Leuthold Funds N-CSRCertified annual shareholder report (management investment company)

Annual Report 

September 30, 2021

LEUTHOLD FUNDS

Leuthold Core Investment Fund  

Retail Class Shares    LCORX 

Institutional Class Shares    LCRIX

Leuthold Global Fund  

Retail Class Shares    GLBLX 

Institutional Class Shares    GLBIX

Leuthold Select Industries Fund  

LSLTX

Grizzly Short Fund  

GRZZX

Leuthold Core ETF  

LCR

Inside Cover - blank

Leuthold Funds

Table of Contents

Leuthold Funds

Dear Leuthold Fund Shareholders:

It isn’t “fleeting” nor “passing.” It’s not “momentary” or “temporary.” Ephemeral? No. It’s “transitory.” Yesteryear’s catchphrase, “unprecedented,” is long forgotten.

Today’s inflation stint will certainly prove “transitory.” The word transitory is effectively meaningless. Afterall, our time on earth will be transitory, and so too will the current stock market hysteria.

By early August, “Team Transitory” (aka the Fed) could point to the 60-bps¹ drop in bond yields as confirmation that bond investors considered the inflation backdrop as merely benign. Typically, we’d place our trust in the message from bond investors over that of the Fed; unfortunately, the Fed itself is now the largest incremental investor in the bond market. One should therefore view the “message of the market” with less reverence than before.

The bond market’s refusal to acknowledge this summer’s deteriorating inflation readings also served to bolster the consensus view that inflation troubles would be transitory. Pundits trotted out the familiar axioms: “The bond market is always right,” and “The bond market knows best.” But, when there’s a systematic, price-insensitive buyer (aka Team Transitory) guzzling up $120 billion in Treasuries per month, do bonds still “know best?”

For today’s cyclical setting, inflation is already “too high,” and, as the economy recovers, equity investors will be less and less tolerant of rising prices.

The Last Twelve Months’ Market Action

From October through December 2020, equity markets soared to new heights led by SMID²-caps, high beta, and value stocks; election risks had subsided, and the vaccine roll-out boosted market sentiment. The reflation theme became more established as interest rates broke out of their previous trading range and the dollar weakened significantly. Reopening-economy beneficiaries were big winners, Energy and Financial stocks staged substantial turnarounds, and Materials and Industrials continued a healthy upward track. Meanwhile, the defensive areas of Consumer Staples, Real Estate, and Utilities underperformed.

Stocks extended their strong rally through the first quarter of 2021. The January moves in heavily shorted micro-caps were more bizarre than anything we saw in the wildest days of the Tech Bubble. An observer on Reddit noted, “In all my six days of trading, I have never seen anything like this.”

The reflation theme also persisted in early 2021. Interest rates jumped 70 bps and the dollar strengthened on the back of better economic performance. With the reopening theme becoming more established, equity leadership favored small-cap value stocks, while growth and momentum-style equities trailed by a generous amount.

Energy and Financials maintained their robust reversals. Industrials and Materials were the next-best performers. Defensive sectors were again the “has-beens,” but this time they were accompanied by 2020’s best performers: Information Technology and Consumer Discretionary.

The equity rally stretched through the second quarter. Underneath the surface, though, large-caps regained momentum and SMID-cap stocks retreated to the downside. Value stocks became laggards, and growth sharply rebounded as bond yields rolled over—falling 30 bps from April through June. Despite red-hot inflation numbers, the reflation theme saw a significant turnaround, too, as a hawkish surprise from the Fed lowered inflation expectations.

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Following its rough start to 2021, Info Tech resumed its 2020 trend as a top performer, and Energy sustained its forceful U-turn. Conversely, several sectors that did well the first three months of 2021 saw dramatic rollovers, including Industrials, Financials, and Materials; some of the most defensive sectors were also underperformers.

The stock market contagion was swallowing up more and more professionals as gains intensified. Sell-side strategists trolled the bears in a more acerbic fashion than we could ever recall, and Morningstar eliminated its “Bear Market Fund” category.

U.S. stocks continued to melt up during the summer, although less broadly than in the summer of 2020. July through September had mixed results among stock market segments. Mid- and small-caps’ poor showing in July got even uglier when volatility struck everything in September. The global tightening trend was well underway, and the Fed was sending a clear signal to start tapering.

Fears of stagflation re-emerged as a global energy crisis took place amid weakening economic data. Additionally, supply chain constraints, concerns about contagion from China’s Evergrande debacle, and the recurring debt ceiling nightmare prompted investors to reduce risk. As a result, large-cap growth stocks outdid their smaller and cheaper counterparts, albeit with a diminished advantage.

Back in January, while the rest of the world couldn’t wait for 2020 to end, we imagined that investors, at least, might be sorry to see it go—especially the passive-equity crowd. At the time, we believed that we had perhaps just witnessed the most powerful ever, single-year reinforcement of the “buy-and-hold” mantra. The 200-day “report card” flaunted the best initial gain of all post-war bulls, but it came at a price: Investor sentiment was above the levels seen at the same point in all past bull markets. And then there were valuations, which were higher than every prior bull-market peak, except for Y2K.

Stocks have been able to shrug off the worsening inflation picture all year, but in the months ahead, the market will likely confront lingering high inflation and the tapering of the Fed’s bond purchases. It isn’t easy to envision stocks making significant headway in that environment—but we’ve been wrong before. Compounding that is the likelihood the equity market’s stellar performance has contributed to the inflationary problems in many sectors of the economy.

Equity investors, and even tactical managers, now face a more challenging long-term opportunity-set than what existed near the top of the Tech Bubble. In 1999 and 2000, gutsy equity managers had choices outside of the valuation risks concentrated among the mega-caps. That’s not possible today—it seems like nearly everything is overvalued on an absolute basis.

In the manufacturing economy, bottlenecks have reached levels that have historically been troublesome for stocks. Tactical investors, meanwhile, are confronted with this broadly expensive equity market along with fixed income alternatives that are highly unappealing from an absolute return point of view. No wonder some investors feel compelled to dabble in crypto!

From a calendar perspective, the U.S. economic recovery and bull market are very young. Yet, ironically, there are an astounding array of readings that resemble “late-cycle” conditions, both on Main Street and Wall Street. At year-end 2020, we said it was a full-blown mania, and the bull’s relative “youth” didn’t make it “safer” to climb aboard.

Fast forward through September 2021, the twelve-month stock market gains for every primary benchmark of every equity style and size category have exploded—not imploded. Now, based on three dozen measures of cap-weighted and “median” equity valuations, we believe U.S. stocks are the most expensive on record.

We were indeed wrong with our early-year expectation that the market would need to flush out the excesses and firm up the health of its underlying fundamentals. Thankfully, we have always championed the advice and values adhered to by the founder of our firm:

“All is for naught if we should lose our flexibility, our ability to admit we can be wrong.”

~ Steve Leuthold

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ANNUAL PERFORMANCE REVIEW

TACTICAL ASSET ALLOCATION—DOMESTIC & GLOBAL MUTUAL FUNDS

The Leuthold Core (Core) Investment Fund and Leuthold Global (Global) Fund began the 2020-2021 fiscal year with a neutral view on the prospects for stocks (net exposure of 51%). However, the scores among our technical indicators got worse in late-October 2020, which pushed our quantitative analysis to a negative stance. With the impending presidential election, there was a lot of “noise” in the mix, so our response to the downgrade was a conservative, equity hedge increase of 2% in each Fund.

As the election fatigue dissipated, the negative signal was overturned, and the 2% addition to the equity hedge was reversed. Compounded with market action, this resulted in equity exposure shifting upward to 56%. In hindsight, our model’s temporary dip to negative was ill-timed, but both Funds recovered and moved sharply higher in November, delivering strong performance—both from stocks and bonds.

During the rest of the fiscal year (FY) through September 2021, the average net equity exposure in the Core Fund was about 54%. With foreign-traded stock valuations looking much more appealing, the Global Fund had a bit heavier net equity level of 56%.

For the twelve months through September 2021, the Core Fund’s retail share class posted a +16.44% total return. Its peer category, Morningstar Tactical Allocation average, outperformed by 268 basis points (bps) with a +19.12% total return. The Fund also lagged the fully invested S&P 500 benchmark’s +30.00% total return by 45%. The performance gap with the S&P 500 equates to the Core Fund’s 46% lower exposure to equities.

The Global Fund retail share class ended September 2021 with a FY total return of +18.01%. Performance about matched its peer-fund category, the Morningstar World Allocation average (+18.07% total return). The fully invested MSCI ACWI had a total return of +27.44%. The Global Fund’s average net exposure during the year was 44% less than the benchmark, yet the Fund trailed by a smaller 34%. This indicates that underlying Global Fund holdings were more profitable, which narrowed the performance disparity brought about by the Fund’s lower stock allocation.

Leuthold Core & Global Tactical Funds’ Long Equity Exposure

Traditional long-stock investments comprised a FY monthly average of 61% and 64%, respectively, in the Core and Global Funds. While U.S.-stock indexes repeatedly soared to ever-greater, new record highs throughout the fiscal year, the MSCI ACWI (+27.44%) nearly kept pace with the S&P 500 (+30.00%). The MSCI Emerging Markets Index had a solid +18.28% return, but the Russell 2000 and S&P 600 SmallCap indices stole the show: +47.68% and +57.64%, respectively.

The Core Fund’s U.S.-traded stocks returned +36.35%; its Emerging Market (EM) equity holding produced +29.01%. The Global Fund’s stocks were up +38.47%. Compared to the benchmarks, the Core Fund’s domestic stocks outdid the S&P 500 by +635 bps, while its EM stocks surpassed the MSCI Emerging Market Index by +1,073 bps. The Global Fund’s equities beat the MSCI ACWI by a substantial +1,103 bps. Each strategy’s specific equity-performance drivers are further detailed below.

Emerging Market Equities—Leuthold Core Investment Fund

We’ve been under-allocated to Emerging Markets (EM) for much of the last decade—we began the FY in the same mode, with EM stocks at a 2.5% portfolio weight. The MSCI EM Index surged nearly +20% in the first three months of our FY (October-December 2020), and our allocation followed suit with a +19% gain.

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We were encouraged as EM returns continued to trend higher in early 2021, but our model’s stance progressively faded, and we eliminated the position in May. That decision paid off. The MSCI EM Index reversed to the downside in the third quarter, ending September with a YTD loss of -1.25%. The MSCI EM gain of +18.28% (year-over-year through September) was essentially thanks to the results obtained from the short window between October-December 2020.

The Core Fund’s monthly-average EM weight of just 2.6% for the holding period of October 2020 through May 2021 produced a +29.01% return. Due to the small-scale allocation, its contribution to FY results was negligible.

Looking ahead, based on both the Normalized P/E multiple and Price/Book, there’s plenty of runway for EM stocks just to get back to the midpoint of their 20-year valuation range. Rising commodity prices and a weak dollar help, and we will look to rebuild an EM position as opportunity and disciplines allow.

Tactical Funds’ Equity Hedge

The equity hedge was adjusted in a narrow range throughout the year. There was an average monthly holding of 8% in the Core, and 9% in the Global Fund. This equity hedge detracted from return during the last three months of 2020, as stocks of all sizes and styles shot higher.

From January through September 2021, performance from the equity hedge either matched or improved on the inverse index’s corresponding results. The portfolios’ FY hedge trailed the S&P 500 inverse by -392 bps, but it was noticeably better (+976 bps) than the corresponding S&P 400 MidCap results. When factoring in the portfolio weight, the equity hedge was a drag on the last twelve-months’ results: -296 bps in the Core Fund and -256 bps in the Global Fund.

Tactical Funds’ Fixed Income

Everyone is struggling with allocations to a bond market that seems exceptionally over-priced. The Funds’ FY fixed income allocation of 18-19% was underweight our normal guideline minimum of 30%. Risk/reward prospects continue to be unfavorable, which is why we are keeping the bond duration at the short end of the scale compared to the benchmark.

Associated positions were modest but spread across exposures and risk profiles. Developed Market Sovereign Debt was the largest allocation, but its weight was trimmed with each passing month—beginning near 10% and ending the fiscal year at 7%. The Quality Corporate bond position and MBS bond funds also each gradually declined as the year progressed: Corporates moved from 5-6% a year ago down to 3.8%, on average, as of September 30th; MBS bond funds began the FY at an average weight of 2.6% and closed the year at 0.8%. High Yield bonds were a steady holding all year, at 1.8% on average. EM Sovereign Debt (0.3% weight) and TIPS (2.3%) were introduced in early 2021.

Among the fixed income subsets, High Yield bonds stood apart in terms of absolute return (+10.50% average gain for the Core and Global Funds). Other holdings with lower (but measurable) returns were TIPS (+4.19%) and EM Sovereign Debt (+2.38%). DM Sovereign Debt was a portfolio loser (-4.27%). After incorporating the portfolio weight with the associated performance of each allocation, the collective results had basically zero impact on the Funds’ FY returns.

It’s a pretty good bet that yields are headed higher in the next few years, which is a performance negative for the asset class—and even more so with long-term bonds; this is the reasoning for seeking shorter-duration securities. Despite the challenging environment and scarcity of “income,” bonds play a constructive role on a smaller scale. As more attractive prospects develop and risks are flushed out, we will welcome the occasion to boost the Funds’ yield profiles and rebuild the allocation to our optimal minimum 30%.

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Gold

The Funds’ commodities exposure was dedicated exclusively to gold, which carried a steady 4.4% average weight over the last twelve months. In an outstanding period for commodities in general (the Bloomberg Commodity Index is up 30% YTD in 2021), gold is down. This position had solid gains in only two months of the fiscal year, December 2020 and May 2021, where the holding outpaced the S&P 500 (+316 bps and +700 bps, respectively). This gold allocation produced losses in the majority of the other ten months. Overall, it was down a bit more than -700 bps for the year, yet after considering the roughly 4% portfolio weight, it had little drag on return.

Some of the investment demand for gold has been siphoned by cryptocurrencies, but we think crypto is too dependent on a continuing stock market boom. We believe it makes sense to maintain at least some exposure to gold for now, as it offers defense, diversification, and it should profit if the dollar is put under pressure.

LEUTHOLD CORE ETF

The ETF version of the Leuthold Core Investment portfolio simulates the same asset allocation and tactical adjustments. The goal is to provide relatively equivalent returns for those who prefer the features of an ETF to gain exposure to the Core strategy’s “best ideas.”

The Core ETF builds its stock exposure with third-party, equity-sector and industry ETFs to approximate the composition obtained via individual stocks in the mutual fund. In addition, corresponding fixed income, alternatives, and other potential positions, such as asset-class hedges, are also acquired through ETFs with like concentrations to the chosen exposures.

The Core ETF had a +13.59% NAV total return (+13.58% market total return) for the FY ended September 2021, behind the benchmark S&P 500’s +30.00% total return. The variance is mainly due to the Core ETF’s 46% lower stock allocation; the residual deficit is attributed to investment selection.

Core ETF: Performance Drivers

Among conventional equity positions (60% average long-stock exposure), the Technology sector was the largest holding; it began the FY at a 26% weight and closed September 2021 near 24%. The general Tech-sector exposure, which gained +664 bps, was reinforced with a freestanding Semiconductor-specific investment (2.7% average weight) that boosted the overall Technology-related return by another +148 bps. The commingled results were +41 bps additive over the +771 bps of the S&P 500’s Technology sector’s 27% position.

Adding to the tech vibe was the next largest sector position, Communication Services, which contains Wireless & Telecommunication Services, Cable & Satellite, and Interactive & Social Media, among others. At an average portfolio weight of 15%, Communication Services contributed +454 bps. Alternatively, the S&P 500’s 11% position in the sector resulted in a lagging +406 bps.

Diversified Consumer Discretionary exposure of 10% was augmented with industry-specific holdings in Home Construction (4.9% weight), Homebuilders (2.1%), and Retail (1.7%). This aggregated to a total of 19% and provided +518 bps over the benchmark’s +238 bps return (12% weight). As for Consumer Staples, its score slid last fall, and the 10% allocation was eliminated in early 2021. The partial-year investment had a +52 bps return while the S&P 500’s 6% Staples’ position translated to +78 bps.

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One year ago, the Core ETF contained an overweight 19% of equity assets in Health Care (via the broad-spectrum Health Care sector, Biotechnology group, and Health Care Providers) versus 13% in the benchmark. In early 2021, our rankings were showing increasing weakness, which prompted a reduction. As of fiscal year-end, Health Care Providers was the only holding still active in the portfolio. The full year’s result from the pooled allocation was +409 bps. The S&P 500 gained +308 bps from its Health Care commitment.

From the broad-sector angle, at the start of the fiscal year, the Core ETF had no commitment to Utilities, Real Estate, Energy, Financials, Industrials, or Materials. The latter three were introduced as the year advanced, with Financials and Materials ending the FY as equity positions around 6% and Industrials at 3%.

At the group level, concentrations in Regional Banking, Brokerages, Metals & Mining, Gold, and Timber heightened the exposure to the Financials and Materials sectors. The three financial-associated vehicles were all profitable with a combined +693 bps. The Materials allocations were mixed—Gold and Timber losses outstripped small gains from both Metals & Mining and the all-embracing sector position, which resulted in a net decline of -15 bps. The largescale Industrials sector was detractive by -11 bps.

Traditional equities were hedged with a security that signified a monthly average weight of about 8%. This component provided inverse stock exposure to lessen volatility and cushion performance during market declines. While this position had a FY loss of -2,558 bps, it was constructive in that it added value over the inverse S&P 500, which would have correlated to a loss in the range of -3,000 bps. When accounting for the small size of the equity hedge, the aggregate result to the fiscal-year return was minimal: -30 bps.

The Core ETF’s central fixed income positions (FY average 15.6% of assets) consisted of Quality Corporate bonds (5.5% average weight), Developed Market Sovereign Debt (3.2%), Treasury Inflation-Protected Securities or “TIPS” (3.1%), High Yield bonds (2.1%), and an MBS allocation (1.7%). International Treasury bonds incorporated another 4% to the mix for the full twelve months.

In June, an 11% position in one- to three-year Treasuries was introduced, which increased fixed income to a 27% weight through September 30th. The Treasuries, however, essentially equated to “cash equivalents” instead of a targeted position for alternate fixed income characteristics or diversification. All in all, the fixed income portfolio had a small twelve-month gain of +109 bps. It did not translate to much of a value-add after incorporating the relative size of the position.

Gold was the dedicated “commodities” allocation. The end goal is to profit from this holding, but its differing character (versus stocks) can provide defense under certain circumstances. Furthermore, should the dollar be put under pressure, gold tends to benefit. In contrast to the last fiscal year, the allocation was a loser on an absolute basis (-707 bps). In relation to its small weight (4.5% average), this component had little sway on fiscal-year return.

LEUTHOLD SELECT INDUSTRIES AND LEUTHOLD GLOBAL INDUSTRIES

Long Equity Exposure—Domestic & Global Strategies

Leuthold Select Industries (SI) Fund and Leuthold Global Industries (GI) strategy are fully invested in the stock market. The approach intends to pivot between industries as economic conditions develop and financial markets evolve. The goal is to identify and capture momentum within groups of stocks (“industries”) inclined to profit mutually from marketplace forces. Alternatively, industries are deactivated from portfolios when our disciplines detect signs of underlying weakness as a leadership chapter fades.

For the fiscal year ended September 2021, the Leuthold SI Fund had a total return of +34.14%, which was +414 bps ahead of the S&P 500 one-year gain of +30.00%. The SI Fund trailed its peer category, Morningstar Mid-Cap Blend average (+38.88% total return), by +474 bps. The Leuthold GI strategy (Global Industries, L.P., net performance) produced a total return of +36.20%, which was substantially better than the MSCI ACWI and the Morningstar World Large-Stock Blend average (+27.44% and +25.83% total returns, respectively).

This top-down methodology aims to identify industry groups that, as an aggregate, are showing strength or appear likely to be leaders based on global trends and the economic setting. The momentum factor heavily influences the quantitative assessment at the industry-group level, whereas valuation is the crucial element behind the stock selection.

Ideally, these strategies endeavor to uncover longer-term trends (one year or more); however, opportunities may have shorter lifespans among highly cyclical groups. Either way, the object is to isolate collective strength.

The equity universe for the SI Fund is composed of 3,000 domestically traded securities. The GI stock universe contains roughly 5,000 stocks. Both are constructed with securities that meet minimum liquidity thresholds.

Equity Sector/Industry Group Drivers

(Relative performance and portfolio overweight/underweight comparisons refer to the corresponding sector/group exposures of each strategy’s respective benchmark.)

Equity rotation can result in big underweights or overweights compared to the benchmarks. Per our model, selecting solid stocks from the most attractive industries has proven successful in generating alpha over a portfolio of unrelated stocks that do not have shared performance drivers.

For the last twelve months, from a sector view, none of the SI or GI allocations generated a loss, and most outperformed corresponding benchmark exposures. The Information Technology (IT) sector was the biggest allocation among both SI and GI holdings (23% average weight in each). Overall, it was the best performer in the SI Fund (+976 bps contribution to return) and the second best in the GI portfolio (+890 bps). IT was also the most prominent weight and best performer for the S&P 500 (27% average weight; +771 bps) and MSCI ACWI (21% weight; +626 bps); however, SI and GI outperformed by +205 bps and +264 bps, respectively.

At a 20% weight, Consumer Discretionary added +653 bps to SI Fund results, contrasting with the 12% underweight in the S&P 500, which lagged at +238 bps. Likewise, Health Care, Financials, and Industrials encompassed SI portfolio weights from 10.9% to 15.6%—each a heavier composition than the benchmark (8.5% to 12.2%)—and these SI sector holdings outperformed the S&P 500 allocations by a combined +482 bps.

The remaining sector holdings in SI were Communication Services (7.5% weight against the benchmark’s 11.0%), Materials (6.6% weight versus 2.7%), and Consumer Staples (1.9% weight compared to 6.2%). Results for Communication Services and Consumer Staples were -244 bps less than the S&P 500 positions. On the other hand, the SI Materials’ allocation (+86 bps) was slightly ahead of the S&P 500’s exposure (+78 bps).

The GI portfolio’s overweight exposure to Financials, Materials, and Health Care (12.2% to 16.9%) outperformed the MSCI ACWI’s corresponding exposure (4.9% to 13.8% weights) by a collective +830 bps. The global Consumer Discretionary sector was the fifth largest weight in GI (11.7%), and its +172 bps return trailed the benchmark’s +253 bps.

The global sectors making up Communication Services (7.8% weight), Industrials (7.4%), Consumer Staples (1.8%), and Energy (1.0%) had mixed results. All contributed net gains, but the former two eked out a +169 bps advantage to the benchmark’s positions, while the latter two had a combined loss of -104 bps.

SI had no exposure to the Energy, Real Estate, or Utilities sectors; GI had no holdings from Utilities or Real Estate.

One of our key performance measures is the “total effect” of attribution versus the benchmark. The formula evaluates investments based on the pooled results of 1) “industry” selection, and 2) “stocks chosen” to represent the targeted industry. Based on this yardstick, the domestic SI and global GI equity portfolios both outdid the benchmark with their IT-sector exposure to Semiconductor Equipment, Banking & Brokerage stocks (Financials sector), Trading Cos. & Distributors (Industrials), and Specialty Stores (Consumer Discretionary).

The SI and GI portfolios had common areas where the total effect of the industry investment and the underlying stock selection were performance negatives relative to the benchmark: Containers & Paper Packaging (Materials sector), Consumer Finance (Financials), Managed Health Care (Health Care), and Homebuilding (Consumer Discretionary).

When considering U.S. and non-U.S. industries, there are several facets that may inversely influence results between domestic and global stocks. Among them are leadership and political structure, financial health, climate conditions, and geography in general.

The shared borders of Eurasian countries are an advantage for transcontinental business among companies domiciled there. Alternatively, for many North American industries, the physical detachment and distance from global peers increases costs, adds to delivery timetables, and presents other challenges with planning and development.

Domestic business cycles and leadership trends can be out of synch with those overseas; this can generate opposing industry dynamics and present different opportunities based on where an industry and its key partners, work force, customers, and competitors are located.

The subtleties of commerce can vary significantly in foreign landscapes versus domestically, so it isn’t unusual to have different outcomes for domestic versus global industry peers. For example, over the last twelve months, stocks from the Marine industry were a standout performer in the GI portfolio, while the group had no presence in the domestic SI Fund. Similarly, Oil & Gas Exploration & Production had a sizable positive impact on GI results, but it was not attractive in our U.S. rankings.

Another divergence between GI and SI was the Life Sciences industry: It was a very constructive position at the global level, yet the domestic stocks did not thrive. Additionally, among other profitable exposures in global groups were Life & Health Insurance and Air Freight & Logistics—neither was a plus in the domestic SI allocations.

Positives for SI that were absent in the GI portfolio included Human Resources & Employment Services, Automotive Retail, and Health Care Facilities. These three industries had a total additive effect of +298 bps over the S&P 500 benchmark.

Of industry detractors not yet noted among SI concentrations, the most unfavorable exposures were Diversified Banks, Interactive Home Entertainment, Gold, Managed Health Care, and Biotechnology. The GI portfolio’s other group disappointments were Food & Staples Retail, Software, IT Consulting, and Construction Materials.

Global/Foreign Equity Exposure

Leuthold SI and GI strategies have flexibility when it comes to the characteristics of their international exposure. Investment concentrations to developed market (DM) or emerging market (EM) stocks are largely the result of our quantitative process. Certain industries require DM amenities to succeed, while other businesses can be prosperous incorporating operations in EM countries.

The SI Fund obtains foreign-stock exposure from ADR/ADS securities traded on U.S. exchanges. At times, this has materially affected performance, both on an absolute basis and relative to the S&P 500. Within the SI Fund, the last twelve months’ DM and EM exposure did not materially change from the prior fiscal year: DM stocks from outside the U.S. made up a 6.4% quarterly average weight, and there were no EM stocks.

Leuthold GI methodology builds a group concentration by selecting the highest-rated stocks within an industry from our global-equity universe. Over the last twelve months, U.S. stocks encompassed most of the assets, with an average weight of 56% (the same as the benchmark). Of the 44% foreign securities, DM stocks (ex-U.S.) incorporated 32% of assets, and EM held 12%.

With the S&P 500’s FY return of +3,000 bps, the GI portfolio’s 56% U.S. weight benefited in kind, contributing +2,400 bps to the fiscal-year results. That U.S. exposure in the GI strategy outdid the associated U.S. exposure in the MSCI ACWI (+1,656 bps). GI relative outperformance among its U.S. equities shows the value gained by limiting investments to industries that exhibit strength and leadership, in contrast to a massive portfolio of stocks across the spectrum of industries. The GI portfolio contained just 131 stocks on average throughout the FY, while the benchmark represented 2,979 stocks.

The GI portfolio’s DM equities (ex-U.S.) contributed +882 bps, while EM stocks gave a boost of +544 bps. Each outperformed the MSCI ACWI’s corresponding allocations, which were up +818 bps and +200 bps, respectively.

GI investments outside the U.S. that produced the best performance (absolute and relative) were industries in the U.K., Japan, Netherlands, Ireland, and Mexico. Gains from these combined to contribute +790 bps to return and outperformed the benchmark’s holdings by +380 bps. The portfolio’s positions affiliated with Germany, France, and Indonesia had net losses that were detractive by -53 bps. In contrast, the MSCI ACWI holdings within the same countries each experienced a net gain, which together tallied to +111 bps.

We do not adjust for global currency fluctuation in the Leuthold GI strategy. These hedging practices are expensive and do not guarantee to protect against losses. Instead, the GI model incorporates a U.S. dollar-based relative-strength component to identify potentially attractive, broad FX-market opportunities. Specific to the last twelve months, currency movement had a negligible performance impact on a relative basis. The portfolio had roughly market-weight exposure to U.S. stocks and was diversified across the rest of the world—a combination that typically results in minimal currency impact.

GRIZZLY SHORT FUND

Short-Only Equity Exposure

The Grizzly Short Fund aims to be 100% short individual stocks. Investors use this vehicle for various reasons: A means to potentially profit when stock prices decline; used in tandem with other investments for diversification; moderating market volatility; and managing capital gains and losses.

The Grizzly Short Fund is an actively managed, quantitative methodology. The strategy invests in mid/large-cap stocks with ample liquidity that appear to be priced far beyond levels supported by underlying fundamentals. These are generally solid companies that are simply overvalued and vulnerable to a price decline; this approach does not intend to take positions in the stocks of companies at risk of insolvency or susceptible to an industry collapse.

For the fiscal year ended September 2021, the Grizzly Short Fund produced a -33.92% total return. The result looks rather agreeable when sized up to the inverse S&P 400 MidCap Index (-43.68%), and even better balanced against the inverse S&P 600 SmallCap Index (-57.64%).

Set against the inverse performance of the S&P 500 total return of +30.00%, the Grizzly Short Fund was a laggard (the gap with the inverse index had the Grizzly Short Fund behind by -392 bps). It’s worth noting that evaluating short-selling returns to the reverse of an index doesn’t precisely represent the results if one had been short a given strategy in real-time for longer than one day. A portfolio of stocks sold short to mirror an index will be subject to the upshots of cash inflow/outflow, volatility, and the compounding effect on daily returns.

Short Equity Exposure: Sectors And Industry Group Drivers

(Relative performance and Fund overweight/underweight references relate to the S&P 500’s corresponding sector/group exposures.)

It is normal for the Grizzly Short Fund to have pronounced differences in exposure to individual sectors versus the S&P 500. These departures from the benchmark are usually an advantage. The flexibility allows the portfolio to adjust holdings as opportunities change, while S&P 500 positions are essentially static and cannot eliminate or significantly expand exposure on either a sector-by-sector basis or across industry compositions.

Unlike most years, the Grizzly Short Fund had exposure to all eleven broad sectors the entire fiscal year. With the last twelve months’ prevailing gains across all stock market segments, every sector position in the Fund detracted from performance on an absolute basis. Six did worse than the benchmark’s sector results.

An overweight in Consumer Discretionary was the biggest adversary (-707 bps) compared to the S&P 500’s related loss of -207 bps. Other detractors were Industrials (-455 bps), Energy (-380 bps), Health Care (-318 bps), Real Estate (-144 bps), and Materials (-144 bps). Of those, only Industrials had a significant overweight. On the whole, relative to the benchmark, these underperforming sectors produced a big loss of -2,147 bps in the Fund, while the S&P 500’s exposure detracted by just -909 bps.

Utilities, Communication Services, Financials, and Information Technology (-1,020 bps combined) outperformed the benchmark’s corresponding positions (-1,479 bps). The Fund’s Consumer Staples return (-75 bps) wasn’t far behind that of the S&P 500 (-66 bps).

At the industry level, positive contributions were few and far between. Those with gains of +20 bps or more included Electric Utilities (+20 bps), Health Care Services (+25 bps), Education Services (+32 bps), and Health Care Technology (+34 bps).

Among the contingency of the Fund’s biggest losers, the reopening-economy theme was evident. Over the last twelve months, industries hit hardest by the pandemic shutdown were resuscitated with each passing month. The Grizzly Short Fund was saddled with stocks related to Hotels Resorts & Cruise Lines (-219 bps), Aerospace (-131 bps), Restaurants (-125 bps), Movies & Entertainment (-79 bps), and Airlines (-96 bps).

Industries in the Grizzly Short Fund that were benefactors of the reopening at a bit smaller scale (and detracted from the Fund) were Apparel Retail and Apparel Accessories & Luxury Goods (-207 bps combined), and Trucking (-83 bps).

Significant losses not particularly tied to the reopening theme were generated from Energy exposure to Integrated Oil & Gas, Oil & Gas Equipment, and Oil & Gas Exploration. These three produced a collective -269 bps. Also among the Fund’s major detractors were positions in Application Software (-203 bps) and Health Care Equipment (-144 bps).

The group exposures with losses less than 100 bps are too numerous to list. The most pronounced of those were Technology Hardware Storage & Peripherals (-79 bps), Health Care Supplies (-65 bps), Residential REITs (-62 bps), Fertilizers & Ag Chemicals (-55 bps), Internet Services & Infrastructure (-51 bps), and Semiconductors (-50 bps).

Because it is actively managed, the Grizzly Short Fund’s sector/industry weights and concentrations are apt to fluctuate greatly from the benchmark. The Fund has policies that limit the size of positions at both the sector and industry levels. Likewise, the Grizzly Short Fund’s individual stocks have roughly equal portfolio weight (a stark distinction to the market-cap weighting of the S&P 500). These disciplines minimize the potential for a particular holding to have an unpredictable, oversized (negative) effect on performance due to a “surprise” industry announcement or a sharp stock-price movement à la GameStop. Portfolio holdings are monitored closely on an intra-day basis, and investors should expect high turnover.

Our Tactical M.O. = Be Long But Watch The Ticks

A stock market at new highs is a strong indication of an accelerating economy. Rising bond yields suggest the same. But, by the time yields climb to a 52-week high, they may begin to exert a braking effect on economic acceleration. As the economy subsequently slows down, the rise in yields tends to self-correct. Overall, when things as disparate as stock prices and bond yields simultaneously move to one-year extremes, a powerful message exists—and at least one of the markets is usually primed for a big move.

In recent weeks, the market narrative has evolved from “inflation will be transitory” to “higher inflation could be bullish for earnings and stocks.” The numbers being reported undermine the first notion, and there’s very little we can find in the history of the stock market to support the latter. Moreover, there is no history—at all—of stocks parading valuations anywhere near today’s levels with inflation spiraling: The CPI is now at +5.4%, and the PPI for Finished Goods is at +11.8%.

In the past, inflation readings this high were accompanied by Fed rate hikes. In today’s cycle, such increases are several months away (at the earliest). The central question is “when,” and at “what pace” the Fed will decelerate its effective monetization of U.S. debt. So, from a policy perspective, “this time is different.” Moreover, there seems to be a widespread belief that buying stocks at near-record valuations will also produce an outcome that is “different.”

Young readers sometimes give us a not-so-subtle roll of the eyes when we discuss any stock market history that occurred before they were “aware” of the stock market. They’ll learn. To paraphrase legendary trader Jesse Livermore: It takes experience to appreciate “there’s nothing new under the sun—least of all in the stock market.”

What is scary is that we certainly don’t need much history to demonstrate the huge valuation risks now embedded in large-cap stocks. There’s more than enough risk even if we assume that “new-era” valuations and corporate fundamentals will persist through the next decade.

Today, one could reasonably argue that the stock market has never been more expensive considering the prevailing inflation rate. That’s the conclusion of the “Rule of Twenty,” developed almost 40 years ago. This rule proposes that the stock market’s Price to Earnings (P/E)³ multiple and the trailing 12-month consumer price inflation rate should sum up to “20.” So, based on that, with CPI inflation now raging at 5.4%, the proper P/E ratio would be 14.6x.

No matter which P/E measure is used, the S&P 500 looks exceptionally overvalued using that “Rule of Twenty.” But the gauge we’ve found to be the most correlated with that simple rule is also the one with the best long-term forecasting power among all the valuation measures we track: the S&P 500 P/E ratio on Peak EPS (earnings per share⁴). At 31.5x, the “Peak” P/E multiple is now 116% above the 14.6x level proposed by the Rule of Twenty; it even surpasses the degree of overvaluation at the top of the Y2K Tech Bubble.

Over the last year, the central message from our valuation work is that prospective long-term returns for U.S. large-caps look poor—even if the relatively higher valuations enjoyed since the mid-1990s endure. For example, suppose today’s Peak P/E ratio turns out to be as misleadingly pessimistic as it was at its worst point in history. In that case, the S&P 500 could deliver an annualized nominal total return of only +5% over the next ten years.

A decade of quantitative easing (QE) should have taught us that when the Fed conducts a decade’s worth of QE in a little more than one year, U.S. large-cap stocks benefit the most. That said, mid- and small-caps have enjoyed gains at least in the same zip code as the S&P 500, both on a YTD basis and over the prior ten years.

In terms of performance, technicians might classify the post-COVID recovery as broader and healthier than the surge leading up to the Y2K top. Broader, yes—but healthier? In fact, the late-1990s’ bifurcated market contained a glimmering silver lining: There were genuinely attractive, cut-rate stock market opportunities to be had even at the Tech-Bubble top. In our view, that is certainly not true today.

During the last couple of innings of the Tech Bubble, the late Barton Biggs of Morgan Stanley counseled to “Be long but watch the ticks.” That is essentially our current modus operandi, as we believe the broad U.S. stock market has never been more expensive than today, relative to “sustainable” fundamentals.

Of course, the S&P 500 has proven impervious to our monetary measures, inflation signals, and our valuation and sentiment concerns. Fortunately, despite internal-market flakiness over the summer, our technical work has remained steadfastly bullish, which has kept our tactical portfolios moderately exposed to a melt-up that is getting more extraordinary with each passing week.

When the contemporary excesses are flushed out, we believe the stock market is likely poised for a three- to four-year period in which headline indexes will be more inclined to move sideways, in contrast to the extraordinary gains achieved both prior to and in the wake of the brief bear-market collapse in 2020. For active managers (like us) with the flexibility to pursue leadership from all corners of the market, that environment should provide an abundance of occasions to showcase the merits of diversifying out of passive investments and strategies held captive to market-cap constraints or style parameters.

We have immense conviction in our processes and strive for competitive results with each of our Funds. Of course, not all environments are friendly for every strategy. If we had to say there is a silver lining to navigating investment-market challenges, it’s that we strive to learn from them and become better managers. We are mindful that we can always improve by reassessing factors that drive our disciplines and researching how to capitalize on new market influences as they materialize.

An essential component in our approach is to study how market undercurrents affected performance in the past. Using that information, we look for counterbalancing and enhancing techniques that we can implement in like-conditions in the future to either offset unfavorable forces or multiply the rewards of environments that present the conditions we know are productive. Our autonomy and flexibility give us that freedom. We are fortunate to have this independence, which is not particularly widespread across the industry.

It’s important to note, as we do every year, we don’t just manage Leuthold Funds—we are also shareholders, and our firm is majority employee-owned. So, it’s in our best interest to do the best possible job keeping your best interest, as a fellow shareholder, top of mind. As a small fish in the investment sea, we are grateful for your support.

Sincerely,
Doug Ramsey, CFA, CMT
CIO & Co-Portfolio Manager
Chun Wang, CFA, PRM	Scott Opsal, CFA
Co-Portfolio Manager	Co-Portfolio Manager
Greg Swenson, CFA	Kristen Perleberg, CFA
Co-Portfolio Manager	Co-Portfolio Manager

The Leuthold Core ETF is structured as a fund-of-funds and is subject to the same risks as the funds it holds. Investors will incur the expenses of the Fund in addition to fees of the underlying funds in the portfolio.

Investments in foreign securities may involve risks such as social and political instability, market illiquidity, exchange-rate fluctuations, a high level of volatility, and limited regulation. Investing in emerging markets involves different and greater risks, as these countries are substantially smaller, less liquid, and more volatile than securities markets in more developed markets.

The Fund uses short sales, which involve substantial risk. The loss on a short sale is, in principle, unlimited since there is no upward limit on the price of a shorted asset. The Fund may invest in Underlying Investments that principally invest in the commodities markets through investment in managed futures programs. Such investments may subject an Underlying Investment to greater volatility than investments in traditional securities.

The Fund may invest in Underlying Investments that primarily invest in high-yield securities (also known as “junk bonds”). Although high-yield securities generally pay higher rates of interest than investment grade bonds, high-yield securities are speculative, high-risk investments that may cause income and principal losses for such Underlying Investments and consequently, negatively affect the value of the Fund’s investment in such Underlying Investments.

As with all ETFs, Fund shares may be bought and sold in the secondary market at market prices. The market price normally should approximate the Fund’s net asset value per share (NAV), but the market price sometimes may be higher or lower than the NAV.

Leuthold Core Investment Fund

Allocation of Portfolio Holdings
September 30, 2021

Leuthold Global Fund

Allocation of Portfolio Holdings
September 30, 2021

Leuthold Select Industries Fund

Allocation of Portfolio Holdings
September 30, 2021*

Grizzly Short Fund

Allocation of Securities Sold Short

September 30, 2021

Leuthold Core ETF

Allocation of Portfolio Holdings
September 30, 2021

Average Annual Rate of Return For Periods Ended
September 30, 2021

A $10,000 investment in the Leuthold Core Investment Fund – Retail Class - LCORX

The S&P 500 Index is an unmanaged capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of the 500 stocks, which represent all major industries.

The Morningstar Tactical Allocation Category Average is a composite comprised of funds that incorporate a tactical asset allocation strategy which is the process by which the asset of a fund is changed on a short-term basis to take advantage of perceived differences in relative values of the various asset classes.

The Bloomberg Global Aggregate Index provides a broad-based measure of the global investment grade fixed-rate debt markets. It is comprised of the U.S. Aggregate, Pan-European Aggregate, the Asian-Pacific Aggregate, and the Canadian Aggregate Indices. It also includes a wide range of standard and customized sub-indices by liquidity constraint, sector, quality, and maturity.

Index and composite figures do not take any expenses, fees, or taxes into account, but mutual fund returns do. The indices and composite are used herein for comparative purposes in accordance with the U.S Securities and Exchange Commission regulations.

This chart assumes an initial gross investment of $10,000 made on November 20, 1995 (commencement of operations). Returns shown include the reinvestment of all dividends. The Fund’s past performance is not necessarily an indication of its future performance. It may perform better or worse in the future. The graph and the table do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of shares.

Average Annual Rate of Return For Periods Ended
September 30, 2021

A $1,000,000 investment in the Leuthold Core Investment Fund – Institutional Class - LCRIX

The S&P 500 Index is an unmanaged capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of the 500 stocks, which represent all major industries.

The Morningstar Tactical Allocation Category Average is a composite comprised of funds that incorporate a tactical asset allocation strategy which is the process by which the asset of a fund is changed on a short-term basis to take advantage of perceived differences in relative values of the various asset classes.

The Bloomberg Global Aggregate Index provides a broad-based measure of the global investment grade fixed-rate debt markets. It is comprised of the U.S. Aggregate, Pan-European Aggregate, the Asian-Pacific Aggregate, and the Canadian Aggregate Indices. It also includes a wide range of standard and customized sub-indices by liquidity constraint, sector, quality, and maturity.

Index and composite figures do not take any expenses, fees, or taxes into account, but mutual fund returns do. The indices and composite are used herein for comparative purposes in accordance with the U.S Securities and Exchange Commission regulations.

This chart assumes an initial gross investment of $1,000,000 made on January 31, 2006 (commencement of operations). Returns shown include the reinvestment of all dividends. The Fund’s past performance is not necessarily an indication of its future performance. It may perform better or worse in the future. The graph and the table do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of shares.

Average Annual Rate of Return For Periods Ended
September 30, 2021

A $10,000 investment in the Leuthold Global Fund - Retail Class - GLBLX

The MSCI ACWI (All Country World Index) captures large- and mid-cap representation across 23 Developed Market (DM) and 27 Emerging Market (EM) countries.

The Bloomberg Global Aggregate Index provides a broad-based measure of the global investment grade fixed-rate debt markets. It is comprised of the U.S. Aggregate, Pan-European Aggregate, the Asian-Pacific Aggregate, and the Canadian Aggregate Indices. It also includes a wide range of standard and customized sub-indices by liquidity constraint, sector, quality, and maturity.

The S&P 500 Index is an unmanaged capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of the 500 stocks, which represent all major industries.

Index figures do not take any expenses, fees, or taxes into account, but mutual fund returns do. The indices are used herein for comparative purposes in accordance with the U.S Securities and Exchange Commission regulations.

This chart assumes an initial gross investment of $10,000 made on July 1, 2008 (commencement of operations). Returns shown include the reinvestment of all dividends. The Fund’s past performance is not necessarily an indication of its future performance. It may perform better or worse in the future. The graph and the table do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of shares.

Average Annual Rate of Return For Periods Ended
September 30, 2021

A $1,000,000 investment in the Leuthold Global Fund - Institutional Class - GLBIX

The MSCI ACWI (All Country World Index) captures large- and mid-cap representation across 23 Developed Market (DM) and 27 Emerging Market (EM) countries.

The Bloomberg Global Aggregate Index provides a broad-based measure of the global investment grade fixed-rate debt markets. It is comprised of the U.S. Aggregate, Pan-European Aggregate, the Asian-Pacific Aggregate, and the Canadian Aggregate Indices. It also includes a wide range of standard and customized sub-indices by liquidity constraint, sector, quality, and maturity.

The S&P 500 Index is an unmanaged capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of the 500 stocks, which represent all major industries.

Index figures do not take any expenses, fees, or taxes into account, but mutual fund returns do. The indices are used herein for comparative purposes in accordance with the U.S Securities and Exchange Commission regulations.

This chart assumes an initial gross investment of $1,000,000 made on April 30, 2008 (commencement of operations). Returns shown include the reinvestment of all dividends. The Fund’s past performance is not necessarily an indication of its future performance. It may perform better or worse in the future. The graph and the table do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of shares.

Average Annual Rate of Return For Periods Ended
September 30, 2021

A $10,000 investment in the Leuthold Select Industries Fund - LSLTX

The S&P 500 Index is an unmanaged capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of the 500 stocks, which represent all major industries.

The S&P MidCap 400 Index is a capitalization-weighted index, which measures the performance of the mid-range sector of the U.S. stock market. The index was developed with a base level of 100 as of December 31, 1990.

The S&P 600 Index is an index of small-cap stocks which tracks a broad range of small-sized companies that meet specific liquidity and stability requirements. This is determined by specific metrics such as public float, market capitalization, and financial viability among a few other factors. Market capitalization, for instance, must fall between $450 million and $2.1 billion to ensure individual assets do not overlap with the larger S&P 500 or S&P MidCap 400 indexes.

Index figures do not take any expenses, fees, or taxes into account, but mutual fund returns do. The indices are used herein for comparative purposes in accordance with the U.S Securities and Exchange Commission regulations.

This chart assumes an initial gross investment of $10,000 made on June 19, 2000 (commencement of operations). Returns shown include the reinvestment of all dividends. The Fund’s past performance is not necessarily an indication of its future performance. It may perform better or worse in the future. The graph and the table do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of shares.

Average Annual Rate of Return For Periods Ended
September 30, 2021

A $10,000 investment in the Grizzly Short Fund - GRZZX

The S&P 500 Index is an unmanaged capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of the 500 stocks, which represent all major industries.

The S&P MidCap 400 Index is a capitalization-weighted index, which measures the performance of the mid-range sector of the U.S. stock market. The index was developed with a base level of 100 as of December 31, 1990.

Index figures do not take any expenses, fees, or taxes into account, but mutual fund returns do. The indices are used herein for comparative purposes in accordance with the U.S Securities and Exchange Commission regulations.

This chart assumes an initial gross investment of $10,000 made on June 19, 2000 (commencement of operations). Returns shown include the reinvestment of all dividends. The Fund’s past performance is not necessarily an indication of its future performance. It may perform better or worse in the future. The graph and the table do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of shares.

Average Annual Rate of Return For Periods Ended
September 30, 2021

A $10,000 investment in the Leuthold Core ETF - LCR

The S&P 500 Index is an unmanaged capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of the 500 stocks, which represent all major industries.

The Morningstar Tactical Allocation Category Average is a composite comprised of funds that incorporate a tactical asset allocation strategy which is the process by which the asset of a fund is changed on a short-term basis to take advantage of perceived differences in relative values of the various asset classes.

The Bloomberg Global Aggregate Index provides a broad-based measure of the global investment grade fixed-rate debt markets. It is comprised of the U.S. Aggregate, Pan-European Aggregate, the Asian-Pacific Aggregate, and the Canadian Aggregate Indices. It also includes a wide range of standard and customized sub-indices by liquidity constraint, sector, quality, and maturity.

Index and composite figures do not take any expenses, fees, or taxes into account, but ETF returns do. The indices and composite are used herein for comparative purposes in accordance with the U.S Securities and Exchange Commission regulations.

This chart assumes an initial gross investment of $10,000 made on January 6, 2020 (commencement of operations). Returns shown include the reinvestment of all dividends. The Fund’s past performance is not necessarily an indication of its future performance. It may perform better or worse in the future. The graph and the table do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of shares.

Percentages are stated as a percent of net assets. 

The Global Industry Classification Standard (GICS^®) was developed by and/or is the exclusive property of MSCI, Inc. and Standard & Poor’s Financial Services LLC (“S&P”). GICS^® is a service mark of MSCI, Inc. and S&P and has been licensed for use by U.S. Bancorp Fund Services, LLC.

Percentages are stated as a percent of net assets. 

ADR    American Depositary Receipt

The Global Industry Classification Standard (GICS^®) was developed by and/or is the exclusive property of MSCI, Inc. and Standard & Poor’s Financial Services LLC (“S&P”). GICS^® is a service mark of MSCI, Inc. and S&P and has been licensed for use by U.S. Bancorp Fund Services, LLC.