short Duration Fund — Institutional Class1 | 399,570 | 3,975,718 | ||||||
Guggenheim Strategy Fund II1 | 58,987 | 1,459,343 | ||||||
Total Mutual Funds | ||||||||
(Cost $24,916,413) | 24,738,755 | |||||||
MONEY MARKET FUND† - 4.2% | ||||||||
Dreyfus Treasury Securities Cash Management Fund — Institutional Shares 1.44%2 | 1,376,853 | 1,376,853 | ||||||
Total Money Market Fund | ||||||||
(Cost $1,376,853) | 1,376,853 | |||||||
Total Investments - 100.0% | ||||||||
(Cost $32,889,774) | $ | 33,026,160 | ||||||
Other Assets & Liabilities, net - 0.0% | 9,662 | |||||||
Total Net Assets - 100.0% | $ | 33,035,822 |
136 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2019 |
SERIES X (STYLEPLUS—SMALL GROWTH SERIES) |
Futures Contracts | ||||||||||||||||
Description | Number of | Expiration | Notional | Value and | ||||||||||||
Equity Futures Contracts Purchased† | ||||||||||||||||
Russell 2000 Index Mini Futures Contracts | 4 | Mar 2020 | $ | 333,960 | $ | 2,857 | ||||||||||
S&P MidCap 400 Index Mini Futures Contracts | 1 | Mar 2020 | 206,430 | 2,251 | ||||||||||||
$ | 540,390 | $ | 5,108 |
Total Return Swap Agreements | |||||||||||||||||||
Counterparty | Index | Financing | Payment | Maturity | Units | Notional | Value and | ||||||||||||
OTC Equity Index Swap Agreements†† | |||||||||||||||||||
Morgan Stanley Capital Services LLC | Russell 2000 Growth Index | 1.89% (3 Month USD LIBOR - 0.17%) | At Maturity | 01/02/20 | 23,683 | $ | 25,754,727 | $ | 3,254,727 |
* | Non-income producing security. |
** | Includes cumulative appreciation (depreciation). Variation margin is reported within the Statement of Assets and Liabilities. |
† | Value determined based on Level 1 inputs — See Note 4. |
†† | Value determined based on Level 2 inputs — See Note 4. |
1 | Affiliated issuer. |
2 | Rate indicated is the 7-day yield as of December 31, 2019. |
LIBOR — London Interbank Offered Rate | |
plc — Public Limited Company | |
REIT — Real Estate Investment Trust | |
See Sector Classification in Other Information section. |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2019 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stocks | $ | 6,717,252 | $ | — | $ | — | $ | 6,717,252 | ||||||||
Exchange-Traded Funds | 193,300 | — | — | 193,300 | ||||||||||||
Mutual Funds | 24,738,755 | — | — | 24,738,755 | ||||||||||||
Money Market Fund | 1,376,853 | — | — | 1,376,853 | ||||||||||||
Equity Futures Contracts** | 5,108 | — | — | 5,108 | ||||||||||||
Equity Index Swap Agreements** | — | 3,254,727 | — | 3,254,727 | ||||||||||||
Total Assets | $ | 33,031,268 | $ | 3,254,727 | $ | — | $ | 36,285,995 |
** | This derivative is reported as unrealized appreciation/depreciation at period end. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 137 |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2019 |
SERIES X (STYLEPLUS—SMALL GROWTH SERIES) |
Affiliated Transactions
Investments representing 5% or more of the outstanding voting shares of a company, or control of or by, or common control under Guggenheim Investments (“GI”), result in that company being considered an affiliated issuer, as defined in the 1940 Act.
The Fund may invest in certain of the underlying series of Guggenheim Strategy Funds Trust, including Guggenheim Strategy Fund II, Guggenheim Strategy Fund III, and Guggenheim Variable Insurance Strategy Fund III, (collectively, the “Short Term Investment Vehicles”), each of which are open-end management investment companies managed by GI. The Short Term Investment Vehicles, which launched on March 11, 2014, are offered as short term investment options only to mutual funds, trusts, and other accounts managed by GI and/or its affiliates, and are not available to the public. The Short Term Investment Vehicles pay no investment management fees. The Short Term Investment Vehicles’ annual report on Form N-CSR dated September 30, 2019, is available publicly or upon request. This information is available from the EDGAR database on the SEC’s website at https://www.sec.gov/Archives/edgar/data/1601445/000089180419000405/gug78512-ncsr.htm.
Transactions during the year ended December 31, 2019, in which the company is an affiliated issuer, were as follows:
Security Name | Value | Additions | Reductions | Realized | Change in | Value | Shares | Investment | ||||||||||||||||||||||||
Mutual Funds | ||||||||||||||||||||||||||||||||
Guggenheim Strategy Fund II | $ | 960,582 | $ | 503,187 | $ | — | $ | — | $ | (4,426 | ) | $ | 1,459,343 | 58,987 | $ | 40,256 | ||||||||||||||||
Guggenheim Strategy Fund III | 8,846,136 | 260,420 | — | — | (25,700 | ) | 9,080,856 | 367,349 | 261,181 | |||||||||||||||||||||||
Guggenheim Ultra Short Duration Fund — Institutional Class | 641,809 | 6,363,765 | (3,027,981 | ) | (1,225 | ) | (650 | ) | 3,975,718 | 399,570 | 94,010 | |||||||||||||||||||||
Guggenheim Variable Insurance Strategy Fund III | 9,959,384 | 259,467 | — | — | 3,987 | 10,222,838 | 412,877 | 259,155 | ||||||||||||||||||||||||
$ | 20,407,911 | $ | 7,386,839 | $ | (3,027,981 | ) | $ | (1,225 | ) | $ | (26,789 | ) | $ | 24,738,755 | $ | 654,602 |
138 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SERIES X (STYLEPLUS—SMALL GROWTH SERIES) |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2019 |
Assets: | ||||
Investments in unaffiliated issuers, at value (cost $7,973,361) | $ | 8,287,405 | ||
Investments in affiliated issuers, at value (cost $24,916,413) | 24,738,755 | |||
Cash | 710 | |||
Segregated cash with broker | 19,200 | |||
Unrealized appreciation on OTC swap agreements | 3,254,727 | |||
Prepaid expenses | 3,302 | |||
Receivables: | ||||
Dividends | 46,929 | |||
Interest | 2,150 | |||
Investment Adviser | 15 | |||
Total assets | 36,353,193 | |||
Liabilities: | ||||
Segregated cash due to broker | 3,139,009 | |||
Payable for: | ||||
Swap settlement | 59,127 | |||
Securities purchased | 43,813 | |||
Distribution and service fees | 6,738 | |||
Management fees | 4,540 | |||
Trustees’ fees* | 3,548 | |||
Transfer agent/maintenance fees | 2,237 | |||
Fund accounting/administration fees | 2,156 | |||
Fund shares redeemed | 1,776 | |||
Variation margin on futures contracts | 290 | |||
Miscellaneous | 54,137 | |||
Total liabilities | 3,317,371 | |||
Commitments and contingent liabilities (Note 14) | — | |||
Net assets | $ | 33,035,822 | ||
Net assets consist of: | ||||
Paid in capital | $ | 31,868,606 | ||
Total distributable earnings (loss) | 1,167,216 | |||
Net assets | $ | 33,035,822 | ||
Capital shares outstanding | 956,865 | |||
Net asset value per share | $ | 34.53 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2019 |
Investment Income: | ||||
Dividends from securities of unaffiliated issuers (net of foreign withholding tax of $10) | $ | 72,320 | ||
Dividends from securities of affiliated issuers | 654,602 | |||
Interest | 24,618 | |||
Total investment income | 751,540 | |||
Expenses: | ||||
Management fees | 239,680 | |||
Distribution and service fees | 79,894 | |||
Transfer agent/maintenance fees | 25,126 | |||
Professional fees | 39,285 | |||
Interest expense | 26,774 | |||
Fund accounting/administration fees | 25,566 | |||
Custodian fees | 24,826 | |||
Trustees’ fees* | 19,928 | |||
Miscellaneous | 35,657 | |||
Total expenses | 516,736 | |||
Less: | ||||
Expenses reimbursed by Adviser | (6,624 | ) | ||
Expenses waived by Adviser | (153,877 | ) | ||
Earnings credits applied | (909 | ) | ||
Total waived/reimbursed expenses | (161,410 | ) | ||
Net expenses | 355,326 | |||
Net investment income | 396,214 | |||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments in unaffiliated issuers | (126,027 | ) | ||
Investments in affiliated issuers | (1,225 | ) | ||
Swap agreements | (2,716,836 | ) | ||
Futures contracts | 243,431 | |||
Net realized loss | (2,600,657 | ) | ||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments in unaffiliated issuers | 1,286,770 | |||
Investments in affiliated issuers | (26,789 | ) | ||
Swap agreements | 8,129,962 | |||
Futures contracts | (16,117 | ) | ||
Net change in unrealized appreciation (depreciation) | 9,373,826 | |||
Net realized and unrealized gain | 6,773,169 | |||
Net increase in net assets resulting from operations | $ | 7,169,383 |
* | 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 | 139 |
SERIES X (STYLEPLUS—SMALL GROWTH SERIES) |
STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | ||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income | $ | 396,214 | $ | 530,275 | ||||
Net realized gain (loss) on investments | (2,600,657 | ) | 4,401,130 | |||||
Net change in unrealized appreciation (depreciation) on investments | 9,373,826 | (7,633,406 | ) | |||||
Net increase (decrease) in net assets resulting from operations | 7,169,383 | (2,702,001 | ) | |||||
Distributions to shareholders | (3,561,318 | ) | (5,483,772 | ) | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 1,854,292 | 1,853,913 | ||||||
Distributions reinvested | 3,561,318 | 5,483,772 | ||||||
Cost of shares redeemed | (4,632,150 | ) | (10,067,145 | ) | ||||
Net increase (decrease) from capital share transactions | 783,460 | (2,729,460 | ) | |||||
Net increase (decrease) in net assets | 4,391,525 | (10,915,233 | ) | |||||
Net assets: | ||||||||
Beginning of year | 28,644,297 | 39,559,530 | ||||||
End of year | $ | 33,035,822 | $ | 28,644,297 | ||||
Capital share activity: | ||||||||
Shares sold | 55,734 | 46,425 | ||||||
Shares issued from reinvestment of distributions | 109,109 | 140,429 | ||||||
Shares redeemed | (135,747 | ) | (243,287 | ) | ||||
Net increase (decrease) in shares | 29,096 | (56,433 | ) |
140 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SERIES X (STYLEPLUS—SMALL GROWTH SERIES) |
FINANCIAL HIGHLIGHTS |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 30.87 | $ | 40.19 | $ | 33.08 | $ | 31.03 | $ | 31.77 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | .42 | .56 | .36 | .25 | .10 | |||||||||||||||
Net gain (loss) on investments (realized and unrealized) | 7.28 | (3.33 | ) | 7.02 | 3.74 | (.47 | ) | |||||||||||||
Total from investment operations | 7.70 | (2.77 | ) | 7.38 | 3.99 | (.37 | ) | |||||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | (.22 | ) | (.43 | ) | (.27 | ) | (.13 | ) | (.27 | ) | ||||||||||
Net realized gains | (3.82 | ) | (6.12 | ) | — | (1.81 | ) | (.10 | ) | |||||||||||
Total distributions | (4.04 | ) | (6.55 | ) | (.27 | ) | (1.94 | ) | (.37 | ) | ||||||||||
Net asset value, end of period | $ | 34.53 | $ | 30.87 | $ | 40.19 | $ | 33.08 | $ | 31.03 | ||||||||||
| ||||||||||||||||||||
Total Returnb | 25.68 | % | (10.30 | %) | 22.38 | % | 13.45 | % | (1.29 | %) | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 33,036 | $ | 28,644 | $ | 39,560 | $ | 34,216 | $ | 38,601 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | 1.24 | % | 1.42 | % | 0.99 | % | 0.83 | % | 0.32 | % | ||||||||||
Total expensesc | 1.62 | % | 1.47 | % | 1.37 | % | 1.23 | % | 1.21 | % | ||||||||||
Net expensesd,e,f | 1.11 | % | 1.12 | % | 1.10 | % | 1.23 | % | 1.21 | % | ||||||||||
Portfolio turnover rate | 59 | % | 65 | % | 50 | % | 76 | % | 79 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not take into account any of the expenses associated with an investment in variable insurance products. If total return had taken into account these expenses, performance would have been lower. Shares of a series of Guggenheim Variable Funds Trust are available only through the purchase of such products. |
c | Does not include expenses of the underlying funds in which the Fund invests. |
d | Net expense information reflects the expense ratios after expense waivers and reimbursements, as applicable. |
e | Net expenses may include expenses that are excluded from the expense limitation agreement. Excluding these expenses, the net expense ratios for the years would be: |
12/31/19 | 12/31/18 | 12/31/17 | 12/31/16 | 12/31/15 | |
1.03% | 1.06% | 1.09% | 1.23% | 1.21% |
f | The portion of the ratios of net expenses to average net assets attributable to recoupment of prior fee reductions or expenses reimbursements for the years presented was as follows: |
12/31/19 | 12/31/18 | 12/31/17 | 12/31/16 | |
— | 0.00%* | — | — |
* | Less than 0.01% |
SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 141 |
MANAGERS’ COMMENTARY (Unaudited) | December 31, 2019 |
To Our Shareholders:
The Series Y (StylePlusTM—Large Growth Series) (the “Fund”) is managed by a team of seasoned professionals, including Farhan Sharaff, Senior Managing Director and Assistant Chief Investment Officer, Equities; Jayson Flowers, Senior Managing Director and Portfolio Manager; Qi Yan, Managing Director and Portfolio Manager; and Adam J. Bloch, Managing Director and Portfolio Manager. In the following paragraphs, the investment team discusses performance for the fiscal year ended December 31, 2019.
For the year ended December 31, 2019, Series Y (StylePlus—Large Growth Series) returned 33.92%, compared with the 36.39% return of its benchmark, the Russell 1000 Growth Index.
Investment Approach
Through a combination of actively managed individual equity, passive equity, and actively managed fixed income, the Fund seeks to exceed the total return of the Russell 1000 Growth Index. The actively managed equity and fixed income components seek to provide multiple sources of outperformance and take advantage of Guggenheim’s competencies in both fixed income and systematic stock selection.
The active and passive decisions seek to add value by tactically allocating to actively managed equity through quantitative selection models when stock picking opportunities are high. During periods when Guggenheim views these opportunities to be less attractive, the Fund seeks to increase its passive exposure to equities and the allocation to fixed income securities. The prospective return during such periods is the equity index plus an “alpha” component coming from the yield of the fixed income overlay.
Performance Review
Over the period, from 15-25% of the total equity position was allocated to actively managed equity and 75-85% to passive equity. Remaining Fund assets were invested in the Guggenheim Strategy Funds, short-term fixed income investment companies advised by Guggenheim Investments, and the Guggenheim Ultra Short Duration Fund, whose objective is to seek a high level of income consistent with the preservation of capital.
The Fund underperformed the Russell 1000 Growth Index for the year ended December 31, 2019 by 247 basis points net of fees. The actively managed equity sleeve detracted from performance on a relative basis. The passive equity position, maintained through swap agreements and futures contracts, contributed to performance for the period.
The fixed income sleeve comprised investments in certain of the underlying series of Guggenheim Funds Trust and Guggenheim Strategy Funds Trust, specifically Guggenheim Ultra Short Duration, Guggenheim Strategy Fund II, Guggenheim Strategy Fund III, and Guggenheim Variable Insurance Strategy Fund III, (collectively, the “Short Term Investment Vehicles”), each of which are open-end management investment companies managed by Guggenheim Investments. The Short Term Investment Vehicles, which launched on March 11, 2014, are offered as short term investment options only to mutual funds, trusts, and other accounts managed by Guggenheim Investments and/or its affiliates, and are not available to the public, with the exception of Guggenheim Ultra Short Duration Fund, which is available to the public. Guggenheim Strategy Fund II, Guggenheim Strategy Fund III, and Guggenheim Variable Insurance Strategy Fund III do not charge an investment management fee. Guggenheim Ultra Short Duration Fund charges an investment management fee but that fee is waived by the respective investee fund. For the one-year period ended December 31, 2019, investment in the Short Term Investment Vehicles benefited Fund performance.
Performance displayed represents past performance which is no guarantee of future results.
The opinions and forecast expressed may not actually come to pass. This information is subject to change at any time, based on market and other conditions, and should not be construed as a recommendation of any specific security or strategy.
142 | THE GUGGENHEIM FUNDS ANNUAL REPORT |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2019 |
SERIES Y (STYLEPLUS—LARGE GROWTH SERIES)
OBJECTIVE: Seeks long-term growth of capital.
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments, investments in Guggenheim Strategy Funds Trust mutual funds, or investments in Guggenheim Ultra Short Duration Fund.
Inception Date: May 3, 1999 |
Ten Largest Holdings (% of Total Net Assets) | |
Guggenheim Variable Insurance Strategy Fund III | 28.5% |
Guggenheim Strategy Fund III | 25.3% |
Guggenheim Ultra Short Duration Fund — Institutional Class | 11.9% |
Guggenheim Strategy Fund II | 8.6% |
Microsoft Corp. | 1.6% |
Alphabet, Inc. — Class C | 1.3% |
Amazon.com, Inc. | 1.1% |
Facebook, Inc. — Class A | 0.8% |
Verizon Communications, Inc. | 0.6% |
Merck & Company, Inc. | 0.5% |
Top Ten Total | 80.2% |
“Ten Largest Holdings” excludes any temporary cash or derivative investments. |
THE GUGGENHEIM FUNDS ANNUAL REPORT | 143 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2019 |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2019
| 1 Year | 5 Year | 10 Year |
Series Y (StylePlus—Large Growth Series) | 33.92% | 14.00% | 13.40% |
Russell 1000 Growth Index | 36.39% | 14.63% | 15.22% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The Russell 1000 Growth Index is an unmanaged index and, unlike the Fund, has no management fees or operating expenses to reduce its reported return. |
† | Performance figures do not reflect fees and expenses associated with an investment in variable insurance products. If returns had taken into account these fees and expenses, performance would have been lower. Shares of a series of Guggenheim Variable Funds Trust are available only through the purchase of such products. |
144 | THE GUGGENHEIM FUNDS ANNUAL REPORT |
SCHEDULE OF INVESTMENTS | December 31, 2019 |
SERIES Y (STYLEPLUS—LARGE GROWTH SERIES) |
| Shares | Value | ||||||
COMMON STOCKS† - 20.6% | ||||||||
Consumer, Non-cyclical - 6.1% | ||||||||
Merck & Company, Inc. | 2,316 | $ | 210,640 | |||||
Pfizer, Inc. | 5,208 | 204,049 | ||||||
Johnson & Johnson | 1,270 | 185,255 | ||||||
Medtronic plc | 1,562 | 177,209 | ||||||
Eli Lilly & Co. | 1,116 | 146,676 | ||||||
Amgen, Inc. | 545 | 131,383 | ||||||
Humana, Inc. | 312 | 114,354 | ||||||
HCA Healthcare, Inc. | 728 | 107,606 | ||||||
Kimberly-Clark Corp. | 734 | 100,962 | ||||||
Baxter International, Inc. | 1,151 | 96,247 | ||||||
Abbott Laboratories | 1,096 | 95,199 | ||||||
Regeneron Pharmaceuticals, Inc.* | 225 | 84,483 | ||||||
Philip Morris International, Inc. | 976 | 83,048 | ||||||
Alexion Pharmaceuticals, Inc.* | 763 | 82,519 | ||||||
H&R Block, Inc. | 3,379 | 79,339 | ||||||
Kellogg Co. | 1,032 | 71,373 | ||||||
McKesson Corp. | 478 | 66,117 | ||||||
Incyte Corp.* | 745 | 65,053 | ||||||
Universal Health Services, Inc. — Class B | 378 | 54,228 | ||||||
Biogen, Inc.* | 166 | 49,257 | ||||||
Zimmer Biomet Holdings, Inc. | 236 | 35,324 | ||||||
United Rentals, Inc.* | 208 | 34,688 | ||||||
AbbVie, Inc. | 363 | 32,140 | ||||||
Bristol-Myers Squibb Co. | 434 | 27,859 | ||||||
Thermo Fisher Scientific, Inc. | 82 | 26,639 | ||||||
Procter & Gamble Co. | 205 | 25,604 | ||||||
Global Payments, Inc. | 139 | 25,376 | ||||||
CVS Health Corp. | 339 | 25,184 | ||||||
Total Consumer, Non-cyclical | 2,437,811 | |||||||
Communications - 5.0% | ||||||||
Alphabet, Inc. — Class C* | 396 | 529,460 | ||||||
Amazon.com, Inc.* | 242 | 447,178 | ||||||
Facebook, Inc. — Class A* | 1,501 | 308,080 | ||||||
Verizon Communications, Inc. | 3,920 | 240,688 | ||||||
Cisco Systems, Inc. | 3,385 | 162,345 | ||||||
Booking Holdings, Inc.* | 51 | 104,740 | ||||||
eBay, Inc. | 2,070 | 74,748 | ||||||
Comcast Corp. — Class A | 1,389 | 62,463 | ||||||
Fox Corp. — Class A | 763 | 28,284 | ||||||
Expedia Group, Inc. | 259 | 28,008 | ||||||
Walt Disney Co. | 168 | 24,298 | ||||||
Total Communications | 2,010,292 | |||||||
Technology - 3.6% | ||||||||
Microsoft Corp. | 4,088 | 644,677 | ||||||
Intel Corp. | 3,251 | 194,573 | ||||||
Oracle Corp. | 2,014 | 106,702 | ||||||
Cerner Corp. | 1,421 | 104,287 | ||||||
Seagate Technology plc | 1,438 | 85,561 | ||||||
NetApp, Inc. | 1,023 | 63,682 | ||||||
Skyworks Solutions, Inc. | 408 | 49,319 | ||||||
Fidelity National Information Services, Inc. | 334 | 46,456 | ||||||
Electronic Arts, Inc.* | 359 | 38,596 | ||||||
Fiserv, Inc.* | 263 | 30,411 | ||||||
QUALCOMM, Inc. | 336 | 29,645 | ||||||
Adobe, Inc.* | 83 | 27,374 | ||||||
salesforce.com, Inc.* | 151 | 24,559 | ||||||
Total Technology | 1,445,842 | |||||||
Industrial - 2.4% | ||||||||
Union Pacific Corp. | 784 | 141,739 | ||||||
3M Co. | 595 | 104,970 | ||||||
CSX Corp. | 1,418 | 102,607 | ||||||
Norfolk Southern Corp. | 457 | 88,717 | ||||||
FedEx Corp. | 500 | 75,605 | ||||||
J.B. Hunt Transport Services, Inc. | 599 | 69,951 | ||||||
United Parcel Service, Inc. — Class B | 582 | 68,129 | ||||||
Kansas City Southern | 423 | 64,787 | ||||||
Expeditors International of Washington, Inc. | 829 | 64,679 | ||||||
Garmin Ltd. | 651 | 63,512 | ||||||
Waters Corp.* | 171 | 39,954 | ||||||
Boeing Co. | 100 | 32,576 | ||||||
United Technologies Corp. | 181 | 27,106 | ||||||
Masco Corp. | 537 | 25,770 | ||||||
Total Industrial | 970,102 | |||||||
Consumer, Cyclical - 1.4% | ||||||||
Aptiv plc | 992 | 94,210 | ||||||
AutoZone, Inc.* | 72 | 85,774 | ||||||
Hanesbrands, Inc. | 4,569 | 67,850 | ||||||
Starbucks Corp. | 717 | 63,039 | ||||||
Las Vegas Sands Corp. | 909 | 62,757 | ||||||
Home Depot, Inc. | 269 | 58,744 | ||||||
NIKE, Inc. — Class B | 373 | 37,788 | ||||||
Tapestry, Inc. | 1,071 | 28,885 | ||||||
Hasbro, Inc. | 259 | 27,353 | ||||||
McDonald’s Corp. | 127 | 25,097 | ||||||
Total Consumer, Cyclical | 551,497 | |||||||
Energy - 1.2% | ||||||||
ConocoPhillips | 2,135 | 138,839 | ||||||
Devon Energy Corp. | 4,029 | 104,633 | ||||||
Marathon Oil Corp. | 6,218 | 84,440 | ||||||
Exxon Mobil Corp. | 1,055 | 73,618 | ||||||
HollyFrontier Corp. | 857 | 43,459 | ||||||
Cabot Oil & Gas Corp. — Class A | 1,706 | 29,702 | ||||||
Cimarex Energy Co. | 547 | 28,712 | ||||||
Total Energy | 503,403 | |||||||
Financial - 0.8% | ||||||||
Visa, Inc. — Class A | 683 | 128,336 | ||||||
Berkshire Hathaway, Inc. — Class B* | 378 | 85,617 | ||||||
Mastercard, Inc. — Class A | 244 | 72,856 | ||||||
U.S. Bancorp | 422 | 25,020 | ||||||
Total Financial | 311,829 | |||||||
SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 145 |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2019 |
SERIES Y (STYLEPLUS—LARGE GROWTH SERIES) |
| Shares | Value | ||||||
Basic Materials - 0.1% | ||||||||
Ecolab, Inc. | 128 | $ | 24,703 | |||||
Total Common Stocks | ||||||||
(Cost $7,180,922) | 8,255,479 | |||||||
MUTUAL FUNDS† - 74.3% | ||||||||
Guggenheim Variable Insurance Strategy Fund III1 | 461,924 | 11,437,229 | ||||||
Guggenheim Strategy Fund III1 | 411,723 | 10,177,783 | ||||||
Guggenheim Ultra Short Duration Fund — Institutional Class1 | 481,258 | 4,788,517 | ||||||
Guggenheim Strategy Fund II1 | 140,044 | 3,464,697 | ||||||
Total Mutual Funds | ||||||||
(Cost $30,097,857) | 29,868,226 | |||||||
MONEY MARKET FUND† - 5.2% | ||||||||
Dreyfus Treasury Securities Cash Management Fund — Institutional Shares 1.44%2 | 2,094,317 | 2,094,317 | ||||||
Total Money Market Fund | ||||||||
(Cost $2,094,317) | 2,094,317 | |||||||
Total Investments - 100.1% | ||||||||
(Cost $39,373,096) | $ | 40,218,022 | ||||||
Other Assets & Liabilities, net - (0.1)% | (30,970 | ) | ||||||
Total Net Assets - 100.0% | $ | 40,187,052 |
Futures Contracts | ||||||||||||||||
Description | Number of | Expiration | Notional | Value and | ||||||||||||
Equity Futures Contracts Purchased† | ||||||||||||||||
NASDAQ-100 Index Mini Futures Contracts | 2 | Mar 2020 | $ | 349,910 | $ | 5,691 | ||||||||||
S&P 500 Index Mini Futures Contracts | 3 | Mar 2020 | 484,425 | 4,745 | ||||||||||||
$ | 834,335 | $ | 10,436 |
Total Return Swap Agreements | |||||||||||||||||||
Counterparty | Index | Financing | Payment | Maturity | Units | Notional | Value and | ||||||||||||
OTC Equity Index Swap Agreements†† | |||||||||||||||||||
Wells Fargo Bank, N.A. | Russell 1000 Growth Index | 2.24% (3 Month USD LIBOR + 0.18%) | At Maturity | 01/02/20 | 17,739 | $ | 31,407,254 | $ | 3,706,795 |
* | Non-income producing security. |
** | Includes cumulative appreciation (depreciation). Variation margin is reported within the Statement of Assets and Liabilities. |
† | Value determined based on Level 1 inputs — See Note 4. |
†† | Value determined based on Level 2 inputs — See Note 4. |
1 | Affiliated issuer. |
2 | Rate indicated is the 7-day yield as of December 31, 2019. |
plc — Public Limited Company | |
See Sector Classification in Other Information section. |
146 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2019 |
SERIES Y (STYLEPLUS—LARGE GROWTH SERIES) |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2019 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stocks | $ | 8,255,479 | $ | — | $ | — | $ | 8,255,479 | ||||||||
Mutual Funds | 29,868,226 | — | — | 29,868,226 | ||||||||||||
Money Market Fund | 2,094,317 | — | — | 2,094,317 | ||||||||||||
Equity Futures Contracts** | 10,436 | — | — | 10,436 | ||||||||||||
Equity Index Swap Agreements** | — | 3,706,795 | — | 3,706,795 | ||||||||||||
Total Assets | $ | 40,228,458 | $ | 3,706,795 | $ | — | $ | 43,935,253 |
** | This derivative is reported as unrealized appreciation/depreciation at period end. |
Affiliated Transactions
Investments representing 5% or more of the outstanding voting shares of a company, or control of or by, or common control under Guggenheim Investments (“GI”), result in that company being considered an affiliated issuer, as defined in the 1940 Act.
The Fund may invest in certain of the underlying series of Guggenheim Strategy Funds Trust, including Guggenheim Strategy Fund II, Guggenheim Strategy Fund III, and Guggenheim Variable Insurance Strategy Fund III, (collectively, the “Short Term Investment Vehicles”), each of which are open-end management investment companies managed by GI. The Short Term Investment Vehicles, which launched on March 11, 2014, are offered as short term investment options only to mutual funds, trusts, and other accounts managed by GI and/or its affiliates, and are not available to the public. The Short Term Investment Vehicles pay no investment management fees. The Short Term Investment Vehicles’ annual report on Form N-CSR dated September 30, 2019, is available publicly or upon request. This information is available from the EDGAR database on the SEC’s website at https://www.sec.gov/Archives/edgar/data/1601445/000089180419000405/gug78512-ncsr.htm.
Transactions during the year ended December 31, 2019, in which the company is an affiliated issuer, were as follows:
Security Name | Value | Additions | Reductions | Realized | Change in | Value | Shares | Investment | ||||||||||||||||||||||||
Mutual Funds | ||||||||||||||||||||||||||||||||
Guggenheim Strategy Fund II | $ | 1,525,973 | $ | 1,949,532 | $ | — | $ | — | $ | (10,808 | ) | $ | 3,464,697 | $ | 140,044 | $ | 84,558 | |||||||||||||||
Guggenheim Strategy Fund III | 9,077,761 | 1,129,166 | — | — | (29,144 | ) | 10,177,783 | 411,723 | 279,984 | |||||||||||||||||||||||
Guggenheim Ultra Short Duration Fund — Institutional Class | 1,021,666 | 6,885,557 | (3,114,993 | ) | (2,980 | ) | (733 | ) | 4,788,517 | 481,258 | 101,308 | |||||||||||||||||||||
Guggenheim Variable Insurance Strategy Fund III | 11,142,480 | 290,287 | — | — | 4,462 | 11,437,229 | 461,924 | 289,795 | ||||||||||||||||||||||||
$ | 22,767,880 | $ | 10,254,542 | $ | (3,114,993 | ) | $ | (2,980 | ) | $ | (36,223 | ) | $ | 29,868,226 | $ | 755,645 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 147 |
SERIES Y (STYLEPLUS—LARGE GROWTH SERIES) |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2019 |
Assets: | ||||
Investments in unaffiliated issuers, at value (cost $9,275,239) | $ | 10,349,796 | ||
Investments in affiliated issuers, at value (cost $30,097,857) | 29,868,226 | |||
Cash | 4,110 | |||
Segregated cash with broker | 33,300 | |||
Unrealized appreciation on OTC swap agreements | 3,706,795 | |||
Prepaid expenses | 3,374 | |||
Receivables: | ||||
Dividends | 59,462 | |||
Fund shares sold | 23,410 | |||
Interest | 2,214 | |||
Total assets | 44,050,687 | |||
Liabilities: | ||||
Segregated cash due to broker | 3,660,000 | |||
Payable for: | ||||
Swap settlement | 54,289 | |||
Securities purchased | 53,144 | |||
Fund shares redeemed | 14,994 | |||
Distribution and service fees | 8,120 | |||
Management fees | 5,469 | |||
Trustees’ fees* | 3,031 | |||
Variation margin on futures contracts | 2,635 | |||
Fund accounting/administration fees | 2,599 | |||
Transfer agent/maintenance fees | 2,360 | |||
Miscellaneous | 56,994 | |||
Total liabilities | 3,863,635 | |||
Commitments and contingent liabilities (Note 14) | — | |||
Net assets | $ | 40,187,052 | ||
Net assets consist of: | ||||
Paid in capital | $ | 33,190,535 | ||
Total distributable earnings (loss) | 6,996,517 | |||
Net assets | $ | 40,187,052 | ||
Capital shares outstanding | 2,027,090 | |||
Net asset value per share | $ | 19.82 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2019 |
Investment Income: | ||||
Dividends from securities of unaffiliated issuers | $ | 129,112 | ||
Dividends from securities of affiliated issuers | 755,645 | |||
Interest | 30,586 | |||
Total investment income | 915,343 | |||
Expenses: | ||||
Management fees | 240,232 | |||
Distribution and service fees | 92,397 | |||
Transfer agent/maintenance fees | 25,239 | |||
Professional fees | 40,399 | |||
Fund accounting/administration fees | 29,567 | |||
Interest expense | 23,381 | |||
Custodian fees | 20,767 | |||
Trustees’ fees* | 19,293 | |||
Miscellaneous | 39,126 | |||
Total expenses | 530,401 | |||
Less: | ||||
Expenses reimbursed by Adviser | (5,669 | ) | ||
Expenses waived by Adviser | (168,005 | ) | ||
Earnings credits applied | (571 | ) | ||
Total waived/reimbursed expenses | (174,245 | ) | ||
Net expenses | 356,156 | |||
Net investment income | 559,187 | |||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments in unaffiliated issuers | 420,625 | |||
Investments in affiliated issuers | (2,980 | ) | ||
Swap agreements | 1,630,842 | |||
Futures contracts | 304,595 | |||
Net realized gain | 2,353,082 | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments in unaffiliated issuers | 1,408,124 | |||
Investments in affiliated issuers | (36,223 | ) | ||
Swap agreements | 6,277,132 | |||
Futures contracts | 11,842 | |||
Net change in unrealized appreciation (depreciation) | 7,660,875 | |||
Net realized and unrealized gain | 10,013,957 | |||
Net increase in net assets resulting from operations | $ | 10,573,144 |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
148 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SERIES Y (STYLEPLUS—LARGE GROWTH SERIES) |
STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | ||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income | $ | 559,187 | $ | 725,580 | ||||
Net realized gain on investments | 2,353,082 | 6,273,548 | ||||||
Net change in unrealized appreciation (depreciation) on investments | 7,660,875 | (6,932,089 | ) | |||||
Net increase in net assets resulting from operations | 10,573,144 | 67,039 | ||||||
Distributions to shareholders | (3,884,327 | ) | (6,149,452 | ) | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 3,347,793 | 4,400,491 | ||||||
Distributions reinvested | 3,884,327 | 6,149,452 | ||||||
Cost of shares redeemed | (5,470,930 | ) | (20,903,247 | ) | ||||
Net increase (decrease) from capital share transactions | 1,761,190 | (10,353,304 | ) | |||||
Net increase (decrease) in net assets | 8,450,007 | (16,435,717 | ) | |||||
Net assets: | ||||||||
Beginning of year | 31,737,045 | 48,172,762 | ||||||
End of year | $ | 40,187,052 | $ | 31,737,045 | ||||
Capital share activity: | ||||||||
Shares sold | 179,743 | 220,024 | ||||||
Shares issued from reinvestment of distributions | 212,374 | 325,368 | ||||||
Shares redeemed | (292,350 | ) | (991,652 | ) | ||||
Net increase (decrease) in shares | 99,767 | (446,260 | ) |
SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 149 |
SERIES Y (STYLEPLUS—LARGE GROWTH SERIES) |
FINANCIAL HIGHLIGHTS |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 16.47 | $ | 20.30 | $ | 15.75 | $ | 15.11 | $ | 15.58 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | .28 | .34 | .25 | .17 | .08 | |||||||||||||||
Net gain (loss) on investments (realized and unrealized) | 5.13 | (.63 | ) | 4.48 | 1.13 | .79 | ||||||||||||||
Total from investment operations | 5.41 | (.29 | ) | 4.73 | 1.30 | .87 | ||||||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | (.38 | ) | (.34 | ) | (.18 | ) | (.08 | ) | (.17 | ) | ||||||||||
Net realized gains | (1.68 | ) | (3.20 | ) | — | (.58 | ) | (1.17 | ) | |||||||||||
Total distributions | (2.06 | ) | (3.54 | ) | (.18 | ) | (.66 | ) | (1.34 | ) | ||||||||||
Net asset value, end of period | $ | 19.82 | $ | 16.47 | $ | 20.30 | $ | 15.75 | $ | 15.11 | ||||||||||
| ||||||||||||||||||||
Total Returnb | 33.92 | % | (3.68 | %) | 30.11 | % | 8.72 | % | 5.49 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 40,187 | $ | 31,737 | $ | 48,173 | $ | 38,565 | $ | 40,178 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | 1.51 | % | 1.70 | % | 1.36 | % | 1.14 | % | 0.52 | % | ||||||||||
Total expensesc | 1.44 | % | 1.38 | % | 1.20 | % | 1.04 | % | 1.15 | % | ||||||||||
Net expensesd,e,f | 0.97 | % | 1.02 | % | 0.97 | % | 1.04 | % | 1.15 | % | ||||||||||
Portfolio turnover rate | 47 | % | 59 | % | 43 | % | 42 | % | 65 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not take into account any of the expenses associated with an investment in variable insurance products. If total return had taken into account these expenses, performance would have been lower. Shares of a series of Guggenheim Variable Funds Trust are available only through the purchase of such products. |
c | Does not include expenses of the underlying funds in which the Fund invests. |
d | Net expense information reflects the expense ratios after expense waivers and reimbursements, as applicable. |
e | Net expenses may include expenses that are excluded from the expense limitation agreement. Excluding these expenses, the net expense ratios for the periods would be: |
12/31/19 | 12/31/18 | 12/31/17 | 12/31/16 | 12/31/15 | |
0.90% | 0.93% | 0.97% | 1.04% | 1.15% |
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 periods presented was as follows: |
12/31/19 | 12/31/18 | 12/31/17 | 12/31/16 | |
— | 0.00%* | — | — |
* | Less than 0.01% |
150 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
MANAGERS’ COMMENTARY (Unaudited) | December 31, 2019 |
To Our Shareholders:
The Series Z (Alpha Opportunity Series) (the “Fund”) is managed by a team of seasoned professionals, including Farhan Sharaff, Senior Managing Director and Assistant Chief Investment Officer, Equities, and Portfolio Manager; Jayson Flowers, Senior Managing Director and Portfolio Manager; Samir Sanghani, CFA, Managing Director and Portfolio Manager; and Burak Hurmeydan, Ph.D., Director and Portfolio Manager. In the paragraphs below, the investment team discusses the performance of the Fund for the 12-month period ended December 31, 2019.
For the year ended December 31, 2019, Series Z (Alpha Opportunity Series) returned -2.45%, compared with the 2.28% return of its benchmark, the ICE BofA Merrill Lynch 3-Month U.S. Treasury Bill Index. The Fund’s secondary benchmark is the Morningstar Long/Short Equity Category Average. Its return for the 12 months was 9.79%.
Investment Approach
The Fund is managed as an opportunistic long/short strategy, which employs forward-looking, fundamental analysis to measure the market’s expected return for each stock in the universe. Quantitative techniques are then applied to evaluate market- and company-specific risk factors embedded in each stock and to assess which specific risk factors (such as size, growth, or sectors) are being overvalued or undervalued by the market. Finally, a portfolio is constructed within guidelines that is long the stocks that give the portfolio both the broad risk characteristics and company-specific risks that are perceived to be undervalued and is short stocks for which those characteristics are perceived to be overpriced.
The Fund will ordinarily hold simultaneous long and short positions in equity securities or securities markets that provide exposure up to a level equal to 150% of the Fund’s net assets for both the long and short positions. The Fund intends to maintain a low overall net exposure (the difference between the notional value of long positions and the notional value of short positions), typically varying between 50% net long and 30% net short in order to maintain low correlation to traditional equity markets and lower-than-market volatility, and seek to provide consistent absolute return. The overall net exposure will change as market opportunities change, and may, based on the Fund’s view of current market conditions, be outside this range.
Derivatives in the Fund are used to take short positions as well as long exposure above 100% of NAV (that is, to take leverage).
Performance Review
The year began by rebounding strongly from 2018’s end-of-year plunging markets. The economy had begun to slow, and the trade war continued to escalate, leading the U.S. Federal Reserve (the “Fed”) to change its tone from hawkish to dovish. The Fed course reversal became a large driver of the risk market, as the fears of steady rate rises causing a recession quickly dissipated. Equity markets took a short-term hit in May when trade threats against China and Mexico escalated. But like most other dips over the last few years, it was short and quickly reversed, as the administration lowered its trade rhetoric.
As global growth expectations decreased while the risk of trade wars and disorderly Brexit increased, investors continued moving towards safer assets, such as long-term U.S. Treasurys and high-quality stocks. In August, the yield curve between the 2-year and 10-year U.S. Treasury rates briefly inverted, a historical indicator that has presaged past recessions. The markets took the clues and began punishing a whole host of more cyclical industries, while groups with any sort of organic growth (whether profitable or not) became market favorites. The Fed fully abandoned last year’s hawkish stance and cut short term rates three times during the period while calling it a “midcycle adjustment to policy.”
By the end of year, two political risk events suddenly cleared up. A Phase one trade deal was signed with China, which for the time being resolved further escalations. And a new election in the UK seems to have resolved the muddy Brexit approach by consolidating power for their new Prime Minister. Both helped to resolve major market uncertainty—and along with the several rate cuts—further contributed to steady U.S. stock market moves higher to end the year with a remarkable gain over 30%.
At period end, the Fund held about 124% of assets in long securities, and 94% short, for a net-dollar exposure of 30%. The net exposure averaged 27% during the year (ranging between 22% and 35%) While the positive net market exposure resulted in contribution to returns simply from the market exposure, the Fund is less exposed to the broad market returns than most long/short equity managers. Indeed, much of the Fund’s returns for the period are mostly explained by sector and style positioning.
THE GUGGENHEIM FUNDS ANNUAL REPORT | 151 |
MANAGERS’ COMMENTARY (Unaudited)(concluded) | December 31, 2019 |
The realized net beta (sensitivity of daily Fund returns to the S&P 500 index) averaged around 0.32 during the year. The long positions (on a standalone unlevered basis) averaged a return of 22.2%, compared to the Russell 3000 index return of 30.9%. Short positions returned 30.4% on a stand-alone basis. The Fund’s negative return for the year stems mostly from poor alpha the long side, while shorts ended up with market-like total returns, serving no better than a simple market hedge this year.
The Fund’s sector positioning had basically no net impact on the Fund for the full year, contributing -0.1% to attribution. Net long positions in Consumer Staples and Utilities paid off on a beta-adjusted basis, but much of that was offset by a short position in REITs and Financials, both of which did well during the year. The Fund’s fundamental style tilts were the primary negative contributor to the period’s returns, resulting in about -6.6% of the contribution. The Fund’s tilts towards value names and away from high growth companies both underperformed.
A performance factor early in the year was the unprecedented persistence of value names underperforming expensive stocks. The magnitude of cumulative Value style underperformance had reached historic levels last seen in the 1999 Tech bubble. In early September, we saw a huge reversal of the above trend over the course of a few days. The weekly move in ‘momentum’ and ‘value’ factors were of magnitudes not seen in a decade. That reversal in Value names continued a bit—helping the Fund achieve positive returns in the fourth quarter of the year. A key question going forward is: is the break in expensive momentum names a short-term fluke, or a long overdue rotation back to cheaper companies? The equity style reversal in September may have simply been a knee jerk reaction to the quick pop in interest rates at that time (the compression in yields has highly correlated with the bias towards expensive stocks). History also shows that strong momentum creates crowding in narrow market leaders, and that crowding can turn into a rush to exit as soon as the leading names become more volatile.
The Fund’s strategy is to determine attractiveness of broad groups of stocks relative to their fundamentals. The Value factor has seen its risk premium (or embedded valuation) improve as the returns have struggled—implying that the valuation of the stocks (both cheaper and expensive) have spread much further than fundamentals of the companies. To what extent this ‘behavioral’ cycle will continue is a key question—and one that is very difficult to answer. In every market environment there are elements of the macro-economic cycle that are somewhat predictable, and elements that are new and completely unpredictable (global quantitative easing, negative long rates, and trade wars being the most unique factors this time around). These unique elements can drive market sentiment in ways that are hard to predict.
Focusing on corporate fundamentals tends to produce slightly more predictability. Companies must invest in operations and research to produce sales and earnings—and there are some bounds on how much and how little the companies can earn on that capital before competition comes in to erode them. Given some bounded limits on corporate earnings power, we find that the valuations awarded the most expensive tiers of the equity market have far surpassed the likely long-term earnings power.
We find some comfort during a poor performance period in knowing that, in past periods of Value drawdown, the forward performance of the factor has been tremendous due to the rewinding of all the excess valuations.
Positioning
At period end, the Fund’s net dollar exposure was 30%. The Fund maintains its large style bias towards cheaper valuation names, while maintaining moderate free cash flow bias and profitability bias–both of which are styles that have historically helped protect against macro risk in the event of recession. Guggenheim’s macro research team is still wary of recession in the next year or so and vulnerability in overall markets–and the Fund has likewise taken a cautious positioning with quality style characteristics and managed overall market exposure.
From an industry perspective, the Fund now holds a net short in the Technology sector after prior years of being positioned net long. The flip in exposure occurred during this year in response to relative attractiveness of the names vis-à-vis other sector opportunities. The net short in the Financial sector has begun to shrink after remaining quite negative for a few years. The largest sector net long exposures are in Healthcare, Consumer Staples, and Transportation. The largest net short exposures exist in Real Estate, Materials, and IT sectors.
Performance displayed represents past performance which is no guarantee of future results.
The opinions and forecast expressed may not actually come to pass. This information is subject to change at any time, based on market and other conditions, and should not be construed as a recommendation of any specific security or strategy.
152 | THE GUGGENHEIM FUNDS ANNUAL REPORT |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2019 |
SERIES Z (ALPHA OPPORTUNITY SERIES)
OBJECTIVE: Seeks long-term growth of capital.
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments.
Inception Date: July 7, 2003 |
Ten Largest Holdings (% of Total Net Assets) | |
Omnicom Group, Inc. | 1.3% |
Verizon Communications, Inc. | 1.3% |
Archer-Daniels-Midland Co. | 1.3% |
Kimberly-Clark Corp. | 1.3% |
Exxon Mobil Corp. | 1.3% |
Equity Commonwealth | 1.2% |
Eli Lilly & Co. | 1.2% |
Norfolk Southern Corp. | 1.1% |
AES Corp. | 1.1% |
Amgen, Inc. | 1.1% |
Top Ten Total | 12.2% |
“Ten Largest Holdings” excludes any temporary cash or derivative investments. |
THE GUGGENHEIM FUNDS ANNUAL REPORT | 153 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2019 |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2019
| 1 Year | 5 Year | 10 Year |
Series Z (Alpha Opportunity Series) | (2.45%) | (0.12%) | 6.83% |
ICE BofA Merrill Lynch 3-Month U.S. Treasury Bill Index | 2.28% | 1.07% | 0.58% |
Morningstar Long/Short Equity Category Average | 9.79% | 2.42% | 4.43% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The ICE BofA Merrill Lynch 3-Month U.S. Treasury Bill Index and Morningstar Long/Short Equity Category Average are an unmanaged indices and, unlike the Fund, have no management fees or operating expenses to reduce their reported returns. |
† | Performance figures do not reflect fees and expenses associated with an investment in variable insurance products. If returns had taken into account these fees and expenses, performance would have been lower. Shares of a series of Guggenheim Variable Funds Trust are available only through the purchase of such products. |
154 | THE GUGGENHEIM FUNDS ANNUAL REPORT |
SCHEDULE OF INVESTMENTS | December 31, 2019 |
SERIES Z (ALPHA OPPORTUNITY SERIES) |
| Shares | Value | ||||||
COMMON STOCKS† - 104.2% | ||||||||
Consumer, Non-cyclical - 33.4% | ||||||||
Archer-Daniels-Midland Co. | 1,734 | $ | 80,371 | |||||
Kimberly-Clark Corp. | 578 | 79,504 | ||||||
Eli Lilly & Co. | 556 | 73,075 | ||||||
Amgen, Inc.1 | 285 | 68,705 | ||||||
Merck & Company, Inc.1 | 739 | 67,212 | ||||||
Pfizer, Inc.1 | 1,713 | 67,115 | ||||||
Gilead Sciences, Inc.1 | 990 | 64,330 | ||||||
CVS Health Corp.1 | 861 | 63,964 | ||||||
Ingredion, Inc.1 | 683 | 63,485 | ||||||
JM Smucker Co. | 595 | 61,957 | ||||||
Kellogg Co. | 883 | 61,068 | ||||||
McKesson Corp. | 437 | 60,446 | ||||||
Molson Coors Beverage Co. — Class B1 | 1,114 | 60,044 | ||||||
General Mills, Inc.1 | 1,108 | 59,344 | ||||||
Darling Ingredients, Inc.*,1 | 2,055 | 57,704 | ||||||
Sysco Corp.1 | 672 | 57,483 | ||||||
Post Holdings, Inc.* | 510 | 55,641 | ||||||
Hormel Foods Corp. | 1,232 | 55,576 | ||||||
Johnson & Johnson | 348 | 50,763 | ||||||
Procter & Gamble Co. | 340 | 42,466 | ||||||
Philip Morris International, Inc.1 | 478 | 40,673 | ||||||
Campbell Soup Co. | 823 | 40,673 | ||||||
Medtronic plc | 357 | 40,502 | ||||||
Hologic, Inc.*,1 | 775 | 40,463 | ||||||
Jazz Pharmaceuticals plc* | 269 | 40,156 | ||||||
Baxter International, Inc.1 | 480 | 40,138 | ||||||
Abbott Laboratories | 445 | 38,653 | ||||||
Zimmer Biomet Holdings, Inc.1 | 255 | 38,168 | ||||||
Cardinal Health, Inc.1 | 720 | 36,418 | ||||||
Becton Dickinson and Co.1 | 127 | 34,540 | ||||||
Clorox Co. | 187 | 28,712 | ||||||
Herbalife Nutrition Ltd.* | 584 | 27,839 | ||||||
Integer Holdings Corp.* | 342 | 27,507 | ||||||
Alexion Pharmaceuticals, Inc.* | 239 | 25,848 | ||||||
B&G Foods, Inc. | 1,420 | 25,461 | ||||||
Thermo Fisher Scientific, Inc. | 76 | 24,690 | ||||||
United Therapeutics Corp.* | 280 | 24,663 | ||||||
STERIS plc | 160 | 24,387 | ||||||
Cal-Maine Foods, Inc. | 568 | 24,282 | ||||||
TrueBlue, Inc.* | 972 | 23,386 | ||||||
Innoviva, Inc.* | 1,619 | 22,925 | ||||||
H&R Block, Inc. | 962 | 22,588 | ||||||
TreeHouse Foods, Inc.* | 455 | 22,067 | ||||||
Mondelez International, Inc. — Class A | 375 | 20,655 | ||||||
John B Sanfilippo & Son, Inc. | 226 | 20,629 | ||||||
Molina Healthcare, Inc.* | 152 | 20,625 | ||||||
Macquarie Infrastructure Corp. | 436 | 18,678 | ||||||
PepsiCo, Inc.1 | 122 | 16,674 | ||||||
Hershey Co. | 107 | 15,727 | ||||||
Total Consumer, Non-cyclical | 2,077,980 | |||||||
Industrial - 17.3% | ||||||||
Norfolk Southern Corp.1 | 356 | 69,110 | ||||||
Lincoln Electric Holdings, Inc. | 621 | 60,069 | ||||||
Crane Co.1 | 692 | 59,775 | ||||||
CSX Corp.1 | 723 | 52,316 | ||||||
CH Robinson Worldwide, Inc.1 | 638 | 49,892 | ||||||
Werner Enterprises, Inc. | 1,323 | 48,144 | ||||||
Gentex Corp.1 | 1,629 | 47,208 | ||||||
Landstar System, Inc. | 383 | 43,612 | ||||||
FedEx Corp.1 | 287 | 43,397 | ||||||
Caterpillar, Inc. | 286 | 42,236 | ||||||
Regal Beloit Corp. | 484 | 41,435 | ||||||
Kansas City Southern1 | 247 | 37,831 | ||||||
Schneider National, Inc. — Class B | 1,621 | 35,370 | ||||||
Kennametal, Inc. | 923 | 34,050 | ||||||
Textron, Inc. | 730 | 32,558 | ||||||
J.B. Hunt Transport Services, Inc. | 272 | 31,764 | ||||||
Heartland Express, Inc. | 1,369 | 28,818 | ||||||
Knight-Swift Transportation Holdings, Inc. | 782 | 28,027 | ||||||
Union Pacific Corp. | 152 | 27,480 | ||||||
Marten Transport Ltd. | 1,253 | 26,927 | ||||||
Waters Corp.* | 115 | 26,870 | ||||||
Echo Global Logistics, Inc.* | 1,296 | 26,827 | ||||||
Sturm Ruger & Company, Inc. | 527 | 24,785 | ||||||
Agilent Technologies, Inc. | 283 | 24,143 | ||||||
Honeywell International, Inc. | 131 | 23,187 | ||||||
Mettler-Toledo International, Inc.* | 29 | 23,005 | ||||||
Garmin Ltd. | 228 | 22,244 | ||||||
Oshkosh Corp. | 217 | 20,539 | ||||||
Vishay Intertechnology, Inc. | 821 | 17,479 | ||||||
MDU Resources Group, Inc. | 539 | 16,014 | ||||||
Old Dominion Freight Line, Inc. | 82 | 15,562 | ||||||
Total Industrial | 1,080,674 | |||||||
Consumer, Cyclical - 16.4% | ||||||||
Lear Corp.1 | 373 | 51,176 | ||||||
World Fuel Services Corp. | 1,167 | 50,671 | ||||||
Southwest Airlines Co.1 | 907 | 48,960 | ||||||
Carnival Corp. | 886 | 45,036 | ||||||
Allison Transmission Holdings, Inc.1 | 870 | 42,038 | ||||||
Whirlpool Corp. | 280 | 41,309 | ||||||
Autoliv, Inc. | 483 | 40,770 | ||||||
BorgWarner, Inc.1 | 904 | 39,215 | ||||||
Las Vegas Sands Corp. | 565 | 39,008 | ||||||
Cracker Barrel Old Country Store, Inc. | 251 | 38,589 | ||||||
Brunswick Corp. | 638 | 38,267 | ||||||
Extended Stay America, Inc. | 2,464 | 36,615 | ||||||
Gentherm, Inc.* | 822 | 36,489 | ||||||
Aptiv plc | 374 | 35,519 | ||||||
Wyndham Destinations, Inc. | 670 | 34,632 | ||||||
Delta Air Lines, Inc.1 | 568 | 33,217 | ||||||
Toll Brothers, Inc. | 740 | 29,237 | ||||||
Polaris, Inc. | 269 | 27,357 | ||||||
Norwegian Cruise Line Holdings Ltd.* | 453 | 26,460 | ||||||
Cummins, Inc. | 143 | 25,591 | ||||||
AutoZone, Inc.* | 21 | 25,017 | ||||||
Royal Caribbean Cruises Ltd. | 181 | 24,165 | ||||||
PulteGroup, Inc. | 620 | 24,056 | ||||||
SkyWest, Inc. | 370 | 23,913 | ||||||
General Motors Co. | 593 | 21,704 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 155 |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2019 |
SERIES Z (ALPHA OPPORTUNITY SERIES) |
| Shares | Value | ||||||
Allegiant Travel Co. — Class A | 115 | $ | 20,014 | |||||
Lennar Corp. — Class A | 357 | 19,917 | ||||||
Goodyear Tire & Rubber Co. | 1,250 | 19,444 | ||||||
United Airlines Holdings, Inc.*,1 | 220 | 19,380 | ||||||
Starbucks Corp. | 216 | 18,991 | ||||||
DR Horton, Inc. | 297 | 15,667 | ||||||
JetBlue Airways Corp.*,1 | 831 | 15,556 | ||||||
Mohawk Industries, Inc.* | 106 | 14,456 | ||||||
Total Consumer, Cyclical | 1,022,436 | |||||||
Utilities - 13.2% | ||||||||
AES Corp.1 | 3,456 | 68,775 | ||||||
PPL Corp.1 | 1,855 | 66,557 | ||||||
FirstEnergy Corp.1 | 1,336 | 64,930 | ||||||
Exelon Corp.1 | 1,409 | 64,236 | ||||||
Evergy, Inc.1 | 981 | 63,853 | ||||||
NRG Energy, Inc. | 1,527 | 60,698 | ||||||
Pinnacle West Capital Corp. | 658 | 59,174 | ||||||
Portland General Electric Co. | 1,034 | 57,687 | ||||||
Vistra Energy Corp.1 | 2,212 | 50,854 | ||||||
Avangrid, Inc. | 957 | 48,960 | ||||||
National Fuel Gas Co.1 | 1,005 | 46,772 | ||||||
Ameren Corp.1 | 603 | 46,310 | ||||||
Public Service Enterprise Group, Inc. | 574 | 33,895 | ||||||
Southern Co. | 454 | 28,920 | ||||||
Entergy Corp. | 193 | 23,122 | ||||||
NiSource, Inc. | 814 | 22,662 | ||||||
Avista Corp. | 369 | 17,745 | ||||||
Total Utilities | 825,150 | |||||||
Communications - 8.5% | ||||||||
Omnicom Group, Inc.1 | 1,005 | 81,425 | ||||||
Verizon Communications, Inc.1 | 1,319 | 80,987 | ||||||
AT&T, Inc.1 | 1,735 | 67,804 | ||||||
Discovery, Inc. — Class A*,1 | 1,362 | 44,592 | ||||||
eBay, Inc. | 1,179 | 42,574 | ||||||
AMC Networks, Inc. — Class A* | 977 | 38,591 | ||||||
News Corp. — Class A | 2,616 | 36,990 | ||||||
Booking Holdings, Inc.* | 17 | 34,913 | ||||||
Yelp, Inc. — Class A* | 717 | 24,973 | ||||||
TEGNA, Inc. | 1,342 | 22,398 | ||||||
Alphabet, Inc. — Class C* | 14 | 18,718 | ||||||
Scholastic Corp. | 457 | 17,572 | ||||||
Juniper Networks, Inc. | 618 | 15,221 | ||||||
Total Communications | 526,758 | |||||||
Financial - 7.5% | ||||||||
Equity Commonwealth REIT1 | 2,274 | 74,655 | ||||||
Weingarten Realty Investors REIT1 | 2,105 | 65,760 | ||||||
Lexington Realty Trust REIT | 6,007 | 63,794 | ||||||
Apartment Investment & Management Co. — Class A REIT1 | 783 | 40,442 | ||||||
Brixmor Property Group, Inc. REIT | 1,857 | 40,130 | ||||||
Summit Hotel Properties, Inc. REIT | 2,184 | 26,951 | ||||||
Deluxe Corp. | 467 | 23,313 | ||||||
Sunstone Hotel Investors, Inc. REIT | 1,264 | 17,595 | ||||||
Janus Henderson Group plc | 719 | 17,579 | ||||||
JPMorgan Chase & Co.1 | 122 | 17,007 | ||||||
Franklin Resources, Inc. | 645 | 16,757 | ||||||
M&T Bank Corp. | 95 | 16,126 | ||||||
Comerica, Inc. | 223 | 16,000 | ||||||
Travelers Companies, Inc. | 116 | 15,886 | ||||||
Hartford Financial Services Group, Inc.1 | 254 | 15,436 | ||||||
Total Financial | 467,431 | |||||||
Energy - 6.4% | ||||||||
Exxon Mobil Corp.1 | 1,139 | 79,479 | ||||||
Chevron Corp. | 451 | 54,350 | ||||||
Devon Energy Corp. | 1,466 | 38,072 | ||||||
Valero Energy Corp.1 | 389 | 36,430 | ||||||
HollyFrontier Corp.1 | 608 | 30,832 | ||||||
ConocoPhillips | 471 | 30,629 | ||||||
Kinder Morgan, Inc.1 | 1,429 | 30,252 | ||||||
CVR Energy, Inc. | 667 | 26,967 | ||||||
Phillips 661 | 241 | 26,850 | ||||||
Delek US Holdings, Inc.1 | 800 | 26,824 | ||||||
ONEOK, Inc. | 221 | 16,723 | ||||||
Total Energy | 397,408 | |||||||
Technology - 1.2% | ||||||||
Activision Blizzard, Inc. | 378 | 22,461 | ||||||
Skyworks Solutions, Inc. | 154 | 18,616 | ||||||
Teradata Corp.* | 621 | 16,624 | ||||||
Oracle Corp.1 | 278 | 14,728 | ||||||
Total Technology | 72,429 | |||||||
Basic Materials - 0.3% | ||||||||
Domtar Corp. | 479 | 18,317 | ||||||
Total Common Stocks | ||||||||
(Cost $6,076,541) | 6,488,583 | |||||||
MONEY MARKET FUND† - 2.3% | ||||||||
Goldman Sachs Financial Square Treasury Instruments Fund — Institutional Shares 1.43%2 | 144,941 | 144,941 | ||||||
Total Money Market Fund | ||||||||
(Cost $144,941) | 144,941 | |||||||
Total Investments - 106.5% | ||||||||
(Cost $6,221,482) | $ | 6,633,524 | ||||||
Other Assets & Liabilities, net - (6.5)% | (404,482 | ) | ||||||
Total Net Assets - 100.0% | $ | 6,229,042 |
156 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2019 |
SERIES Z (ALPHA OPPORTUNITY SERIES) |
Custom Basket Swap Agreements | |||||||||||||||
Counterparty | Reference Obligation | Financing | Payment | Maturity | Notional | Value and | |||||||||
OTC Custom Basket Swap Agreements†† | |||||||||||||||
Morgan Stanley Capital Services LLC | MS Equity Custom Basket | 1.95% (Fed Funds Rate + 0.40%) | At Maturity | 02/01/24 | $ | 629,634 | $ | 41,308 | |||||||
Goldman Sachs International | GS Equity Custom Basket | 2.00% (Fed Funds Rate + 0.45%) | At Maturity | 05/06/24 | 628,839 | 38,469 | |||||||||
$ | 1,258,473 | $ | 79,777 | ||||||||||||
OTC Custom Basket Swap Agreements Sold Short†† | |||||||||||||||
Morgan Stanley Capital Services LLC | MS Equity Custom Basket | (1.25)% (Fed Funds Rate - 0.30%) | At Maturity | 02/01/24 | $ | 3,007,014 | $ | (234,929 | ) | ||||||
Goldman Sachs International | GS Equity Custom Basket | (1.35)% (Fed Funds Rate - 0.20%) | At Maturity | 05/06/24 | 2,863,317 | (180,010 | ) | ||||||||
$ | 5,870,331 | $ | (414,939 | ) |
* | Non-income producing security. |
† | Value determined based on Level 1 inputs — See Note 4. |
†† | Value determined based on Level 2 inputs — See Note 4. |
1 | All or a portion of this security is pledged as custom basket swap collateral at December 31, 2019. |
2 | Rate indicated is the 7-day yield as of December 31, 2019. |
GS — Goldman Sachs International | |
MS — Morgan Stanley Capital Services LLC | |
plc — Public Limited Company | |
REIT — Real Estate Investment Trust | |
See Sector Classification in Other Information section. |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2019 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stocks | $ | 6,488,583 | $ | — | $ | — | $ | 6,488,583 | ||||||||
Money Market Fund | 144,941 | — | — | 144,941 | ||||||||||||
Custom Basket Swap Agreements** | — | 79,777 | — | 79,777 | ||||||||||||
Total Assets | $ | 6,633,524 | $ | 79,777 | $ | — | $ | 6,713,301 |
Investments in Securities (Liabilities) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Custom Basket Swap Agreements** | $ | — | $ | 414,939 | $ | — | $ | 414,939 |
** | This derivative is reported as unrealized appreciation/depreciation at period end. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 157 |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2019 |
SERIES Z (ALPHA OPPORTUNITY SERIES) |
| Shares | Percentage | Value and | |||||||||
MS EQUITY LONG CUSTOM BASKET | ||||||||||||
Utilities | ||||||||||||
FirstEnergy Corp. | 127 | 0.99 | % | $ | 1,130 | |||||||
AES Corp. | 329 | 1.05 | % | 1,119 | ||||||||
PPL Corp. | 176 | 1.01 | % | 839 | ||||||||
Portland General Electric Co. | 98 | 0.87 | % | 708 | ||||||||
Southern Co. | 43 | 0.44 | % | 361 | ||||||||
Avangrid, Inc. | 91 | 0.74 | % | 202 | ||||||||
NRG Energy, Inc. | 145 | 0.92 | % | 199 | ||||||||
Pinnacle West Capital Corp. | 62 | 0.89 | % | 169 | ||||||||
NiSource, Inc. | 77 | 0.34 | % | 105 | ||||||||
Avista Corp. | 35 | 0.27 | % | 83 | ||||||||
Ameren Corp. | 57 | 0.70 | % | 79 | ||||||||
Entergy Corp. | 18 | 0.34 | % | 38 | ||||||||
Evergy, Inc. | 93 | 0.96 | % | (8 | ) | |||||||
Public Service Enterprise Group, Inc. | 54 | 0.51 | % | (57 | ) | |||||||
Exelon Corp. | 134 | 0.97 | % | (194 | ) | |||||||
Vistra Energy Corp. | 216 | 0.79 | % | (690 | ) | |||||||
National Fuel Gas Co. | 95 | 0.70 | % | (1,240 | ) | |||||||
Total Utilities | 2,843 | |||||||||||
Consumer, Cyclical | ||||||||||||
World Fuel Services Corp. | 116 | 0.80 | % | 1,651 | ||||||||
Carnival Corp. | 84 | 0.68 | % | 671 | ||||||||
Las Vegas Sands Corp. | 53 | 0.58 | % | 574 | ||||||||
Lear Corp. | 35 | 0.76 | % | 480 | ||||||||
Norwegian Cruise Line Holdings Ltd. | 43 | 0.40 | % | 428 | ||||||||
BorgWarner, Inc. | 103 | 0.71 | % | 387 | ||||||||
Wyndham Destinations, Inc. | 63 | 0.52 | % | 353 | ||||||||
Aptiv plc | 35 | 0.53 | % | 329 | ||||||||
Southwest Airlines Co. | 86 | 0.74 | % | 323 | ||||||||
Royal Caribbean Cruises Ltd. | 17 | 0.36 | % | 320 | ||||||||
Autoliv, Inc. | 46 | 0.62 | % | 320 | ||||||||
Allison Transmission Holdings, Inc. | 82 | 0.63 | % | 278 | ||||||||
Gentherm, Inc. | 78 | 0.55 | % | 267 | ||||||||
Delta Air Lines, Inc. | 54 | 0.50 | % | 236 | ||||||||
Toll Brothers, Inc. | 70 | 0.44 | % | 235 | ||||||||
JetBlue Airways Corp. | 79 | 0.23 | % | 210 | ||||||||
AutoZone, Inc. | 2 | 0.38 | % | 162 | ||||||||
PulteGroup, Inc. | 59 | 0.36 | % | 156 | ||||||||
United Airlines Holdings, Inc. | 21 | 0.29 | % | 91 | ||||||||
Starbucks Corp. | 20 | 0.28 | % | 78 | ||||||||
SkyWest, Inc. | 35 | 0.36 | % | 75 | ||||||||
Extended Stay America, Inc. | 234 | 0.55 | % | 62 | ||||||||
Brunswick Corp. | 60 | 0.57 | % | 59 | ||||||||
Allegiant Travel Co. — Class A | 10 | 0.28 | % | 48 | ||||||||
DR Horton, Inc. | 28 | 0.23 | % | 42 | ||||||||
Polaris, Inc. | 25 | 0.40 | % | 6 | ||||||||
Cummins, Inc. | 13 | 0.37 | % | (18 | ) | |||||||
Mohawk Industries, Inc. | 10 | 0.22 | % | (76 | ) | |||||||
Lennar Corp. — Class A | 34 | 0.30 | % | (89 | ) | |||||||
Whirlpool Corp. | 26 | 0.61 | % | (95 | ) | |||||||
Goodyear Tire & Rubber Co. | 119 | 0.29 | % | (102 | ) | |||||||
General Motors Co. | 56 | 0.33 | % | (129 | ) | |||||||
Cracker Barrel Old Country Store, Inc. | 23 | 0.56 | % | (144 | ) | |||||||
Total Consumer, Cyclical | 7,188 | |||||||||||
Consumer, Non-cyclical | ||||||||||||
CVS Health Corp. | 82 | 0.97 | % | 1,696 | ||||||||
Darling Ingredients, Inc. | 195 | 0.87 | % | 1,409 | ||||||||
Eli Lilly & Co. | 52 | 1.09 | % | 1,236 | ||||||||
Sysco Corp. | 64 | 0.87 | % | 1,022 | ||||||||
Amgen, Inc. | 27 | 1.03 | % | 947 | ||||||||
Merck & Company, Inc. | 70 | 1.01 | % | 885 | ||||||||
Kimberly-Clark Corp. | 55 | 1.20 | % | 866 | ||||||||
Zimmer Biomet Holdings, Inc. | 24 | 0.57 | % | 749 | ||||||||
McKesson Corp. | 95 | 2.09 | % | 697 | ||||||||
Kellogg Co. | 84 | 0.92 | % | 657 | ||||||||
Medtronic plc | 34 | 0.61 | % | 645 | ||||||||
Archer-Daniels-Midland Co. | 165 | 1.21 | % | 604 | ||||||||
Hologic, Inc. | 73 | 0.61 | % | 519 | ||||||||
Jazz Pharmaceuticals plc | 25 | 0.59 | % | 483 | ||||||||
Campbell Soup Co. | 78 | 0.61 | % | 434 | ||||||||
Johnson & Johnson | 33 | 0.76 | % | 381 | ||||||||
Becton Dickinson and Co. | 12 | 0.52 | % | 359 | ||||||||
Hormel Foods Corp. | 117 | 0.84 | % | 343 | ||||||||
Molina Healthcare, Inc. | 14 | 0.30 | % | 343 | ||||||||
Philip Morris International, Inc. | 45 | 0.61 | % | 337 | ||||||||
Herbalife Nutrition Ltd. | 55 | 0.42 | % | 229 | ||||||||
Thermo Fisher Scientific, Inc. | 7 | 0.36 | % | 224 | ||||||||
General Mills, Inc. | 105 | 0.89 | % | 211 | ||||||||
Baxter International, Inc. | 45 | 0.60 | % | 193 | ||||||||
Abbott Laboratories | 42 | 0.58 | % | 181 | ||||||||
Macquarie Infrastructure Corp. | 41 | 0.28 | % | 168 | ||||||||
Post Holdings, Inc. | 48 | 0.83 | % | 141 | ||||||||
Gilead Sciences, Inc. | 94 | 0.97 | % | 135 | ||||||||
Innoviva, Inc. | 154 | 0.35 | % | 130 | ||||||||
TrueBlue, Inc. | 92 | 0.35 | % | 128 | ||||||||
Alexion Pharmaceuticals, Inc. | 22 | 0.38 | % | 115 | ||||||||
Procter & Gamble Co. | 32 | 0.63 | % | 115 |
158 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2019 |
SERIES Z (ALPHA OPPORTUNITY SERIES) |
| Shares | Percentage | Value and | |||||||||
Clorox Co. | 17 | 0.41 | % | $ | 106 | |||||||
Molson Coors Beverage Co. — Class B | 106 | 0.91 | % | 87 | ||||||||
STERIS plc | 15 | 0.36 | % | 85 | ||||||||
Ingredion, Inc. | 65 | 0.96 | % | 83 | ||||||||
PepsiCo, Inc. | 11 | 0.24 | % | 75 | ||||||||
Cardinal Health, Inc. | 180 | 1.45 | % | 30 | ||||||||
Integer Holdings Corp. | 32 | 0.41 | % | 22 | ||||||||
Mondelez International, Inc. — Class A | 35 | 0.31 | % | 19 | ||||||||
United Therapeutics Corp. | 26 | 0.36 | % | (26 | ) | |||||||
TreeHouse Foods, Inc. | 43 | 0.33 | % | (29 | ) | |||||||
Hershey Co. | 10 | 0.23 | % | (63 | ) | |||||||
Cal-Maine Foods, Inc. | 54 | 0.37 | % | (69 | ) | |||||||
John B Sanfilippo & Son, Inc. | 21 | 0.30 | % | (120 | ) | |||||||
Pfizer, Inc. | 163 | 1.01 | % | (130 | ) | |||||||
JM Smucker Co. | 56 | 0.93 | % | (154 | ) | |||||||
B&G Foods, Inc. | 135 | 0.38 | % | (280 | ) | |||||||
H&R Block, Inc. | 91 | 0.34 | % | (378 | ) | |||||||
Total Consumer, Non-cyclical | 15,840 | |||||||||||
Industrial | ||||||||||||
Kansas City Southern | 23 | 0.56 | % | 884 | ||||||||
Lincoln Electric Holdings, Inc. | 59 | 0.91 | % | 789 | ||||||||
Regal Beloit Corp. | 46 | 0.63 | % | 693 | ||||||||
Caterpillar, Inc. | 27 | 0.63 | % | 654 | ||||||||
Crane Co. | 65 | 0.89 | % | 623 | ||||||||
Norfolk Southern Corp. | 33 | 1.02 | % | 499 | ||||||||
Marten Transport Ltd. | 119 | 0.41 | % | 477 | ||||||||
Agilent Technologies, Inc. | 27 | 0.37 | % | 472 | ||||||||
Oshkosh Corp. | 20 | 0.30 | % | 405 | ||||||||
Union Pacific Corp. | 14 | 0.40 | % | 402 | ||||||||
Landstar System, Inc. | 36 | 0.65 | % | 338 | ||||||||
Knight-Swift Transportation Holdings, Inc. | 74 | 0.42 | % | 330 | ||||||||
Old Dominion Freight Line, Inc. | 7 | 0.21 | % | 326 | ||||||||
Gentex Corp. | 155 | 0.71 | % | 323 | ||||||||
Werner Enterprises, Inc. | 126 | 0.73 | % | 277 | ||||||||
Garmin Ltd. | 21 | 0.33 | % | 264 | ||||||||
Mettler-Toledo International, Inc. | 2 | 0.25 | % | 245 | ||||||||
Heartland Express, Inc. | 130 | 0.43 | % | 242 | ||||||||
Vishay Intertechnology, Inc. | 78 | 0.26 | % | 237 | ||||||||
Kennametal, Inc. | 87 | 0.51 | % | 215 | ||||||||
Honeywell International, Inc. | 12 | 0.34 | % | 199 | ||||||||
Schneider National, Inc. — Class B | 154 | 0.53 | % | 168 | ||||||||
Sturm Ruger & Company, Inc. | 50 | 0.37 | % | 125 | ||||||||
MDU Resources Group, Inc. | 51 | 0.24 | % | 29 | ||||||||
J.B. Hunt Transport Services, Inc. | 25 | 0.46 | % | 16 | ||||||||
CSX Corp. | 68 | 0.78 | % | 4 | ||||||||
Echo Global Logistics, Inc. | 123 | 0.40 | % | (34 | ) | |||||||
Waters Corp. | 11 | 0.41 | % | (92 | ) | |||||||
CH Robinson Worldwide, Inc. | 60 | 0.75 | % | (110 | ) | |||||||
Textron, Inc. | 69 | 0.49 | % | (225 | ) | |||||||
FedEx Corp. | 55 | 1.32 | % | (298 | ) | |||||||
Total Industrial | 8,477 | |||||||||||
Energy | ||||||||||||
Devon Energy Corp. | 139 | 0.57 | % | 559 | ||||||||
Kinder Morgan, Inc. | 136 | 0.46 | % | 368 | ||||||||
ConocoPhillips | 44 | 0.45 | % | 339 | ||||||||
Phillips 66 | 22 | 0.39 | % | 311 | ||||||||
Valero Energy Corp. | 37 | 0.55 | % | 207 | ||||||||
ONEOK, Inc. | 21 | 0.25 | % | 115 | ||||||||
Delek US Holdings, Inc. | 76 | 0.40 | % | 15 | ||||||||
HollyFrontier Corp. | 57 | 0.46 | % | (6 | ) | |||||||
Chevron Corp. | 43 | 0.82 | % | (75 | ) | |||||||
CVR Energy, Inc. | 63 | 0.40 | % | (386 | ) | |||||||
Exxon Mobil Corp. | 108 | 1.20 | % | (397 | ) | |||||||
Total Energy | 1,050 | |||||||||||
Financial | ||||||||||||
Weingarten Realty Investors | 200 | 0.99 | % | 472 | ||||||||
JPMorgan Chase & Co. | 11 | 0.24 | % | 438 | ||||||||
Deluxe Corp. | 44 | 0.35 | % | 376 | ||||||||
Hartford Financial Services Group, Inc. | 24 | 0.23 | % | 276 | ||||||||
Brixmor Property Group, Inc. | 176 | 0.60 | % | 270 | ||||||||
Janus Henderson Group plc | 68 | 0.26 | % | 225 | ||||||||
Summit Hotel Properties, Inc. | 208 | 0.41 | % | 182 | ||||||||
Lexington Realty Trust | 572 | 0.96 | % | 135 | ||||||||
Equity Commonwealth | 216 | 1.13 | % | 116 | ||||||||
Apartment Investment & Management Co. — Class A | 74 | 0.61 | % | 100 | ||||||||
M&T Bank Corp. | 9 | 0.24 | % | 69 | ||||||||
Comerica, Inc. | 21 | 0.24 | % | 63 | ||||||||
Sunstone Hotel Investors, Inc. | 120 | 0.27 | % | (2 | ) | |||||||
Travelers Companies, Inc. | 11 | 0.24 | % | (34 | ) | |||||||
Franklin Resources, Inc. | 101 | 0.42 | % | (100 | ) | |||||||
Total Financial | 2,586 | |||||||||||
SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 159 |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2019 |
SERIES Z (ALPHA OPPORTUNITY SERIES) |
| Shares | Percentage | Value and | |||||||||
Technology | ||||||||||||
Skyworks Solutions, Inc. | 14 | 0.27 | % | $ | 711 | |||||||
Activision Blizzard, Inc. | 36 | 0.34 | % | 249 | ||||||||
Oracle Corp. | 26 | 0.22 | % | 2 | ||||||||
Teradata Corp. | 59 | 0.25 | % | (150 | ) | |||||||
Total Technology | 812 | |||||||||||
Communications | ||||||||||||
TEGNA, Inc. | 127 | 0.34 | % | 526 | ||||||||
Discovery, Inc. — Class A | 129 | 0.67 | % | 520 | ||||||||
News Corp. — Class A | 249 | 0.56 | % | 383 | ||||||||
Omnicom Group, Inc. | 95 | 1.22 | % | 351 | ||||||||
AT&T, Inc. | 165 | 1.02 | % | 301 | ||||||||
Verizon Communications, Inc. | 125 | 1.22 | % | 261 | ||||||||
Booking Holdings, Inc. | 1 | 0.33 | % | 102 | ||||||||
Juniper Networks, Inc. | 58 | 0.23 | % | 70 | ||||||||
Alphabet, Inc. — Class C | 1 | 0.21 | % | 35 | ||||||||
Yelp, Inc. — Class A | 68 | 0.38 | % | 26 | ||||||||
Scholastic Corp. | 43 | 0.26 | % | 20 | ||||||||
AMC Networks, Inc. — Class A | 93 | 0.58 | % | (26 | ) | |||||||
eBay, Inc. | 112 | 0.64 | % | (186 | ) | |||||||
Total Communications | 2,383 | |||||||||||
Basic Materials | ||||||||||||
Domtar Corp. | 45 | 0.27 | % | 129 | ||||||||
Total MS Equity Long Custom Basket | $ | 41,308 | ||||||||||
MS EQUITY SHORT CUSTOM BASKET | ||||||||||||
Technology | ||||||||||||
Appian Corp. | 113 | (0.13 | )% | 1,832 | ||||||||
Workday, Inc. — Class A | 29 | (0.16 | )% | 1,021 | ||||||||
Elastic N.V. | 51 | (0.11 | )% | 537 | ||||||||
MongoDB, Inc. | 46 | (0.20 | )% | 486 | ||||||||
Alteryx, Inc. — Class A | 44 | (0.15 | )% | 453 | ||||||||
Veeva Systems, Inc. — Class A | 32 | (0.15 | )% | 387 | ||||||||
Intuit, Inc. | 24 | (0.21 | )% | 230 | ||||||||
Atlassian Corporation plc — Class A | 36 | (0.14 | )% | 200 | ||||||||
ServiceNow, Inc. | 19 | (0.18 | )% | 186 | ||||||||
Zscaler, Inc. | 84 | (0.13 | )% | 101 | ||||||||
Manhattan Associates, Inc. | 50 | (0.13 | )% | 87 | ||||||||
Twilio, Inc. — Class A | 39 | (0.13 | )% | (9 | ) | |||||||
Aspen Technology, Inc. | 40 | (0.16 | )% | (48 | ) | |||||||
Workiva, Inc. | 93 | (0.13 | )% | (96 | ) | |||||||
LivePerson, Inc. | 106 | (0.13 | )% | (126 | ) | |||||||
Paychex, Inc. | 184 | (0.52 | )% | (209 | ) | |||||||
Coupa Software, Inc. | 35 | (0.17 | )% | (335 | ) | |||||||
Guidewire Software, Inc. | 41 | (0.15 | )% | (338 | ) | |||||||
Fair Isaac Corp. | 14 | (0.17 | )% | (340 | ) | |||||||
Appfolio, Inc. — Class A | 37 | (0.14 | )% | (367 | ) | |||||||
Autodesk, Inc. | 40 | (0.24 | )% | (384 | ) | |||||||
HubSpot, Inc. | 70 | (0.37 | )% | (422 | ) | |||||||
Accenture plc — Class A | 33 | (0.23 | )% | (521 | ) | |||||||
PROS Holdings, Inc. | 72 | (0.14 | )% | (529 | ) | |||||||
Tyler Technologies, Inc. | 12 | (0.12 | )% | (594 | ) | |||||||
ANSYS, Inc. | 17 | (0.15 | )% | (737 | ) | |||||||
ExlService Holdings, Inc. | 288 | (0.67 | )% | (934 | ) | |||||||
Smartsheet, Inc. — Class A | 170 | (0.25 | )% | (969 | ) | |||||||
Five9, Inc. | 59 | (0.13 | )% | (1,027 | ) | |||||||
Paycom Software, Inc. | 21 | (0.18 | )% | (1,037 | ) | |||||||
Monolithic Power Systems, Inc. | 30 | (0.18 | )% | (1,278 | ) | |||||||
EPAM Systems, Inc. | 84 | (0.59 | )% | (1,445 | ) | |||||||
Science Applications International Corp. | 346 | (1.00 | )% | (1,457 | ) | |||||||
DocuSign, Inc. | 138 | (0.34 | )% | (1,541 | ) | |||||||
Broadcom, Inc. | 38 | (0.40 | )% | (1,704 | ) | |||||||
Adobe, Inc. | 51 | (0.56 | )% | (1,924 | ) | |||||||
Black Knight, Inc. | 394 | (0.84 | )% | (2,142 | ) | |||||||
salesforce.com, Inc. | 174 | (0.94 | )% | (2,161 | ) | |||||||
Genpact Ltd. | 548 | (0.77 | )% | (2,220 | ) | |||||||
ACI Worldwide, Inc. | 564 | (0.71 | )% | (2,344 | ) | |||||||
CACI International, Inc. — Class A | 128 | (1.06 | )% | (3,360 | ) | |||||||
Envestnet, Inc. | 257 | (0.60 | )% | (3,901 | ) | |||||||
Splunk, Inc. | 126 | (0.63 | )% | (4,110 | ) | |||||||
Total Technology | (33,089 | ) | ||||||||||
Utilities | ||||||||||||
California Water Service Group | 186 | (0.32 | )% | 254 | ||||||||
PNM Resources, Inc. | 193 | (0.33 | )% | 118 | ||||||||
Eversource Energy | 116 | (0.33 | )% | (100 | ) | |||||||
WEC Energy Group, Inc. | 107 | (0.33 | )% | (162 | ) | |||||||
Sempra Energy | 43 | (0.22 | )% | (199 | ) | |||||||
South Jersey Industries, Inc. | 306 | (0.34 | )% | (245 | ) | |||||||
Alliant Energy Corp. | 178 | (0.32 | )% | (278 | ) | |||||||
MGE Energy, Inc. | 84 | (0.22 | )% | (346 | ) | |||||||
American States Water Co. | 184 | (0.53 | )% | (510 | ) | |||||||
Atmos Energy Corp. | 86 | (0.32 | )% | (761 | ) | |||||||
American Water Works Company, Inc. | 134 | (0.55 | )% | (825 | ) | |||||||
NextEra Energy, Inc. | 41 | (0.33 | )% | (1,946 | ) | |||||||
Dominion Energy, Inc. | 874 | (2.41 | )% | (4,288 | ) | |||||||
Total Utilities | �� | (9,288 | ) | |||||||||
Financial | ||||||||||||
WP Carey, Inc. | 443 | (1.18 | )% | 3,240 | ||||||||
Essential Properties Realty Trust, Inc. | 787 | (0.65 | )% | 1,303 | ||||||||
Acadia Realty Trust | 450 | (0.39 | )% | 1,107 | ||||||||
CME Group, Inc. — Class A | 74 | (0.49 | )% | 361 |
160 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2019 |
SERIES Z (ALPHA OPPORTUNITY SERIES) |
| Shares | Percentage | Value and | |||||||||
Northwest Bancshares, Inc. | 689 | (0.38 | )% | $ | 194 | |||||||
American Assets Trust, Inc. | 578 | (0.88 | )% | 44 | ||||||||
National Storage Affiliates Trust | 301 | (0.34 | )% | 4 | ||||||||
UDR, Inc. | 447 | (0.69 | )% | (65 | ) | |||||||
American Campus Communities, Inc. | 726 | (1.14 | )% | (77 | ) | |||||||
Realty Income Corp. | 463 | (1.13 | )% | (83 | ) | |||||||
BancorpSouth Bank | 400 | (0.42 | )% | (95 | ) | |||||||
Armada Hoffler Properties, Inc. | 1,216 | (0.74 | )% | (326 | ) | |||||||
Global Net Lease, Inc. | 480 | (0.32 | )% | (327 | ) | |||||||
Capitol Federal Financial, Inc. | 784 | (0.36 | )% | (329 | ) | |||||||
Atlantic Union Bankshares Corp. | 232 | (0.29 | )% | (351 | ) | |||||||
BankUnited, Inc. | 179 | (0.22 | )% | (371 | ) | |||||||
Reinsurance Group of America, Inc. — Class A | 186 | (1.01 | )% | (663 | ) | |||||||
CenterState Bank Corp. | 403 | (0.33 | )% | (710 | ) | |||||||
Mastercard, Inc. — Class A | 40 | (0.40 | )% | (781 | ) | |||||||
Camden Property Trust | 155 | (0.55 | )% | (821 | ) | |||||||
Douglas Emmett, Inc. | 305 | (0.45 | )% | (949 | ) | |||||||
STAG Industrial, Inc. | 550 | (0.58 | )% | (1,014 | ) | |||||||
UMB Financial Corp. | 158 | (0.36 | )% | (1,020 | ) | |||||||
QTS Realty Trust, Inc. — Class A | 308 | (0.56 | )% | (1,073 | ) | |||||||
RenaissanceRe Holdings Ltd. | 107 | (0.70 | )% | (1,075 | ) | |||||||
Columbia Financial, Inc. | 640 | (0.36 | )% | (1,160 | ) | |||||||
Intercontinental Exchange, Inc. | 302 | (0.93 | )% | (1,167 | ) | |||||||
Synovus Financial Corp. | 277 | (0.36 | )% | (1,174 | ) | |||||||
Washington Real Estate Investment Trust | 660 | (0.64 | )% | (1,196 | ) | |||||||
Healthcare Realty Trust, Inc. | 916 | (1.02 | )% | (1,238 | ) | |||||||
Brown & Brown, Inc. | 776 | (1.02 | )% | (1,269 | ) | |||||||
Glacier Bancorp, Inc. | 313 | (0.48 | )% | (1,293 | ) | |||||||
People’s United Financial, Inc. | 1,634 | (0.92 | )% | (1,356 | ) | |||||||
Valley National Bancorp | 1,428 | (0.54 | )% | (1,668 | ) | |||||||
STORE Capital Corp. | 712 | (0.88 | )% | (1,794 | ) | |||||||
Agree Realty Corp. | 504 | (1.18 | )% | (2,018 | ) | |||||||
BOK Financial Corp. | 286 | (0.83 | )% | (2,165 | ) | |||||||
Crown Castle International Corp. | 156 | (0.74 | )% | (2,460 | ) | |||||||
Old National Bancorp | 1,504 | (0.91 | )% | (2,771 | ) | |||||||
Americold Realty Trust | 2,034 | (2.37 | )% | (2,919 | ) | |||||||
American Tower Corp. — Class A | 155 | (1.18 | )% | (3,138 | ) | |||||||
Athene Holding Ltd. — Class A | 392 | (0.61 | )% | (3,149 | ) | |||||||
EastGroup Properties, Inc. | 157 | (0.69 | )% | (3,277 | ) | |||||||
Arthur J Gallagher & Co. | 397 | (1.26 | )% | (3,462 | ) | |||||||
Alexandria Real Estate Equities, Inc. | 279 | (1.50 | )% | (3,505 | ) | |||||||
Easterly Government Properties, Inc. | 1,872 | (1.48 | )% | (3,547 | ) | |||||||
Equinix, Inc. | 29 | (0.56 | )% | (3,866 | ) | |||||||
Hudson Pacific Properties, Inc. | 1,241 | (1.55 | )% | (3,891 | ) | |||||||
Fifth Third Bancorp | 864 | (0.88 | )% | (4,112 | ) | |||||||
First Republic Bank | 263 | (1.03 | )% | (4,132 | ) | |||||||
Everest Re Group Ltd. | 99 | (0.91 | )% | (4,256 | ) | |||||||
SBA Communications Corp. | 125 | (1.00 | )% | (4,348 | ) | |||||||
RLI Corp. | 355 | (1.06 | )% | (5,831 | ) | |||||||
Sun Communities, Inc. | 266 | (1.33 | )% | (8,499 | ) | |||||||
Terreno Realty Corp. | 711 | (1.28 | )% | (9,780 | ) | |||||||
Rexford Industrial Realty, Inc. | 943 | (1.43 | )% | (10,204 | ) | |||||||
Total Financial | (108,522 | ) | ||||||||||
Basic Materials | ||||||||||||
Allegheny Technologies, Inc. | 420 | (0.29 | )% | 2,898 | ||||||||
WR Grace & Co. | 341 | (0.79 | )% | 2,169 | ||||||||
Carpenter Technology Corp. | 345 | (0.57 | )% | (212 | ) | |||||||
Kaiser Aluminum Corp. | 148 | (0.55 | )% | (986 | ) | |||||||
Southern Copper Corp. | 284 | (0.40 | )% | (1,546 | ) | |||||||
Steel Dynamics, Inc. | 329 | (0.37 | )% | (1,884 | ) | |||||||
Reliance Steel & Aluminum Co. | 103 | (0.41 | )% | (2,313 | ) | |||||||
Commercial Metals Co. | 483 | (0.36 | )% | (2,359 | ) | |||||||
Freeport-McMoRan, Inc. | 1,227 | (0.54 | )% | (2,852 | ) | |||||||
Compass Minerals International, Inc. | 404 | (0.82 | )% | (2,988 | ) | |||||||
Balchem Corp. | 249 | (0.84 | )% | (3,221 | ) | |||||||
Air Products & Chemicals, Inc. | 95 | (0.74 | )% | (3,389 | ) | |||||||
PPG Industries, Inc. | 197 | (0.87 | )% | (4,336 | ) | |||||||
RPM International, Inc. | 311 | (0.79 | )% | (4,876 | ) | |||||||
Sherwin-Williams Co. | 45 | (0.87 | )% | (5,000 | ) | |||||||
Linde plc | 225 | (1.59 | )% | (5,275 | ) | |||||||
Total Basic Materials | (36,170 | ) | ||||||||||
Consumer, Non-cyclical | ||||||||||||
Rollins, Inc. | 250 | (0.28 | )% | 1,088 | ||||||||
Guardant Health, Inc. | 63 | (0.16 | )% | 936 | ||||||||
Verisk Analytics, Inc. — Class A | 67 | (0.33 | )% | 553 | ||||||||
Gartner, Inc. | 109 | (0.56 | )% | 457 | ||||||||
Glaukos Corp. | 60 | (0.11 | )% | 261 | ||||||||
FleetCor Technologies, Inc. | 65 | (0.62 | )% | 249 | ||||||||
Avalara, Inc. | 53 | (0.13 | )% | (91 | ) |
SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 161 |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2019 |
SERIES Z (ALPHA OPPORTUNITY SERIES) |
| Shares | Percentage | Value and | |||||||||
Booz Allen Hamilton Holding Corp. | 86 | (0.20 | )% | $ | (154 | ) | ||||||
Bright Horizons Family Solutions, Inc. | 108 | (0.54 | )% | (408 | ) | |||||||
Intuitive Surgical, Inc. | 9 | (0.18 | )% | (481 | ) | |||||||
LiveRamp Holdings, Inc. | 88 | (0.14 | )% | (486 | ) | |||||||
Illumina, Inc. | 16 | (0.18 | )% | (624 | ) | |||||||
ResMed, Inc. | 26 | (0.13 | )% | (657 | ) | |||||||
Viad Corp. | 256 | (0.57 | )% | (667 | ) | |||||||
Paylocity Holding Corp. | 29 | (0.12 | )% | (833 | ) | |||||||
PayPal Holdings, Inc. | 242 | (0.87 | )% | (1,075 | ) | |||||||
Euronet Worldwide, Inc. | 95 | (0.50 | )% | (1,275 | ) | |||||||
IHS Markit Ltd. | 89 | (0.22 | )% | (1,462 | ) | |||||||
WEX, Inc. | 160 | (1.11 | )% | (2,279 | ) | |||||||
Brink’s Co. | 218 | (0.66 | )% | (2,551 | ) | |||||||
MarketAxess Holdings, Inc. | 28 | (0.35 | )% | (3,499 | ) | |||||||
Avery Dennison Corp. | 210 | (0.91 | )% | (4,510 | ) | |||||||
Total Consumer, Non-cyclical | (17,508 | ) | ||||||||||
Communications | ||||||||||||
8x8, Inc. | 721 | (0.44 | )% | 1,475 | ||||||||
Palo Alto Networks, Inc. | 62 | (0.48 | )% | 733 | ||||||||
Proofpoint, Inc. | 146 | (0.56 | )% | 356 | ||||||||
Okta, Inc. | 52 | (0.20 | )% | 329 | ||||||||
VeriSign, Inc. | 26 | (0.17 | )% | 129 | ||||||||
Zendesk, Inc. | 210 | (0.54 | )% | (434 | ) | |||||||
Anaplan, Inc. | 96 | (0.17 | )% | (522 | ) | |||||||
Trade Desk, Inc. — Class A | 17 | (0.15 | )% | (645 | ) | |||||||
Charter Communications, Inc. — Class A | 20 | (0.32 | )% | (781 | ) | |||||||
RingCentral, Inc. — Class A | 28 | (0.16 | )% | (1,247 | ) | |||||||
Q2 Holdings, Inc. | 233 | (0.63 | )% | (1,834 | ) | |||||||
Total Communications | (2,441 | ) | ||||||||||
Industrial | ||||||||||||
HEICO Corp. | 74 | (0.28 | )% | 1,119 | ||||||||
Roper Technologies, Inc. | 48 | (0.57 | )% | 498 | ||||||||
Exponent, Inc. | 175 | (0.40 | )% | 208 | ||||||||
Casella Waste Systems, Inc. — Class A | 222 | (0.34 | )% | (622 | ) | |||||||
Universal Display Corp. | 24 | (0.16 | )% | (801 | ) | |||||||
Ball Corp. | 291 | (0.63 | )% | (841 | ) | |||||||
Materion Corp. | 386 | (0.76 | )% | (1,140 | ) | |||||||
Sonoco Products Co. | 226 | (0.46 | )% | (1,378 | ) | |||||||
Westinghouse Air Brake Technologies Corp. | 142 | (0.37 | )% | (1,885 | ) | |||||||
Worthington Industries, Inc. | 540 | (0.76 | )% | (2,934 | ) | |||||||
Vulcan Materials Co. | 186 | (0.89 | )% | (3,658 | ) | |||||||
Martin Marietta Materials, Inc. | 103 | (0.96 | )% | (6,732 | ) | |||||||
TransDigm Group, Inc. | 79 | (1.47 | )% | (8,606 | ) | |||||||
Total Industrial | (26,772 | ) | ||||||||||
Energy | ||||||||||||
Warrior Met Coal, Inc. | 507 | (0.36 | )% | (891 | ) | |||||||
Consumer, Cyclical | ||||||||||||
Wingstop, Inc. | 183 | (0.52 | )% | 1,477 | ||||||||
McDonald’s Corp. | 48 | (0.32 | )% | 258 | ||||||||
Toro Co. | 274 | (0.73 | )% | (1,983 | ) | |||||||
Total Consumer, Cyclical | (248 | ) | ||||||||||
Total MS Equity Short Custom Basket | $ | (234,929 | ) | |||||||||
GS EQUITY LONG CUSTOM BASKET | ||||||||||||
Utilities | ||||||||||||
AES Corp. | 329 | 1.05 | % | 1,225 | ||||||||
PPL Corp. | 176 | 1.01 | % | 930 | ||||||||
FirstEnergy Corp. | 127 | 0.99 | % | 668 | ||||||||
Southern Co. | 43 | 0.44 | % | 343 | ||||||||
Avangrid, Inc. | 91 | 0.74 | % | 210 | ||||||||
NRG Energy, Inc. | 145 | 0.92 | % | 167 | ||||||||
Portland General Electric Co. | 98 | 0.87 | % | 162 | ||||||||
NiSource, Inc. | 77 | 0.34 | % | 112 | ||||||||
Avista Corp. | 35 | 0.27 | % | 60 | ||||||||
Ameren Corp. | 57 | 0.70 | % | 58 | ||||||||
Entergy Corp. | 18 | 0.34 | % | 40 | ||||||||
Evergy, Inc. | 93 | 0.96 | % | 0 | ||||||||
Public Service Enterprise Group, Inc. | 54 | 0.51 | % | (83 | ) | |||||||
Exelon Corp. | 134 | 0.97 | % | (114 | ) | |||||||
Pinnacle West Capital Corp. | 62 | 0.89 | % | (257 | ) | |||||||
Vistra Energy Corp. | 188 | 0.69 | % | (492 | ) | |||||||
National Fuel Gas Co. | 95 | 0.70 | % | (547 | ) | |||||||
Total Utilities | 2,482 | |||||||||||
Industrial | ||||||||||||
Kansas City Southern | 23 | 0.56 | % | 781 | ||||||||
Lincoln Electric Holdings, Inc. | 59 | 0.91 | % | 770 | ||||||||
Regal Beloit Corp. | 46 | 0.63 | % | 674 | ||||||||
Werner Enterprises, Inc. | 126 | 0.73 | % | 621 | ||||||||
Caterpillar, Inc. | 27 | 0.63 | % | 615 | ||||||||
Crane Co. | 65 | 0.89 | % | 608 | ||||||||
Schneider National, Inc. — Class B | 154 | 0.53 | % | 594 | ||||||||
Landstar System, Inc. | 36 | 0.65 | % | 440 | ||||||||
Vishay Intertechnology, Inc. | 78 | 0.26 | % | 424 | ||||||||
Agilent Technologies, Inc. | 27 | 0.37 | % | 411 | ||||||||
Union Pacific Corp. | 14 | 0.40 | % | 384 | ||||||||
Marten Transport Ltd. | 119 | 0.41 | % | 368 |
162 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2019 |
SERIES Z (ALPHA OPPORTUNITY SERIES) |
| Shares | Percentage | Value and | |||||||||
Knight-Swift Transportation Holdings, Inc. | 74 | 0.42 | % | $ | 354 | |||||||
Kennametal, Inc. | 87 | 0.51 | % | 351 | ||||||||
Old Dominion Freight Line, Inc. | 7 | 0.21 | % | 343 | ||||||||
Gentex Corp. | 155 | 0.71 | % | 324 | ||||||||
Oshkosh Corp. | 20 | 0.30 | % | 317 | ||||||||
Heartland Express, Inc. | 130 | 0.44 | % | 302 | ||||||||
Garmin Ltd. | 21 | 0.33 | % | 256 | ||||||||
Waters Corp. | 11 | 0.41 | % | 252 | ||||||||
Norfolk Southern Corp. | 33 | 1.02 | % | 242 | ||||||||
Mettler-Toledo International, Inc. | 2 | 0.25 | % | 237 | ||||||||
Honeywell International, Inc. | 12 | 0.34 | % | 189 | ||||||||
Sturm Ruger & Company, Inc. | 50 | 0.37 | % | 96 | ||||||||
MDU Resources Group, Inc. | 51 | 0.24 | % | 32 | ||||||||
Echo Global Logistics, Inc. | 123 | 0.40 | % | 23 | ||||||||
J.B. Hunt Transport Services, Inc. | 25 | 0.46 | % | 10 | ||||||||
CH Robinson Worldwide, Inc. | 60 | 0.75 | % | (146 | ) | |||||||
Textron, Inc. | 69 | 0.49 | % | (201 | ) | |||||||
FedEx Corp. | 54 | 1.30 | % | (291 | ) | |||||||
CSX Corp. | 68 | 0.78 | % | (298 | ) | |||||||
Total Industrial | 9,082 | |||||||||||
Consumer, Cyclical | ||||||||||||
World Fuel Services Corp. | 116 | 0.80 | % | 1,188 | ||||||||
Carnival Corp. | 84 | 0.68 | % | 662 | ||||||||
Las Vegas Sands Corp. | 53 | 0.58 | % | 572 | ||||||||
Lear Corp. | 35 | 0.76 | % | 421 | ||||||||
Norwegian Cruise Line Holdings Ltd. | 43 | 0.40 | % | 421 | ||||||||
BorgWarner, Inc. | 103 | 0.71 | % | 377 | ||||||||
Wyndham Destinations, Inc. | 63 | 0.52 | % | 348 | ||||||||
Allison Transmission Holdings, Inc. | 82 | 0.63 | % | 346 | ||||||||
Aptiv plc | 35 | 0.53 | % | 333 | ||||||||
Royal Caribbean Cruises Ltd. | 17 | 0.36 | % | 316 | ||||||||
Autoliv, Inc. | 46 | 0.62 | % | 309 | ||||||||
Gentherm, Inc. | 78 | 0.55 | % | 264 | ||||||||
Southwest Airlines Co. | 86 | 0.74 | % | 264 | ||||||||
Toll Brothers, Inc. | 70 | 0.44 | % | 184 | ||||||||
AutoZone, Inc. | 2 | 0.38 | % | 160 | ||||||||
PulteGroup, Inc. | 59 | 0.36 | % | 154 | ||||||||
Delta Air Lines, Inc. | 54 | 0.50 | % | 134 | ||||||||
SkyWest, Inc. | 35 | 0.36 | % | 85 | ||||||||
Starbucks Corp. | 20 | 0.28 | % | 74 | ||||||||
Brunswick Corp. | 60 | 0.57 | % | 70 | ||||||||
Extended Stay America, Inc. | 234 | 0.55 | % | 60 | ||||||||
Allegiant Travel Co. — Class A | 10 | 0.28 | % | 51 | ||||||||
United Airlines Holdings, Inc. | 21 | 0.29 | % | 35 | ||||||||
DR Horton, Inc. | 28 | 0.23 | % | 34 | ||||||||
Polaris, Inc. | 25 | 0.40 | % | 8 | ||||||||
Cummins, Inc. | 13 | 0.37 | % | (25 | ) | |||||||
JetBlue Airways Corp. | 79 | 0.24 | % | (29 | ) | |||||||
Mohawk Industries, Inc. | 10 | 0.22 | % | (71 | ) | |||||||
Lennar Corp. — Class A | 34 | 0.30 | % | (98 | ) | |||||||
Goodyear Tire & Rubber Co. | 119 | 0.29 | % | (100 | ) | |||||||
Whirlpool Corp. | 26 | 0.61 | % | (104 | ) | |||||||
General Motors Co. | 56 | 0.33 | % | (116 | ) | |||||||
Cracker Barrel Old Country Store, Inc. | 23 | 0.56 | % | (142 | ) | |||||||
Total Consumer, Cyclical | 6,185 | |||||||||||
Communications | ||||||||||||
Verizon Communications, Inc. | 125 | 1.22 | % | 516 | ||||||||
News Corp. — Class A | 249 | 0.56 | % | 438 | ||||||||
Discovery, Inc. — Class A | 129 | 0.67 | % | 428 | ||||||||
AT&T, Inc. | 165 | 1.03 | % | 290 | ||||||||
TEGNA, Inc. | 127 | 0.34 | % | 218 | ||||||||
Omnicom Group, Inc. | 95 | 1.22 | % | 218 | ||||||||
Scholastic Corp. | 43 | 0.26 | % | 217 | ||||||||
Booking Holdings, Inc. | 1 | 0.33 | % | 106 | ||||||||
Juniper Networks, Inc. | 58 | 0.23 | % | 62 | ||||||||
Yelp, Inc. — Class A | 68 | 0.38 | % | 37 | ||||||||
Alphabet, Inc. — Class C | 1 | 0.21 | % | 24 | ||||||||
AMC Networks, Inc. — Class A | 93 | 0.58 | % | (29 | ) | |||||||
eBay, Inc. | 112 | 0.64 | % | (201 | ) | |||||||
Total Communications | 2,324 | |||||||||||
Financial | ||||||||||||
Weingarten Realty Investors | 200 | 0.99 | % | 473 | ||||||||
Deluxe Corp. | 44 | 0.35 | % | 362 | ||||||||
JPMorgan Chase & Co. | 11 | 0.24 | % | 316 | ||||||||
Brixmor Property Group, Inc. | 176 | 0.60 | % | 262 | ||||||||
Janus Henderson Group plc | 68 | 0.26 | % | 224 | ||||||||
Hartford Financial Services Group, Inc. | 24 | 0.23 | % | 139 | ||||||||
Summit Hotel Properties, Inc. | 208 | 0.41 | % | 126 | ||||||||
Lexington Realty Trust | 572 | 0.97 | % | 123 | ||||||||
M&T Bank Corp. | 9 | 0.24 | % | 64 | ||||||||
Comerica, Inc. | 21 | 0.24 | % | 49 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 163 |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2019 |
SERIES Z (ALPHA OPPORTUNITY SERIES) |
| Shares | Percentage | Value and | |||||||||
Apartment Investment & Management Co. — Class A | 74 | 0.61 | % | $ | 38 | |||||||
Sunstone Hotel Investors, Inc. | 120 | 0.27 | % | (3 | ) | |||||||
Travelers Companies, Inc. | 11 | 0.24 | % | (35 | ) | |||||||
Franklin Resources, Inc. | 101 | 0.42 | % | (111 | ) | |||||||
Equity Commonwealth | 216 | 1.13 | % | (133 | ) | |||||||
Total Financial | 1,894 | |||||||||||
Consumer, Non-cyclical | ||||||||||||
Darling Ingredients, Inc. | 195 | 0.87 | % | 1,640 | ||||||||
CVS Health Corp. | 82 | 0.97 | % | 1,627 | ||||||||
Eli Lilly & Co. | 52 | 1.09 | % | 1,209 | ||||||||
Amgen, Inc. | 27 | 1.04 | % | 1,017 | ||||||||
Ingredion, Inc. | 65 | 0.96 | % | 809 | ||||||||
Sysco Corp. | 64 | 0.87 | % | 707 | ||||||||
Zimmer Biomet Holdings, Inc. | 24 | 0.57 | % | 701 | ||||||||
Kellogg Co. | 84 | 0.92 | % | 646 | ||||||||
Archer-Daniels-Midland Co. | 165 | 1.22 | % | 590 | ||||||||
Merck & Company, Inc. | 70 | 1.01 | % | 545 | ||||||||
Jazz Pharmaceuticals plc | 25 | 0.59 | % | 483 | ||||||||
Medtronic plc | 34 | 0.61 | % | 453 | ||||||||
Becton Dickinson and Co. | 12 | 0.52 | % | 419 | ||||||||
Campbell Soup Co. | 78 | 0.61 | % | 411 | ||||||||
Johnson & Johnson | 33 | 0.77 | % | 344 | ||||||||
Hormel Foods Corp. | 117 | 0.84 | % | 336 | ||||||||
Hologic, Inc. | 73 | 0.61 | % | 330 | ||||||||
Molina Healthcare, Inc. | 14 | 0.30 | % | 317 | ||||||||
Philip Morris International, Inc. | 45 | 0.61 | % | 257 | ||||||||
Baxter International, Inc. | 45 | 0.60 | % | 246 | ||||||||
TrueBlue, Inc. | 92 | 0.35 | % | 237 | ||||||||
Herbalife Nutrition Ltd. | 55 | 0.42 | % | 235 | ||||||||
Thermo Fisher Scientific, Inc. | 7 | 0.36 | % | 226 | ||||||||
Post Holdings, Inc. | 48 | 0.83 | % | 220 | ||||||||
Kimberly-Clark Corp. | 55 | 1.20 | % | 217 | ||||||||
Abbott Laboratories | 42 | 0.58 | % | 175 | ||||||||
Macquarie Infrastructure Corp. | 41 | 0.28 | % | 157 | ||||||||
Procter & Gamble Co. | 32 | 0.64 | % | 120 | ||||||||
Clorox Co. | 17 | 0.42 | % | 117 | ||||||||
Integer Holdings Corp. | 32 | 0.41 | % | 114 | ||||||||
Alexion Pharmaceuticals, Inc. | 22 | 0.38 | % | 111 | ||||||||
General Mills, Inc. | 105 | 0.89 | % | 108 | ||||||||
Innoviva, Inc. | 154 | 0.35 | % | 97 | ||||||||
Molson Coors Beverage Co. — Class B | 106 | 0.91 | % | 89 | ||||||||
Cal-Maine Foods, Inc. | 54 | 0.37 | % | 85 | ||||||||
STERIS plc | 15 | 0.36 | % | 81 | ||||||||
PepsiCo, Inc. | 11 | 0.24 | % | 38 | ||||||||
Cardinal Health, Inc. | 180 | 1.45 | % | 33 | ||||||||
Mondelez International, Inc. — Class A | 35 | 0.31 | % | 18 | ||||||||
TreeHouse Foods, Inc. | 43 | 0.33 | % | (32 | ) | |||||||
McKesson Corp. | 95 | 2.09 | % | (39 | ) | |||||||
United Therapeutics Corp. | 26 | 0.36 | % | (48 | ) | |||||||
Hershey Co. | 10 | 0.23 | % | (69 | ) | |||||||
Gilead Sciences, Inc. | 94 | 0.97 | % | (70 | ) | |||||||
John B Sanfilippo & Son, Inc. | 21 | 0.30 | % | (117 | ) | |||||||
Pfizer, Inc. | 163 | 1.02 | % | (311 | ) | |||||||
B&G Foods, Inc. | 135 | 0.38 | % | (339 | ) | |||||||
JM Smucker Co. | 56 | 0.93 | % | (363 | ) | |||||||
H&R Block, Inc. | 91 | 0.34 | % | (412 | ) | |||||||
Total Consumer, Non-cyclical | 13,765 | |||||||||||
Energy | ||||||||||||
Phillips 66 | 22 | 0.39 | % | 587 | ||||||||
HollyFrontier Corp. | 57 | 0.46 | % | 581 | ||||||||
Devon Energy Corp. | 139 | 0.57 | % | 579 | ||||||||
Valero Energy Corp. | 37 | 0.55 | % | 444 | ||||||||
ConocoPhillips | 44 | 0.45 | % | 342 | ||||||||
ONEOK, Inc. | 21 | 0.25 | % | 117 | ||||||||
Kinder Morgan, Inc. | 136 | 0.46 | % | 60 | ||||||||
Chevron Corp. | 43 | 0.82 | % | (42 | ) | |||||||
Delek US Holdings, Inc. | 76 | 0.41 | % | (166 | ) | |||||||
Exxon Mobil Corp. | 108 | 1.20 | % | (252 | ) | |||||||
CVR Energy, Inc. | 63 | 0.41 | % | (393 | ) | |||||||
Total Energy | 1,857 | |||||||||||
Basic Materials | ||||||||||||
Domtar Corp. | 45 | 0.27 | % | 129 | ||||||||
Technology | ||||||||||||
Skyworks Solutions, Inc. | 14 | 0.27 | % | 656 | ||||||||
Activision Blizzard, Inc. | 36 | 0.34 | % | 243 | ||||||||
Oracle Corp. | 26 | 0.22 | % | (22 | ) | |||||||
Teradata Corp. | 59 | 0.25 | % | (126 | ) | |||||||
Total Technology | 751 | |||||||||||
Total GS Equity Long Custom Basket | $ | 38,469 | ||||||||||
GS EQUITY SHORT CUSTOM BASKET | ||||||||||||
Financial | ||||||||||||
WP Carey, Inc. | 443 | (1.25 | )% | $ | 3,722 | |||||||
Essential Properties Realty Trust, Inc. | 787 | (0.68 | )% | 1,276 | ||||||||
Acadia Realty Trust | 450 | (0.41 | )% | 1,107 | ||||||||
CME Group, Inc. — Class A | 74 | (0.52 | )% | 382 | ||||||||
Northwest Bancshares, Inc. | 689 | (0.40 | )% | 181 |
164 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2019 |
SERIES Z (ALPHA OPPORTUNITY SERIES) |
| Shares | Percentage | Value and | |||||||||
National Storage Affiliates Trust | 301 | (0.35 | )% | $ | 108 | |||||||
UDR, Inc. | 447 | (0.73 | )% | 92 | ||||||||
American Assets Trust, Inc. | 578 | (0.93 | )% | 44 | ||||||||
Capitol Federal Financial, Inc. | 784 | (0.38 | )% | 39 | ||||||||
BancorpSouth Bank | 400 | (0.44 | )% | (99 | ) | |||||||
Camden Property Trust | 155 | (0.57 | )% | (126 | ) | |||||||
American Campus Communities, Inc. | 726 | (1.19 | )% | (214 | ) | |||||||
Atlantic Union Bankshares Corp. | 232 | (0.30 | )% | (269 | ) | |||||||
Armada Hoffler Properties, Inc. | 1,216 | (0.78 | )% | (320 | ) | |||||||
Global Net Lease, Inc. | 480 | (0.34 | )% | (325 | ) | |||||||
BankUnited, Inc. | 179 | (0.23 | )% | (548 | ) | |||||||
CenterState Bank Corp. | 403 | (0.35 | )% | (603 | ) | |||||||
Reinsurance Group of America, Inc. — Class A | 186 | (1.06 | )% | (633 | ) | |||||||
Realty Income Corp. | 463 | (1.19 | )% | (648 | ) | |||||||
Intercontinental Exchange, Inc. | 302 | (0.98 | )% | (713 | ) | |||||||
RLI Corp. | 355 | (1.12 | )% | (811 | ) | |||||||
Douglas Emmett, Inc. | 305 | (0.47 | )% | (921 | ) | |||||||
Crown Castle International Corp. | 156 | (0.77 | )% | (975 | ) | |||||||
RenaissanceRe Holdings Ltd. | 107 | (0.73 | )% | (999 | ) | |||||||
STAG Industrial, Inc. | 550 | (0.61 | )% | (1,002 | ) | |||||||
UMB Financial Corp. | 158 | (0.38 | )% | (1,007 | ) | |||||||
QTS Realty Trust, Inc. — Class A | 308 | (0.58 | )% | (1,083 | ) | |||||||
Synovus Financial Corp. | 277 | (0.38 | )% | (1,092 | ) | |||||||
Healthcare Realty Trust, Inc. | 916 | (1.07 | )% | (1,143 | ) | |||||||
Mastercard, Inc. — Class A | 40 | (0.42 | )% | (1,161 | ) | |||||||
Washington Real Estate Investment Trust | 660 | (0.67 | )% | (1,173 | ) | |||||||
Brown & Brown, Inc. | 776 | (1.07 | )% | (1,270 | ) | |||||||
Columbia Financial, Inc. | 640 | (0.38 | )% | (1,286 | ) | |||||||
Valley National Bancorp | 1,428 | (0.57 | )% | (1,451 | ) | |||||||
STORE Capital Corp. | 712 | (0.93 | )% | (1,662 | ) | |||||||
People’s United Financial, Inc. | 1,634 | (0.96 | )% | (1,758 | ) | |||||||
Glacier Bancorp, Inc. | 313 | (0.50 | )% | (1,822 | ) | |||||||
Agree Realty Corp. | 504 | (1.24 | )% | (1,880 | ) | |||||||
Everest Re Group Ltd. | 99 | (0.96 | )% | (2,104 | ) | |||||||
SBA Communications Corp. | 125 | (1.05 | )% | (2,215 | ) | |||||||
Equinix, Inc. | 29 | (0.59 | )% | (2,304 | ) | |||||||
American Tower Corp. — Class A | 155 | (1.24 | )% | (2,330 | ) | |||||||
Old National Bancorp | 1,504 | (0.96 | )% | (2,463 | ) | |||||||
Alexandria Real Estate Equities, Inc. | 279 | (1.57 | )% | (2,469 | ) | |||||||
EastGroup Properties, Inc. | 157 | (0.73 | )% | (2,856 | ) | |||||||
BOK Financial Corp. | 286 | (0.87 | )% | (2,992 | ) | |||||||
Athene Holding Ltd. — Class A | 392 | (0.64 | )% | (3,147 | ) | |||||||
Arthur J Gallagher & Co. | 397 | (1.32 | )% | (3,358 | ) | |||||||
Easterly Government Properties, Inc. | 1,872 | (1.55 | )% | (3,617 | ) | |||||||
Fifth Third Bancorp | 864 | (0.93 | )% | (3,966 | ) | |||||||
Hudson Pacific Properties, Inc. | 1,241 | (1.63 | )% | (4,159 | ) | |||||||
First Republic Bank | 263 | (1.08 | )% | (4,598 | ) | |||||||
Terreno Realty Corp. | 711 | (1.34 | )% | (5,027 | ) | |||||||
Sun Communities, Inc. | 266 | (1.39 | )% | (5,711 | ) | |||||||
Rexford Industrial Realty, Inc. | 943 | (1.50 | )% | (5,828 | ) | |||||||
Total Financial | (79,187 | ) | ||||||||||
Technology | ||||||||||||
Appian Corp. | 113 | (0.15 | )% | 1,675 | ||||||||
Elastic N.V. | 51 | (0.11 | )% | 1,414 | ||||||||
Workday, Inc. — Class A | 29 | (0.17 | )% | 1,049 | ||||||||
Alteryx, Inc. — Class A | 44 | (0.15 | )% | 879 | ||||||||
Veeva Systems, Inc. — Class A | 32 | (0.16 | )% | 715 | ||||||||
MongoDB, Inc. | 46 | (0.21 | )% | 697 | ||||||||
Atlassian Corporation plc — Class A | 36 | (0.15 | )% | 471 | ||||||||
Aspen Technology, Inc. | 40 | (0.17 | )% | 357 | ||||||||
ServiceNow, Inc. | 19 | (0.19 | )% | 209 | ||||||||
Zscaler, Inc. | 84 | (0.14 | )% | 159 | ||||||||
Manhattan Associates, Inc. | 50 | (0.14 | )% | 131 | ||||||||
Coupa Software, Inc. | 35 | (0.18 | )% | 87 | ||||||||
Intuit, Inc. | 24 | (0.22 | )% | 25 | ||||||||
Twilio, Inc. — Class A | 39 | (0.13 | )% | (5 | ) | |||||||
LivePerson, Inc. | 106 | (0.14 | )% | (88 | ) | |||||||
Workiva, Inc. | 93 | (0.14 | )% | (117 | ) | |||||||
Paychex, Inc. | 184 | (0.55 | )% | (184 | ) | |||||||
HubSpot, Inc. | 70 | (0.39 | )% | (251 | ) | |||||||
Fair Isaac Corp. | 14 | (0.18 | )% | (337 | ) | |||||||
Appfolio, Inc. — Class A | 37 | (0.14 | )% | (381 | ) | |||||||
Guidewire Software, Inc. | 41 | (0.16 | )% | (425 | ) | |||||||
Accenture plc — Class A | 33 | (0.24 | )% | (503 | ) | |||||||
PROS Holdings, Inc. | 72 | (0.15 | )% | (560 | ) | |||||||
Tyler Technologies, Inc. | 12 | (0.13 | )% | (592 | ) | |||||||
Autodesk, Inc. | 40 | (0.26 | )% | (708 | ) | |||||||
Paycom Software, Inc. | 21 | (0.19 | )% | (756 | ) | |||||||
Smartsheet, Inc. — Class A | 170 | (0.27 | )% | (851 | ) | |||||||
ANSYS, Inc. | 17 | (0.15 | )% | (875 | ) | |||||||
ExlService Holdings, Inc. | 288 | (0.70 | )% | (931 | ) | |||||||
Five9, Inc. | 59 | (0.14 | )% | (971 | ) | |||||||
Science Applications International Corp. | 346 | (1.05 | )% | (1,358 | ) |
SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 165 |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2019 |
SERIES Z (ALPHA OPPORTUNITY SERIES) |
| Shares | Percentage | Value and | |||||||||
Monolithic Power Systems, Inc. | 30 | (0.19 | )% | $ | (1,406 | ) | ||||||
EPAM Systems, Inc. | 84 | (0.62 | )% | (1,487 | ) | |||||||
Broadcom, Inc. | 38 | (0.42 | )% | (1,612 | ) | |||||||
DocuSign, Inc. | 138 | (0.36 | )% | (1,806 | ) | |||||||
Adobe, Inc. | 51 | (0.59 | )% | (2,032 | ) | |||||||
Black Knight, Inc. | 394 | (0.89 | )% | (2,080 | ) | |||||||
Genpact Ltd. | 548 | (0.81 | )% | (2,153 | ) | |||||||
salesforce.com, Inc. | 174 | (0.99 | )% | (2,395 | ) | |||||||
ACI Worldwide, Inc. | 564 | (0.75 | )% | (2,417 | ) | |||||||
CACI International, Inc. — Class A | 128 | (1.12 | )% | (3,296 | ) | |||||||
Envestnet, Inc. | 257 | (0.62 | )% | (3,867 | ) | |||||||
Splunk, Inc. | 126 | (0.66 | )% | (3,924 | ) | |||||||
Total Technology | (30,500 | ) | ||||||||||
Basic Materials | ||||||||||||
WR Grace & Co. | 341 | (0.83 | )% | 1,598 | ||||||||
Allegheny Technologies, Inc. | 420 | (0.30 | )% | 1,432 | ||||||||
Carpenter Technology Corp. | 345 | (0.60 | )% | (121 | ) | |||||||
Balchem Corp. | 249 | (0.88 | )% | (1,240 | ) | |||||||
Southern Copper Corp. | 284 | (0.42 | )% | (1,556 | ) | |||||||
Air Products & Chemicals, Inc. | 95 | (0.78 | )% | (1,842 | ) | |||||||
Compass Minerals International, Inc. | 404 | (0.86 | )% | (1,846 | ) | |||||||
Steel Dynamics, Inc. | 329 | (0.39 | )% | (1,926 | ) | |||||||
Reliance Steel & Aluminum Co. | 103 | (0.43 | )% | (2,298 | ) | |||||||
Commercial Metals Co. | 483 | (0.38 | )% | (2,359 | ) | |||||||
Kaiser Aluminum Corp. | 148 | (0.57 | )% | (2,551 | ) | |||||||
Freeport-McMoRan, Inc. | 1,227 | (0.56 | )% | (2,927 | ) | |||||||
Linde plc | 225 | (1.67 | )% | (3,492 | ) | |||||||
PPG Industries, Inc. | 197 | (0.92 | )% | (3,572 | ) | |||||||
Sherwin-Williams Co. | 45 | (0.92 | )% | (4,218 | ) | |||||||
RPM International, Inc. | 311 | (0.83 | )% | (4,891 | ) | |||||||
Total Basic Materials | (31,809 | ) | ||||||||||
Communications | ||||||||||||
8x8, Inc. | 721 | (0.46 | )% | 1,458 | ||||||||
Okta, Inc. | 52 | (0.21 | )% | 737 | ||||||||
VeriSign, Inc. | 26 | (0.17 | )% | 256 | ||||||||
Zendesk, Inc. | 210 | (0.56 | )% | (96 | ) | |||||||
Proofpoint, Inc. | 146 | (0.59 | )% | (356 | ) | |||||||
Trade Desk, Inc. — Class A | 17 | (0.15 | )% | (465 | ) | |||||||
Anaplan, Inc. | 96 | (0.18 | )% | (475 | ) | |||||||
Charter Communications, Inc. — Class A | 20 | (0.34 | )% | (787 | ) | |||||||
RingCentral, Inc. — Class A | 28 | (0.16 | )% | (1,146 | ) | |||||||
Q2 Holdings, Inc. | 233 | (0.66 | )% | (1,409 | ) | |||||||
Palo Alto Networks, Inc. | 62 | (0.50 | )% | (1,715 | ) | |||||||
Total Communications | (3,998 | ) | ||||||||||
Consumer, Non-cyclical | ||||||||||||
Rollins, Inc. | 250 | (0.29 | )% | 1,095 | ||||||||
Verisk Analytics, Inc. — Class A | 67 | (0.35 | )% | 559 | ||||||||
Gartner, Inc. | 109 | (0.59 | )% | 448 | ||||||||
Avalara, Inc. | 53 | (0.14 | )% | 438 | ||||||||
Glaukos Corp. | 60 | (0.11 | )% | 301 | ||||||||
FleetCor Technologies, Inc. | 65 | (0.65 | )% | 282 | ||||||||
Guardant Health, Inc. | 63 | (0.17 | )% | 173 | ||||||||
Bright Horizons Family Solutions, Inc. | 108 | (0.57 | )% | 14 | ||||||||
Booz Allen Hamilton Holding Corp. | 86 | (0.21 | )% | (118 | ) | |||||||
Paylocity Holding Corp. | 29 | (0.12 | )% | (434 | ) | |||||||
LiveRamp Holdings, Inc. | 88 | (0.15 | )% | (437 | ) | |||||||
Illumina, Inc. | 16 | (0.19 | )% | (562 | ) | |||||||
Intuitive Surgical, Inc. | 9 | (0.19 | )% | (594 | ) | |||||||
ResMed, Inc. | 26 | (0.14 | )% | (647 | ) | |||||||
Viad Corp. | 256 | (0.60 | )% | (731 | ) | |||||||
PayPal Holdings, Inc. | 242 | (0.91 | )% | (933 | ) | |||||||
Euronet Worldwide, Inc. | 95 | (0.52 | )% | (1,140 | ) | |||||||
MarketAxess Holdings, Inc. | 28 | (0.37 | )% | (1,188 | ) | |||||||
IHS Markit Ltd. | 89 | (0.23 | )% | (1,398 | ) | |||||||
WEX, Inc. | 160 | (1.17 | )% | (2,138 | ) | |||||||
Brink’s Co. | 218 | (0.69 | )% | (2,327 | ) | |||||||
Avery Dennison Corp. | 210 | (0.96 | )% | (4,164 | ) | |||||||
Total Consumer, Non-cyclical | (13,501 | ) | ||||||||||
Industrial | ||||||||||||
Materion Corp. | 386 | (0.80 | )% | 2,217 | ||||||||
HEICO Corp. | 74 | (0.30 | )% | 1,223 | ||||||||
Ball Corp. | 291 | (0.66 | )% | 604 | ||||||||
Roper Technologies, Inc. | 48 | (0.59 | )% | 532 | ||||||||
Exponent, Inc. | 175 | (0.42 | )% | 237 | ||||||||
Universal Display Corp. | 24 | (0.17 | )% | (276 | ) | |||||||
Casella Waste Systems, Inc. — Class A | 222 | (0.36 | )% | (608 | ) | |||||||
Vulcan Materials Co. | 186 | (0.94 | )% | (1,222 | ) | |||||||
Sonoco Products Co. | 226 | (0.49 | )% | (1,337 | ) | |||||||
Westinghouse Air Brake Technologies Corp. | 142 | (0.39 | )% | (1,752 | ) | |||||||
Worthington Industries, Inc. | 540 | (0.80 | )% | (2,916 | ) | |||||||
Martin Marietta Materials, Inc. | 103 | (1.01 | )% | (4,806 | ) | |||||||
TransDigm Group, Inc. | 79 | (1.55 | )% | (7,335 | ) | |||||||
Total Industrial | (15,439 | ) | ||||||||||
166 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2019 |
SERIES Z (ALPHA OPPORTUNITY SERIES) |
| Shares | Percentage | Value and | |||||||||
Utilities | ||||||||||||
California Water Service Group | 186 | (0.33 | )% | $ | 274 | |||||||
PNM Resources, Inc. | 193 | (0.34 | )% | 147 | ||||||||
Eversource Energy | 116 | (0.34 | )% | (77 | ) | |||||||
WEC Energy Group, Inc. | 107 | (0.34 | )% | (153 | ) | |||||||
Sempra Energy | 43 | (0.23 | )% | (220 | ) | |||||||
Alliant Energy Corp. | 178 | (0.34 | )% | (322 | ) | |||||||
South Jersey Industries, Inc. | 306 | (0.35 | )% | (346 | ) | |||||||
MGE Energy, Inc. | 84 | (0.23 | )% | (352 | ) | |||||||
American States Water Co. | 184 | (0.56 | )% | (472 | ) | |||||||
American Water Works Company, Inc. | 134 | (0.57 | )% | (624 | ) | |||||||
Atmos Energy Corp. | 86 | (0.34 | )% | (788 | ) | |||||||
NextEra Energy, Inc. | 41 | (0.35 | )% | (1,648 | ) | |||||||
Total Utilities | (4,581 | ) | ||||||||||
Consumer, Cyclical | ||||||||||||
Wingstop, Inc. | 183 | (0.55 | )% | 1,411 | ||||||||
McDonald’s Corp. | 48 | (0.33 | )% | 384 | ||||||||
Toro Co. | 274 | (0.76 | )% | (1,951 | ) | |||||||
Total Consumer, Cyclical | (156 | ) | ||||||||||
Energy | ||||||||||||
Warrior Met Coal, Inc. | 507 | (0.37 | )% | (839 | ) | |||||||
Total GS Equity Short Custom Basket | $ | (180,010 | ) |
SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 167 |
SERIES Z (ALPHA OPPORTUNITY SERIES) |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2019 |
Assets: | ||||
Investments, at value (cost $6,221,482) | $ | 6,633,524 | ||
Unrealized appreciation on OTC swap agreements | 79,777 | |||
Prepaid expenses | 2,994 | |||
Receivables: | ||||
Dividends | 10,565 | |||
Investment Adviser | 5,250 | |||
Interest | 135 | |||
Fund shares sold | 8 | |||
Total assets | 6,732,253 | |||
Liabilities: | ||||
Overdraft due to custodian bank | 533 | |||
Unrealized depreciation on OTC swap agreements | 414,939 | |||
Payable for: | ||||
Professional fees | 27,891 | |||
Swap settlement | 26,882 | |||
Transfer agent/maintenance fees | 4,308 | |||
Fund shares redeemed | 3,167 | |||
Trustees’ fees* | 2,253 | |||
Distribution and service fees | 1,290 | |||
Miscellaneous | 21,948 | |||
Total liabilities | 503,211 | |||
Commitments and contingent liabilities (Note 14) | — | |||
Net assets | $ | 6,229,042 | ||
Net assets consist of: | ||||
Paid in capital | $ | 7,675,188 | ||
Total distributable earnings (loss) | (1,446,146 | ) | ||
Net assets | $ | 6,229,042 | ||
Capital shares outstanding | 418,968 | |||
Net asset value per share | $ | 14.87 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2019 |
Investment Income: | ||||
Dividends | $ | 169,504 | ||
Interest | 4,117 | |||
Total investment income | 173,621 | |||
Expenses: | ||||
Management fees | 63,992 | |||
Distribution and service fees | 17,776 | |||
Transfer agent/maintenance fees | 25,211 | |||
Professional fees | 42,082 | |||
Custodian fees | 29,944 | |||
Fund accounting/administration fees | 24,999 | |||
Trustees’ fees* | 18,355 | |||
Miscellaneous | 28,038 | |||
Total expenses | 250,397 | |||
Less: | ||||
Expenses reimbursed by Adviser | (46,826 | ) | ||
Expenses waived by Adviser | (61,389 | ) | ||
Earnings credits applied | (85 | ) | ||
Total waived/reimbursed expenses | (108,300 | ) | ||
Net expenses | 142,097 | |||
Net investment income | 31,524 | |||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments | (84,703 | ) | ||
Swap agreements | (852,241 | ) | ||
Net realized loss | (936,944 | ) | ||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | 1,409,739 | |||
Swap agreements | (714,084 | ) | ||
Net change in unrealized appreciation (depreciation) | 695,655 | |||
Net realized and unrealized loss | (241,289 | ) | ||
Net decrease in net assets resulting from operations | $ | (209,765 | ) |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
168 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SERIES Z (ALPHA OPPORTUNITY SERIES) |
STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | ||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income | $ | 31,524 | $ | 21,761 | ||||
Net realized loss on investments | (936,944 | ) | (604,305 | ) | ||||
Net change in unrealized appreciation (depreciation) on investments | 695,655 | (704,773 | ) | |||||
Net decrease in net assets resulting from operations | (209,765 | ) | (1,287,317 | ) | ||||
Distributions to shareholders | (11,658 | ) | (1,239,887 | ) | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 182,878 | 242,866 | ||||||
Distributions reinvested | 11,658 | 1,239,887 | ||||||
Cost of shares redeemed | (1,800,412 | ) | (3,215,853 | ) | ||||
Net decrease from capital share transactions | (1,605,876 | ) | (1,733,100 | ) | ||||
Net decrease in net assets | (1,827,299 | ) | (4,260,304 | ) | ||||
Net assets: | ||||||||
Beginning of year | 8,056,341 | 12,316,645 | ||||||
End of year | $ | 6,229,042 | $ | 8,056,341 | ||||
Capital share activity: | ||||||||
Shares sold | 12,241 | 14,248 | ||||||
Shares issued from reinvestment of distributions | 804 | 78,723 | ||||||
Shares redeemed | (121,599 | ) | (179,652 | ) | ||||
Net decrease in shares | (108,554 | ) | (86,681 | ) |
SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 169 |
SERIES Z (ALPHA OPPORTUNITY SERIES) |
FINANCIAL HIGHLIGHTS |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 15.27 | $ | 20.05 | $ | 18.70 | $ | 16.59 | $ | 27.33 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | .07 | .04 | (.04 | ) | (.21 | ) | (.43 | ) | ||||||||||||
Net gain (loss) on investments (realized and unrealized) | (.45 | ) | (2.28 | ) | 1.39 | 2.32 | (.69 | ) | ||||||||||||
Total from investment operations | (.38 | ) | (2.24 | ) | 1.35 | 2.11 | (1.12 | ) | ||||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | (.02 | ) | — | — | — | — | ||||||||||||||
Net realized gains | — | (2.54 | ) | — | — | (9.62 | ) | |||||||||||||
Total distributions | (.02 | ) | (2.54 | ) | — | — | (9.62 | ) | ||||||||||||
Net asset value, end of period | $ | 14.87 | $ | 15.27 | $ | 20.05 | $ | 18.70 | $ | 16.59 | ||||||||||
| ||||||||||||||||||||
Total Returnb | (2.45 | %) | (11.57 | %) | 7.22 | % | 12.79 | % | (4.69 | %) | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 6,229 | $ | 8,056 | $ | 12,317 | $ | 13,192 | $ | 12,548 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | 0.44 | % | 0.22 | % | (0.23 | %) | (1.18 | %) | (2.03 | %) | ||||||||||
Total expenses | 3.52 | % | 2.47 | % | 2.48 | % | 2.92 | % | 3.54 | % | ||||||||||
Net expensesc,d,e | 2.00 | % | 1.99 | % | 2.22 | % | 2.92 | % | 3.46 | % | ||||||||||
Portfolio turnover rate | 172 | % | 219 | % | 182 | % | 198 | % | 446 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not take into account any of the expenses associated with an investment in variable insurance products. If total return had taken into account these expenses, performance would have been lower. Shares of a series of Guggenheim Variable Funds Trust are available only through the purchase of such products. |
c | Net expense information reflects the expense ratios after expense waivers and reimbursements, as applicable. |
d | Net expenses may include expenses that are excluded from the expense limitation agreement. Excluding these expenses, the net expense ratios for the years would be: |
12/31/19 | 12/31/18 | 12/31/17 | 12/31/16 | 12/31/15 | |
2.00% | 1.99% | 2.13% | 2.35% | 2.35% |
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 was as follows: |
12/31/19 | 12/31/18 | 12/31/17 | 12/31/16 | |
— | — | 0.15% | — |
170 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
NOTES TO FINANCIAL STATEMENTS |
Note 1 – Organization and Significant Accounting Policies
Organization
Guggenheim Variable Funds Trust (the “Trust”), a Delaware statutory trust, is registered with the SEC under the Investment Company Act of 1940 (“1940 Act”), as an open-ended investment company of the series type. Each series, in effect, is representing a separate fund (each, a “Fund”). The Trust is authorized to issue an unlimited number of no par value shares. The Trust accounts for the assets of each Fund separately. At December 31, 2019, the Trust consisted of fourteen funds. The Trust offers shares of the funds to insurance companies for their variable annuity and variable life insurance contracts.
This report covers the following funds (collectively, the “Funds”):
Fund Name | Investment |
Series A (StylePlus—Large Core Series) | Diversified |
Series B (Large Cap Value Series) | Diversified |
Series D (World Equity Income Series) | Diversified |
Series E (Total Return Bond Series) | Diversified |
Series F (Floating Rate Strategies Series) | Diversified |
Series J (StylePlus—Mid Growth Series) | Diversified |
Series N (Managed Asset Allocation Series) | Diversified |
Series O (All Cap Value Series) | Diversified |
Series P (High Yield Series) | Diversified |
Series Q (Small Cap Value Series) | Diversified |
Series V (SMid Cap Value Series) (formerly, Mid Cap Value Series) | Diversified |
Series X (StylePlus—Small Growth Series) | Diversified |
Series Y (StylePlus—Large Growth Series) | Diversified |
Series Z (Alpha Opportunity Series) | Diversified |
Security Investors, LLC and Guggenheim Partners Investment Management, LLC (“GPIM”), which operate under the name Guggenheim Investments (“GI”), provide advisory services. GPIM provides advisory services to Series F (Floating Rate Strategies Series) and Security Investors, LLC provides advisory services to the remaining Funds covered in this report. Guggenheim Funds Distributors, LLC (“GFD”) acts as principal underwriter for the Trust. GI and GFD are affiliated entities.
Significant Accounting Policies
The Funds operate as investment companies and, accordingly, follow the investment company accounting and reporting guidance of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification Topic 946 Financial Services – Investment Companies.
The following significant accounting policies are in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”) and are consistently followed by the Trust. This requires management to make estimates and assumptions that affect the reported amount of assets and liabilities, contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. All time references are based on Eastern Time.
The net asset value per share (“NAV”) of a fund is calculated by dividing the market value of a fund’s securities and other assets, less all liabilities, by the number of outstanding shares of that fund.
(a) Valuation of Investments
The Board of Trustees of the Funds (the “Board”) has adopted policies and procedures for the valuation of the Funds’ investments (the “Valuation Procedures”). Pursuant to the Valuation Procedures, the Board has delegated to a valuation committee, consisting of representatives from Guggenheim’s investment management, fund administration, legal and compliance departments (the “Valuation Committee”), the day-to-day responsibility for implementing the Valuation Procedures, including, under most circumstances, the responsibility for determining the fair value of the Funds’ securities and/or other assets.
Valuations of the Funds’ securities and other assets are supplied primarily by pricing services appointed pursuant to the processes set forth in the Valuation Procedures. The Valuation Committee convenes monthly, or more frequently as needed, to review the valuation of all assets which have been fair valued for reasonableness. The Funds’ officers, through the Valuation Committee and consistent with the monitoring and review responsibilities set forth in the Valuation Procedures, regularly review procedures used and valuations provided by the pricing services.
If the pricing service cannot or does not provide a valuation for a particular investment or such valuation is deemed unreliable, such investment is fair valued by the Valuation Committee.
Equity securities listed or traded on a recognized U.S. securities exchange or the National Association of Securities Dealers Automated Quotations (“NASDAQ”) National Market System shall generally be valued on the basis of the last sale price on the primary U.S. exchange or market on which the security is listed or traded; provided, however, that securities listed on NASDAQ will be valued at the NASDAQ Official Closing Price, which may not necessarily represent the last sale price. If there is no sale on the valuation date, exchange-traded U.S. equity securities will be valued on the basis of the last bid price.
Generally, trading in foreign securities markets is substantially completed each day at various times prior to the close of the New York Stock Exchange (“NYSE”). The values of foreign securities are
THE GUGGENHEIM FUNDS ANNUAL REPORT | 171 |
NOTES TO FINANCIAL STATEMENTS (continued) |
determined as of the close of such foreign markets or the close of the NYSE, if earlier. All investments quoted in foreign currencies are valued in U.S. dollars on the basis of the foreign currency exchange rates prevailing at the close of U.S. business at 4:00 p.m. Investments in foreign securities may involve risks not present in domestic investments. The Valuation Committee will determine the current value of such foreign securities by taking into consideration certain factors which may include those discussed above, as well as the following factors, among others: the value of the securities traded on other foreign markets, ADR trading, closed-end fund trading, foreign currency exchange activity, and the trading prices of financial products that are tied to foreign securities. In addition, under the Valuation Procedures, the Valuation Committee and GI are authorized to use prices and other information supplied by a third party pricing vendor in valuing foreign securities.
Open-end investment companies are valued at their NAV as of the close of business, on the valuation date. Exchange-traded funds and closed-end investment companies are valued at the last quoted sale price.
U.S. Government securities are valued by independent pricing services, the last traded fill price, or at the reported bid price at the close of business.
Repurchase agreements are generally valued at amortized cost, provided such amounts approximate market value.
Debt securities with a maturity of greater than 60 days at acquisition are valued at prices that reflect broker-dealer supplied valuations or are obtained from independent pricing services, which may consider the trade activity, treasury spreads, yields or price of bonds of comparable quality, coupon, maturity, and type, as well as prices quoted by dealers who make markets in such securities. Short-term debt securities with a maturity of 60 days or less at acquisition are valued at amortized cost, provided such amount approximates market value.
Typically, loans are valued using information provided by an independent third party pricing service that uses broker quotes, among other inputs. If the pricing service cannot or does not provide a valuation for a particular loan, or such valuation is deemed unreliable, such investment is valued based on a quote from a broker-dealer or is fair valued by the Valuation Committee.
Exchange-traded options are valued at the mean of the bid and ask prices on the principal exchange on which they are traded. Over-the-counter (“OTC”) options are valued using a price provided by a pricing service.
The value of futures contracts is accounted for using the unrealized appreciation or depreciation on the contracts that is determined by marking the contracts to their current realized settlement prices. Financial futures contracts are valued at the 4:00 p.m. price on the valuation date. In the event that the exchange for a specific futures contract closes earlier than 4:00 p.m., the futures contract is valued at the official settlement price of the exchange. However, the underlying securities from which the futures contract value is derived are monitored until 4:00 p.m. to determine if fair valuation would provide a more accurate valuation.
The value of interest rate swap agreements entered into by a fund is accounted for using the unrealized appreciation or depreciation on the agreements that is determined using the previous day’s Chicago Mercantile Exchange close price, adjusted for the current day’s spreads.
The values of other swap agreements entered into by a fund are accounted for using the unrealized appreciation or depreciation on the agreements that are determined by marking the agreements to the last quoted value of the index or the underlying position that the swaps pertain to at the close of the NYSE.
Forward foreign currency exchange contracts are valued daily based on the applicable exchange rate of the underlying currency.
Investments for which market quotations are not readily available are fair-valued as determined in good faith by GI subject to review and approval by the Valuation Committee, pursuant to methods established or ratified by the Board. Valuations in accordance with these methods are intended to reflect each security’s (or asset’s or liability’s) “fair value”. Each such determination is based on a consideration of all relevant factors, which are likely to vary from one pricing context to another. Examples of such factors may include, but are not limited to market prices; sale prices; broker quotes; and models which derive prices based on inputs such as prices of securities with comparable maturities and characteristics, or based on inputs such as anticipated cash flows or collateral, spread over U.S. Treasury securities, and other information analysis.
In connection with futures contracts and other derivative investments, such factors may include obtaining information as to how (a) these contracts and other derivative investments trade in the futures or other derivative markets, respectively, and (b) the securities underlying these contracts and other derivative investments trade in the cash market.
(b) U.S. Government and Agency Obligations
Certain U.S. Government and Agency Obligations are traded on a discount basis; the interest rates shown on the Schedules of Investments reflect the effective rates paid at the time of purchase by the Funds. Other securities bear interest at the rates shown, payable at fixed dates through maturity.
172 | THE GUGGENHEIM FUNDS ANNUAL REPORT |
NOTES TO FINANCIAL STATEMENTS (continued) |
Inflation-Indexed bonds are fixed-income securities whose principal value is periodically adjusted to the rate of inflation. The interest rate on these securities is generally fixed at issuance at a rate lower than typical bonds. Over the life of an inflation-indexed bond however, interest will be paid based on a principal value which is adjusted for inflation. Any increase in the principal amount of an inflation-indexed bond is recognized as a component of interest on the Statements of Operations, even though principal is not received until maturity.
(c) Senior Floating Rate Interests and Loan Investments
Senior floating rate interests in which the Funds invest generally pay interest rates which are periodically adjusted by reference to a base short-term floating rate, plus a premium. These base lending rates are generally (i) the lending rate offered by one or more major European banks, such as the one-month or three-month London Inter-Bank Offered Rate (“LIBOR”), (ii) the prime rate offered by one or more major United States banks, or (iii) the bank’s certificate of deposit rate. Senior floating rate interests often require prepayments from excess cash flows or permit the borrower to repay at its election. The rate at which the borrower repays cannot be predicted with accuracy. As a result, the actual remaining maturity may be substantially less than the stated maturities disclosed in the Funds’ Schedules of Investments. The interest rate indicated is the rate in effect at December 31, 2019.
The Funds invest in loans and other similar debt obligations (“obligations”). A portion of the Funds’ investments in these obligations is sometimes referred to as “covenant lite” loans or obligations (“covenant lite obligations”), which are obligations that lack covenants or possess fewer or less restrictive covenants or constraints on borrowers than certain other types of obligations. The Funds may also obtain exposure to covenant lite obligations through investment in securitization vehicles and other structured products. In recent market conditions, many new or reissued obligations have not featured traditional covenants, which are intended to protect lenders and investors by (i) imposing certain restrictions or other limitations on a borrower’s operations or assets or (ii) providing certain rights to lenders. The Funds may have fewer rights with respect to covenant lite obligations, including fewer protections against the possibility of default and fewer remedies in the event of default. As a result, investments in (or exposure to) covenant lite obligations are subject to more risk than investments in (or exposure to) certain other types of obligations. The Funds are subject to other risks associated with investments in (or exposure to) obligations, including that obligations may not be considered “securities” and, as a result, the Funds may not be entitled to rely on the anti-fraud protections under the federal securities laws and instead may have to resort to state law and direct claims.
(d) Interests in When-Issued Securities
The Funds may purchase and sell interests in securities on a when-issued and delayed delivery basis, with payment and delivery scheduled for a future date. No income accrues to the Funds on such interests or securities in connection with such transactions prior to the date the Funds actually take delivery of such interests or securities. These transactions are subject to market fluctuations and are subject to the risk that the value at delivery may be more or less than the trade date purchase price. Although the Funds will generally purchase these securities with the intention of acquiring such securities, they may sell such securities before the settlement date.
(e) Options
Upon the purchase of an option, the premium paid is recorded as an investment, the value of which is marked-to-market daily. If a purchased option expires, the Fund realizes a loss in the amount of the cost of the option. When the Fund enters into a closing sale transaction, it realizes a gain or loss depending on whether the proceeds from the closing sale transaction are greater or less than the cost of the option. If the Fund exercises a put option, it realizes a gain or loss from the sale of the underlying security and the proceeds from such sale will be decreased by the premium originally paid. When the Fund exercises a call option, the cost of the security purchased by the Fund upon exercise increases by the premium originally paid.
When the Fund writes (sells) an option, an amount equal to the premium received is entered in that Fund’s accounting records as an asset and equivalent liability. The amount of the liability is subsequently marked-to-market to reflect the current value of the option written. When a written option expires, or if the Fund enters into a closing purchase transaction, it realizes a gain (or loss if the cost of a closing purchase transaction exceeds the premium received when the option was sold).
(f) Futures Contracts
Upon entering into a futures contract, a Fund deposits and maintains as collateral such initial margin as required by the exchange on which the transaction is affected. Pursuant to the contract, the Fund agrees to receive from or pay to the broker an amount of cash equal to the daily fluctuation in value of the contract. Such receipts or payments are known as variation margin and are recorded by the Fund as unrealized appreciation or depreciation. When the contract is closed, the Fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed.
THE GUGGENHEIM FUNDS ANNUAL REPORT | 173 |
NOTES TO FINANCIAL STATEMENTS (continued) |
(g) Swap Agreements
Swap agreements are marked-to-market daily and the change, if any, is recorded as unrealized appreciation or depreciation. Payments received or made as a result of an agreement or termination of an agreement are recognized as realized gains or losses.
Upon entering into certain centrally-cleared swap transactions, a Fund is required to deposit with its clearing broker an amount of cash or securities as an initial margin. Subsequent variation margin receipts or payments are received or made by the Fund depending on fluctuations in the fair value of the reference entity and are recorded by the Fund as unrealized appreciation or depreciation. When the contract is closed, the Fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed.
Upfront payments received or made by a Fund on credit default swap agreements and interest rate swap agreements are amortized over the expected life of the agreement. Periodic payments received or paid by a Fund are recorded as realized gains or losses. Payments received or made as a result of a credit event or termination of the contract are recognized, net of a proportional amount of the upfront payment, as realized gains or losses.
(h) Currency Translations
The accounting records of the Funds are maintained in U.S. dollars. All assets and liabilities initially expressed in foreign currencies are converted into U.S. dollars at prevailing exchange rates. Purchases and sales of investment securities, dividend and interest income, and certain expenses are translated at the rates of exchange prevailing on the respective dates of such transactions. Changes in the relationship of these foreign currencies to the U.S. dollar can significantly affect the value of the investments and earnings of the Funds. Foreign investments may also subject the Funds to foreign government exchange restrictions, expropriation, taxation, or other political, social or economic developments, all of which could affect the market and/or credit risk of the investments.
The Funds do not isolate that portion of the results of operations resulting from changes in the foreign exchange rates on investments from the fluctuations arising from changes in the market prices of securities held. Such fluctuations are included with the net realized gain or loss and unrealized appreciation or depreciation on investments.
Reported net realized foreign exchange gains and losses arise from sales of foreign currencies and currency gains or losses realized between the trade and settlement dates on investment transactions. Net unrealized appreciation and depreciation arise from changes in the fair values of assets and liabilities other than investments in securities at the fiscal period end, resulting from changes in exchange rates.
(i) Forward Foreign Currency Exchange Contracts
The change in value of a forward foreign currency exchange contract is recorded as unrealized appreciation or depreciation until the contract is closed. When the contract is closed, the Fund records a realized gain or loss equal to the difference between the value at the time the contract was opened and the value at the time it was closed.
(j) Foreign Taxes
The Funds may be subject to foreign taxes (a portion of which may be reclaimable) on income, stock dividends, capital gains on investments or certain foreign currency transactions. All foreign taxes are recorded in accordance with the applicable foreign tax regulations and rates that exist in the foreign jurisdictions in which the Funds invest. These foreign taxes, if any, are paid by the Funds and reflected in their Statements of Operations as follows: foreign taxes withheld at source are presented as a reduction of income and foreign taxes on capital gains from sales of investments are included with the net realized gain (loss) on investments. Foreign taxes payable or deferred as of December 31, 2019, if any, are disclosed in the Funds’ Statements of Assets and Liabilities.
(k) 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. Taxable non-cash dividends are recorded as dividend income. Interest income, including amortization of premiums and accretion of discounts, is accrued on a daily basis. Interest income also includes paydown gains and losses on mortgage-backed and asset-backed securities and senior and subordinated loans. Amendment fees are earned as compensation for evaluating and accepting changes to the original loan agreement and are recognized when received. Dividend income from Real Estate Investment Trusts (“REITs”) is recorded based on the income included in the distributions received from the REIT investments using published REIT classifications, including some management estimates when actual amounts are not available. Distributions received in excess of this estimated amount are recorded as a reduction of the cost of investments or reclassified to realized gains. The actual amounts of income, return of capital, and realized gains are only determined by each REIT after its fiscal year-end, and may differ from the estimated amounts.
174 | THE GUGGENHEIM FUNDS ANNUAL REPORT |
NOTES TO FINANCIAL STATEMENTS (continued) |
Income from residual collateralized loan obligations is recognized using the effective interest method. At the time of purchase, management estimates the future expected cash flows and determines the effective yield and estimated maturity date based on the estimated cash flows. Subsequent to the purchase, the estimated cash flows are updated periodically and a revised yield is calculated prospectively.
Certain Funds may receive other income from investments in senior loan interests including amendment fees, consent fees and commitment fees. For funded loans, these fees are recorded as income when received by the Funds and included in interest income on the Statement of Operations. For unfunded loans, commitment fees are included in realized gain on investments on the Statement of Operations at the end of the commitment period.
(l) Distributions
Distributions of net investment income and net realized gains, if any, are declared and paid at least annually. Normally, all distributions of a Fund will automatically be reinvested without charge in additional shares of the same Fund. Distributions are recorded on the ex-dividend date and are determined in accordance with U.S. federal income tax regulations which may differ from U.S. GAAP.
(m) Expenses
Expenses directly attributable to a Fund are charged directly to the Fund. Other expenses common to various funds within the fund complex are generally allocated amongst such funds on the basis of average net assets.
(n) Earnings Credits
Under the fee arrangement with the custodian, the Funds may earn credits based on overnight custody cash balances. These credits are utilized to reduce related custodial expenses. The custodian fees disclosed in the Statements of Operations are before the reduction in expense from the related earnings credits, if any. Earnings credits for the year ended December 31, 2019, are disclosed in the Statements of Operations.
(o) 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 1.55% at December 31, 2019.
(p) 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 – Derivatives
As part of their investment strategy, the Funds utilize a variety of derivative instruments. These investments involve, to varying degrees, elements of market risk and risks in excess of amounts recognized in the Statements of Assets and Liabilities. Valuation and accounting treatment of these instruments can be found under Significant Accounting Policies in Note 1 of these Notes to Financial Statements.
Derivatives are instruments whose values depend on, or are derived from, in whole or in part, the value of one or more other assets, such as securities, currencies, commodities or indices. Derivative instruments may be used to increase investment flexibility (including to maintain cash reserves while maintaining exposure to certain other assets), for risk management (hedging) purposes, to facilitate trading, to reduce transaction costs and to pursue higher investment returns. Derivative instruments may also be used to mitigate certain investment risks, such as foreign currency exchange rate risk, interest rate risk and credit risk. U.S. GAAP requires disclosures to enable investors to better understand how and why a Fund uses derivative instruments, how these derivative instruments are accounted for and their effects on the Fund’s financial position and results of operations.
The Funds may utilize derivatives for the following purposes:
Duration: the use of an instrument to manage the interest rate risk of a portfolio.
Hedge: an investment made in order to reduce the risk of adverse price movements in a security, by taking an offsetting position to protect against broad market moves.
Income: the use of any instrument that distributes cash flows typically based upon some rate of interest.
Index Exposure: the use of an instrument to obtain exposure to a listed or other type of index.
THE GUGGENHEIM FUNDS ANNUAL REPORT | 175 |
NOTES TO FINANCIAL STATEMENTS (continued) |
Leverage: gaining total exposure to equities or other assets on the long and short sides at greater than 100% of invested capital.
Speculation: the use of an instrument to express macro-economic and other investment views.
For any Fund whose investment strategy consistently involves applying leverage, the value of the Fund’s shares will tend to increase or decrease more than the value of any increase or decrease in the underlying index or other asset. In addition, because an investment in derivative instruments generally requires a small investment relative to the amount of investment exposure assumed, an opportunity for increased net income is created; but, at the same time, leverage risk will increase. The Fund’s use of leverage, through borrowings or instruments such as derivatives, may cause the Fund to be more volatile and riskier than if they had not been leveraged.
Options Purchased and Written
A call option on a security gives the purchaser of the option the right to buy, and the writer of a call option the obligation to sell, the underlying security. The purchaser of a put option has the right to sell, and the writer of the put option the obligation to buy, the underlying security at any time during the option period. The risk associated with purchasing options is limited to the premium originally paid.
The following table represents the Fund’s use and volume of call/put options purchased on a monthly basis:
Average Notional Amount | |||||||||
Fund | Use | Call | Put | ||||||
Series E (Total Return Bond Series) | Hedge | $ | — | $ | 91,620,237 |
The risk in writing a call option is that a Fund may incur a loss if the market price of the underlying security increases and the option is exercised. The risk in writing a put option is that a Fund may incur a loss if the market price of the underlying security decreases and the option is exercised. In addition, there may be an imperfect correlation between the movement in prices of options and the underlying securities where a Fund may not be able to enter into a closing transaction because of an illiquid secondary market; or, for OTC options, a Fund may be at risk because of the counterparty’s inability to perform.
The following table represents the Fund’s use and volume of call/put options written on a monthly basis:
Average Notional Amount | |||||||||
Fund | Use | Call | Put | ||||||
Series E (Total Return Bond Series) | Hedge | $ | — | $ | 1,436,904 |
Futures Contracts
A futures contract is an agreement to purchase (long) or sell (short) an agreed amount of securities or other instruments at a set price for delivery at a future date. There are significant risks associated with a Fund’s use of futures contracts, including (i) there may be an imperfect or no correlation between the changes in market value of the underlying asset and the prices of futures contracts; (ii) there may not be a liquid secondary market for a futures contract; (iii) trading restrictions or limitations may be imposed by an exchange; and (iv) government regulations may restrict trading in futures contracts. When investing in futures, there is minimal counterparty credit risk to a Fund because futures are exchange-traded and the exchange’s clearinghouse, as counterparty to all exchange-traded futures, guarantees against default. Cash deposits are shown as segregated cash with broker on the Statements of Assets and Liabilities; securities held as collateral are noted on the Schedules of Investments.
176 | THE GUGGENHEIM FUNDS ANNUAL REPORT |
NOTES TO FINANCIAL STATEMENTS (continued) |
The following table represents the Funds’ use and volume of futures on a monthly basis:
Average Notional Amount | |||||||||
Fund | Use | Long | Short | ||||||
Series A (StylePlus—Large Core Series) | Index exposure | $ | 2,784,569 | $ | — | ||||
Series D (World Equity Income Series) | Hedge | — | 8,896,618 | ||||||
Series E (Total Return Bond Series) | Hedge, Income | — | 1,063,582 | ||||||
Series J (StylePlus—Mid Growth Series) | Index exposure | 3,393,197 | — | ||||||
Series N (Managed Asset Allocation Series) | Index exposure, Speculation | 15,358,942 | 993,661 | ||||||
Series X (StylePlus—Small Growth Series) | Index exposure | 1,014,394 | — | ||||||
Series Y (StylePlus—Large Growth Series) | Index exposure | 1,193,783 | — |
Swap Agreements
A swap is an agreement that obligates two parties to exchange a series of cash flows at specified intervals based upon or calculated by reference to changes in specified prices or rates for a specified amount of an underlying asset. When utilizing OTC swaps, a fund bears the risk of loss of the amount expected to be received under a swap agreement in the event of the default or bankruptcy of a swap agreement counterparty or if the underlying asset declines in value. Certain standardized swaps are subject to mandatory central clearing and are executed on a multi-lateral or other trade facility platform, such as a registered exchange. There is limited counterparty credit risk with respect to centrally-cleared swaps as the transaction is facilitated through a central clearinghouse, much like exchange-traded futures contracts. For a fund utilizing centrally cleared swaps, the exchange bears the risk of loss resulting from a counterparty not being able to pay. There is no guarantee that a fund or an underlying fund could eliminate its exposure under an outstanding swap agreement by entering into an offsetting swap agreement with the same or another party.
Total return and custom basket swaps involve commitments where single or multiple cash flows are exchanged based on the price of an underlying reference asset (such as an index or custom basket of securities) for a fixed or variable interest rate. Total return and custom basket swaps will usually be computed based on the current value of the reference asset as of the close of regular trading on the NYSE or other exchange, with the swap value being adjusted to include dividends accrued, financing charges and/or interest associated with the swap agreement. When utilizing total return or custom basket swaps, a fund bears the risk of loss of the amount expected to be received under a swap agreement in the event of the default or bankruptcy of a swap agreement counterparty or if the underlying reference asset declines in value.
The following table represents the Funds’ use and volume of total return and custom basket swaps on a monthly basis:
Average Notional Amount | |||||||||
Fund | Use | Long | Short | ||||||
Series A (StylePlus—Large Core Series) | Index exposure | $ | 162,507,567 | $ | — | ||||
Series E (Total Return Bond Series) | Income | 210,806 | 88,023 | ||||||
Series J (StylePlus—Mid Growth Series) | Index exposure | 119,299,704 | — | ||||||
Series X (StylePlus—Small Growth Series) | Index exposure | 24,751,056 | — | ||||||
Series Y (StylePlus—Large Growth Series) | Index exposure | 28,707,431 | — | ||||||
Series Z (Alpha Opportunity Series) | Hedge, Leverage | 1,743,693 | 6,918,286 |
Interest rate swaps involve the exchange by the Funds with another party for their respective commitment to pay or receive a fixed or variable interest rate on a notional amount of principal. Interest rate swaps are generally centrally-cleared, but central clearing does not make interest rate swap transactions risk free.
The following table represents the Fund’s use and volume of interest rate swaps on a monthly basis:
Average Notional Amount | |||||||||
Fund | Use | Pay Floating Rate | Receive Floating Rate | ||||||
Series E (Total Return Bond Series) | Duration, Hedge | $ | 7,758,333 | $ | 4,869,583 |
THE GUGGENHEIM FUNDS ANNUAL REPORT | 177 |
NOTES TO FINANCIAL STATEMENTS (continued) |
Credit default swaps are instruments which allow for the full or partial transfer of third party credit risk, with respect to a particular entity or entities, from one counterparty to the other. A fund enters into credit default swaps as a “seller” or “buyer” of protection primarily to gain or reduce exposure to the investment grade and/or high yield bond market. A seller of credit default swaps is selling credit protection or assuming credit risk with respect to the underlying entity or entities. The buyer in a credit default swap is obligated to pay the seller a periodic stream of payments over the term of the contract provided that no event of default on an underlying reference obligation has occurred. If a credit event occurs, as defined under the terms of the swap agreement, the seller will either (i) pay to the buyer of protection an amount equal to the notional amount of the swap and take delivery of the referenced obligation or underlying securities comprising the referenced index or (ii) pay a net settlement amount in the form of cash or securities equal to the notional amount of the swap less the recovery value of the referenced obligation or underlying securities comprising the referenced index. The notional amount reflects the maximum potential amount the seller of credit protection could be required to pay to the buyer if a credit event occurs. The seller of protection receives periodic premium payments from the buyer and may also receive or pay an upfront premium adjustment to the stated periodic payments. In the event a credit default occurs on a credit default swap referencing an index, a factor adjustment will take place and the buyer of protection will received a payment reflecting the par less the default recovery rate of the defaulted index component based on its weighting in the index. If no default occurs, the counterparty will pay the stream of payments and have no further obligations to the fund selling the credit protection. For a fund utilizing centrally cleared credit default swaps, the exchange bears the risk of loss resulting from a counterparty not being able to pay. For OTC credit default swaps, a fund bears the risk of loss of the amount expected to be received under a swap agreement in the event of the default or bankruptcy of a swap agreement counterparty, or in the case of a credit default swap in which a fund is selling credit protection, the default of a third party issuer.
The quoted market prices and resulting market values for credit default swap agreements on securities and credit indices serve as an indicator of the current status of the payment/performance risk and represent the likelihood of an expected liability (or profit) for the credit derivative had the notional amount of the swap agreement been closed/sold as of the period end. Increasing market values, in absolute terms when compared to the notional amount of the swap, represent a deterioration of the referenced entity’s credit soundness and a greater likelihood or risk of default or other credit event occurring as defined under the terms of the agreement.
The following table represents the Fund’s use and volume of credit default swaps on a monthly basis:
Average Notional Amount | |||||||||
Fund | Use | Protection Sold | Protection Purchased | ||||||
Series E (Total Return Bond Series) | Hedge | $ | — | $ | 24,030,000 |
Forward Foreign Currency Exchange Contracts
A forward foreign currency exchange contract is an agreement between two parties to exchange two designated currencies at a specific time in the future. Certain types of contracts may be cash settled, in an amount equal to the change in exchange rates during the term of the contract. The contracts can be used to hedge or manage exposure to foreign currency risks with portfolio investments or to gain exposure to foreign currencies.
The market value of a forward foreign currency exchange contract changes with fluctuations in foreign currency exchange rates. Furthermore, the Funds may be exposed to risk if the counterparties cannot meet the contract terms or if the currency value changes unfavorably as compared to the U.S. dollar.
The following table represents the Funds’ use, and volume of forward foreign currency exchange contracts on a monthly basis:
Average Value | |||||||||
Fund | Use | Purchased | Sold | ||||||
Series E (Total Return Bond Series) | Hedge, Income | $ | 2,873,606 | $ | 19,584,580 | ||||
Series P (High Yield Series) | Hedge | 49,811 | 205,586 |
178 | THE GUGGENHEIM FUNDS ANNUAL REPORT |
NOTES TO FINANCIAL STATEMENTS (continued) |
Derivative Investment Holdings Categorized by Risk Exposure
The following is a summary of the location of derivative investments on the Funds’ Statements of Assets and Liabilities as of December 31, 2019:
Derivative Investment Type | Asset Derivatives | Liability Derivatives |
Equity contracts | Unrealized appreciation on OTC swap agreements | Unrealized depreciation on OTC swap agreements |
| Variation margin on futures contracts | Variation margin on futures contracts |
Interest Rate contracts | Unamortized upfront premiums paid on interest rate swap agreements | Unamortized upfront premiums received on interest rate swap agreements |
Variation margin on futures contracts | Variation margin on futures contracts | |
| Investments in unaffiliated issuers, at value | Variation margin on interest rate swap agreements |
Currency contracts | Unrealized appreciation on forward foreign currency exchange contracts | Unrealized depreciation on forward foreign currency exchange contracts |
| Variation margin on futures contracts | Variation margin on futures contracts |
Credit contracts | Unamortized upfront premiums paid on credit default swap agreements | Unamortized upfront premiums received on credit default swap agreements |
Variation margin on credit default swap agreements | Unrealized depreciation on OTC swap agreements |
The following table sets forth the fair value of the Funds’ derivative investments categorized by primary risk exposure at December 31, 2019:
Asset Derivative Investments Value | ||||||||||||||||||||||||||||||||||||
Fund | Futures | Swaps | Futures | Futures | Swaps | Swaps | Options | Forward | Total | |||||||||||||||||||||||||||
Series A (StylePlus—Large Core Series) | $ | 15,817 | $ | 17,897,688 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 17,913,505 | ||||||||||||||||||
Series E (Total Return Bond Series) | — | — | — | — | 2,558 | — | 216,240 | 284,374 | 503,172 | |||||||||||||||||||||||||||
Series J (StylePlus—Mid Growth Series) | 20,113 | 12,002,584 | — | — | — | — | — | — | 12,022,697 | |||||||||||||||||||||||||||
Series N (Managed Asset Allocation Series) | 92,594 | — | — | — | — | — | — | — | 92,594 | |||||||||||||||||||||||||||
Series X (StylePlus—Small Growth Series) | 5,108 | 3,254,727 | — | — | — | — | — | — | 3,259,835 | |||||||||||||||||||||||||||
Series Y (StylePlus—Large Growth Series) | 10,436 | 3,706,795 | — | — | — | — | — | — | 3,717,231 | |||||||||||||||||||||||||||
Series Z (Alpha Opportunity Series) | — | 79,777 | — | — | — | — | — | — | 79,777 |
Liability Derivative Investments Value | ||||||||||||||||||||||||||||||||||||
Fund | Futures | Swaps | Futures | Futures | Swaps | Swaps | Options | Forward | Total | |||||||||||||||||||||||||||
Series D (World Equity Income Series) | $ | — | $ | — | $ | 452 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 452 | ||||||||||||||||||
Series E (Total Return Bond Series) | — | — | — | — | 158,913 | 424,391 | — | 156,982 | 740,286 | |||||||||||||||||||||||||||
Series N (Managed Asset Allocation Series) | 3,940 | — | 377 | 47,404 | — | — | — | — | 51,721 | |||||||||||||||||||||||||||
Series P (High Yield Series) | — | — | — | — | — | — | — | (2,168 | ) | (2,168 | ) | |||||||||||||||||||||||||
Series Z (Alpha Opportunity Series) | — | 414,939 | — | — | — | — | — | — | 414,939 |
* | Includes cumulative appreciation (depreciation) of exchange-traded, OTC and centrally-cleared derivatives as reported on the Schedules of Investments. For exchange-traded and centrally cleared derivatives, variation margin is reported within the Statements of Assets and Liabilities. |
THE GUGGENHEIM FUNDS ANNUAL REPORT | 179 |
NOTES TO FINANCIAL STATEMENTS (continued) |
The following is a summary of the location of derivative investments on the Funds’ Statements of Operations for the year ended December 31, 2019:
Derivative Investment Type | Location of Gain (Loss) on Derivatives |
Equity/Interest Rate contracts | Net realized gain (loss) on futures contracts |
| Net change in unrealized appreciation (depreciation) on futures contracts |
Net realized gain (loss) on options purchased | |
Net change in unrealized appreciation (depreciation) on options purchased | |
Net realized gain (loss) on options written | |
Net change in unrealized appreciation (depreciation) on options written | |
Net realized gain (loss) on swap agreements | |
| Net change in unrealized appreciation (depreciation) on swap agreements |
Currency contracts | Net realized gain (loss) on futures contracts |
Net change in unrealized appreciation (depreciation) on futures contracts | |
Net realized gain (loss) on forward foreign currency exchange contracts | |
| Net change in unrealized appreciation (depreciation) on forward foreign currency exchange contracts |
Credit contracts | Net realized gain (loss) on swap agreements |
Net change in unrealized appreciation (depreciation) on swap agreements |
The following is a summary of the Funds’ realized gain (loss) and change in unrealized appreciation (depreciation) on derivative investments recognized on the Statements of Operations categorized by primary risk exposure for the year ended December 31, 2019:
Realized Gain (Loss) on Derivative Investments Recognized on the Statements of Operations | ||||||||||||||||||||||||||||||||||||||||||||
Fund | Futures | Swaps | Futures | Futures | Swaps | Swaps | Options | Options | Options | Forward | Total | |||||||||||||||||||||||||||||||||
Series A (StylePlus—Large Core Series) | $ | 1,093,610 | $ | 8,886,339 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 9,979,949 | ||||||||||||||||||||||
Series D (World Equity Income Series) | — | — | (508,853 | ) | — | — | — | — | — | — | — | (508,853 | ) | |||||||||||||||||||||||||||||||
Series E (Total Return Bond Series) | — | — | — | (111,192 | ) | (1,124,511 | ) | (204,518 | ) | 39,854 | (341,751 | ) | (230 | ) | 106,733 | (1,635,615 | ) | |||||||||||||||||||||||||||
Series J (StylePlus—Mid Growth Series) | 981,733 | 7,853,670 | — | — | — | — | — | — | — | — | 8,835,403 | |||||||||||||||||||||||||||||||||
Series N (Managed Asset Allocation Series) | 1,475,006 | — | (5,882 | ) | 401,798 | — | — | — | — | — | — | 1,870,922 | ||||||||||||||||||||||||||||||||
Series P (High Yield Series) | — | — | — | — | — | — | — | — | — | (12,449 | ) | (12,449 | ) | |||||||||||||||||||||||||||||||
Series X (StylePlus—Small Growth Series) | 243,431 | (2,716,836 | ) | — | — | — | — | — | — | — | — | (2,473,405 | ) | |||||||||||||||||||||||||||||||
Series Y (StylePlus—Large Growth Series) | 304,595 | 1,630,842 | — | — | — | — | — | — | — | — | 1,935,437 | |||||||||||||||||||||||||||||||||
Series Z (Alpha Opportunity Series) | — | (852,241 | ) | — | — | — | — | — | — | — | — | (852,241 | ) |
180 | THE GUGGENHEIM FUNDS ANNUAL REPORT |
NOTES TO FINANCIAL STATEMENTS (continued) |
Change in Unrealized Appreciation (Depreciation) on Derivative Investments Recognized on the Statements of Operations | ||||||||||||||||||||||||||||||||||||||||||||
Fund | Futures | Swaps | Futures | Futures | Swaps | Swaps | Options | Options | Options | Forward | Total | |||||||||||||||||||||||||||||||||
Series A (StylePlus—Large Core Series) | $ | (85,729 | ) | $ | 30,716,186 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 30,630,457 | |||||||||||||||||||||
Series D (World Equity Income Series) | — | — | (160,027 | ) | — | — | — | — | — | — | — | (160,027 | ) | |||||||||||||||||||||||||||||||
Series E (Total Return Bond Series) | — | — | — | 39,035 | 726,024 | (591,521 | ) | — | 213,640 | (72,611 | ) | 266,100 | 580,667 | |||||||||||||||||||||||||||||||
Series J (StylePlus—Mid Growth Series) | 34,270 | 24,556,084 | — | — | — | — | — | — | — | — | 24,590,354 | |||||||||||||||||||||||||||||||||
Series N (Managed Asset Allocation Series) | 352,137 | — | (381 | ) | (220,046 | ) | — | — | — | — | — | — | 131,710 | |||||||||||||||||||||||||||||||
Series P (High Yield Series) | — | — | — | — | — | — | — | — | — | 5,030 | 5,030 | |||||||||||||||||||||||||||||||||
Series X (StylePlus—Small Growth Series) | (16,117 | ) | 8,129,962 | — | — | — | — | — | — | — | — | 8,113,845 | ||||||||||||||||||||||||||||||||
Series Y (StylePlus—Large Growth Series) | 11,842 | 6,277,132 | — | — | — | — | — | — | — | — | 6,288,974 | |||||||||||||||||||||||||||||||||
Series Z (Alpha Opportunity Series) | — | (714,084 | ) | — | — | — | — | — | — | — | — | (714,084 | ) |
In conjunction with the use of derivative instruments, the Funds are required to maintain collateral in various forms. Depending on the financial instrument utilized and the broker involved, the Funds use margin deposits at the broker, cash and/or securities segregated at the custodian bank, discount notes or repurchase agreements allocated to the Funds as collateral.
Foreign Investments
There are several risks associated with exposure to foreign currencies, foreign issuers and emerging markets. A fund’s indirect and direct exposure to foreign currencies subjects the Fund to the risk that those currencies will decline in value relative to the U.S. dollar, or in the case of short positions, that the U.S. dollar will decline in value relative to the currency being hedged. Currency rates in foreign countries may fluctuate significantly over short periods of time for a number of reasons, including changes in interest rates and the imposition of currency controls or other political developments in the U.S. or abroad. In addition, the Fund may incur transaction costs in connection with conversions between various currencies. The Fund may, but is not obligated to, engage in currency hedging transactions, which generally involve buying currency forward, options or futures contracts. However, not all currency risks may be effectively hedged, and in some cases the costs of hedging techniques may outweigh expected benefits. In such instances, the value of securities denominated in foreign currencies can change significantly when foreign currencies strengthen or weaken relative to the U.S. dollar.
The Funds may invest in securities of foreign companies directly, or in financial instruments, such as ADRs and exchange-traded funds, which are indirectly linked to the performance of foreign issuers. Foreign markets can be more volatile than the U.S. market due to increased risks of adverse issuer, political, regulatory, market, or economic developments and can perform differently from the U.S. market. Investing in securities of foreign companies directly, or in financial instruments that are indirectly linked to the performance of foreign issuers, may involve risks not typically associated with investing in U.S. issuers. The value of securities denominated in foreign currencies, and of dividends from such securities, can change significantly when foreign currencies strengthen or weaken relative to the U.S. dollar. Foreign securities markets generally have less trading volume and less liquidity than U.S. markets, and prices in some foreign markets may fluctuate more than those of securities traded on U.S. markets. Many foreign countries lack accounting and disclosure standards comparable to those that apply to U.S. companies, and it may be more difficult to obtain reliable information regarding a foreign issuer’s financial condition and operations. Transaction costs and costs associated with custody services are generally higher for foreign securities than they are for U.S. securities. Some foreign governments levy withholding taxes against dividend and interest income. Although in some countries portions of these taxes are recoverable, the non-recovered portion will reduce the income received by the Funds.
The Trust has established counterparty credit guidelines and enters into transactions only with financial institutions of investment grade or better. The Trust monitors the counterparty credit risk.
THE GUGGENHEIM FUNDS ANNUAL REPORT | 181 |
NOTES TO FINANCIAL STATEMENTS (continued) |
Note 3 – Offsetting
In the normal course of business, the Funds enter into transactions subject to enforceable master netting arrangements or other similar arrangements. Generally, the right to offset in those agreements allows the Funds to counteract the exposure to a specific counterparty with collateral received from or delivered to that counterparty based on the terms of the arrangements. These arrangements provide for the right to liquidate upon the occurrence of an event of default, credit event upon merger or additional termination event.
In order to better define their contractual rights and to secure rights that will help the Funds mitigate their counterparty risk, the Funds may enter into an International Swaps and Derivatives Association, Inc. Master Agreement (“ISDA Master Agreement”) or similar agreement with their derivative contract counterparties. An ISDA Master Agreement is a bilateral agreement between a fund and a counterparty that governs OTC derivatives, including foreign exchange contracts, and typically contains, among other things, collateral posting terms and netting provisions in the event of a default and/or termination event. The provisions of the ISDA Master Agreement typically permit a single net payment in the event of a default (close-out netting) or similar event, including the bankruptcy or insolvency of the counterparty.
For derivatives traded under an ISDA Master Agreement, the collateral requirements are typically calculated by netting the mark-to-market amount for each transaction under such agreement and comparing that amount to the value of any collateral currently pledged by the Funds and the counterparty. For financial reporting purposes, cash collateral that has been pledged to cover obligations of the Funds and cash collateral received from the counterparty, if any, are reported separately on the Statements of Assets and Liabilities as segregated cash with broker/receivable for variation margin, or payable for swap settlement/variation margin. Cash and/or securities pledged or received as collateral by the Funds in connection with an OTC derivative subject to an ISDA Master Agreement generally may not be invested, sold or rehypothecated by the counterparty or the Funds, as applicable, absent an event of default under such agreement, in which case such collateral generally may be applied towards obligations due to and payable by such counterparty or the Funds, as applicable. Generally, the amount of collateral due from or to a counterparty must exceed a minimum transfer amount threshold (e.g., $300,000) before a transfer is required to be made. To the extent amounts due to the Funds from their counterparties are not fully collateralized, contractually or otherwise, the Funds bear the risk of loss from counterparty nonperformance. The Funds attempt to mitigate counterparty risk by only entering into agreements with counterparties that they believe to be of good standing and by monitoring the financial stability of those counterparties.
For financial reporting purposes, the Funds do not offset derivative assets and derivative liabilities that are subject to netting arrangements in the Statements of Assets and Liabilities.
182 | THE GUGGENHEIM FUNDS ANNUAL REPORT |
NOTES TO FINANCIAL STATEMENTS (continued) |
The following tables present derivative financial instruments and secured financing transactions that are subject to enforceable netting arrangements:
Gross Amounts Not Offset | |||||||||||||||||||||||||
Fund | Instrument | Gross | Gross | Net Amount | Financial | Cash | Net | ||||||||||||||||||
Series A (StylePlus—Large Core Series) | Swap equity contracts | $ | 17,897,688 | $ | — | $ | 17,897,688 | $ | — | $ | (17,310,000 | ) | $ | 587,688 | |||||||||||
Series E (Total Return Bond Series) | Forward foreign currency exchange contracts | 284,374 | — | 284,374 | (134,483 | ) | (27,774 | ) | 122,117 | ||||||||||||||||
Swap equity contracts | 1,155 | — | 1,155 | (1,155 | ) | — | — | ||||||||||||||||||
Options purchased contracts | 216,240 | — | 216,240 | (80,442 | ) | (41,728 | ) | 94,070 | |||||||||||||||||
Series J (StylePlus—Mid Growth Series) | Swap equity contracts | 12,002,584 | — | 12,002,584 | — | (11,080,000 | ) | 922,584 | |||||||||||||||||
Series X (StylePlus—Small Growth Series) | Swap equity contracts | 3,254,727 | — | 3,254,727 | — | (3,139,009 | ) | 115,718 | |||||||||||||||||
Series Y (StylePlus—Large Growth Series) | Swap equity contracts | 3,706,795 | — | 3,706,795 | — | (3,660,000 | ) | 46,795 | |||||||||||||||||
Series Z (Alpha Opportunity Series) | Custom basket swap agreements | 79,777 | — | 79,777 | (79,777 | ) | — | — |
Gross Amounts Not Offset | |||||||||||||||||||||||||
Fund | Instrument | Gross | Gross | Net Amount | Financial | Cash | Net | ||||||||||||||||||
Series E (Total Return Bond Series) | Credit default swap agreements | $ | 98,258 | $ | — | $ | 98,258 | $ | (80,442 | ) | $ | — | $ | 17,816 | |||||||||||
Forward foreign currency exchange contracts | 156,982 | — | 156,982 | (135,638 | ) | — | 21,344 | ||||||||||||||||||
Total return swap agreements | 2,576 | — | 2,576 | — | — | 2,576 | |||||||||||||||||||
Series P (High Yield Series) | Forward foreign currency exchange contracts | 2,168 | — | 2,168 | — | — | 2,168 | ||||||||||||||||||
Series Z (Alpha Opportunity Series) | Custom basket swap agreements | 414,939 | — | 414,939 | (414,939 | ) | — | — |
1 | Exchange-traded or centrally-cleared derivatives are excluded from these reported amounts. |
THE GUGGENHEIM FUNDS ANNUAL REPORT | 183 |
NOTES TO FINANCIAL STATEMENTS (continued) |
The Funds have the right to offset deposits against any related derivative liabilities outstanding with each counterparty with the exception of exchange-traded or centrally-cleared derivatives. The following table presents deposits held by others in connection with derivative investments as of December 31, 2019.
Fund | Counterparty/Clearing Agent | Asset Type | Cash Pledged | Cash Received | ||||||
Series A (StylePlus—Large Core Series) | Citibank, N.A. | Total return swap agreements | $ | — | $ | 17,310,000 | ||||
| Morgan Stanley Capital Services LLC | Futures contracts | 63,000 | — | ||||||
Series A (StylePlus—Large Core Series) Total |
|
| 63,000 | 17,310,000 | ||||||
Series E (Total Return Bond Series) | BofA Securities, Inc. | Credit default swap agreements | 191,145 | — | ||||||
BofA Securities, Inc. | Interest rate swap agreements | 390,030 | — | |||||||
| Morgan Stanley Capital Services LLC | Forward foreign currency exchange contracts, Credit default swap agreements, Options purchased contracts | — | 106,000 | ||||||
Series E (Total Return Bond Series) Total |
|
| 581,175 | 106,000 | ||||||
Series J (StylePlus—Mid Growth Series) | Morgan Stanley Capital Services LLC | Futures contracts | 63,000 | — | ||||||
| Wells Fargo Bank, N.A. | Total return swap agreements | — | 11,080,000 | ||||||
Series J (StylePlus—Mid Growth Series) Total |
|
| 63,000 | 11,080,000 | ||||||
Series X (StylePlus—Small Growth Series) | Morgan Stanley Capital Services LLC | Futures contracts | 19,200 | — | ||||||
| Morgan Stanley Capital Services LLC | Total return swap agreements | — | 3,139,009 | ||||||
Series X (StylePlus—Small Growth Series) Total |
|
| 19,200 | 3,139,009 | ||||||
Series Y (StylePlus—Large Growth Series) | Morgan Stanley Capital Services LLC | Futures contracts | 33,300 | — | ||||||
| Wells Fargo Bank, N.A. | Total return swap agreements | — | 3,660,000 | ||||||
Series Y (StylePlus—Large Growth Series) Total |
|
| 33,300 | 3,660,000 |
Note 4 – Fair Value Measurement
In accordance with U.S. GAAP, fair value is defined as the price that the Funds would receive to sell an investment or pay to transfer a liability in an orderly transaction with an independent buyer in the principal market, or in the absence of a principal market, the most advantageous market for the investment or liability. U.S. GAAP establishes a three-tier fair value hierarchy based on the types of inputs used to value assets and liabilities and requires corresponding disclosure. The hierarchy and the corresponding inputs are summarized below:
Level 1 — | quoted prices in active markets for identical assets or liabilities. |
Level 2 — | significant other observable inputs (for example quoted prices for securities that are similar based on characteristics such as interest rates, prepayment speeds, credit risk, etc.). |
Level 3 — | significant unobservable inputs based on the best information available under the circumstances, to the extent observable inputs are not available, which may include assumptions. |
The types of inputs available depend on a variety of factors, such as the type of security and the characteristics of the markets in which it trades, if any. Fair valuation determinations that rely on fewer or no observable inputs require greater judgment. Accordingly, fair value determinations for Level 3 securities require the greatest amount of judgment.
Independent pricing services are used to value a majority of the Funds’ investments. When values are not available from a pricing service, they will be determined using a variety of sources and techniques, including: market prices; broker quotes; and models which derive prices based on inputs such as prices of securities with comparable maturities and characteristics or based on inputs such as anticipated cash flows or collateral, spread over U.S. Treasury securities, and other information and analysis. A significant portion of the Funds’ assets and liabilities are categorized as Level 2, as indicated in this report.
Quotes from broker-dealers, adjusted for fluctuations in criteria such as credit spreads and interest rates, may also be used to value the Funds’ assets and liabilities, i.e. prices provided by a broker-dealer or other market participant who has not committed to trade at that price. Although quotes are typically received from established market participants, the Funds may not have the transparency to view the underlying inputs which support the market quotations. Significant changes in a quote would generally result in significant changes in the fair value of the security.
184 | THE GUGGENHEIM FUNDS ANNUAL REPORT |
NOTES TO FINANCIAL STATEMENTS (continued) |
Certain fixed income securities are valued by obtaining a monthly quote from a broker-dealer, adjusted for fluctuations in criteria such as credit spreads and interest rates.
Certain loans and other securities are valued using a single daily broker quote or a price from a third party vendor based on a single daily or monthly broker quote.
The inputs or methodologies used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. The suitability of the techniques and sources employed to determine fair valuation are regularly monitored and subject to change.
Note 5 – Investment Advisory Agreement and Other Agreements
Under the terms of an investment advisory contract, the Funds pay GI investment advisory fees calculated at the annualized rates below, based on the average daily net assets of the Funds:
Fund | Management Fees | |||
Series A (StylePlus—Large Core Series) | 0.75 | % | ||
Series B (Large Cap Value Series) | 0.65 | % | ||
Series D (World Equity Income Series) | 0.70 | % | ||
Series E (Total Return Bond Series) | 0.39 | % | ||
Series F (Floating Rate Strategies Series) | 0.65 | %1 | ||
Series J (StylePlus—Mid Growth Series) | 0.75 | % | ||
Series N (Managed Asset Allocation Series) | 0.40 | % | ||
Series O (All Cap Value Series) | 0.70 | % | ||
Series P (High Yield Series) | 0.60 | % | ||
Series Q (Small Cap Value Series) | 0.75 | % | ||
Series V (SMid Cap Value Series) | 0.75 | % | ||
Series X (StylePlus—Small Growth Series) | 0.75 | % | ||
Series Y (StylePlus—Large Growth Series) | 0.65 | % | ||
Series Z (Alpha Opportunity Series) | 0.90 | % |
1 | The Series’ management fee is subject to a 0.05% reduction on assets over $5 billion. |
GI pays operating expenses on behalf of the Trust, such as audit and accounting related services, legal services, custody, printing and mailing, among others, on a pass-through basis. Such expenses are allocated to various Funds within the complex based on relative net assets.
The Board has adopted a Distribution and Shareholder Services Plan pursuant to Rule 12b-1 under the 1940 Act that allows those Funds to pay distribution and shareholder services fees to GFD. The Funds will pay distribution and shareholder services fees to GFD at an annual rate not to exceed 0.25% of average daily net assets. GFD may, in turn, pay all or a portion of the proceeds from the distribution and shareholder services fees to insurance companies or their affiliates and qualified plan administrators (“intermediaries”) for services they provide on behalf of the Funds to current and prospective variable contract owners and qualified plan participants that invest in the Funds through the intermediaries.
THE GUGGENHEIM FUNDS ANNUAL REPORT | 185 |
NOTES TO FINANCIAL STATEMENTS (continued) |
Contractual expense limitation agreements for the following Funds provide that the total expenses be limited to a percentage of average net assets for the Funds, exclusive of brokerage costs, dividends or interest on securities sold short, expenses of other investment companies in which a Fund invests, interest, taxes, litigation, indemnification and extraordinary expenses. The limits are listed below:
| Limit | Effective | Contract | |||||||||
Series A (StylePlus—Large Core Series) | 0.91 | % | 05/01/17 | 05/01/22 | ||||||||
Series B (Large Cap Value Series) | 0.80 | % | 05/01/17 | 05/01/22 | ||||||||
Series D (World Equity Income Series) | 0.90 | % | 05/01/17 | 05/01/22 | ||||||||
Series E (Total Return Bond Series) | 0.81 | % | 11/30/12 | 05/01/20 | ||||||||
Series F (Floating Rate Strategies Series) | 1.15 | % | 04/22/13 | 05/01/21 | ||||||||
Series J (StylePlus—Mid Growth Series) | 0.94 | % | 05/01/17 | 05/01/22 | ||||||||
Series O (All Cap Value Series) | 0.88 | % | 05/01/17 | 05/01/22 | ||||||||
Series P (High Yield Series) | 1.07 | % | 10/20/14 | 05/01/20 | ||||||||
Series Q (Small Cap Value Series) | 1.14 | % | 05/01/17 | 05/01/22 | ||||||||
Series V (SMid Cap Value Series) | 0.91 | % | 05/01/17 | 05/01/22 | ||||||||
Series X (StylePlus—Small Growth Series) | 1.06 | % | 05/01/17 | 05/01/22 | ||||||||
Series Y (StylePlus—Large Growth Series) | 0.93 | % | 05/01/17 | 05/01/22 | ||||||||
Series Z (Alpha Opportunity Series) | 2.00 | % | 05/31/17 | 05/01/22 |
GI is entitled to reimbursement by the Funds for fees waived or expenses reimbursed during any of the previous 36 months, beginning on the date of the expense limitation agreement, if on any day the estimated operating expenses are less than the indicated percentages. For purposes of this arrangement, GI is entitled to recoupment of previously waived fees or reimbursed expenses for 36 months from the date of the waiver or reimbursement by GI. At December 31, 2019, the amount of fees waived or expenses reimbursed that are subject to recoupment and will expire during the years ended December 31, are presented in the following table:
Fund | 2020 | 2021 | 2022 | Total | ||||||||||||
Series A (StylePlus—Large Core Series) | $ | 436,916 | $ | 660,760 | $ | 627,973 | $ | 1,725,649 | ||||||||
Series B (Large Cap Value Series) | 555,470 | 657,291 | 596,531 | 1,809,292 | ||||||||||||
Series D (World Equity Income Series) | 359,114 | 403,628 | 384,683 | 1,147,425 | ||||||||||||
Series E (Total Return Bond Series) | 188,079 | 130,822 | 159,891 | 478,792 | ||||||||||||
Series F (Floating Rate Strategies Series) | 52,478 | 64,413 | 92,992 | 209,883 | ||||||||||||
Series J (StylePlus—Mid Growth Series) | 342,729 | 471,165 | 429,212 | 1,243,106 | ||||||||||||
Series O (All Cap Value Series) | 272,422 | 349,269 | 319,350 | 941,041 | ||||||||||||
Series P (High Yield Series) | 59,723 | 105,313 | 112,110 | 277,146 | ||||||||||||
Series Q (Small Cap Value Series) | 88,099 | 102,746 | 107,646 | 298,491 | ||||||||||||
Series V (Mid Cap Value Series) | 448,055 | 612,269 | 531,107 | 1,591,431 | ||||||||||||
Series X (StylePlus—Small Growth Series) | 95,707 | 132,343 | 151,315 | 379,365 | ||||||||||||
Series Y (StylePlus—Large Growth Series) | 98,297 | 153,784 | 163,763 | 415,844 | ||||||||||||
Series Z (Alpha Opportunity Series) | 33,178 | 47,889 | 108,215 | 189,282 |
For the year ended December 31, 2019, no amounts were recouped by GI.
If a Fund invests in a fund that is advised by the same adviser or an affiliated adviser, the investing Fund’s adviser has agreed to waive fees at the investing fund level to the extent necessary to offset the proportionate share of any management fee paid by each Fund with respect to its investment in such affiliated fund. Fee waivers will be calculated at the investing Fund level without regard to any expense cap, if any, in effect for the investing Fund. Fees waived under this arrangement are not subject to reimbursement to GI. For the year ended December 31, 2019, the following Funds waived fees related to investments in affiliated funds:
Fund | Amount Waived | |||
Series A (StylePlus—Large Core Series) | $ | 38,462 | ||
Series E (Total Return Bond Series) | 48,643 | |||
Series J (StylePlus—Mid Growth Series) | 37,792 | |||
Series N (Managed Asset Allocation Series) | 2,525 | |||
Series X (StylePlus—Small Growth Series) | 9,186 | |||
Series Y (StylePlus—Large Growth Series) | 9,911 |
186 | THE GUGGENHEIM FUNDS ANNUAL REPORT |
NOTES TO FINANCIAL STATEMENTS (continued) |
Certain trustees and officers of the Trust are also officers of GI and/or GFD. The Trust does not compensate its officers or trustees who are officers, directors and/or employees of GI or GFD.
MUFG Investor Services (US), LLC (“MUIS”) acts as the Funds’ administrator, transfer agent and accounting agent. As administrator, transfer agent and accounting agent, MUIS maintains the books and records of the Funds’ securities and cash. The Bank of New York Mellon Corp. (“BNY”) acts as the Funds’ custodian. As custodian, BNY is responsible for the custody of the Funds’ assets. For providing the aforementioned administrative and accounting services, MUIS is entitled to receive a monthly fee equal to a percentage of the Funds’ average daily net assets and out of pocket expenses. For providing the aforementioned transfer agent and custodian services, MUIS and BNY are entitled to receive a monthly fee based on the number of transactions during the month and the number of accounts under management, subject to certain minimum monthly fees, and out of pocket expenses.
Note 6 – Federal Income Tax Information
The Funds intend to comply with the provisions of Subchapter M of the Internal Revenue Code applicable to regulated investment companies and will distribute substantially all taxable net investment income and capital gains sufficient to relieve the Funds from all, or substantially all, federal income, excise and state income taxes. Therefore, no provision for federal or state income tax or federal excise tax is required.
Tax positions taken or expected to be taken in the course of preparing the Funds’ tax returns are evaluated to determine whether the tax positions are “more-likely-than-not” of being sustained by the applicable tax authority. Tax positions not deemed to meet the more-likely-than-not threshold would be recorded as a tax benefit or expense in the current year. Management has analyzed the Funds’ tax positions taken, or to be taken, on U.S. federal income tax returns for all open tax years, and has concluded that no provision for income tax is required in the Funds’ financial statements. The Funds’ U.S. federal income tax returns are subject to examination by the Internal Revenue Service (“IRS”) for a period of three years after they are filed.
The tax character of distributions paid during the year ended December 31, 2019 was as follows:
Fund | Ordinary | Long-Term | Total | |||||||||
Series A (StylePlus—Large Core Series) | $ | 15,823,058 | $ | — | $ | 15,823,058 | ||||||
Series B (Large Cap Value Series) | 4,909,168 | 12,270,184 | 17,179,352 | |||||||||
Series D (World Equity Income Series) | 5,270,431 | 5,528,640 | 10,799,071 | |||||||||
Series E (Total Return Bond Series) | 3,605,920 | — | 3,605,920 | |||||||||
Series F (Floating Rate Strategies Series) | 2,678,923 | — | 2,678,923 | |||||||||
Series J (StylePlus—Mid Growth Series) | 15,157,609 | — | 15,157,609 | |||||||||
Series N (Managed Asset Allocation Series) | 745,349 | 359,789 | 1,105,138 | |||||||||
Series O (All Cap Value Series) | 2,015,279 | 7,586,230 | 9,601,509 | |||||||||
Series P (High Yield Series) | 4,081,160 | — | 4,081,160 | |||||||||
Series Q (Small Cap Value Series) | 890,774 | 3,896,134 | 4,786,908 | |||||||||
Series V (SMid Cap Value Series) | 3,320,862 | 18,300,980 | 21,621,842 | |||||||||
Series X (StylePlus—Small Growth Series) | 3,561,318 | — | 3,561,318 | |||||||||
Series Y (StylePlus—Large Growth Series) | 3,884,327 | — | 3,884,327 | |||||||||
Series Z (Alpha Opportunity Series) | 11,658 | — | 11,658 |
THE GUGGENHEIM FUNDS ANNUAL REPORT | 187 |
NOTES TO FINANCIAL STATEMENTS (continued) |
The tax character of distributions paid during the year ended December 31, 2018 was as follows:
Fund | Ordinary | Long-Term | Total | |||||||||
Series A (StylePlus—Large Core Series) | $ | 28,367,479 | $ | 1,855,836 | $ | 30,223,315 | ||||||
Series B (Large Cap Value Series) | 6,944,998 | 12,437,373 | 19,382,371 | |||||||||
Series D (World Equity Income Series) | 4,156,958 | — | 4,156,958 | |||||||||
Series E (Total Return Bond Series) | 5,237,160 | — | 5,237,160 | |||||||||
Series F (Floating Rate Strategies Series) | 1,907,470 | — | 1,907,470 | |||||||||
Series J (StylePlus—Mid Growth Series) | 20,452,256 | 683,555 | 21,135,811 | |||||||||
Series N (Managed Asset Allocation Series) | 1,468,502 | 2,668,094 | 4,136,596 | |||||||||
Series O (All Cap Value Series) | 4,068,546 | 6,638,689 | 10,707,235 | |||||||||
Series P (High Yield Series) | 5,180,373 | — | 5,180,373 | |||||||||
Series Q (Small Cap Value Series) | 2,626,687 | 6,154,519 | 8,781,206 | |||||||||
Series V (SMid Cap Value Series) | 8,708,618 | 22,966,285 | 31,674,903 | |||||||||
Series X (StylePlus—Small Growth Series) | 5,355,327 | 128,445 | 5,483,772 | |||||||||
Series Y (StylePlus—Large Growth Series) | 6,134,993 | 14,459 | 6,149,452 | |||||||||
Series Z (Alpha Opportunity Series) | 438,900 | 800,987 | 1,239,887 |
Note: For U.S. federal income tax purposes, short-term capital gain distributions are treated as ordinary income distributions.
The tax components of distributable earnings/(loss) as of December 31, 2019 were as follows:
Fund | Undistributed | Undistributed | Net Unrealized | Accumulated | Total | |||||||||||||||
Series A (StylePlus—Large Core Series) | $ | 12,350,788 | $ | — | $ | 21,627,613 | $ | — | $ | 33,978,401 | ||||||||||
Series B (Large Cap Value Series) | 4,070,876 | 13,216,825 | 44,390,402 | — | 61,678,103 | |||||||||||||||
Series D (World Equity Income Series) | 3,489,762 | 1,213,483 | 12,963,634 | — | 17,666,879 | |||||||||||||||
Series E (Total Return Bond Series) | 2,739,181 | — | 1,169,243 | (877,391 | ) | 3,031,033 | ||||||||||||||
Series F (Floating Rate Strategies Series) | 2,229,065 | — | (782,227 | ) | (1,527,474 | ) | (80,636 | ) | ||||||||||||
Series J (StylePlus—Mid Growth Series) | 9,832,562 | — | 13,703,782 | — | 23,536,344 | |||||||||||||||
Series N (Managed Asset Allocation Series) | 1,463,049 | 1,736,981 | 10,966,381 | — | 14,166,411 | |||||||||||||||
Series O (All Cap Value Series) | 1,675,487 | 4,640,880 | 20,077,283 | — | 26,393,650 | |||||||||||||||
Series P (High Yield Series) | 3,157,421 | — | (2,434,252 | ) | (5,718,626 | ) | (4,995,457 | ) | ||||||||||||
Series Q (Small Cap Value Series) | 1,460,517 | 3,494,871 | 4,507,444 | — | 9,462,832 | |||||||||||||||
Series V (SMid Cap Value Series) | 1,960,612 | 6,231,869 | 21,014,782 | — | 29,207,263 | |||||||||||||||
Series X (StylePlus—Small Growth Series) | 395,656 | — | 3,385,161 | (2,613,601 | ) | 1,167,216 | ||||||||||||||
Series Y (StylePlus—Large Growth Series) | 2,418,053 | 45,170 | 4,533,294 | — | 6,996,517 | |||||||||||||||
Series Z (Alpha Opportunity Series) | 39,573 | — | 56,055 | (1,541,774 | ) | (1,446,146 | ) |
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. Under the RIC Modernization Act of 2010, the Funds are permitted to carry forward capital losses incurred in taxable years beginning after December 22, 2010 for an unlimited period and such capital loss carryforwards will retain their character as either short-term or long-term capital losses. As of December 31, 2019, capital loss carryforwards for the Funds were as follows:
Unlimited | ||||||||||||
Fund | Short-Term | Long-Term | Total | |||||||||
Series E (Total Return Bond Series) | $ | (247,022 | ) | $ | (630,369 | ) | $ | (877,391 | ) | |||
Series F (Floating Rate Strategies Series) | (183,014 | ) | (1,344,460 | ) | (1,527,474 | ) | ||||||
Series P (High Yield Series) | — | (5,718,626 | ) | (5,718,626 | ) | |||||||
Series X (StylePlus—Small Growth Series) | (2,613,601 | ) | — | (2,613,601 | ) | |||||||
Series Z (Alpha Opportunity Series) | (1,444,019 | ) | (97,755 | ) | (1,541,774 | ) |
188 | THE GUGGENHEIM FUNDS ANNUAL REPORT |
NOTES TO FINANCIAL STATEMENTS (continued) |
Net investment income and net realized gains (losses) may differ for financial statement and tax purposes because of temporary or permanent book/tax differences. These differences are primarily due to investments in real estate investment trusts, foreign currency gains and losses, dividend reclasses, losses deferred due to wash sales, distributions in connection with redemption of fund shares, return of capital distributions received, income accruals on certain investments, income recharacterization from certain investments, investments in swaps, and the “mark-to-market,” recharacterization, or disposition of certain Passive Foreign Investment Companies (PFICs). Additional differences may result from the tax treatment of bond premium/discount amortization and the “mark-to-market” of certain derivatives. To the extent these differences are permanent and would require a reclassification between Paid in Capital and Total Distributable Earnings (Loss), such reclassifications are made in the period that the differences arise. These reclassifications have no effect on net assets or NAV per share.
The following adjustments were made on the Statements of Assets and Liabilities as of December 31, 2019 for permanent book/tax differences:
Fund | Paid In | Total | ||||||
Series A (StylePlus—Large Core Series) | $ | 1,937,408 | $ | (1,937,408 | ) | |||
Series B (Large Cap Value Series) | 2,692,942 | (2,692,942 | ) | |||||
Series J (StylePlus—Mid Growth Series) | 2,335,279 | (2,335,279 | ) | |||||
Series N (Managed Asset Allocation Series) | 254,193 | (254,193 | ) | |||||
Series O (All Cap Value Series) | 1,460,339 | (1,460,339 | ) | |||||
Series Q (Small Cap Value Series) | 806,698 | (806,698 | ) | |||||
Series V (SMid Cap Value Series) | 1,843,995 | (1,843,995 | ) | |||||
Series Y (StylePlus—Large Growth Series) | 462,547 | (462,547 | ) |
At December 31, 2019, 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 Unrealized | ||||||||||||
Series A (StylePlus—Large Core Series) | $ | 214,282,262 | $ | 23,503,063 | $ | (1,875,450 | ) | $ | 21,627,613 | |||||||
Series B (Large Cap Value Series) | 182,937,369 | 54,468,058 | (10,077,656 | ) | 44,390,402 | |||||||||||
Series D (World Equity Income Series) | 120,292,687 | 14,626,441 | (1,668,487 | ) | 12,957,954 | |||||||||||
Series E (Total Return Bond Series) | 125,619,975 | 2,704,216 | (1,537,586 | ) | 1,166,630 | |||||||||||
Series F (Floating Rate Strategies Series) | 49,221,307 | 132,997 | (914,454 | ) | (781,457 | ) | ||||||||||
Series J (StylePlus—Mid Growth Series) | 155,575,659 | 15,395,585 | (1,691,803 | ) | 13,703,782 | |||||||||||
Series N (Managed Asset Allocation Series) | 35,222,555 | 11,099,708 | (133,330 | ) | 10,966,378 | |||||||||||
Series O (All Cap Value Series) | 87,233,758 | 25,605,063 | (5,527,780 | ) | 20,077,283 | |||||||||||
Series P (High Yield Series) | 57,417,918 | 1,416,302 | (3,919,664 | ) | (2,503,362 | ) | ||||||||||
Series Q (Small Cap Value Series) | 68,807,017 | 11,607,534 | (7,100,090 | ) | 4,507,444 | |||||||||||
Series V (SMid Cap Value Series) | 174,292,016 | 34,728,264 | (13,713,482 | ) | 21,014,782 | |||||||||||
Series X (StylePlus—Small Growth Series) | 32,895,726 | 3,899,057 | (513,896 | ) | 3,385,161 | |||||||||||
Series Y (StylePlus—Large Growth Series) | 39,391,523 | 4,858,819 | (325,525 | ) | 4,533,294 | |||||||||||
Series Z (Alpha Opportunity Series) | 6,242,307 | 562,817 | (506,762 | ) | 56,055 |
THE GUGGENHEIM FUNDS ANNUAL REPORT | 189 |
NOTES TO FINANCIAL STATEMENTS (continued) |
Note 7 – Securities Transactions
For the year ended December 31, 2019, the cost of purchases and proceeds from sales of investment securities, excluding government securities, short-term investments and derivatives, were as follows:
Fund | Purchases | Sales | ||||||
Series A (StylePlus—Large Core Series) | $ | 101,301,491 | $ | 80,673,762 | ||||
Series B (Large Cap Value Series) | 66,974,021 | 80,688,143 | ||||||
Series D (World Equity Income Series) | 179,457,662 | 193,451,860 | ||||||
Series E (Total Return Bond Series) | 42,564,667 | 19,176,513 | ||||||
Series F (Floating Rate Strategies Series) | 14,223,048 | 28,115,949 | ||||||
Series J (StylePlus—Mid Growth Series) | 100,080,145 | 83,952,036 | ||||||
Series N (Managed Asset Allocation Series) | 6,179,018 | 7,399,305 | ||||||
Series O (All Cap Value Series) | 33,279,400 | 45,198,081 | ||||||
Series P (High Yield Series) | 30,974,829 | 31,218,868 | ||||||
Series Q (Small Cap Value Series) | 37,487,953 | 45,774,151 | ||||||
Series V (SMid Cap Value Series) | 75,415,221 | 101,007,751 | ||||||
Series X (StylePlus—Small Growth Series) | 21,970,878 | 18,131,041 | ||||||
Series Y (StylePlus—Large Growth Series) | 23,226,809 | 16,505,092 | ||||||
Series Z (Alpha Opportunity Series) | 12,260,279 | 14,629,303 |
For the year ended December 31, 2019, the cost of purchases and proceeds from the sales of government securities were as follows:
Fund | Purchases | Sales | ||||||
Series E (Total Return Bond Series) | $ | 34,848,281 | $ | 37,406,652 |
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 December 31, 2019, the Funds engaged in purchases and sales of securities, pursuant to Rule 17a-7 of the 1940 Act, as follows:
Fund | Purchases | Sales | Realized | |||||||||
Series E (Total Return Bond Series) | $ | — | $ | 116,485 | $ | 4,027 | ||||||
Series P (High Yield Series) | 2,283,606 | 1,631,213 | 6,242 |
Note 8 – Unfunded Loan Commitments
Pursuant to the terms of certain loan agreements, certain Funds held unfunded loan commitments as of December 31, 2019. The Funds are obligated to fund these loan commitments at the borrower’s discretion.
The unfunded loan commitments as of December 31, 2019, were as follows:
Fund | Borrower | Maturity Date | Face Amount | Value | |||||||||
Series F (Floating Rate Strategies Series) | |||||||||||||
Aspect Software, Inc. | 07/15/23 | $ | 44,625 | $ | 534 | ||||||||
Mavis Tire Express Services Corp. | 03/20/25 | 38,828 | 1,100 | ||||||||||
$ | 83,453 | $ | 1,634 | ||||||||||
Series P (High Yield Series) | |||||||||||||
Aspect Software, Inc. | 07/15/23 | 2,009 | 24 | ||||||||||
DCG Acquisition Corp. | 09/30/26 | 13,905 | 337 | ||||||||||
Epicor Software | 06/01/20 | 600,000 | 5,949 | ||||||||||
$ | 615,914 | $ | 6,310 |
190 | THE GUGGENHEIM FUNDS ANNUAL REPORT |
NOTES TO FINANCIAL STATEMENTS (continued) |
Note 9 – Restricted Securities
The securities below are considered illiquid and restricted under guidelines established by the Board:
Fund | Restricted Securities | Acquisition Date | Cost | Value | |||||||||
Series E (Total Return Bond Series) | |||||||||||||
Copper River CLO Ltd. | |||||||||||||
2007-1A, due 01/20/211 | 05/09/14 | $ | 117,957 | $ | 80,400 | ||||||||
Turbine Engines Securitization Ltd. | |||||||||||||
2013-1A, 5.13% due 12/13/48 | 11/27/13 | 423,000 | 426,798 | ||||||||||
$ | 540,957 | $ | 507,198 | ||||||||||
Series P (High Yield Series) | |||||||||||||
Basic Energy Services, Inc. | |||||||||||||
10.75% due 10/15/23 | 09/25/18 | 173,659 | 125,125 | ||||||||||
Beverages & More, Inc. | |||||||||||||
11.50% due 06/15/22 | 06/16/17 | 407,667 | 308,250 | ||||||||||
Bruin E&P Partners LLC | |||||||||||||
8.88% due 08/01/23 | 10/11/18 | 134,577 | 90,350 | ||||||||||
Mirabela Nickel Ltd. | |||||||||||||
due 06/24/192 | 12/31/13 | 353,909 | 19,504 | ||||||||||
$ | 1,069,812 | $ | 543,229 |
1 | Security has no stated coupon. However, it is expected to receive residual cash flow payments on defined deal dates. |
2 | Security is in default of interest and/or principal obligations. |
Note 10 – Line of Credit
The Trust, along with other affiliated trusts, secured a 364-day committed, $1,065,000,000 line of credit from Citibank, N.A., which was in place through October 5, 2018 at which time the line of credit was renewed, with an increased commitment amount to $1,205,000,000. On October 4, 2019, the line of credit was renewed with an increased commitment amount to $1,230,000,000. A Fund may draw (borrow) from the line of credit as a temporary measure for emergency purposes, to facilitate redemption requests, or for other short-term liquidity purposes consistent with the Fund’s investment objective and program. For example, it may be advantageous for the Fund to borrow money rather than sell existing portfolio positions to meet redemption requests. Fees related to borrowings, if any, vary under this arrangement between the greater of Citibank’s “base rate”, LIBOR plus 1%, or the federal funds rate plus 1/2 of 1%.
The commitment fee that may be paid by the Funds is at an annualized rate of 0.15% of the average daily amount of its allocated unused commitment amount. The allocated commitment fee amount for each Fund is referenced in the Statement of Operations within “Miscellaneous”. The Funds did not have any borrowings under this agreement as of and for the year ended December 31, 2019.
In addition, Series E (Total Return Bond Series) and Series F (Floating Rate Strategies Series) (the “Funds”) entered into an additional unlimited credit facility agreement with BNP Paribas Prime Brokerage, Inc. (the “counterparty”) whereby the counterparty has agreed to provide secured financing to the Funds and the Funds will provide pledged collateral to the counterparty. Fees related to borrowings, if any, equate to 1 month LIBOR plus 0.90%. The Funds did not have any borrowings under this agreement at or during the year ended December 31, 2019.
Note 11 – Other Liabilities
Series A (StylePlus—Large Core Series) and Series V (SMid Cap Value Series) (the “Funds”) each wrote put option contracts through Lehman Brothers, Inc. (“Lehman”) that were exercised prior to the option contracts expiration and prior to the bankruptcy filing by Lehman, during September 2008. However, these transactions have not settled and the securities have not been delivered to the Funds as of December 31, 2019.
Although the ultimate resolution of these transactions is uncertain, the Funds have recorded a liability on their respective books equal to the difference between the strike price on the put options and the market prices of the underlying security on the exercise date. The amount of liability recorded by the Funds as of December 31, 2019 was $18,615 for Series A (StylePlus—Large Core Series) and $205,716 for Series V (SMid Cap Value Series) and included in payable for miscellaneous in the Statements of Assets and Liabilities.
THE GUGGENHEIM FUNDS ANNUAL REPORT | 191 |
NOTES TO FINANCIAL STATEMENTS (continued) |
Note 12 – Reverse Repurchase Agreements
Each of the Funds may enter into reverse repurchase agreements. Under a reverse repurchase agreement, a Fund sells securities and agrees to repurchase them at a particular price at a future date. In the event the buyer of securities under a reverse repurchase agreement files for bankruptcy or becomes insolvent, such buyer or its trustee or receiver may receive an extension of time to determine whether to enforce the Fund’s obligation to repurchase the securities, and the Fund’s use of the proceeds of the reverse repurchase agreement may effectively be restricted pending such decision.
For the year ended December 31, 2019, the following Funds entered into reverse repurchase agreements:
Fund | Number | Balance at | Average | Average | ||||||||||||
Series E (Total Return Bond Series) | 1 | $ | — | * | $ | 3,539,375 | 2.48 | % | ||||||||
Series P (High Yield Series) | 239 | 1,484,224 | 1,063,153 | 1.82 | % |
* | As of December 31, 2019, Series E (Total Return Bond Series) did not have any open reverse repurchase agreements. |
The following table presents reverse repurchase agreements that are subject to netting arrangements and offset in the Statements of Assets of Liabilities in conformity with U.S. GAAP:
Gross Amounts Not Offset | |||||||||||||||||||||||||
Fund | Instrument | Gross | Gross | Net Amount | Financial | Cash | Net | ||||||||||||||||||
Series P (High Yield Series) | Reverse repurchase agreements | $ | 1,484,224 | $ | — | $ | 1,484,224 | $ | (1,484,224 | ) | $ | — | $ | — |
As of December 31, 2019, there was $1,484,224 in reverse repurchase agreements outstanding. As of December 31, 2019, the Series P (High Yield Series) had outstanding reverse repurchase agreements with various counterparties. Details of the reverse repurchase agreements by counterparty are as follows:
Counterparty | Interest Rate(s) | Maturity | Face Value | |||
Barclays Capital, Inc. | (0.25%) | Open Maturity | $ | 135,509 | ||
BMO Capital Markets Corp. | 2.00% | Open Maturity | 333,008 | |||
J.P. Morgan Securities LLC | 1.75% - 1.90% | Open Maturity | 1,015,707 | |||
$ | 1,484,224 |
The following is a summary of the remaining contractual maturities of the reverse repurchase agreements outstanding as of year-end, aggregated by asset class of the related collateral pledged by the Funds:
Fund | Asset Type | Overnight and | Total | ||||||
Series P (High Yield Series) | Corporate Bonds | $ | 1,484,224 | $ | 1,484,224 | ||||
Gross amount of recognized liabilities for reverse repurchase agreements |
| $ | 1,484,224 | $ | 1,484,224 |
192 | THE GUGGENHEIM FUNDS ANNUAL REPORT |
NOTES TO FINANCIAL STATEMENTS (continued) |
Note 13 – Recent Accounting Pronouncements
In March 2017, the Financial Accounting Standards Board issued an Accounting Standards Update, ASU 2017-08, Receivables – Nonrefundable Fees and Other Costs (Subtopic 310-20), Premium Amortization on Purchased Callable Debt Securities (the “2017 ASU”) which amends the amortization period for certain purchased callable debt securities held at a premium, shortening such period to the earliest call date. The 2017 ASU does not require any accounting change for debt securities held at a discount; the discount continues to be amortized to maturity.
As of January 1, 2019 the Funds have fully adopted the provisions of the 2017 ASU which were applied through a modified retrospective transition approach, as prescribed. The adoption resulted in a cumulative effect adjustment to reduce amortized cost and increase unrealized appreciation of investments for affected Funds in the following amounts:
Fund | Cumulative Effect | |||
Series E (Total Return Bond Series) | $ | 5,191 | ||
Series P (High Yield Series) | 22,569 |
The adoption had no impact on total distributable earnings (loss), net assets, the current period results from operations, or any prior period information presented in the financial statements.
In August 2018, the Financial Accounting Standards Board issued an Accounting Standards Update, ASU 2018-13, Fair Value Measurement (Topic 820), Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement (the “2018 ASU”) which adds, modifies and removes disclosure requirements related to certain aspects of fair value measurement. The 2018 ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted. As of December 31, 2019, the Funds have fully adopted the provisions of the 2018 ASU, which did not have a material impact on the Funds’ financial statements and related disclosures or impact the Funds’ net assets or results of operations.
Note 14 – Legal Proceedings
Tribune Company
SBL Fund has been named as a defendant and a putative member of the proposed defendant class of shareholders in the case entitled Kirschner v. FitzSimons, No. 12-2652 (S.D.N.Y.) (formerly Official Committee of Unsecured Creditors of Tribune Co. v. FitzSimons, Adv. Pro. No. 10-54010 (Bankr. D. Del.)) (the “FitzSimons action”), as a result of ownership by certain series of the SBL Fund of shares in the Tribune Company (“Tribune”) in 2007, when Tribune effected a leveraged buyout transaction (“LBO”) by which Tribune converted to a privately-held company. In his complaint, the plaintiff has alleged that, in connection with the LBO, Tribune insiders and shareholders were overpaid for their Tribune stock using financing that the insiders knew would, and ultimately did, leave Tribune insolvent. The plaintiff has asserted claims against certain insiders, major shareholders, professional advisers, and others involved in the LBO. The plaintiff is also attempting to obtain from former Tribune shareholders, including the SBL Fund, the proceeds they received in connection with the LBO.
In June 2011, a group of Tribune creditors filed multiple actions against former Tribune shareholders involving state law constructive fraudulent conveyance claims arising out of the 2007 LBO (the “SLCFC actions”). SBL Fund has been named as a defendant in two of the SLCFC actions: Deutsche Bank Trust Co. Americas v. Ohlson Enter., No. 12-0064 (S.D.N.Y.) and Deutsche Bank Trust Co. Americas v. Cantor Fitzgerald & Co., No. 11-4900 (S.D.N.Y.). In those actions, the creditors seek to recover from Tribune’s former shareholders the proceeds received in connection with the 2007 LBO.
The FitzSimons action and the SLCFC actions have been consolidated with the majority of the other Tribune LBO-related lawsuits in a multidistrict litigation proceeding captioned In re Tribune Company Fraudulent Conveyance Litig., No. 11-md-2296 (S.D.N.Y.) (the “MDL Proceeding”).
On September 23, 2013, the District Court granted the defendants’ omnibus motion to dismiss the SLCFC actions, on the basis that the creditors lacked standing. On September 30, 2013, the creditors filed a notice of appeal of the September 23 order. On October 28, 2013, the defendants filed a joint notice of cross-appeal of that same order. On March 29, 2016, the U.S. Court of Appeals for the Second Circuit issued its opinion on the appeal of the SLCFC actions. The appeals court affirmed the district court’s dismissal of those lawsuits, but on different grounds than the district court. The appeals court held that while the plaintiffs have standing under the U.S. Bankruptcy Code, their claims were preempted by
THE GUGGENHEIM FUNDS ANNUAL REPORT | 193 |
NOTES TO FINANCIAL STATEMENTS (continued) |
Section 546(e) of the Bankruptcy Code—the statutory safe harbor for settlement payments. On April 12, 2016, the Plaintiffs in the SLCFC actions filed a petition seeking rehearing en banc before the appeals court. On July 22, 2016, the appeals court denied the petition. On September 9, 2016, the plaintiffs filed a petition for writ of certiorari in the U.S. Supreme Court challenging the Second Circuit’s decision that the safe harbor of Section 546(e) applied to their claims. The shareholder defendants, including the Funds, filed a joint brief in opposition to the petition for certiorari on October 24, 2016. On April 3, 2018, Justice Kennedy and Justice Thomas issued a “Statement” related to the petition for certiorari suggesting that the Second Circuit and/or District Court may want to take steps to reexamine the application of the Section 546(e) safe harbor to the previously dismissed state law constructive fraudulent transfer claims based on the Supreme Court’s decision in Merit Management Group LP v. FTI Consulting, Inc. On April 10, 2018, plaintiffs filed in the Second Circuit a motion for that court to recall its mandate, vacate its prior decision, and remand to the district court for further proceedings consistent with Merit Management. On April 20, 2018, the shareholder defendants filed a response to plaintiffs’ motion to recall the mandate. On May 15, 2018, the Second Circuit issued an order recalling the mandate “in anticipation of further panel review.” On December 19, 2019, the Second Circuit issued an amended opinion that again affirmed the district court’s ruling on the basis that plaintiffs’ claims were preempted by Section 546(e) of the Bankruptcy Code. Plaintiffs filed a motion for rehearing and rehearing en banc on January 2, 2020.
On May 23, 2014, the defendants filed motions to dismiss the FitzSimons action, including a global motion to dismiss Count I, which is the claim brought against former Tribune shareholders for intentional fraudulent conveyance under U.S. federal law. On January 6, 2017, the United States District Court for the Southern District of New York granted the shareholder defendants’ motion to dismiss the intentional fraudulent conveyance claim in the FitzSimons action. The Court concluded that the plaintiff had failed to allege that Tribune entered the LBO with actual intent to hinder, delay, or defraud its creditors, and therefore the complaint failed to state a claim. In dismissing the intentional fraudulent conveyance claim, the Court denied the plaintiff’s request to amend the complaint. The plaintiff requested that the Court direct entry of a final judgment in order to make the order immediately appealable. On February 23, 2017, the Court issued an order stating that it intended to permit an interlocutory appeal of the dismissal order, but would wait to do so until it has resolved outstanding motions to dismiss filed by other defendants.
On July 18, 2017, the plaintiff submitted a letter to the District Court seeking leave to amend its complaint to add a constructive fraudulent transfer claim. The shareholder defendants opposed that request. On August 24, 2017, the Court denied the plaintiff’s request without prejudice to renewal of the request in the event of an intervening change in the law. On March 8, 2018, the plaintiff renewed his request for leave to file a motion to amend the complaint to assert a constructive fraudulent transfer claim based on the Supreme Court’s ruling in Merit Management Group LP v. FTI Consulting, Inc. The shareholder defendants opposed that request. On June 18, 2018 the District Court ordered that the request would be stayed pending further action by the Second Circuit in the SLCFC actions.
On December 18, 2018, plaintiff filed a letter with the District Court requesting that the stay be dissolved in order to permit briefing on the motion to amend the complaint and indicating plaintiff’s intention to file another motion to amend the complaint to reinstate claims for intentional fraudulent transfer. The shareholder defendants opposed that request. On January 14, 2019, the court held a case management conference, during which the court stated that it would not lift the stay prior to further action from the Second Circuit in the SLCFC actions. The court further stated that it would allow the plaintiff to file a motion to amend to try to reinstate its intentional fraudulent transfer claim. The plaintiff has not yet filed any such motion. On January 23, 2019, the court ordered the parties still facing pending claims to participate in a mediation, to commence on January 28, 2019. The mediation did not result in a settlement of the claims against the shareholder defendants.
On April 4, 2019, plaintiff filed a motion to amend the Fifth Amended Complaint to assert a federal constructive fraudulent transfer claim against certain shareholder defendants. On April 10, 2019, the shareholder defendants filed a brief in opposition to plaintiff’s motion to amend. On April 12, 2019, the plaintiff filed a reply brief. On April 23, 2019, the court denied the plaintiff’s motion to amend. On June 13, 2019, the court entered judgment pursuant to Rule 54(b). On July 12, 2019, the Plaintiff filed a notice of appeal with respect to the dismissal of his claims and the District Court’s denial of his motion for leave to amend. Plaintiff filed an appellate brief on January 7, 2020. The shareholder defendants’ brief is currently due April 6, 2020.
None of these lawsuits alleges any wrongdoing on the part of Guggenheim Variable Funds Trust f/k/a SBL Fund. The following series of Guggenheim Variable Funds Trust held shares of Tribune and tendered these shares as part of Tribune’s LBO: Series A (StylePlus–Large Core Series) f/k/a Series H (Enhanced Index Series), Series N (Managed Asset Allocation Series) and Series O (All Cap Value Series) (the “Funds”). The value of the proceeds received by the foregoing Funds was $158,950, $51,000 and $3,774,000, respectively. At this stage of the proceedings, Guggenheim Variable Funds Trust is not able to make a reliable predication as to the outcome of these lawsuits or the effect, if any, on a Fund’s net asset value.
194 | THE GUGGENHEIM FUNDS ANNUAL REPORT |
NOTES TO FINANCIAL STATEMENTS (concluded) |
Note 15 – 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 | 195 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM |
To the Shareholders and the Board of Trustees of Guggenheim Variable Funds Trust
Opinion on the Financial Statements
We have audited the accompanying statements of assets and liabilities of Guggenheim Variable Funds Trust (the “Trust”) (comprising Series A (StylePlus—Large Core Series), Series B (Large Cap Value Series), Series D (World Equity Income Series), Series E (Total Return Bond Series), Series F (Floating Rate Strategies Series), Series J (StylePlus—Mid Growth Series), Series N (Managed Asset Allocation Series), Series O (All Cap Value Series), Series P (High Yield Series), Series Q (Small Cap Value Series), Series V (SMid Cap Value Series), Series X (StylePlus—Small Growth Series), Series Y (StylePlus—Large Growth Series) and Series Z (Alpha Opportunity Series) (collectively referred to as the “Funds”)), including the schedules of investments, as of December 31, 2019, and the related statements of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the five years in the period then ended and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of each of the Funds comprising Guggenheim Variable Funds Trust at December 31, 2019, the results of their operations for the year then ended, the changes in their net assets for each of the two years in the period then ended and their financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These financial statements are the responsibility of the Trust’s management. Our responsibility is to express an opinion on each of the Funds’ financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Trust in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Trust is not required to have, nor were we engaged to perform, an audit of the Trust’s internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Trust’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 2019, by correspondence with the custodian, transfer agent, paying agents and brokers or by other appropriate auditing procedures where replies from paying agents or brokers were not received. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
We have served as the auditor of one or more Guggenheim investment companies since 1979.
Tysons, Virginia
February 27, 2020
196 | 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 2020, 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 2019.
The Funds’ investment income (dividend income plus short-term capital gains, if any) qualifies as follows:
Of the taxable ordinary income distributions paid during the fiscal year ending December 31, 2019, the following Funds had the corresponding percentages qualify for the dividends received deduction for corporations.
Fund | Dividend | |||
Series A (StylePlus—Large Core Series) | 6.89 | % | ||
Series B (Large Cap Value Series) | 100.00 | % | ||
Series D (World Equity Income Series) | 40.19 | % | ||
Series E (Total Return Bond Series) | 0.25 | % | ||
Series J (StylePlus—Mid Growth Series) | 3.68 | % | ||
Series N (Managed Asset Allocation Series) | 100.00 | % | ||
Series O (All Cap Value Series) | 100.00 | % | ||
Series P (High Yield Series) | 1.48 | % | ||
Series Q (Small Cap Value Series) | 100.00 | % | ||
Series V (SMid Cap Value Series) | 81.85 | % | ||
Series X (StylePlus—Small Growth Series) | 2.65 | % | ||
Series Y (StylePlus—Large Growth Series) | 2.94 | % | ||
Series Z (Alpha Opportunity Series) | 100.00 | % |
With respect to the taxable year ended December 31, 2019, the Funds hereby designate as capital gain dividends the amounts listed below, or, if subsequently determined to be different, the net capital gain of such year:
Fund | From long-term | From long-term capital | ||||||
Series A (StylePlus—Large Core Series) | $ | — | $ | 1,469,034 | ||||
Series B (Large Cap Value Series) | 12,270,184 | 2,692,942 | ||||||
Series D (World Equity Income Series) | 5,528,640 | — | ||||||
Series J (StylePlus—Mid Growth Series) | — | 1,079,667 | ||||||
Series N (Managed Asset Allocation Series) | 359,789 | 254,193 | ||||||
Series O (All Cap Value Series) | 7,586,230 | 1,460,340 | ||||||
Series Q (Small Cap Value Series) | 3,896,134 | 806,697 | ||||||
Series V (SMid Cap Value Series) | 18,300,980 | 1,843,995 | ||||||
Series Y (StylePlus—Large Growth Series) | — | 462,547 |
Proxy Voting Information
A description of the policies and procedures that the Trust uses to determine how to vote proxies relating to securities held in the Funds’ portfolios is available, without charge and upon request, by calling 800.820.0888. This information is also available from the EDGAR database on the SEC’s website at https://www.sec.gov.
Information regarding how the Funds voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available without charge, upon request, by calling 800.820.0888. This information is also available from the EDGAR database on the SEC’s website at https://www.sec.gov.
THE GUGGENHEIM FUNDS ANNUAL REPORT | 197 |
OTHER INFORMATION (Unaudited)(concluded) |
Special Meeting of Shareholders — Voting Results
A joint special meeting of shareholders of the Trust was held on October 28, 2019 to elect the following ten nominees to the Board of Trustees of the Trust: Randall C. Barnes, Angela Brock-Kyle, Donald A. Chubb, Jr., Jerry B. Farley, Roman Friedrich III, Thomas F. Lydon, Jr., Ronald A. Nyberg, Sandra G. Sponem, Ronald E. Toupin, Jr. and Amy J. Lee. At the meeting, the following votes were recorded:
Nominee | Shares For | Shares Withheld | ||||||
Randall C. Barnes | 33,976,534 | 1,023,020 | ||||||
Angela Brock-Kyle | 33,991,936 | 1,007,618 | ||||||
Donald A. Chubb, Jr. | 33,869,823 | 1,129,731 | ||||||
Jerry B. Farley | 33,886,505 | 1,113,049 | ||||||
Roman Friedrich III | 33,853,141 | 1,146,413 | ||||||
Thomas F. Lydon, Jr. | 33,949,460 | 1,050,094 | ||||||
Ronald A. Nyberg | 33,914,467 | 1,085,087 | ||||||
Sandra G. Sponem | 34,046,062 | 953,492 | ||||||
Ronald E. Toupin, Jr. | 34,022,210 | 977,344 | ||||||
Amy J. Lee | 33,929,631 | 1,069,923 |
Sector Classification
Information in the “Schedule of Investments” is categorized by sectors using sector-level Classifications defined by the Bloomberg Industry Classification System, a widely recognized industry classification system provider. Each Fund’s registration statement has investment policies relating to concentration in specific sectors/industries. For purposes of these investment policies, the Funds usually classify sectors/industries based on industry-level Classifications used by widely recognized industry classification system providers such as Bloomberg Industry Classification System, Global Industry Classification Standards and Barclays Global Classification Scheme.
Quarterly Portfolio Schedules Information
The Trust files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year as an exhibit to its reports on Form N-PORT, and for reporting periods ended prior to March 31, 2019, filed such information on Form N-Q. The Funds’ Forms N-PORT and N-Q are available on the SEC’s website at https://www.sec.gov. The Funds’ Forms N-PORT and N-Q may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC, and that information on the operation of the Public Reference Room may be obtained by calling 800-SEC-0330. Copies of the portfolio holdings are also available to shareholders, without charge and upon request, by calling 800.820.0888.
198 | 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 | Since 2014 | Current: Private Investor (2001-present).
Former: Senior Vice President and Treasurer, PepsiCo, Inc. (1993-1997); President, Pizza Hut International (1991-1993); Senior Vice President, Strategic Planning and New Business Development, PepsiCo, Inc. (1987-1990). | 157 | Current: Purpose Investments Funds (2013-present).
Former: Managed Duration Investment Grade Municipal Fund (2003-2016). |
Angela Brock-Kyle (1959) | Trustee | Since 2019 | Current: Founder and Chief Executive Officer, B.O.A.R.D.S. (2013-present).
Former: Senior Leader, TIAA (1987-2012). | 156 | Current: Hunt Companies, Inc. (2019-present).
Former: Infinity Property & Casualty Corp. (2014-2018). |
Donald A. Chubb, Jr. (1946) | Trustee and Chairman of the Valuation Oversight Committee | Since 1994 | Current: Retired
Former: Business broker and manager of commercial real estate, Griffith & Blair, Inc. (1997-2017). | 156 | Former: Midland Care, Inc. (2011-2016). |
Jerry B. Farley (1946) | Trustee and Chairman of the Audit Committee | Since 2005 | Current: President, Washburn University (1997-present). | 156 | Current: CoreFirst Bank & Trust (2000-present).
Former: Westar Energy, Inc. (2004-2018). |
Roman Friedrich III (1946) | Trustee and Chairman of the Contracts Review Committee | Since 2014 | Current: Founder and Managing Partner, Roman Friedrich & Company (1998-present). | 156 | Former: Zincore Metals, Inc. (2009-2019). |
Thomas F. Lydon, Jr. (1960) | Trustee and Vice Chairman of the Contracts Review Committee | Since 2019 | Current: President, Global Trends Investments (1996-present); Co-Chief Executive Officer, ETF Flows, LLC (2019-present); Chief Executive Officer, Lydon Media (2016-present). | 156 | Current: US Global Investors (GROW) (1995-present).
Former: Harvest Volatility Edge Trust (3) (2017-2019). |
THE GUGGENHEIM FUNDS ANNUAL REPORT | 199 |
INFORMATION ON BOARD OF TRUSTEES AND OFFICERS (Unaudited)(continued) |
Name, Address* | Position(s) | Term of Office | Principal Occupation(s) | Number of | Other |
INDEPENDENT TRUSTEES - concluded | |||||
Ronald A. Nyberg (1953) | Trustee and Chairman of the Nominating and Governance Committee | Since 2014 | Current: Partner, Momkus LLC (2016-present).
Former: Partner, Nyberg & Cassioppi, LLC (2000-2016); Executive Vice President, General Counsel, and Corporate Secretary, Van Kampen Investments (1982-1999). | 157 | Current: PPM Funds (9) (2018-present); Edward-Elmhurst Healthcare System (2012-present); Western Asset Inflation-Linked Opportunities & Income Fund (2004-present); Western Asset Inflation-Linked Income Fund (2003-present).
Former: Managed Duration Investment Grade Municipal Fund (2003-2016). |
Sandra G. Sponem (1958) | Trustee | Since 2019 | Current: Retired.
Former: Senior Vice President and Chief Financial Officer, M.A. Mortenson-Companies, Inc. (2007-2017). | 156 | Current: SPDR Series Trust (78) (2018-present); SPDR Index Shares Funds (31) (2018-present); SSGA Active Trust (12) (2018-present); and SSGA Master Trust (1) (2018-present). |
Ronald E. Toupin, Jr. (1958) | Trustee and Chairman of the Board and Chairman of the Executive Committee | Since 2014 | Current: Portfolio Consultant (2010-present); Member, Governing Council, Independent Directors Council (2013-present); Governor, Board of Governors, Investment Company Institute (2018-present).
Former: Member, Executive Committee, Independent Directors Council (2016-2018); Vice President, Manager and Portfolio Manager, Nuveen Asset Management (1998-1999); Vice President, Nuveen Investment Advisory Corp. (1992-1999); Vice President and Manager, Nuveen Unit Investment Trusts (1991-1999); and Assistant Vice President and Portfolio Manager, Nuveen Unit Investment Trusts (1988-1999), each of John Nuveen & Co., Inc. (1982-1999). | 156 | Current: Western Asset Inflation-Linked Opportunities & Income Fund (2004-present); Western Asset Inflation-Linked Income Fund (2003-present).
Former: Managed Duration Investment Grade Municipal Fund (2003-2016). |
200 | 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 2007 (Vice President) | Current: Interested Trustee, certain other funds in the Fund Complex (2018-present); Chief Legal Officer, certain other funds in the Fund Complex (2014-present); Vice President, certain other funds in the Fund Complex (2007-present); Senior Managing Director, Guggenheim Investments (2012-present).
Former: President and Chief Executive Officer, certain other funds in the Fund Complex (2017-2019); Vice President, Associate General Counsel and Assistant Secretary, Security Benefit Life Insurance Company and Security Benefit Corporation (2004-2012). | 156 | 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 |
*** | 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 |
THE GUGGENHEIM FUNDS ANNUAL REPORT | 201 |
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).
Former: Managing Director and President, Deutsche Funds, and Head of US Product, Trading and Fund Administration, Deutsche Asset Management (2013-2018); Managing Director, Head of Business Management and Consulting, Invesco Ltd. (2010-2012). |
James M. Howley (1972) | Assistant Treasurer | Since 2014 | Current: Managing Director, Guggenheim Investments (2004-present); Assistant Treasurer, certain other funds in the Fund Complex (2006-present).
Former: Manager, Mutual Fund Administration of Van Kampen Investments, Inc. (1996-2004). |
Mark E. Mathiasen (1978) | Secretary | Since 2014 | Current: Secretary, certain other funds in the Fund Complex (2007-present); Managing Director, Guggenheim Investments (2007-present). |
Glenn McWhinnie (1969) | Assistant Treasurer | Since 2016 | Current: Vice President, Guggenheim Investments (2009-present); Assistant Treasurer, certain other funds in the Fund Complex (2016-present). |
Michael P. Megaris (1984) | Assistant Secretary | Since 2014 | Current: Assistant Secretary, certain other funds in the Fund Complex (2014-present); Director, Guggenheim Investments (2012-present). |
Elisabeth Miller (1968) | Chief Compliance Officer | Since 2012 | Current: Chief Compliance Officer, certain other funds in the Fund Complex (2012-present); Senior Managing Director, Guggenheim Investments (2012-present); 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 Distributors, LLC (2009-2014); Senior Manager, Security Investors, LLC (2004-2014); Senior Manager, Guggenheim Distributors, LLC (2004-2014). |
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 and certain other funds in the Fund Complex (2017-present); Managing Director, Guggenheim Investments (2015-present).
Former: Assistant Chief Compliance Officer, Security Investors, LLC and Guggenheim Funds Investments Advisors, LLC (2015-2018). |
William Rehder (1967) | Assistant Vice President | Since 2018 | Current: Managing Director, Guggenheim Investments (2002-present). |
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INFORMATION ON BOARD OF TRUSTEES AND OFFICERS (Unaudited)(concluded) |
Name, Address* | Position(s) | Term of Office | Principal Occupation(s) |
OFFICERS - concluded | |||
Kimberly J. Scott (1974) | Assistant Treasurer | Since 2014 | Current: Director, Guggenheim Investments (2012-present); Assistant Treasurer, certain other funds in the Fund Complex (2012-present).
Former: Financial Reporting Manager, Invesco, Ltd. (2010-2011); Vice President/Assistant Treasurer, Mutual Fund Administration for Van Kampen Investments, Inc./Morgan Stanley Investment Management (2009-2010); Manager of Mutual Fund Administration, Van Kampen Investments, Inc./Morgan Stanley Investment Management (2005-2009). |
Bryan Stone (1979) | Vice President | Since 2014 | Current: Vice President, certain other funds in the Fund Complex (2014-present); Managing Director, Guggenheim Investments (2013-present).
Former: Senior Vice President, Neuberger Berman Group LLC (2009-2013); Vice President, Morgan Stanley (2002-2009). |
John L. Sullivan (1955) | Chief Financial Officer, Chief Accounting Officer and Treasurer | Since 2014 | Current: Chief Financial Officer, Chief Accounting Officer and Treasurer, certain other funds in the Fund Complex (2010-present); Senior Managing Director, Guggenheim Investments (2010-present).
Former: Managing Director and Chief Compliance Officer, each of the funds in the Van Kampen Investments fund complex (2004-2010); Managing Director and Head of Fund Accounting and Administration, Morgan Stanley Investment Management (2002-2004); Chief Financial Officer and Treasurer, Van Kampen Funds (1996-2004). |
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).
Former: Assistant Treasurer of Henderson Global Funds and Manager of US Fund Administration, Henderson Global Investors (North America) Inc. (“HGINA”), (2017); Senior Analyst of US Fund Administration, HGINA (2014–2017); Senior Associate of Fund Administration, Cortland Capital Market Services, LLC (2013-2014); Experienced Associate, PricewaterhouseCoopers LLP (2012-2013). |
* | 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. |
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GUGGENHEIM INVESTMENTS PRIVACY NOTICE (Unaudited) |
Who We Are
This Privacy Notice describes the data protection practices of Guggenheim Investments. Guggenheim Investments as used herein refers to the affiliated investment management businesses of Guggenheim Partners, LLC: Guggenheim Funds Investment Advisors, LLC, Guggenheim Partners Investment Management, LLC, Guggenheim Funds Distributors, LLC, Security Investors, LLC, Guggenheim Investment Advisors (Europe) Limited, Guggenheim Real Estate, LLC, GS Gamma Advisors, LLC, Guggenheim Partners India Management, LLC, Guggenheim Partners Europe Limited, as well as the funds in the Guggenheim Funds complex (the “Funds”) (“Guggenheim Investments,” “we,” “us,” or “our”).
Guggenheim Partners Investment Management Holdings, LLC, located at 330 Madison Avenue, New York, New York 10017 is the data controller for your information. The affiliates who are also controllers of certain of your information are: Guggenheim Investment Advisors (Europe) Limited, Guggenheim Partners Europe Limited, Guggenheim Partners, LLC, Guggenheim Funds Investment Advisors, LLC, Guggenheim Partners Investment Management, LLC, Guggenheim Funds Distributors, LLC and Security Investors, LLC, as well as the Funds.
Our Commitment to You
Guggenheim Investments considers your privacy our utmost concern. When you become our client or investor, you entrust us with not only your hard-earned money but also with your personal and financial information. Because we have access to your private information, we hold ourselves to the highest standards in its safekeeping and use. We strictly limit how we share your information with others, whether you are a current or former Guggenheim Investments client or investor.
The Information We Collect About You
We collect certain nonpublic personal information about you from information you provide on applications, other forms, our website, and/or from third parties including investment advisors. This information includes Social Security or other tax identification number, assets, income, tax information, retirement and estate plan information, transaction history, account balance, payment history, bank account information, marital status, family relationships, information that we collect on our website through the use of “cookies,” and other personal information that you or others provide to us. We may also collect such information through your inquiries by mail, e-mail or telephone. We may also collect customer due diligence information, as required by applicable law and regulation, through third party service providers.
How We Handle Your Personal Information
The legal basis for using your information as set out in this Privacy Notice is as follows: (a) use of your personal data is necessary to perform our obligations under any contract with you (such as a contract for us to provide financial services to you); or (b) where use of your personal data is not necessary for performance of a contract, use of your personal data is necessary for our legitimate interests or the legitimate interests of others (for example, to enforce the legal terms governing our services, operate and market our website and other services we offer, ensure safe environments for our personnel and others, make and receive payments, prevent fraud and to know the customer to whom we are providing the services). Some processing is done to comply with applicable law.
In addition to the specific uses described above, we also use your information in the following manner:
● | We use your information in connection with servicing your accounts. |
● | We use information to respond to your requests or questions. For example, we might use your information to respond to your customer feedback. |
● | We use information to improve our products and services. We may use your information to make our website and products better. We may use your information to customize your experience with us. |
● | We use information for security purposes. We may use your information to protect our company and our customers. |
● | We use information to communicate with you. For example, we will communicate with you about your account or our relationship. We may contact you about your feedback. We might also contact you about this Privacy Notice. We may also enroll you in our email newsletter. |
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GUGGENHEIM INVESTMENTS PRIVACY NOTICE (Unaudited)(continued) |
● | We use information as otherwise permitted by law, as we may notify you. |
● | Aggregate/Anonymous Data. We may aggregate and/or anonymize any information collected through the website so that such information can no longer be linked to you or your device (“Aggregate/Anonymous Information”). We may use Aggregate/Anonymous Information for any purpose, including without limitation for research and marketing purposes, and may also share such data with any third parties, including advertisers, promotional partners, and sponsors. |
We do not sell information about current or former clients or their accounts to third parties. Nor do we share this information, except when necessary to complete transactions at your request, to make you aware of investment products and services that we or our affiliates offer, or as permitted or required by law.
We provide information about you to companies and individuals not affiliated with Guggenheim Investments to complete certain transactions or account changes, or to perform services for us related to your account. For example, if you ask to transfer assets from another financial institution to Guggenheim Investments, we must provide certain information about you to that company to complete the transaction. We provide the third party with only the information necessary to carry out its responsibilities and only for that purpose. And we require these third parties to treat your private information with the same high degree of confidentiality that we do. To alert you to other Guggenheim Investments products and services, we share your information within our family of affiliated companies. You may limit our sharing with affiliated companies as set out below. We may also share information with any successor to all or part of our business, or in connection with steps leading up to a merger or acquisition. For example, if part of our business was sold we may give customer information as part of that transaction. We may also share information about you with your consent.
We will release information about you if you direct us to do so, if we are compelled by law to do so, or in other circumstances as permitted by law (for example, to protect your account from fraud).
If you close your account(s) or become an inactive client or investor, we will continue to adhere to the privacy policies and practices described in this notice.
Opt-Out Provisions and Your Data Choices
The law allows you to “opt out” of certain kinds of information sharing with third parties. We do not share personal information about you with any third parties that triggers this opt-out right. This means YOU ARE ALREADY OPTED OUT.
When you are no longer our client or investor, we continue to share your information as described in this notice, and you may contact us at any time to limit our sharing by sending an email to CorporateDataPrivacy@GuggenheimPartners.com.
European Union Data Subjects and certain others: In addition to the choices set forth above, residents of the European Union and certain other jurisdictions have certain rights to (1) request access to or rectification or deletion of information we collect about them, (2) request a restriction on the processing of their information, (3) object to the processing of their information, or (4) request the portability of certain information. To exercise these or other rights, please contact us using the contact information below. We will consider all requests and provide our response within the time period stated by applicable law. Please note, however, that certain information may be exempt from such requests in some circumstances, which may include if we need to keep processing your information for our legitimate interests or to comply with a legal obligation. We may request you provide us with information necessary to confirm your identity before responding to your request.
Residents of France and certain other jurisdictions may also provide us with instructions regarding the manner in which we may continue to store, erase and share your information after your death, and where applicable, the person you have designated to exercise these rights after your death.
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
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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.
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Item 2. | Code of Ethics. |
The registrant’s Board of Trustees has adopted a code of ethics that applies to the registrant’s principal executive officer and principal financial officer. No substantive amendments were approved or waivers were granted to the Code during the period covered by this report. The Code is filed as an exhibit to this Form N-CSR.
Item 3. | Audit Committee Financial Expert. |
The registrant's Board of Trustees has determined that it has at least one audit committee financial expert serving on its audit committee (the “Audit Committee”), Dr. Jerry B. Farley. Dr. Farley is “independent,” meaning that he 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 he does not accept any consulting, advisory, or other compensatory fee from the Registrant (except in his capacity as a Board or committee member). Dr. Farley qualifies as an audit committee financial expert by virtue of his experience at educational institutions, where his business responsibilities have included all aspects of financial management and reporting.
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.
Item 4. | Principal Accountant Fees and Services. |
(a)Audit Fees. The aggregate Audit Fees billed by the registrant’s principal accountant for professional services rendered for the audit of the annual financial statements or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for the fiscal years ended December 31, 2019 and December 31, 2018 were $327,786, and $329,730, respectively.
(b)Audit-Related Fees. The aggregate Audit-Related Fees billed by the registrant’s principal accountant for assurance and related services that are reasonably related to the performance of the audit of the registrant’s financial statements and are not reported under paragraph (a) of this Item for the fiscal years ended December 31, 2019 and December 31, 2018 were $0 and $0, respectively.
The aggregate fees billed in the Reporting Periods for assurance and related services by the Auditor to the registrant’s investment adviser (not including any sub-investment adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by or under common control with the investment adviser that provides ongoing services to the Registrant (“Service Affiliates”) which required pre-approval by the Audit Committee which related to the review of the transfer agent function for the fiscal years ended December 31, 2019 and December 31, 2018 were $0 and $0, respectively.
(c)Tax Fees. The aggregate Tax Fees billed by the registrant’s principal accountant for professional services rendered for tax compliance, tax advice, and tax planning, including preparation of tax returns and distribution assistance, for the fiscal years ended December 31, 2019 and December 31, 2018 were $85,600, and $83,621, respectively.
(d)All Other Fees. The aggregate All Other Fees billed by the registrant’s principal accountant for products and services provided by the principal accountant, other than the services reported in paragraphs (a) through (c) of this Item, for the fiscal years ended December 31, 2019 and December 31, 2018 were $0 and $0, respectively.
(e) Audit Committee Pre-Approval Policies and Procedures.
(1) The registrant’s audit committee reviews, and in its sole discretion, pre-approves, pursuant to written pre-approval procedures (A) all engagements for audit and non-audit services to be provided by the principal accountant to the registrant and (B) all engagements for non-audit services to be provided by the principal accountant (1) to the registrant’s investment adviser (not including a sub-adviser whose role is primarily portfolio management and is subcontracted or overseen by another investment adviser) and (2) to any entity controlling, controlled by or under common control with the registrant’s investment adviser that provides ongoing services to the registrant; but in the case of the services described in subsection (B)(1) or (2), only if the engagement relates directly to the operations and financial reporting of the registrant; provided that such pre-approval need not be obtained in circumstances in which the preapproval requirement is waived under rules promulgated by the Securities and Exchange Commission or New York Stock Exchange listing standards. Sections V.B.2 and V.B.3 of the registrant’s audit committee’s Audit Committee Charter contain the Audit Committee’s Pre-Approval Policies and Procedures and such sections are included below.
V.B.2.Pre-approve any engagement of the independent auditors to provide any non-prohibited services to the Fund, 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 the following (collectively, “Identified Services”):
Audit Services
• Annual financial statement audits
• Seed audits (related to new product filings, as required)
• SEC and regulatory filings and consents
Audit-Related Services
• Accounting consultations
• Fund merger/reorganization support services
• Other accounting related matters
• Agreed upon procedures reports
• Attestation reports
• Other internal control reports
Tax Services
• Recurring tax services:
o Preparation of Federal and state income tax returns, including extensions
o Preparation of calculations of taxable income, including fiscal year tax designations
o Preparation of annual Federal excise tax returns (if applicable)
o Preparation of calendar year excise distribution calculations
o Calculation of tax equalization on an as-needed basis
o Preparation of the estimated excise distribution calculations on an as-needed basis
o Preparation of quarterly Federal, state and local and franchise tax estimated tax payments on an as-needed basis
o Preparation of state apportionment calculations to properly allocate Fund taxable income among the states for state tax filing purposes
o Provision of tax compliance services in India for Funds with direct investments in India
o Assistance with management’s identification of passive foreign investment companies (PFICs) for tax purposes
• Permissible non-recurring tax services upon request:
o Assistance with determining ownership changes which impact a Fund’s utilization of loss carryforwards
o Assistance with calendar year shareholder reporting designations on Form 1099
o Assistance with corporate actions and tax treatment of complex securities and structured products
o Assistance with IRS ruling requests and calculation of deficiency dividends
o Conduct training sessions for the Adviser’s internal tax resources
o Assistance with Federal, state, local and international tax planning and advice regarding the tax consequences of proposed or actual transactions
o Tax services related to amendments to Federal, state and local returns and sales and use tax compliance
o RIC qualification reviews
o Tax distribution analysis and planning
o Tax authority examination services
o Tax appeals support services
o Tax accounting methods studies
o Fund merger, reorganization and liquidation support services
o Tax compliance, planning and advice services and related projects
(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 services on behalf of the Committee.
(d) For Identified Services with estimated fees of $50,000 or more, such 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 Chief Accounting Officer (“CAO”) of the Trust by the independent auditor using the pre-approval request form attached as Appendix C to the Audit Committee Charter. The Trust’s CAO will determine whether such services are included within the list of services that have received the general preapproval 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 quarterly 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).
V.B.3. 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 and 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 and 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 and financial reporting of the Trust for which the estimated fees are $25,000 or more, such services require pre-approval by the Committee.
(2) None of the services described in each of Items 4(b) through (d) were approved by the Audit Committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X.
(f) Not applicable.
(g)Non-Audit Fees. The aggregate non-audit fees billed by the registrant’s accountant for the most recent fiscal year and the preceding fiscal year for services rendered to the registrant, the investment advisor, and any entity controlling, controlled by, or under common control with the advisor that provides ongoing services to the registrant were $85,600, and $83,621, respectively.
(h)Auditor Independence. The registrant’s Audit Committee was provided with information relating to the provision of non-audit services by Ernst & Young LLP to the registrant’s investment adviser (not including any sub adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant that were not pre-approved by the Audit Committee so that a determination could be made whether the provision of such services is compatible with maintaining Ernst & Young LLP’s independence.
Item 5. | Audit Committee of Listed Registrants. |
Not applicable.
Item 6. | Investments. |
Schedule of Investments is included as part of the report to shareholders filed under Item 1 of this form
Item 7. | Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies. |
Not applicable.
Item 8. | Portfolio Mangers of Closed-end Management Investment Companies |
Not applicable
Item 9. | Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers. |
Not applicable.
Item 10. | Submission of Matters to a Vote of Security Holders. |
The registrant does not currently have in place procedures by which shareholders may recommend nominees to the registrant’s board.
There have been no changes to the procedures by which shareholders may recommend nominees to the registrant’s board.
Item 11. | Controls and Procedures. |
(a) The registrant’s President (principal executive officer) and Treasurer (principal financial officer) have evaluated the registrant’s disclosure controls and procedures (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) There were no changes in the registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act) that occurred during the period covered by this report that have materially affected, or are 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)(2) Separate certifications by the President (principal executive officer) and Treasurer (principal financial officer) of the registrant as required by Rule 30a-2(a) under the Act (17 CFR 270.30a-2(a)) are attached.
(b) A certification by the registrant’s President (principal executive officer) and Treasurer (principal financial officer) as required by Rule 30a-2(b) under the Act (17 CFR 270.30a-2(b)) is attached.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) | Guggenheim Variable Funds Trust | |
By (Signature and Title)* | /s/ Brian Binder | |
Brian Binder, President and Chief Executive Officer | ||
Date | March 6, 2020 | |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. | ||
By (Signature and Title)* | /s/ Brian Binder | |
Brian Binder, President and Chief Executive Officer | ||
Date | March 6, 2020 | |
By (Signature and Title)* | /s/ John L. Sullivan | |
John L. Sullivan, Chief Financial Officer and Treasurer | ||
Date | March 6, 2020 |
* | Print the name and title of each signing officer under his or her signature. |