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 811-22959
1290 FUNDS
(Exact name of registrant as specified in charter)
1290 Avenue of the Americas
New York, New York 10104
(Address of principal executive offices)
PATRICIA LOUIE, ESQ.
Executive Vice President and General Counsel
AXA Equitable Funds Management Group, LLC
1290 Avenue of the Americas
New York, New York 10104
(Name and Address of Agent for Service)
Copies to:
MARK AMOROSI, ESQ.
K&L Gates LLP
1601 K Street, N.W.
Washington, D.C. 20006
Registrant’s telephone number, including area code: (212) 554-1234
Date of fiscal year end: October 31
Date of reporting period: November 1, 2015 - April 30, 2016
Item 1. | Reports to Stockholders. |
The following is a copy of the report transmitted to shareholders pursuant to Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1).
Semi-Annual Report
April 30, 2016
1290 Funds
Semi-Annual Report
April 30, 2016
4 | ||
Funds | ||
5 | ||
16 | ||
30 | ||
40 | ||
52 | ||
61 | ||
73 | ||
81 | ||
94 | ||
117 | ||
134 | ||
143 | ||
143 |
Market Overview for the Six Months Ended April 30, 2016
Economy
In the six-month period ended April 30, 2016, the global economy continued to advance at a sluggish pace as central banks around the world took decisive action to stimulate gross domestic product (“GDP”) growth. In the U.S., despite only modest changes to the economic outlook, the U.S. Federal Reserve (“Fed”) held its benchmark interest rate steady while dramatically changing the projected path of future rate increases. In March, Fed members indicated an expectation of just two quarter-point rate hikes in 2016, compared to four increases expected four months earlier.
In the eurozone, anemic inflation and a slowdown in global growth spurred the European Central Bank (“ECB”) to provide additional easing measures, with a focus on stimulating credit expansion. In March, the ECB reduced its projected rate of eurozone inflation for 2016 from 1% to just 0.1%. To counter deflation, the ECB lowered its overnight interest rate by 0.1%, to -0.4%, and expanded its bond-buying program from 60 billion to 80 billion euros per month.
China continued to be the world’s most unpredictable economy. In January, China announced that its economy grew by just 6.9% in 2015, the lowest rate in 25 years. While China’s GDP growth continues to outpace that of every major economy in the world, its manufacturing sector has slowed significantly compared to a year ago. Chinese economic policymakers continue to struggle with the transition from an export-dominated manufacturing economy to one more balanced by services and domestic consumption. In mid-February, the Chinese government and its central bank announced they will provide more stimulus to ease the transition. An underlying problem of the Chinese economy is a very high level of corporate debt, about 160% of GDP. According to the International Monetary Fund, $1.3 trillion worth of Chinese corporate loans are potentially at risk of non-payment.
Sharp currency movements continued throughout the quarter. A quicker-than-expected yuan depreciation at the start of the year revived concerns over the Chinese policy trajectory and global growth. The yen and euro strengthened despite aggressive easing in Japan and Europe, as investors expressed skepticism about the ability of central banks to effectively manage monetary policy with official interest rates below zero. After a year and a half of strength, the U.S. dollar responded to the Fed’s more cautious rate-hike outlook by weakening to a 10-month low at the end of April. The stronger yen and euro weighed on the performance of Japanese and European stocks during the quarter, while the weakening U.S. dollar helped emerging-market equities, as well as U.S. large-caps.
Finally, the oil markets began 2016 by plunging to levels not seen since 2003, due in part to supply dynamics. Brent crude fell to a multi-year low of $31 per barrel in early January, before recovering to $46 by the end of April. Oil prices were supported in March and April by a combination of a weaker dollar and China’s decision to take advantage of low prices to stockpile crude.
Fixed Income
After being battered for almost three years — from the start of 2013 through the end of 2015 — global bonds staged an impressive rally. The Citigroup Non-U.S. Dollar World Government Bond Index led all major fixed-income benchmarks for the six months, returning 9.52%. Global bonds were helped by better prospects for continued growth in China, stronger commodities prices and a somewhat weaker dollar, along with ongoing loose monetary policies in the U.S., eurozone and Japan.
High-yield bonds also rebounded sharply from mid-February through the end of April, leaving the BofA Merrill Lynch U.S. High Yield Master II Index with a return of 2.25% for the six months. Rising oil prices helped to alleviate concerns about defaults in the energy sector of the high-yield market, and all commodity-linked high-yield bond sectors benefitted from the weaker dollar. However, at the end of April, Fitch announced that the high-yield bond default rate in the energy sector was at 13%, an all-time high. Several energy companies reported cuts in bank lines-of-credit, indicating tightening credit ahead. Outside the energy and mining sectors, high-yield bond default rates were in line with historical averages.
U.S. government and investment-grade corporate bonds benefitted from a modest decline in Treasury yields during December of 2015 and January of 2016. The Barclays U.S. Aggregate Bond Index returned 2.82% for the six months ended April 30, 2016, and the Barclays U.S. Intermediate Government Bond Index gained 1.72%.
Equity
In the U.S. and Europe, equity markets fell sharply from the last week of December through mid-February, reflecting investors’ anxiety about global growth. However, global equities began to rally shortly after the Bank of Japan made a surprise move in late January to cut its deposit rate on excess reserves in commercial bank accounts to -0.1%. A trend of rising oil prices in the second half of the period also helped to boost equities.
In the first quarter of 2016, earnings of S&P 500 companies fell on a year-over-year basis for the fourth consecutive quarter, and this trend drove the index’s price-earnings multiples to the highest level of this economic cycle.
For the full six months, the Russell 1000® Index of large-cap U.S. stocks returned 0.22% and the Russell 2000® Index of small-cap U.S. stocks returned -1.90%. The S&P 500 Index gained 0.43%, beating international stocks, represented by the MSCI EAFE Index (-1.75%).
Alternatives
Commodities and precious metals took advantage of the weaker dollar and China’s renewed appetite for oil and metals to rebound strongly from multi-year low prices. The S&P GSCI Gold Index returned 12.98% for the six month period. Prices of agricultural commodities and industrial metals fell through the end of 2015 and did not benefit nearly as much from the commodity rally of early 2016. For the full six month period, agricultural commodities and industrial metals dragged the S&P GSCI Index lower (-10.67%).
2
Source: AXA Equitable Funds Management Group, LLC, doing business as 1290 Asset Managers®. As of 4/30/16.
This information is provided for general information only and is not intended to provide specific advice or recommendations for any individual investor.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. No investment is risk-free. Bond investments are subject to interest rate risk so that when interest rates rise, the prices of bonds can decrease and the investor can lose principal value. High yield bonds are subject to a high degree of credit and market risk. International securities carry additional risks including currency exchange fluctuation and different government regulations, economic conditions or accounting standards. Smaller company stocks involve a greater risk than is customarily associated with more established companies. Index performance is referenced for illustrative purposes only. You cannot invest directly in an index.
3
Total Returns
Performance of the 1290 Funds as shown on the following pages compares each Fund’s performance to that of a broad-based securities index and, with respect to certain Funds, customized composite benchmarks. Each Fund’s rates of return are net of investment advisory fees and expenses of the Fund. Each Fund has a separate investment objective it seeks to achieve by following a separate investment policy. There is no guarantee that these objectives will be attained. The objectives and policies of each Fund will affect its return and its risk. Keep in mind that past performance is not an indication of future results.
Benchmarks
60% S&P 500® Index/40% Barclays U.S. Aggregate Bond Index is a hypothetical combination of unmanaged indexes. The composite index combines the total return of the S&P 500® Index at a weighting of 60% and the Barclays U.S. Aggregate Bond Index at a weighting of 40%.
Barclays U.S. Aggregate Bond Index covers the U.S. dollar denominated investment-grade, fixed-rate, taxable bond market of securities. The index includes bonds from the Treasury, government-related and corporate securities, agency fixed rate and hybrid adjustable mortgage pass through securities, asset-backed securities and commercial mortgage-based securities.
Barclays U.S Intermediate Government Bond Index is an unmanaged index of securities consisting of all U.S. Treasury and agency securities with remaining maturities of one to 10 years.
Citigroup Non-U.S. Dollar World Government Bond Index is an unmanaged, market capitalization weighted index that tracks 10 government bond indices, excluding the United States.
BofA Merrill Lynch 3-Month U.S. Treasury Bill Index measures the returns of negotiable debt obligations issued by the U.S. government and backed by its full faith and credit, having a maturity of three months.
BofA Merrill Lynch All U.S. Convertibles Index consists of U.S. dollar denominated investment grade and non-investment grade convertible bonds sold into the U.S. market and publicly traded in the United States. The index constituents are market value weighted based on the convertible securities prices and outstanding shares, and the underlying index is rebalanced daily.
BofA Merrill Lynch USD 3-Month Deposit Offered Rate Constant Maturity Index, formerly known as the BofA Merrill Lynch U.S. Dollar 3-Month LIBOR Constant Maturity Index, tracks the performance of a synthetic asset paying the London interbank offered rate (LIBOR) to a stated maturity. The index is based on the assumed purchase at par of a synthetic instrument having exactly its stated maturity and with a coupon equal to that day’s fixing rate. That issue is assumed to be sold the following business day (priced at a yield equal to the current day fixing rate) and rolled into a new instrument.
BofA Merrill Lynch U.S. High Yield Master II Index tracks the performance of U.S. dollar denominated below investment grade corporate debt publicly issued in the U.S. domestic market. Qualifying securities must have at least 18 months to final maturity at the time of issuance, at least one year remaining term to final maturity as of the rebalancing date, a fixed coupon schedule and a minimum amount outstanding of $100 million. It is capitalization-weighted.
Morgan Stanley Capital International (MSCI) AC World (Net) Index is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of 23 developed markets and 23 emerging markets. The index covers approximately 85% of the global investment opportunities.
Morgan Stanley Capital International (MSCI) EAFE® Index (Europe, Australasia, Far East) is a free float-adjusted market capitalization index that is designed to measure the equity market performance of developed markets, excluding the U.S. and Canada.
Morgan Stanley Capital International (MSCI) World (Net) Index is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed markets. The index consists of 23 developed market country indexes.
Russell 1000® Index measures the performance of approximately 1,000 of the largest companies in the Russell 3000® Index, and represents approximately 92% of the total market capitalization of the Russell 3000® Index. It is market-capitalization weighted.
Russell 2000® Index is an unmanaged index which measures the performance of approximately 2000 of the smallest companies in the Russell 3000® Index, which represents approximately 10% of the total market capitalization of the Russell 3000® Index. It is market-capitalization weighted.
Russell 2500™ Index measures the performance of approximately 2,500 of the smallest companies in the Russell 3000® Index. It is market-capitalization weighted.
Russell 2500™ Value Index measures the performance of those Russell 2500TM Index companies with lower price-to-book ratios and lower forecasted growth values. It is market-capitalization weighted.
Russell 3000® Index measures the performance of the 3,000 largest U.S. companies based on total market capitalization, which represents approximately 98% of the investable U.S. equity market. It is market-capitalization weighted.
Standard & Poor’s 500® Composite Stock Price Index (“S&P 500® Index”) is a weighted index of common stocks of 500 leading companies in leading industries of the U.S. economy, capturing 75% coverage of U.S. equities. The index is capitalization weighted, thereby giving greater weight to companies with the largest market capitalizations.
S&P GSCI Gold Index is comprised of active and liquid gold futures markets and is calculated primarily on a world production weighted basis.
S&P GSCI Index is a broad-based, production weighted index comprised of the principal physical commodities that are traded in active, liquid futures markets.
4
1290 CONVERTIBLE SECURITIES FUND (Unaudited)
INVESTMENT ADVISER
Ø | 1290 Asset Managers® |
INVESTMENT SUB-ADVISER
Ø | Palisade Capital Management, L.L.C. |
PERFORMANCE RESULTS
Total Returns as of 4/30/16 | ||||||||||||
6 Months | Since Incept. | |||||||||||
Fund – Class A Shares* | without Sales Charge | (3.72 | )% | (7.65 | )% | |||||||
with Sales Charge (a | ) | (8.05 | ) | (11.79 | ) | |||||||
Fund – Class I Shares* | (3.60 | ) | (7.46 | ) | ||||||||
Fund – Class R Shares* | (3.84 | ) | (7.84 | ) | ||||||||
BofA Merrill Lynch All U.S. Convertibles Index | (2.94 | ) | (6.23 | ) | ||||||||
* Date of inception 7/6/15.
(a) A 4.50% front-end sales charge was deducted.
Returns for periods less than one year are not annualized.
Returns for periods greater than one year are annualized. |
|
The performance quoted is past performance and is not a guarantee of future results. Mutual funds are subject to certain market risks. Investment returns and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be higher or lower than the performance data shown. For the most current month-end performance data please call 1-888-310-0416 or visit www.1290Funds.com.
Fund performance may reflect the waiver of the Fund’s fees and reimbursement of expenses for certain periods since the inception date. Without these waivers and reimbursements, performance would have been lower. Also, performance shown in this section does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or redemption of Fund shares.
Palisade Capital Management, L.L.C.
Overview — Palisade Capital Management, L.L.C.
For the six-month period ended April 30, 2016, U.S. convertibles, like both equities and credit, have been buffeted by increased volatility. At times, investors seemed singularly focused on the Federal Reserve’s pace of interest rate hikes, or the prospects of global growth, or the impact of sharp moves in currencies and commodity prices. During this period, credit outperformed equities, with the larger capitalization S&P 500® Index registering a small positive gain while the smaller capitalization Russell 2000® Index declined. U.S. convertibles produced a loss during this period as the stocks of convertible issuers performed poorly. The structural benefits of convertibles mitigated this decline, but were not sufficient to overcome the underperformance.
Fund Highlights
The Fund underperformed the broad convertibles universe over the last six months as positions in growth sectors (mainly health care and technology) detracted from returns. Health care was hurt by intense government scrutiny on drug pricing. Technology was hampered by concerns regarding slowing global growth.
What helped performance during the six-month period ended April 30, 2016:
• | An underweight position relative to the benchmark to the poorly performing energy sector was positive for performance. |
• | Good security selection in the financials, transportation and consumer discretionary sectors benefitted performance. |
• | Outperformance in consumer staples outweighed an underweight position in this strong sector. |
What hurt performance during the six-month period ended April 30, 2016:
• | Unfavorable security selection in the technology and industrials sectors was detrimental to performance. |
• | An underweight position relative to the benchmark in the relatively strong utilities sector was negative for performance. |
• | A relative overweight position in the relatively weak health care sector outweighed good security selection within the sector, detracting from performance. |
Sector Weightings as of April 30, 2016 | % of Net Assets | |||
Information Technology | 30.7 | % | ||
Health Care | 23.6 | |||
Financials | 17.1 | |||
Consumer Discretionary | 11.3 | |||
Industrials | 6.5 | |||
Telecommunication Services | 2.5 | |||
Consumer Staples | 1.4 | |||
Materials | 1.3 | |||
Energy | 0.6 | |||
Utilities | 0.4 | |||
Cash and Other | 4.6 | |||
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100.0 | % | |||
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Holdings are subject to change without notice. |
UNDERSTANDING YOUR EXPENSES:
As a shareholder of the Fund, you incur two types of costs:
(1) transaction costs, including applicable sales charges and redemption fees; and (2) ongoing costs, including investment advisory fees, distribution and/or service (12b-1) fees (in the case of Class A and Class R shares of the Fund), and other Fund expenses. These examples are intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The examples are based on an investment of $1,000 invested at the beginning of the six-month period ended April 30, 2016 and held for the entire six-month period.
5
1290 CONVERTIBLE SECURITIES FUND (Unaudited)
Actual Expenses
The first line of the following table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the following 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 you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
EXAMPLE
Beginning Account Value 11/1/15 | Ending Account Value 4/30/16 | Expenses Paid During Period* 4/30/16 | ||||||||||
Class A | ||||||||||||
Actual | $1,000.00 | $962.78 | $6.34 | |||||||||
Hypothetical (5% average return before expenses) | 1,000.00 | 1,018.40 | 6.52 | |||||||||
Class I | ||||||||||||
Actual | 1,000.00 | 963.98 | 5.13 | |||||||||
Hypothetical (5% average return before expenses) | 1,000.00 | 1,019.64 | 5.27 | |||||||||
Class R | ||||||||||||
Actual | 1,000.00 | 961.57 | 7.56 | |||||||||
Hypothetical (5% average return before expenses) | 1,000.00 | 1,017.16 | 7.77 | |||||||||
* Expenses are equal to the Fund’s Class A, I and R shares annualized expense ratios of 1.30%, 1.05% and 1.55%, respectively, multiplied by the average account value over the period, and multiplied by 182/366 (to reflect the one-half year period). |
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6
1290 FUNDS
1290 CONVERTIBLE SECURITIES FUND
PORTFOLIO OF INVESTMENTS
April 30, 2016 (Unaudited)
Principal Amount | Value (Note 1) | |||||||
LONG-TERM DEBT SECURITIES: | ||||||||
Convertible Bonds (70.2%) | ||||||||
Consumer Discretionary (11.3%) | ||||||||
Automobiles (1.5%) | ||||||||
Fiat Chrysler Automobiles N.V. | ||||||||
7.875%, 12/15/16 | $ | 290,000 | $ | 204,725 | ||||
Tesla Motors, Inc. | ||||||||
1.500%, 6/1/18 | 40,000 | 77,000 | ||||||
|
| |||||||
281,725 | ||||||||
|
| |||||||
Household Durables (3.5%) | ||||||||
CalAtlantic Group, Inc. | ||||||||
1.625%, 5/15/18 | 250,000 | 298,125 | ||||||
Jarden Corp. | ||||||||
1.875%, 9/15/18 | 123,000 | 236,978 | ||||||
Lennar Corp. | ||||||||
3.250%, 11/15/21 | 66,000 | 127,710 | ||||||
|
| |||||||
662,813 | ||||||||
|
| |||||||
Internet & Catalog Retail (2.3%) |
| |||||||
Priceline Group, Inc. | ||||||||
1.000%, 3/15/18 | 287,000 | 425,298 | ||||||
|
| |||||||
Media (3.0%) | ||||||||
Liberty Interactive LLC | ||||||||
0.750%, 3/30/43 | 175,000 | 301,547 | ||||||
1.000%, 9/30/43§ | 143,573 | 123,204 | ||||||
Liberty Media Corp. | ||||||||
1.375%, 10/15/23 | 90,000 | 90,450 | ||||||
Live Nation Entertainment, Inc. | ||||||||
2.500%, 5/15/19 | 56,000 | 55,755 | ||||||
|
| |||||||
570,956 | ||||||||
|
| |||||||
Specialty Retail (1.0%) | ||||||||
GNC Holdings, Inc. | ||||||||
1.500%, 8/15/20§ | 82,000 | 64,114 | ||||||
Restoration Hardware Holdings, Inc. | ||||||||
(Zero Coupon), 6/15/19§ | 160,000 | 131,800 | ||||||
|
| |||||||
195,914 | ||||||||
|
| |||||||
Total Consumer Discretionary | 2,136,706 | |||||||
|
| |||||||
Energy (0.3%) | ||||||||
Oil, Gas & Consumable Fuels (0.3%) |
| |||||||
Cheniere Energy, Inc. | ||||||||
4.250%, 3/15/45 | 120,000 | 69,150 | ||||||
|
| |||||||
Total Energy | 69,150 | |||||||
|
| |||||||
Financials (4.7%) | ||||||||
Capital Markets (0.5%) | ||||||||
New Mountain Finance Corp. | ||||||||
5.000%, 6/15/19 | 70,000 | 68,250 | ||||||
Walter Investment Management Corp. | ||||||||
4.500%, 11/1/19 | 30,000 | 17,869 | ||||||
|
| |||||||
86,119 | ||||||||
|
| |||||||
Insurance (0.9%) | ||||||||
Fidelity National Financial, Inc. | ||||||||
4.250%, 8/15/18 | 100,000 | 175,625 | ||||||
|
| |||||||
Real Estate Investment Trusts (REITs) (3.3%) |
| |||||||
Colony Capital, Inc. | ||||||||
5.000%, 4/15/23 | 65,000 | 59,475 | ||||||
Colony Starwood Homes | ||||||||
4.500%, 10/15/17 | $ | 100,000 | $ | 102,312 | ||||
3.000%, 7/1/19 | 55,000 | 54,691 | ||||||
iStar, Inc. | ||||||||
3.000%, 11/15/16 | 150,000 | 154,312 | ||||||
Starwood Property Trust, Inc. | ||||||||
3.750%, 10/15/17 | 200,000 | 198,625 | ||||||
4.000%, 1/15/19 | 50,000 | 51,063 | ||||||
|
| |||||||
620,478 | ||||||||
|
| |||||||
Total Financials | 882,222 | |||||||
|
| |||||||
Health Care (17.5%) | ||||||||
Biotechnology (7.0%) | ||||||||
Acorda Therapeutics, Inc. | ||||||||
1.750%, 6/15/21 | 65,000 | 57,972 | ||||||
AMAG Pharmaceuticals, Inc. | ||||||||
2.500%, 2/15/19 | 47,000 | 55,783 | ||||||
Anacor Pharmaceuticals, Inc. | ||||||||
2.000%, 4/15/23 (b)§ | 40,000 | 45,900 | ||||||
ARIAD Pharmaceuticals, Inc. | ||||||||
3.625%, 6/15/19§ | 52,000 | 53,592 | ||||||
BioMarin Pharmaceutical, Inc. | ||||||||
0.750%, 10/15/18 | 85,000 | 99,716 | ||||||
1.500%, 10/15/20 | 120,000 | 145,500 | ||||||
Cepheid | ||||||||
1.250%, 2/1/21 | 163,000 | 139,772 | ||||||
Clovis Oncology, Inc. | ||||||||
2.500%, 9/15/21 | 83,000 | 53,172 | ||||||
Emergent BioSolutions, Inc. | ||||||||
2.875%, 1/15/21 | 38,000 | 51,894 | ||||||
Immunomedics, Inc. | ||||||||
4.750%, 2/15/20 | 35,000 | 30,034 | ||||||
Incyte Corp. | ||||||||
0.375%, 11/15/18 | 35,000 | 53,747 | ||||||
1.250%, 11/15/20 | 75,000 | 118,594 | ||||||
Ionis Pharmaceuticals, Inc. | ||||||||
1.000%, 11/15/21 | 128,000 | 118,480 | ||||||
Ironwood Pharmaceuticals, Inc. | ||||||||
2.250%, 6/15/22§ | 114,000 | 103,384 | ||||||
Merrimack Pharmaceuticals, Inc. | ||||||||
4.500%, 7/15/20 | 75,000 | 100,219 | ||||||
Novavax, Inc. | ||||||||
3.750%, 2/1/23§ | 28,000 | 28,350 | ||||||
TESARO, Inc. | ||||||||
3.000%, 10/1/21 | 40,000 | 56,800 | ||||||
|
| |||||||
1,312,909 | ||||||||
|
| |||||||
Health Care Equipment & Supplies (2.1%) |
| |||||||
HeartWare International, Inc. | ||||||||
1.750%, 12/15/21§ | 70,000 | 49,525 | ||||||
Hologic, Inc. | ||||||||
2.000%, 12/15/37 (e) | 55,000 | 80,747 | ||||||
Integra LifeSciences Holdings Corp. | ||||||||
1.625%, 12/15/16 | 115,000 | 155,897 | ||||||
NuVasive, Inc. | ||||||||
2.750%, 7/1/17 | 48,000 | 63,720 | ||||||
Wright Medical Group, Inc. | ||||||||
2.000%, 2/15/20 | 58,000 | 55,136 | ||||||
|
| |||||||
405,025 | ||||||||
|
|
See Notes to Financial Statements.
7
1290 FUNDS
1290 CONVERTIBLE SECURITIES FUND
PORTFOLIO OF INVESTMENTS (Continued)
April 30, 2016 (Unaudited)
Principal Amount | Value (Note 1) | |||||||
Health Care Providers & Services (2.4%) |
| |||||||
Brookdale Senior Living, Inc. | ||||||||
2.750%, 6/15/18 | $ | 55,000 | $ | 54,691 | ||||
HealthSouth Corp. | ||||||||
2.000%, 12/1/43 | 108,000 | 128,587 | ||||||
Molina Healthcare, Inc. | ||||||||
1.125%, 1/15/20 | 120,000 | 166,800 | ||||||
1.625%, 8/15/44 | 56,000 | 62,510 | ||||||
Trinity Biotech Investment Ltd. | ||||||||
4.000%, 4/1/45 (b) | 43,000 | 38,404 | ||||||
|
| |||||||
450,992 | ||||||||
|
| |||||||
Pharmaceuticals (6.0%) | ||||||||
Depomed, Inc. | ||||||||
2.500%, 9/1/21 | 55,000 | 60,672 | ||||||
Horizon Pharma Investment Ltd. | ||||||||
2.500%, 3/15/22 | 125,000 | 109,062 | ||||||
Innoviva, Inc. | ||||||||
2.125%, 1/15/23 | 136,000 | 111,435 | ||||||
Jazz Investments I Ltd. | ||||||||
1.875%, 8/15/21 | 120,000 | 133,500 | ||||||
Medicines Co. | ||||||||
1.375%, 6/1/17 | 76,000 | 104,262 | ||||||
Pacira Pharmaceuticals, Inc. | ||||||||
3.250%, 2/1/19 | 54,000 | 121,770 | ||||||
Teva Pharmaceutical Finance Co. LLC | ||||||||
0.250%, 2/1/26 | 372,000 | 489,413 | ||||||
|
| |||||||
1,130,114 | ||||||||
|
| |||||||
Total Health Care | 3,299,040 | |||||||
|
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Industrials (5.4%) | ||||||||
Air Freight & Logistics (1.1%) |
| |||||||
Atlas Air Worldwide Holdings, Inc. | ||||||||
2.250%, 6/1/22 | 33,000 | 27,761 | ||||||
Echo Global Logistics, Inc. | ||||||||
2.500%, 5/1/20 | 73,000 | 69,852 | ||||||
XPO Logistics, Inc. | ||||||||
4.500%, 10/1/17 | 60,000 | 110,288 | ||||||
|
| |||||||
207,901 | ||||||||
|
| |||||||
Airlines (1.6%) | ||||||||
AirTran Holdings, Inc. | ||||||||
5.250%, 11/1/16 | 100,000 | 304,000 | ||||||
|
| |||||||
Construction & Engineering (0.6%) |
| |||||||
Dycom Industries, Inc. | ||||||||
0.750%, 9/15/21§ | 120,000 | 123,300 | ||||||
|
| |||||||
Machinery (1.0%) | ||||||||
Greenbrier Cos., Inc. | ||||||||
3.500%, 4/1/18 | 90,000 | 98,100 | ||||||
Trinity Industries, Inc. | ||||||||
3.875%, 6/1/36 | 80,000 | 87,350 | ||||||
|
| |||||||
185,450 | ||||||||
|
| |||||||
Professional Services (0.7%) | ||||||||
Huron Consulting Group, Inc. | ||||||||
1.250%, 10/1/19 | 130,000 | 125,044 | ||||||
|
| |||||||
Transportation Infrastructure (0.4%) |
| |||||||
Macquarie Infrastructure Corp. | ||||||||
2.875%, 7/15/19 | 60,000 | 67,837 | ||||||
|
| |||||||
Total Industrials | 1,013,532 | |||||||
|
| |||||||
Information Technology (30.7%) |
| |||||||
Communications Equipment (2.7%) | ||||||||
CalAmp Corp. | ||||||||
1.625%, 5/15/20§ | $ | 60,000 | $ | 54,413 | ||||
Ciena Corp. | ||||||||
3.750%, 10/15/18§ | 150,000 | 168,375 | ||||||
4.000%, 12/15/20 | 140,000 | 168,350 | ||||||
Palo Alto Networks, Inc. | ||||||||
(Zero Coupon), 7/1/19 | 75,000 | 110,250 | ||||||
|
| |||||||
501,388 | ||||||||
|
| |||||||
Electronic Equipment, Instruments & Components (0.8%) |
| |||||||
Knowles Corp. | ||||||||
3.250%, 11/1/21 (b)§ | 19,000 | 19,000 | ||||||
TTM Technologies, Inc. | ||||||||
1.750%, 12/15/20 | 92,000 | 82,110 | ||||||
Vishay Intertechnology, Inc. | ||||||||
2.250%, 11/15/40 | 50,000 | 49,031 | ||||||
|
| |||||||
150,141 | ||||||||
|
| |||||||
Internet Software & Services (5.9%) |
| |||||||
Akamai Technologies, Inc. | ||||||||
(Zero Coupon), 2/15/19 | 61,000 | 58,903 | ||||||
Cornerstone OnDemand, Inc. | ||||||||
1.500%, 7/1/18 | 150,000 | 150,000 | ||||||
LinkedIn Corp. | ||||||||
0.500%, 11/1/19 | 275,000 | 256,781 | ||||||
Pandora Media, Inc. | ||||||||
1.750%, 12/1/20§ | 110,000 | 100,169 | ||||||
Twitter, Inc. | ||||||||
0.250%, 9/15/19 | 125,000 | 108,594 | ||||||
VeriSign, Inc. | ||||||||
4.345%, 8/15/37 | 100,000 | 252,437 | ||||||
Yahoo!, Inc. | ||||||||
(Zero Coupon), 12/1/18 | 190,000 | 190,950 | ||||||
|
| |||||||
1,117,834 | ||||||||
|
| |||||||
IT Services (0.2%) | ||||||||
Cardtronics, Inc. | ||||||||
1.000%, 12/1/20 | 41,000 | 41,000 | ||||||
|
| |||||||
Semiconductors & Semiconductor Equipment (11.1%) |
| |||||||
Inphi Corp. | ||||||||
1.125%, 12/1/20§ | 28,000 | 28,997 | ||||||
Integrated Device Technology, Inc. | ||||||||
0.875%, 11/15/22§ | 85,000 | 79,209 | ||||||
Microchip Technology, Inc. | ||||||||
1.625%, 2/15/25 | 125,000 | 129,609 | ||||||
2.125%, 12/15/37 | 95,000 | 190,000 | ||||||
Micron Technology, Inc. | ||||||||
2.375%, 5/1/32 | 90,000 | 113,963 | ||||||
3.000%, 11/15/43 | 400,000 | 283,250 | ||||||
Novellus Systems, Inc. | ||||||||
2.625%, 5/15/41 | 180,000 | 409,388 | ||||||
NVIDIA Corp. | ||||||||
1.000%, 12/1/18 | 27,000 | 48,111 | ||||||
NXP Semiconductors N.V. | ||||||||
1.000%, 12/1/19 | 155,000 | 175,538 | ||||||
ON Semiconductor Corp. | ||||||||
1.000%, 12/1/20§ | 120,000 | 108,825 | ||||||
2.625%, 12/15/26 | 215,000 | 228,572 |
See Notes to Financial Statements.
8
1290 FUNDS
1290 CONVERTIBLE SECURITIES FUND
PORTFOLIO OF INVESTMENTS (Continued)
April 30, 2016 (Unaudited)
Principal Amount | Value (Note 1) | |||||||
Spansion LLC | ||||||||
2.000%, 9/1/20 | $ | 56,000 | $ | 98,350 | ||||
Xilinx, Inc. | ||||||||
2.625%, 6/15/17 | 135,000 | 202,331 | ||||||
|
| |||||||
2,096,143 | ||||||||
|
| |||||||
Software (8.4%) | ||||||||
Citrix Systems, Inc. | ||||||||
0.500%, 4/15/19 | 150,000 | 169,406 | ||||||
Electronic Arts, Inc. | ||||||||
0.750%, 7/15/16 | 40,000 | 77,450 | ||||||
FireEye, Inc. | ||||||||
1.000%, 6/1/35§ | 148,000 | 127,927 | ||||||
1.625%, 6/1/35§ | 35,000 | 28,875 | ||||||
Nuance Communications, Inc. | ||||||||
1.000%, 12/15/35§ | 114,000 | 103,027 | ||||||
Proofpoint, Inc. | ||||||||
1.250%, 12/15/18 | 41,000 | 64,037 | ||||||
0.750%, 6/15/20§ | 63,000 | 64,339 | ||||||
PROS Holdings, Inc. | ||||||||
2.000%, 12/1/19 | 80,000 | 63,200 | ||||||
Rovi Corp. | ||||||||
0.500%, 3/1/20 | 60,000 | 56,887 | ||||||
salesforce.com, Inc. | ||||||||
0.250%, 4/1/18 | 299,000 | 377,114 | ||||||
ServiceNow, Inc. | ||||||||
(Zero Coupon), 11/1/18 | 70,000 | 81,069 | ||||||
Synchronoss Technologies, Inc. | ||||||||
0.750%, 8/15/19 | 95,000 | 92,388 | ||||||
Take-Two Interactive Software, Inc. | ||||||||
1.750%, 12/1/16 | 93,000 | 166,412 | ||||||
Verint Systems, Inc. | ||||||||
1.500%, 6/1/21 | 114,000 | 102,458 | ||||||
|
| |||||||
1,574,589 | ||||||||
|
| |||||||
Technology Hardware, Storage & Peripherals (1.6%) |
| |||||||
Electronics For Imaging, Inc. | ||||||||
0.750%, 9/1/19 | 65,000 | 66,584 | ||||||
SanDisk Corp. | ||||||||
1.500%, 8/15/17 | 152,000 | 237,595 | ||||||
|
| |||||||
304,179 | ||||||||
|
| |||||||
Total Information Technology | 5,785,274 | |||||||
|
| |||||||
Materials (0.3%) | ||||||||
Construction Materials (0.3%) | ||||||||
Cemex S.A.B. de C.V. | ||||||||
3.720%, 3/15/20 | 56,000 | 54,740 | ||||||
|
| |||||||
Total Materials | 54,740 | |||||||
|
| |||||||
Total Convertible Bonds | 13,240,664 | |||||||
|
| |||||||
Total Long-Term | 13,240,664 | |||||||
|
| |||||||
Number of Shares | Value (Note 1) | |||||||
CONVERTIBLE PREFERRED STOCKS: |
| |||||||
Consumer Staples (1.4%) | ||||||||
Food Products (1.4%) | ||||||||
Bunge Ltd. | ||||||||
4.875% | 547 | 50,513 | ||||||
Tyson Foods, Inc. | ||||||||
4.750% | 2,809 | $ | 204,888 | |||||
|
| |||||||
Total Consumer Staples | 255,401 | |||||||
|
| |||||||
Energy (0.3%) | ||||||||
Oil, Gas & Consumable Fuels (0.3%) |
| |||||||
Kinder Morgan, Inc. | ||||||||
9.750% | 1,100 | 48,576 | ||||||
|
| |||||||
Total Energy | 48,576 | |||||||
|
| |||||||
Financials (12.4%) | ||||||||
Banks (9.2%) | ||||||||
Bank of America Corp. | ||||||||
7.250% | 292 | 344,064 | ||||||
Huntington Bancshares, Inc./Ohio | ||||||||
8.500% | 339 | 461,040 | ||||||
KeyCorp | ||||||||
7.750% | 1,350 | 175,162 | ||||||
Wells Fargo & Co. | ||||||||
7.500% | 610 | 760,060 | ||||||
|
| |||||||
1,740,326 | ||||||||
|
| |||||||
Capital Markets (0.2%) | ||||||||
AMG Capital Trust II | ||||||||
5.150% | 545 | 31,371 | ||||||
|
| |||||||
Real Estate Investment Trusts (REITs) (3.0%) |
| |||||||
Crown Castle International Corp. | ||||||||
4.500% | 2,500 | 265,375 | ||||||
Welltower, Inc. | ||||||||
6.500% | 2,076 | 128,152 | ||||||
Weyerhaeuser Co. | ||||||||
6.375% | 3,444 | 177,400 | ||||||
|
| |||||||
570,927 | ||||||||
|
| |||||||
Total Financials | 2,342,624 | |||||||
|
| |||||||
Health Care (6.1%) | ||||||||
Health Care Equipment & Supplies (0.9%) |
| |||||||
Alere, Inc. | ||||||||
3.000% | 500 | 157,335 | ||||||
|
| |||||||
Health Care Providers & Services (1.9%) |
| |||||||
Amsurg Corp. | ||||||||
5.250% | 295 | 44,710 | ||||||
Anthem, Inc. | ||||||||
5.250% | 6,880 | 318,888 | ||||||
|
| |||||||
363,598 | ||||||||
|
| |||||||
Pharmaceuticals (3.3%) | ||||||||
Allergan plc | ||||||||
5.500% | 773 | 627,282 | ||||||
|
| |||||||
Total Health Care | 1,148,215 | |||||||
|
| |||||||
Industrials (1.1%) | ||||||||
Commercial Services & Supplies (0.3%) |
| |||||||
Stericycle, Inc. | ||||||||
5.250% | 798 | 61,973 | ||||||
|
| |||||||
Machinery (0.8%) | ||||||||
Stanley Black & Decker, Inc. | ||||||||
6.250% | 1,237 | 145,545 | ||||||
|
| |||||||
Total Industrials | 207,518 | |||||||
|
|
See Notes to Financial Statements.
9
1290 FUNDS
1290 CONVERTIBLE SECURITIES FUND
PORTFOLIO OF INVESTMENTS (Continued)
April 30, 2016 (Unaudited)
Number of Shares | Value (Note 1) | |||||||
Materials (1.0%) | ||||||||
Metals & Mining (1.0%) | ||||||||
Alcoa, Inc. | ||||||||
5.375% | 4,821 | $ | 183,584 | |||||
|
| |||||||
Total Materials | 183,584 | |||||||
|
| |||||||
Telecommunication Services (2.5%) | ||||||||
Diversified Telecommunication Services (1.1%) |
| |||||||
Frontier Communications Corp. | ||||||||
11.125% | 2,007 | 209,330 | ||||||
|
| |||||||
Wireless Telecommunication Services (1.4%) |
| |||||||
T-Mobile U.S., Inc. | ||||||||
5.500% | 3,908 | 265,002 | ||||||
|
| |||||||
Total Telecommunication Services | 474,332 | |||||||
|
| |||||||
Utilities (0.4%) | ||||||||
Electric Utilities (0.4%) | ||||||||
NextEra Energy, Inc. | ||||||||
5.799% | 1,400 | 84,630 | ||||||
|
| |||||||
Total Utilities | 84,630 | |||||||
|
| |||||||
Total Convertible Preferred | 4,744,880 | |||||||
|
| |||||||
Total Investments (95.4%) | 17,985,544 | |||||||
Other Assets Less Liabilities (4.6%) | 861,051 | |||||||
|
| |||||||
Net Assets (100%) | $ | 18,846,595 | ||||||
|
|
§ | Securities exempt from registration under Rule 144A of the Securities Act of 1933. These securities may only be resold to qualified institutional buyers. At April 30, 2016, the market value of these securities amounted to $1,606,325 or 8.5% of net assets. Securities denoted with “§” but without “b” have been determined to be liquid under the guidelines established by the Board of Trustees. To the extent any securities might provide a right to demand registration, such rights have not been relied upon when determining liquidity. |
(b) | Illiquid Security. At April 30, 2016, the market value of these securities amounted to $103,304 or 0.5% of net assets. |
(e) | Step Bond—Coupon rate increases in increments to maturity. Rate disclosed is as of April 30, 2016. Maturity date disclosed is the ultimate maturity date. |
The following is a summary of the inputs used to value the Fund’s assets and liabilities carried at fair value as of April 30, 2016:
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
Various inputs are used in determining the value of the Fund’s investments. These inputs are summarized in the three broad levels listed below:
Investment Type | Level 1 Quoted Prices in Active Markets for Identical Securities | Level 2 Significant Other Observable Inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.) | Level 3 Significant Unobservable Inputs (including the Fund’s own assumptions in determining the fair value of investments) | Total | ||||||||||||
Assets: |
| |||||||||||||||
Convertible Bonds | ||||||||||||||||
Consumer Discretionary | $ | 204,725 | $ | 1,931,981 | $ | — | $ | 2,136,706 | ||||||||
Energy | — | 69,150 | — | 69,150 | ||||||||||||
Financials | — | 882,222 | — | 882,222 | ||||||||||||
Health Care | — | 3,299,040 | — | 3,299,040 | ||||||||||||
Industrials | — | 1,013,532 | — | 1,013,532 | ||||||||||||
Information Technology | — | 5,785,274 | — | 5,785,274 | ||||||||||||
Materials | — | 54,740 | — | 54,740 |
See Notes to Financial Statements.
10
1290 FUNDS
1290 CONVERTIBLE SECURITIES FUND
PORTFOLIO OF INVESTMENTS (Continued)
April 30, 2016 (Unaudited)
Investment Type | Level 1 Quoted Prices in Active Markets for Identical Securities | Level 2 Significant Other Observable Inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.) | Level 3 Significant Unobservable Inputs (including the Fund’s own assumptions in determining the fair value of investments) | Total | ||||||||||||
Convertible Preferred Stocks | ||||||||||||||||
Consumer Staples | $ | 255,401 | $ | — | $ | — | $ | 255,401 | ||||||||
Energy | 48,576 | — | — | 48,576 | ||||||||||||
Financials | 2,136,091 | 206,533 | — | 2,342,624 | ||||||||||||
Health Care | 1,148,215 | — | — | 1,148,215 | ||||||||||||
Industrials | 207,518 | — | — | 207,518 | ||||||||||||
Materials | 183,584 | — | — | 183,584 | ||||||||||||
Telecommunication Services | 474,332 | — | — | 474,332 | ||||||||||||
Utilities | 84,630 | — | — | 84,630 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Assets | $ | 4,743,072 | $ | 13,242,472 | $ | — | $ | 17,985,544 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total Liabilities | $ | — | $ | — | $ | — | $ | — | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total | $ | 4,743,072 | $ | 13,242,472 | $ | — | $ | 17,985,544 | ||||||||
|
|
|
|
|
|
|
|
There were no transfers between Levels 1, 2 or 3 during the six months ended April 30, 2016.
The Fund held no derivatives contracts during the six months ended April 30, 2016.
Investment security transactions for the six months ended April 30, 2016 were as follows:
Cost of Purchases: | ||||
Long-term investments other than U.S. government debt securities | $ | 2,837,006 | ||
Net Proceeds of Sales and Redemptions: | ||||
Long-term investments other than U.S. government debt securities | $ | 2,082,331 |
As of April 30, 2016, the gross unrealized appreciation (depreciation) of investments based on the aggregate cost of investments for Federal income tax purposes was as follows:
Aggregate gross unrealized appreciation | $ | 580,289 | ||
Aggregate gross unrealized depreciation | (1,787,969 | ) | ||
|
| |||
Net unrealized depreciation | $ | (1,207,680 | ) | |
|
| |||
Federal income tax cost of investments | $ | 19,193,224 | ||
|
|
See Notes to Financial Statements.
11
1290 FUNDS
1290 CONVERTIBLE SECURITIES FUND
STATEMENT OF ASSETS AND LIABILITIES
April 30, 2016 (Unaudited)
ASSETS | ||||
Investments at value (Cost $19,159,557) | $ | 17,985,544 | ||
Cash | 834,804 | |||
Receivable for securities sold | 110,697 | |||
Dividends, interest and other receivables | 78,448 | |||
Deferred offering cost | 5,010 | |||
Receivable from investment adviser | 1,562 | |||
Other assets | 572 | |||
|
| |||
Total assets | 19,016,637 | |||
|
| |||
LIABILITIES | ||||
Payable for securities purchased | 109,214 | |||
Dividends and distributions payable | 50,143 | |||
Payable for Fund shares redeemed | 164 | |||
Trustees’ fees payable | 103 | |||
Distribution fees payable – Class A | 57 | |||
Distribution fees payable – Class R | 38 | |||
Accrued expenses | 10,323 | |||
|
| |||
Total liabilities | 170,042 | |||
|
| |||
NET ASSETS | $ | 18,846,595 | ||
|
| |||
Net assets were comprised of: | ||||
Paid in capital | $ | 20,666,569 | ||
Accumulated undistributed net investment income (loss) | (84,009 | ) | ||
Accumulated undistributed net realized gain (loss) on investments | (561,952 | ) | ||
Net unrealized appreciation (depreciation) on investments | (1,174,013 | ) | ||
|
| |||
Net assets | $ | 18,846,595 | ||
|
| |||
Class A | ||||
Net asset value and redemption price per share, $303,621 / 33,385 shares outstanding (unlimited amount authorized: $0.001 par value) | $ | 9.09 | ||
Maximum sales charge (4.50% of offering price) | 0.43 | |||
|
| |||
Maximum offering price per share | $ | 9.52 | ||
|
| |||
Class I | ||||
Net asset value and redemption price per share, $18,452,036 / 2,029,101 shares outstanding (unlimited amount authorized: $0.001 par value) | $ | 9.09 | ||
|
| |||
Class R | ||||
Net asset value and redemption price per share, $90,938 / 10,000 shares outstanding (unlimited amount authorized: $0.001 par value) | $ | 9.09 | ||
|
|
STATEMENT OF OPERATIONS
For the Six Months Ended April 30, 2016 (Unaudited)
INVESTMENT INCOME | ||||
Interest | $ | 124,648 | ||
Dividends | 135,968 | |||
|
| |||
Total income | 260,616 | |||
|
| |||
EXPENSES | ||||
Investment management fees | 65,139 | |||
Professional fees | 40,924 | |||
Administrative fees | 13,958 | |||
Registration and filing fees | 13,660 | |||
Offering costs | 13,608 | |||
Transfer agent fees | 11,573 | |||
Printing and mailing expenses | 5,556 | |||
Custodian fees | 2,574 | |||
Trustees’ fees | 1,118 | |||
Distribution fees – Class A | 292 | |||
Distribution fees – Class R | 227 | |||
Miscellaneous | 8,280 | |||
|
| |||
Gross expenses | 176,909 | |||
Less: Waiver from investment adviser | (78,801 | ) | ||
|
| |||
Net expenses | 98,108 | |||
|
| |||
NET INVESTMENT INCOME (LOSS) | 162,508 | |||
|
| |||
REALIZED AND UNREALIZED GAIN (LOSS) | ||||
Net realized gain (loss) on investments | (501,039 | ) | ||
Net change in unrealized appreciation (depreciation) on investments | (346,888 | ) | ||
|
| |||
NET REALIZED AND UNREALIZED GAIN (LOSS) | (847,927 | ) | ||
|
| |||
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | $ | (685,419 | ) | |
|
|
See Notes to Financial Statements.
12
1290 FUNDS
1290 CONVERTIBLE SECURITIES FUND
STATEMENT OF CHANGES IN NET ASSETS
Six Months Ended April 30, 2016 (Unaudited) | July 6, 2015* to October 31, 2015 | |||||||
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS: | ||||||||
Net investment income (loss) | $ | 162,508 | $ | 84,968 | ||||
Net realized gain (loss) on investments | (501,039 | ) | (60,843 | ) | ||||
Net change in unrealized appreciation (depreciation) on investments | (346,888 | ) | (827,125 | ) | ||||
|
|
|
| |||||
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | (685,419 | ) | (803,000 | ) | ||||
|
|
|
| |||||
DIVIDENDS : | ||||||||
Dividends from net investment income | ||||||||
Class A | (3,158 | ) | (554 | ) | ||||
Class I | (253,945 | ) | (79,072 | ) | ||||
Class R | (1,032 | ) | (245 | ) | ||||
|
|
|
| |||||
TOTAL DIVIDENDS: | (258,135 | ) | (79,871 | ) | ||||
|
|
|
| |||||
CAPITAL SHARES TRANSACTIONS: | ||||||||
Class A | ||||||||
Capital shares sold [ 13,231 and 21,551 shares, respectively ] | 122,357 | 211,375 | ||||||
Capital shares issued in reinvestment of dividends[ 293 and 24 shares, respectively ] | 2,692 | 232 | ||||||
Capital shares repurchased [ (1,712) and (2) shares, respectively ] | (14,544 | ) | (19 | ) | ||||
|
|
|
| |||||
Total Class A transactions | 110,505 | 211,588 | ||||||
|
|
|
| |||||
Class I | ||||||||
Capital shares sold [ 33,658 and 1,995,307 shares, respectively ] | 303,833 | 19,945,930 | ||||||
Capital shares issued in reinvestment of dividends[ 626 and 28 shares, respectively ] | 5,714 | 268 | ||||||
Capital shares repurchased [ (513) and (5) shares, respectively ] | (4,770 | ) | (48 | ) | ||||
|
|
|
| |||||
Total Class I transactions | 304,777 | 19,946,150 | ||||||
|
|
|
| |||||
Class R | ||||||||
Capital shares sold [ 0 and 10,000 shares, respectively ] | — | 100,000 | ||||||
|
|
|
| |||||
Total Class R transactions | — | 100,000 | ||||||
|
|
|
| |||||
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM CAPITAL SHARE TRANSACTIONS | 415,282 | 20,257,738 | ||||||
|
|
|
| |||||
TOTAL INCREASE (DECREASE) IN NET ASSETS | (528,272 | ) | 19,374,867 | |||||
NET ASSETS: | ||||||||
Beginning of period | 19,374,867 | — | ||||||
|
|
|
| |||||
End of period (a) | $ | 18,846,595 | $ | 19,374,867 | ||||
|
|
|
|
| ||||
(a) Includes accumulated undistributed (overdistributed) net investment income (loss) of | $ | (84,009 | ) | $ | 11,618 | |||
|
|
|
| |||||
* The Fund commenced operations on July 6, 2015. |
See Notes to Financial Statements.
13
1290 FUNDS
1290 CONVERTIBLE SECURITIES FUND
FINANCIAL HIGHLIGHTS
Class A | Six Months Ended April 30, 2016 (Unaudited) | July 6, 2015* to October 31, 2015 | ||||||
Net asset value, beginning of period | $ | 9.56 | $ | 10.00 | ||||
|
|
|
| |||||
Income (loss) from investment operations: | ||||||||
Net investment income (loss) (e) | 0.07 | 0.03 | ||||||
Net realized and unrealized gain (loss) on investments | (0.43 | ) | (0.44 | ) | ||||
|
|
|
| |||||
Total from investment operations | (0.36 | ) | (0.41 | ) | ||||
|
|
|
| |||||
Less distributions: | ||||||||
Dividends from net investment income | (0.11 | ) | (0.03 | ) | ||||
|
|
|
| |||||
Net asset value, end of period | $ | 9.09 | $ | 9.56 | ||||
|
|
|
| |||||
Total return (b) | (3.72 | )% | (4.08 | )% | ||||
|
|
|
| |||||
Ratios/Supplemental Data: | ||||||||
Net assets, end of period (000’s) | $ | 304 | $ | 206 | ||||
Ratio of expenses to average net assets: | ||||||||
After waivers and reimbursements (a) | 1.30 | % | 1.30 | % | ||||
Before waivers and reimbursements (a) | 2.16 | % | 2.09 | % | ||||
Ratio of net investment income (loss) to average net assets: | ||||||||
After waivers and reimbursements (a) | 1.45 | % | 1.09 | %(l) | ||||
Before waivers and reimbursements (a) | 0.59 | % | 0.30 | %(l) | ||||
Portfolio turnover rate (z)^ | 12 | % | 6 | % | ||||
Class I | Six Months Ended April 30, 2016 (Unaudited) | July 6, 2015* to October 31, 2015 | ||||||
Net asset value, beginning of period | $ | 9.56 | $ | 10.00 | ||||
|
|
|
| |||||
Income (loss) from investment operations: | ||||||||
Net investment income (loss) (e) | 0.08 | 0.04 | ||||||
Net realized and unrealized gain (loss) on investments | (0.42 | ) | (0.44 | ) | ||||
|
|
|
| |||||
Total from investment operations | (0.34 | ) | (0.40 | ) | ||||
|
|
|
| |||||
Less distributions: | ||||||||
Dividends from net investment income | (0.13 | ) | (0.04 | ) | ||||
|
|
|
| |||||
Net asset value, end of period | $ | 9.09 | $ | 9.56 | ||||
|
|
|
| |||||
Total return (b) | (3.60 | )% | (4.00 | )% | ||||
|
|
|
| |||||
Ratios/Supplemental Data: | ||||||||
Net assets, end of period (000’s) | $ | 18,452 | $ | 19,073 | ||||
Ratio of expenses to average net assets: | ||||||||
After waivers and reimbursements (a) | 1.05 | % | 1.05 | % | ||||
Before waivers and reimbursements (a) | 1.90 | % | 1.72 | % | ||||
Ratio of net investment income (loss) to average net assets: | ||||||||
After waivers and reimbursements (a) | 1.75 | % | 1.37 | %(l) | ||||
Before waivers and reimbursements (a) | 0.91 | % | 0.70 | %(l) | ||||
Portfolio turnover rate (z)^ | 12 | % | 6 | % |
See Notes to Financial Statements.
14
1290 FUNDS
1290 CONVERTIBLE SECURITIES FUND
FINANCIAL HIGHLIGHTS (Continued)
Class R | Six Months Ended April 30, 2016 (Unaudited) | July 6, 2015* to October 31, 2015 | ||||||
Net asset value, beginning of period | $ | 9.56 | $ | 10.00 | ||||
|
|
|
| |||||
Income (loss) from investment operations: | ||||||||
Net investment income (loss) (e) | 0.06 | 0.03 | ||||||
Net realized and unrealized gain (loss) on investments | (0.43 | ) | (0.45 | ) | ||||
|
|
|
| |||||
Total from investment operations | (0.37 | ) | (0.42 | ) | ||||
|
|
|
| |||||
Less distributions: | ||||||||
Dividends from net investment income | (0.10 | ) | (0.02 | ) | ||||
|
|
|
| |||||
Net asset value, end of period | $ | 9.09 | $ | 9.56 | ||||
|
|
|
| |||||
Total return (b) | (3.84 | )% | (4.16 | )% | ||||
|
|
|
| |||||
Ratios/Supplemental Data: | ||||||||
Net assets, end of period (000’s) | $ | 91 | $ | 96 | ||||
Ratio of expenses to average net assets: | ||||||||
After waivers and reimbursements (a) | 1.55 | % | 1.55 | % | ||||
Before waivers and reimbursements (a) | 2.40 | % | 2.22 | % | ||||
Ratio of net investment income (loss) to average net assets: | ||||||||
After waivers and reimbursements (a) | 1.26 | % | 0.87 | %(l) | ||||
Before waivers and reimbursements (a) | 0.41 | % | 0.20 | %(l) | ||||
Portfolio turnover rate (z)^ | 12 | % | 6 | % |
* | Commencement of Operations. |
^ | Portfolio turnover rate excludes derivatives, if any. |
(a) | Ratios for periods less than one year are annualized. |
(b) | Total returns for periods less than one year are not annualized. |
(e) | Net investment income (loss) per share is based on average shares outstanding. |
(l) | The annualized ratio of net investment income to average net assets may not be indicative of operating results for a full year. |
(z) | Portfolio turnover rate for periods less than one year is not annualized. |
See Notes to Financial Statements.
15
1290 DOUBLELINE DYNAMIC ALLOCATION FUND (Unaudited)
INVESTMENT ADVISER
Ø | 1290 Asset Managers® |
INVESTMENT SUB-ADVISER
Ø | DoubleLine Capital LP |
PERFORMANCE RESULTS
Total Returns as of 4/30/16 | ||||||||
Since Incept. | ||||||||
Fund – Class A Shares* | without Sales Charge | 2.10 | % | |||||
with Sales Charge (a | ) | (3.50 | ) | |||||
Fund – Class I Shares* | 2.10 | |||||||
Fund – Class R Shares* | 2.10 | |||||||
S&P 500 Index | 3.43 | |||||||
Barclays U.S. Aggregate Bond Index | 1.68 | |||||||
60% S&P 500 Index / 40% Barclays U.S. Aggregate Bond Index | 2.73 | |||||||
* Date of inception 3/7/16.
(a) A 5.50% front-end sales charge was deducted.
Returns for periods less than one year are not annualized. |
|
The performance quoted is past performance and is not a guarantee of future results. Mutual funds are subject to certain market risks. Investment returns and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be higher or lower than the performance data shown. For the most current month-end performance data please call 1-888-310-0416 or visit www.1290Funds.com.
Fund performance may reflect the waiver of the Fund’s fees and reimbursement of expenses for certain periods since the inception date. Without these waivers and reimbursements, performance would have been lower. Also, performance shown in this section does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or redemption of Fund shares.
There is insufficient history available to provide meaningful highlights in this report. Please see the 1290funds.com website for more information about the Fund, its investment process and performance.
Sector Weightings as of April 30, 2016 | % of Net Assets | |||
Government Securities | 24.8 | % | ||
Financials | 9.1 | |||
Asset-Backed and Mortgage-Backed Securities | 5.7 | |||
Information Technology | 5.5 | |||
Health Care | 4.5 | |||
Investment Companies | 4.2 | |||
Energy | 3.6 | |||
Consumer Discretionary | 3.0 | |||
Consumer Staples | 2.7 | |||
Industrials | 2.6 | |||
Utilities | 1.7 | |||
Telecommunication Services | 1.5 | |||
Materials | 1.3 | |||
Cash and Other | 29.8 | |||
|
| |||
100.0 | % | |||
|
| |||
Holdings are subject to change without notice. |
UNDERSTANDING YOUR EXPENSES:
As a shareholder of the Fund, you incur two types of costs:
(1) transaction costs, including applicable sales charges and redemption fees; and (2) ongoing costs, including investment advisory fees, distribution and/or service (12b-1) fees (in the case of Class A and Class R shares of the Fund), and other Fund expenses. These examples are intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The examples are based on an investment of $1,000 invested at the beginning of the six-month period ended April 30, 2016 and held for the entire six-month period.
Actual Expenses
The first line of the following table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the following 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 you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Please note that while the Fund commenced operations on March 8, 2016, the ‘Hypothetical Expenses Paid during the period’ reflect projected activity for the full six months for the purpose of comparability.
16
1290 DOUBLELINE DYNAMIC ALLOCATION FUND (Unaudited)
EXAMPLE
Beginning Account Value 11/1/15† | Ending Account Value 4/30/16 | Expenses Paid During Period* 11/1/15 - 4/30/16 | ||||||||||
Class A |
| |||||||||||
Actual | $1,000.00 | $1,021.00 | $1.82 | |||||||||
Hypothetical (5% average return before expenses) | 1,000.00 | 1,018.80 | 6.12 | |||||||||
Class I | ||||||||||||
Actual | 1,000.00 | 1,021.00 | 1.45 | |||||||||
Hypothetical (5% average return before expenses) | 1,000.00 | 1,020.03 | 4.88 | |||||||||
Class R | ||||||||||||
Actual | 1,000.00 | 1,021.00 | 2.20 | |||||||||
Hypothetical (5% average return before expenses) | 1,000.00 | 1,017.54 | 7.39 | |||||||||
† Commenced operations on March 8, 2016.
* Expenses are equal to the Fund’s Class A, I and R shares annualized expense ratios of 1.22%, 0.97% and 1.47%, respectively, multiplied by the average account value over the period, and multiplied by 182/366 for the hypothetical example (to reflect the one-half year period), and multiplied by 54/366 for the actual example (to reflect the actual number of days the Fund was in operation in the period). |
|
17
1290 FUNDS
1290 DOUBLELINE DYNAMIC ALLOCATION FUND
PORTFOLIO OF INVESTMENTS
April 30, 2016 (Unaudited)
Principal Amount | Value (Note 1) | |||||||
LONG-TERM DEBT SECURITIES: |
| |||||||
Asset-Backed and Mortgage-Backed Securities (5.7%) |
| |||||||
Non-Agency CMO (5.7%) | ||||||||
New Residential Mortgage Loan Trust, |
| |||||||
Series 2016-1A A1 | ||||||||
3.750%, 3/25/56 (l)§ | $ | 980,971 | $ | 1,008,881 | ||||
RALI Trust, | ||||||||
Series 2006-QS4 A10 | ||||||||
6.000%, 4/25/36 | 1,077,488 | 910,727 | ||||||
Wells Fargo Mortgage Backed Securities Trust, |
| |||||||
Series 2007-7 A1 | ||||||||
6.000%, 6/25/37 | 1,029,065 | 1,008,126 | ||||||
|
| |||||||
Total Asset-Backed and Mortgage-Backed Securities | 2,927,734 | |||||||
|
| |||||||
Corporate Bonds (13.9%) | ||||||||
Consumer Discretionary (0.6%) | ||||||||
Auto Components (0.1%) | ||||||||
Delphi Automotive plc | ||||||||
4.250%, 1/15/26 | 40,000 | 42,476 | ||||||
|
| |||||||
Automobiles (0.1%) | ||||||||
Ford Motor Co. | ||||||||
7.450%, 7/16/31 | 40,000 | 53,065 | ||||||
|
| |||||||
Household Durables (0.0%) | ||||||||
Newell Brands, Inc. | ||||||||
3.150%, 4/1/21 | 10,000 | 10,355 | ||||||
|
| |||||||
Internet & Catalog Retail (0.0%) | ||||||||
Amazon.com, Inc. | ||||||||
3.800%, 12/5/24 | 20,000 | 21,872 | ||||||
|
| |||||||
Media (0.3%) | ||||||||
21st Century Fox America, Inc. | ||||||||
4.750%, 9/15/44 | 25,000 | 26,565 | ||||||
Comcast Corp. | ||||||||
4.200%, 8/15/34 | 50,000 | 53,623 | ||||||
Omnicom Group, Inc. | ||||||||
3.600%, 4/15/26 | 50,000 | 52,117 | ||||||
|
| |||||||
132,305 | ||||||||
|
| |||||||
Specialty Retail (0.1%) | ||||||||
Home Depot, Inc. | ||||||||
3.000%, 4/1/26 | 50,000 | 52,248 | ||||||
|
| |||||||
Total Consumer Discretionary | 312,321 | |||||||
|
| |||||||
Consumer Staples (0.7%) | ||||||||
Beverages (0.1%) | ||||||||
Anheuser-Busch InBev Finance, Inc. | ||||||||
4.900%, 2/1/46 | 20,000 | 22,500 | ||||||
Coca-Cola Co. | ||||||||
1.650%, 11/1/18 | 20,000 | 20,374 | ||||||
1.875%, 10/27/20 | 20,000 | 20,274 | ||||||
|
| |||||||
63,148 | ||||||||
|
| |||||||
Food & Staples Retailing (0.2%) | ||||||||
Kroger Co. | ||||||||
6.150%, 1/15/20 | 5,000 | 5,755 | ||||||
3.400%, 4/15/22 | 50,000 | 53,225 | ||||||
Wal-Mart Stores, Inc. | ||||||||
4.300%, 4/22/44 | 40,000 | 44,969 | ||||||
|
| |||||||
103,949 | ||||||||
|
| |||||||
Food Products (0.3%) | ||||||||
Kraft Heinz Foods Co. | ||||||||
2.000%, 7/2/18§ | $ | 50,000 | $ | 50,535 | ||||
Tyson Foods, Inc. | ||||||||
3.950%, 8/15/24 | 90,000 | 96,519 | ||||||
|
| |||||||
147,054 | ||||||||
|
| |||||||
Tobacco (0.1%) |
| |||||||
Reynolds American, Inc. | ||||||||
4.000%, 6/12/22 | 45,000 | 48,955 | ||||||
|
| |||||||
Total Consumer Staples | 363,106 | |||||||
|
| |||||||
Energy (2.4%) |
| |||||||
Energy Equipment & Services (0.0%) |
| |||||||
Schlumberger Holdings Corp. | ||||||||
2.350%, 12/21/18§ | 20,000 | 20,254 | ||||||
|
| |||||||
Oil, Gas & Consumable Fuels (2.4%) |
| |||||||
Apache Corp. | ||||||||
4.750%, 4/15/43 | 35,000 | 34,255 | ||||||
Bharat Petroleum Corp. Ltd. | ||||||||
4.000%, 5/8/25 (b)(m) | 200,000 | 199,764 | ||||||
BP Capital Markets plc | ||||||||
3.062%, 3/17/22 | 35,000 | 36,093 | ||||||
3.119%, 5/4/26 | 10,000 | 10,087 | ||||||
Cosan Overseas Ltd. | ||||||||
8.250%, 8/5/16 (b)(m)(y) | 100,000 | 88,125 | ||||||
Delek & Avner Tamar Bond Ltd. | ||||||||
4.435%, 12/30/20§ | 100,000 | 102,250 | ||||||
Energy Transfer Partners LP | ||||||||
4.750%, 1/15/26 | 35,000 | 33,812 | ||||||
EOG Resources, Inc. | ||||||||
4.150%, 1/15/26 | 20,000 | 21,361 | ||||||
Occidental Petroleum Corp. | ||||||||
3.400%, 4/15/26 | 10,000 | 10,271 | ||||||
Oleoducto Central S.A. | ||||||||
4.000%, 5/7/21 (b)(m) | 200,000 | 191,000 | ||||||
ONGC Videsh Ltd. | ||||||||
3.750%, 5/7/23 (b)(m) | 200,000 | 198,833 | ||||||
Petroleos Mexicanos | ||||||||
5.625%, 1/23/46 | 80,000 | 71,200 | ||||||
Phillips 66 | ||||||||
5.875%, 5/1/42 | 22,000 | 25,373 | ||||||
Reliance Industries Ltd. | ||||||||
5.875%, 2/5/18 (b)(m)(y) | 200,000 | 199,644 | ||||||
|
| |||||||
1,222,068 | ||||||||
|
| |||||||
Total Energy | 1,242,322 | |||||||
|
| |||||||
Financials (5.2%) |
| |||||||
Banks (3.0%) |
| |||||||
Banco Nacional de Comercio Exterior SNC |
| |||||||
4.375%, 10/14/25 (b)(m) | 250,000 | 255,000 | ||||||
Banco Nacional de Costa Rica | ||||||||
5.875%, 4/25/21 (b)§ | 200,000 | 200,500 | ||||||
Bank of America Corp. | ||||||||
2.000%, 1/11/18 | 35,000 | 35,162 | ||||||
2.625%, 4/19/21 | 55,000 | 55,267 | ||||||
Bank of Montreal | ||||||||
2.375%, 1/25/19 | 40,000 | 40,755 | ||||||
BB&T Corp. | ||||||||
2.450%, 1/15/20 | 40,000 | 40,877 |
See Notes to Financial Statements.
18
1290 FUNDS
1290 DOUBLELINE DYNAMIC ALLOCATION FUND
PORTFOLIO OF INVESTMENTS (Continued)
April 30, 2016 (Unaudited)
Principal Amount | Value (Note 1) | |||||||
Citigroup, Inc. | ||||||||
2.650%, 10/26/20 | $ | 40,000 | $ | 40,394 | ||||
2.700%, 3/30/21 | 30,000 | 30,303 | ||||||
Global Bank Corp. | ||||||||
5.125%, 10/30/19 (m) | 200,000 | 203,000 | ||||||
JPMorgan Chase & Co. | ||||||||
2.550%, 10/29/20 | 50,000 | 50,661 | ||||||
4.250%, 10/1/27 | 50,000 | 52,225 | ||||||
MUFG Americas Holdings Corp. | ||||||||
1.625%, 2/9/18 | 40,000 | 39,811 | ||||||
PNC Funding Corp. | ||||||||
3.300%, 3/8/22 | 40,000 | 41,992 | ||||||
Royal Bank of Canada | ||||||||
2.500%, 1/19/21 | 10,000 | 10,189 | ||||||
Sumitomo Mitsui Financial Group, Inc. |
| |||||||
2.934%, 3/9/21 | 50,000 | 50,867 | ||||||
Toronto-Dominion Bank | ||||||||
2.125%, 4/7/21 | 45,000 | 45,066 | ||||||
United Overseas Bank Ltd. | ||||||||
3.500%, 9/16/26 (b)(l)(m) | 200,000 | 200,813 | ||||||
Wells Fargo & Co. | ||||||||
3.550%, 9/29/25 | 60,000 | 62,645 | ||||||
3.000%, 4/22/26 | 30,000 | 29,865 | ||||||
Westpac Banking Corp. | ||||||||
2.600%, 11/23/20 | 45,000 | 45,885 | ||||||
|
| |||||||
1,531,277 | ||||||||
|
| |||||||
Capital Markets (0.4%) |
| |||||||
Goldman Sachs Group, Inc. | ||||||||
2.875%, 2/25/21 | 50,000 | 50,862 | ||||||
Morgan Stanley | ||||||||
2.650%, 1/27/20 | 50,000 | 50,751 | ||||||
2.500%, 4/21/21 | 15,000 | 15,024 | ||||||
3.875%, 1/27/26 | 50,000 | 51,855 | ||||||
State Street Corp. | ||||||||
3.550%, 8/18/25 | 30,000 | 31,905 | ||||||
|
| |||||||
200,397 | ||||||||
|
| |||||||
Consumer Finance (0.5%) |
| |||||||
Ally Financial, Inc. | ||||||||
4.125%, 3/30/20 | 40,000 | 40,848 | ||||||
4.250%, 4/15/21 | 5,000 | 5,075 | ||||||
American Express Credit Corp. | ||||||||
2.250%, 8/15/19 | 100,000 | 101,478 | ||||||
General Motors Financial Co., Inc. | ||||||||
4.200%, 3/1/21 | 60,000 | 63,036 | ||||||
Synchrony Financial | ||||||||
3.000%, 8/15/19 | 50,000 | 50,704 | ||||||
|
| |||||||
261,141 | ||||||||
|
| |||||||
Diversified Financial Services (0.9%) |
| |||||||
GrupoSura Finance S.A. | ||||||||
5.500%, 4/29/26 (b)§ | 200,000 | 203,750 | ||||||
Intercorp Peru Ltd. | ||||||||
5.875%, 2/12/25 (b)(m) | 100,000 | 97,125 | ||||||
National Rural Utilities Cooperative Finance Corp. |
| |||||||
2.000%, 1/27/20 | 65,000 | 65,691 | ||||||
S&P Global, Inc. | ||||||||
4.400%, 2/15/26 | 20,000 | 22,126 | ||||||
SUAM Finance B.V. | ||||||||
4.875%, 4/17/24 (m) | 100,000 | 101,875 | ||||||
|
| |||||||
490,567 | ||||||||
|
| |||||||
Insurance (0.2%) |
| |||||||
Liberty Mutual Group, Inc. | ||||||||
6.500%, 5/1/42§ | $ | 60,000 | $ | 70,070 | ||||
TIAA Asset Management Finance Co. LLC |
| |||||||
2.950%, 11/1/19§ | 31,000 | 31,579 | ||||||
|
| |||||||
101,649 | ||||||||
|
| |||||||
Real Estate Investment Trusts (REITs) (0.2%) |
| |||||||
Boston Properties LP | ||||||||
4.125%, 5/15/21 | 40,000 | 42,895 | ||||||
Simon Property Group LP | ||||||||
3.300%, 1/15/26 | 45,000 | 47,238 | ||||||
|
| |||||||
90,133 | ||||||||
|
| |||||||
Total Financials | 2,675,164 | |||||||
|
| |||||||
Health Care (1.1%) | ||||||||
Biotechnology (0.0%) |
| |||||||
Celgene Corp. | ||||||||
3.875%, 8/15/25 | 20,000 | 21,029 | ||||||
|
| |||||||
Health Care Equipment & Supplies (0.1%) |
| |||||||
Zimmer Biomet Holdings, Inc. | ||||||||
2.700%, 4/1/20 | 45,000 | 45,633 | ||||||
|
| |||||||
Health Care Providers & Services (0.4%) |
| |||||||
Anthem, Inc. | ||||||||
2.300%, 7/15/18 | 50,000 | 50,483 | ||||||
Cardinal Health, Inc. | ||||||||
1.950%, 6/15/18 | 25,000 | 25,225 | ||||||
Express Scripts Holding Co. | ||||||||
4.500%, 2/25/26 | 20,000 | 21,412 | ||||||
Laboratory Corp. of America Holdings |
| |||||||
2.500%, 11/1/18 | 45,000 | 45,326 | ||||||
4.700%, 2/1/45 | 45,000 | 45,933 | ||||||
|
| |||||||
188,379 | ||||||||
|
| |||||||
Life Sciences Tools & Services (0.1%) |
| |||||||
Thermo Fisher Scientific, Inc. | ||||||||
3.300%, 2/15/22 | 60,000 | 61,653 | ||||||
|
| |||||||
Pharmaceuticals (0.5%) |
| |||||||
AbbVie, Inc. | ||||||||
4.700%, 5/14/45 | 40,000 | 42,448 | ||||||
Actavis Funding SCS | ||||||||
2.350%, 3/12/18 | 65,000 | 65,702 | ||||||
AstraZeneca plc | ||||||||
2.375%, 11/16/20 | 40,000 | 40,856 | ||||||
Eli Lilly & Co. | ||||||||
3.700%, 3/1/45 | 40,000 | 41,336 | ||||||
Teva Pharmaceutical Finance Co. B.V. |
| |||||||
2.950%, 12/18/22 | 65,000 | 64,883 | ||||||
|
| |||||||
255,225 | ||||||||
|
| |||||||
Total Health Care | 571,919 | |||||||
|
| |||||||
Industrials (0.5%) | ||||||||
Aerospace & Defense (0.1%) |
| |||||||
Boeing Co. | ||||||||
6.875%, 3/15/39 | 21,000 | 30,464 | ||||||
Lockheed Martin Corp. | ||||||||
4.700%, 5/15/46 | 45,000 | 51,529 | ||||||
|
| |||||||
81,993 | ||||||||
|
| |||||||
Air Freight & Logistics (0.1%) |
| |||||||
FedEx Corp. | ||||||||
4.750%, 11/15/45 | 40,000 | 43,410 | ||||||
|
|
See Notes to Financial Statements.
19
1290 FUNDS
1290 DOUBLELINE DYNAMIC ALLOCATION FUND
PORTFOLIO OF INVESTMENTS (Continued)
April 30, 2016 (Unaudited)
Principal Amount | Value (Note 1) | |||||||
Commercial Services & Supplies (0.1%) |
| |||||||
Waste Management, Inc. | ||||||||
4.100%, 3/1/45 | $ | 35,000 | $ | 35,719 | ||||
|
| |||||||
Road & Rail (0.1%) |
| |||||||
Burlington Northern Santa Fe LLC | ||||||||
4.550%, 9/1/44 | 40,000 | 44,485 | ||||||
|
| |||||||
Trading Companies & Distributors (0.1%) |
| |||||||
Air Lease Corp. | ||||||||
3.375%, 6/1/21 | 35,000 | 35,000 | ||||||
|
| |||||||
Total Industrials | 240,607 | |||||||
|
| |||||||
Information Technology (0.7%) |
| |||||||
Communications Equipment (0.1%) |
| |||||||
Cisco Systems, Inc. | ||||||||
1.650%, 6/15/18 | 50,000 | 50,660 | ||||||
|
| |||||||
Software (0.4%) |
| |||||||
Microsoft Corp. | ||||||||
4.450%, 11/3/45 | 45,000 | 49,953 | ||||||
Oracle Corp. | ||||||||
2.250%, 10/8/19 | 95,000 | 97,926 | ||||||
4.125%, 5/15/45 | 50,000 | 51,509 | ||||||
|
| |||||||
199,388 | ||||||||
|
| |||||||
Technology Hardware, Storage & Peripherals (0.2%) |
| |||||||
Apple, Inc. | ||||||||
4.650%, 2/23/46 | 30,000 | 32,711 | ||||||
Hewlett Packard Enterprise Co. | ||||||||
3.600%, 10/15/20§ | 55,000 | 56,917 | ||||||
|
| |||||||
89,628 | ||||||||
|
| |||||||
Total Information Technology | 339,676 | |||||||
|
| |||||||
Materials (0.7%) | ||||||||
Metals & Mining (0.5%) |
| |||||||
Minsur S.A. | ||||||||
6.250%, 2/7/24 (b)(m) | 150,000 | 144,750 | ||||||
Southern Copper Corp. | ||||||||
5.875%, 4/23/45 | 100,000 | 90,091 | ||||||
|
| |||||||
234,841 | ||||||||
|
| |||||||
Paper & Forest Products (0.2%) |
| |||||||
Georgia-Pacific LLC | ||||||||
3.600%, 3/1/25§ | 95,000 | 99,352 | ||||||
|
| |||||||
Total Materials | 334,193 | |||||||
|
| |||||||
Telecommunication Services (0.9%) | ||||||||
Diversified Telecommunication Services (0.6%) |
| |||||||
AT&T, Inc. | ||||||||
3.400%, 5/15/25 | 50,000 | 50,777 | ||||||
British Telecommunications plc | ||||||||
5.950%, 1/15/18 | 100,000 | 107,684 | ||||||
Orange S.A. | ||||||||
2.750%, 2/6/19 | 45,000 | 46,329 | ||||||
Verizon Communications, Inc. | ||||||||
4.400%, 11/1/34 | 85,000 | 86,700 | ||||||
|
| |||||||
291,490 | ||||||||
|
| |||||||
Wireless Telecommunication Services (0.3%) |
| |||||||
Digicel Group Ltd. | ||||||||
7.125%, 4/1/22 (m) | 200,000 | 161,750 | ||||||
|
| |||||||
Total Telecommunication Services | 453,240 | |||||||
|
| |||||||
Utilities (1.1%) | ||||||||
Electric Utilities (0.6%) |
| |||||||
Duke Energy Progress LLC | ||||||||
4.150%, 12/1/44 | $ | 45,000 | $ | 48,033 | ||||
Exelon Corp. | ||||||||
3.400%, 4/15/26 | 25,000 | 25,612 | ||||||
Mexico Generadora de Energia S de rl |
| |||||||
5.500%, 12/6/32 (m) | 193,648 | 186,386 | ||||||
Southern Co. | ||||||||
2.450%, 9/1/18 | 65,000 | 66,292 | ||||||
|
| |||||||
326,323 | ||||||||
|
| |||||||
Independent Power and Renewable Electricity Producers (0.4%) |
| |||||||
Empresa Electrica Angamos S.A. | ||||||||
4.875%, 5/25/29 (m) | 200,000 | 187,000 | ||||||
|
| |||||||
Multi-Utilities (0.1%) |
| |||||||
Berkshire Hathaway Energy Co. | ||||||||
6.500%, 9/15/37 | 50,000 | 67,148 | ||||||
|
| |||||||
Total Utilities | 580,471 | |||||||
|
| |||||||
Total Corporate Bonds | 7,113,019 | |||||||
|
| |||||||
Government Securities (24.8%) | ||||||||
Agency CMO (9.8%) |
| |||||||
Federal Home Loan Mortgage Corp. | ||||||||
4.000%, 2/15/42 | 1,181,033 | 1,306,196 | ||||||
3.000%, 3/1/46 | 996,349 | 1,021,531 | ||||||
Federal National Mortgage Association |
| |||||||
2.000%, 8/25/42 | 1,001,667 | 964,844 | ||||||
5.342%, 5/25/43 (l) | 1,263,146 | 1,143,991 | ||||||
3.500%, 7/1/42 | 534,805 | 564,950 | ||||||
|
| |||||||
5,001,512 | ||||||||
|
| |||||||
Foreign Governments (0.5%) |
| |||||||
Instituto Costarricense de Electricidad |
| |||||||
6.950%, 11/10/21 (b)(m) | 200,000 | 203,750 | ||||||
United Mexican States | ||||||||
4.000%, 10/2/23 | 60,000 | 62,850 | ||||||
|
| |||||||
266,600 | ||||||||
|
| |||||||
Supranational (0.5%) |
| |||||||
Banco Latinoamericano de Comercio Exterior S.A. |
| |||||||
3.250%, 5/7/20 (b)(m) | 250,000 | 250,625 | ||||||
|
| |||||||
U.S. Treasuries (14.0%) |
| |||||||
U.S. Treasury Bonds | ||||||||
2.750%, 11/15/42 | 1,230,000 | 1,259,232 | ||||||
U.S. Treasury Notes | ||||||||
0.500%, 6/30/16 | 990,000 | 990,418 | ||||||
0.875%, 6/15/17 | 910,000 | 912,382 | ||||||
2.000%, 11/30/20 | 990,000 | 1,022,693 | ||||||
2.250%, 3/31/21 | 1,040,000 | 1,087,117 | ||||||
2.500%, 5/15/24 | 830,000 | 880,448 | ||||||
2.250%, 11/15/24 | 980,000 | 1,019,414 | ||||||
|
| |||||||
7,171,704 | ||||||||
|
| |||||||
Total Government Securities | 12,690,441 | |||||||
|
| |||||||
Total Long-Term Debt Securities (44.4%) | 22,731,194 | |||||||
|
|
See Notes to Financial Statements.
20
1290 FUNDS
1290 DOUBLELINE DYNAMIC ALLOCATION FUND
PORTFOLIO OF INVESTMENTS (Continued)
April 30, 2016 (Unaudited)
Number of Shares | Value (Note 1) | |||||||
COMMON STOCKS: | ||||||||
Consumer Discretionary (2.4%) | ||||||||
Hotels, Restaurants & Leisure (0.7%) |
| |||||||
McDonald’s Corp. | 1,473 | $ | 186,320 | |||||
Starbucks Corp. | 2,975 | 167,284 | ||||||
|
| |||||||
353,604 | ||||||||
|
| |||||||
Internet & Catalog Retail (0.7%) |
| |||||||
Amazon.com, Inc.* | 399 | 263,176 | ||||||
Priceline Group, Inc.* | 89 | 119,586 | ||||||
|
| |||||||
382,762 | ||||||||
|
| |||||||
Media (1.0%) |
| |||||||
Comcast Corp., Class A | 4,850 | 294,686 | ||||||
Twenty-First Century Fox, Inc., Class A | 7,205 | 218,023 | ||||||
|
| |||||||
512,709 | ||||||||
|
| |||||||
Total Consumer Discretionary | 1,249,075 | |||||||
|
| |||||||
Consumer Staples (2.0%) | ||||||||
Beverages (0.4%) | ||||||||
Dr. Pepper Snapple Group, Inc. | 2,215 | 201,365 | ||||||
|
| |||||||
Food & Staples Retailing (0.7%) |
| |||||||
CVS Health Corp. | 2,035 | 204,518 | ||||||
Wal-Mart Stores, Inc. | 2,537 | 169,649 | ||||||
|
| |||||||
374,167 | ||||||||
|
| |||||||
Household Products (0.4%) | ||||||||
Procter & Gamble Co. | 2,758 | 220,971 | ||||||
|
| |||||||
Tobacco (0.5%) | ||||||||
Philip Morris International, Inc. | 2,448 | 240,198 | ||||||
|
| |||||||
Total Consumer Staples | 1,036,701 | |||||||
|
| |||||||
Energy (1.2%) | ||||||||
Oil, Gas & Consumable Fuels (1.2%) |
| |||||||
Exxon Mobil Corp. | 5,114 | 452,078 | ||||||
Pioneer Natural Resources Co. | 892 | 148,161 | ||||||
|
| |||||||
600,239 | ||||||||
|
| |||||||
Total Energy | 600,239 | |||||||
|
| |||||||
Financials (3.9%) | ||||||||
Banks (1.7%) | ||||||||
Citigroup, Inc. | 6,054 | 280,179 | ||||||
JPMorgan Chase & Co. | 4,811 | 304,055 | ||||||
PNC Financial Services Group, Inc. | 2,968 | 260,531 | ||||||
|
| |||||||
844,765 | ||||||||
|
| |||||||
Consumer Finance (0.5%) | ||||||||
Capital One Financial Corp. | 3,727 | 269,798 | ||||||
|
| |||||||
Diversified Financial Services (0.5%) |
| |||||||
Intercontinental Exchange, Inc. | 1,104 | 264,993 | ||||||
|
| |||||||
Insurance (0.5%) | ||||||||
Chubb Ltd. | 1,984 | 233,834 | ||||||
|
| |||||||
Real Estate Investment Trusts (REITs) (0.7%) |
| |||||||
Annaly Capital Management, Inc. (REIT) | 34,022 | 354,509 | ||||||
|
| |||||||
Total Financials | 1,967,899 | |||||||
|
| |||||||
Health Care (3.4%) | ||||||||
Biotechnology (1.5%) | ||||||||
Amgen, Inc. | 1,762 | $ | 278,925 | |||||
Biogen, Inc.* | 869 | 238,966 | ||||||
Gilead Sciences, Inc. | 2,629 | 231,904 | ||||||
|
| |||||||
749,795 | ||||||||
|
| |||||||
Health Care Equipment & Supplies (1.0%) |
| |||||||
Abbott Laboratories | 6,585 | 256,157 | ||||||
Medtronic plc | 3,405 | 269,506 | ||||||
|
| |||||||
525,663 | ||||||||
|
| |||||||
Life Sciences Tools & Services (0.4%) |
| |||||||
Thermo Fisher Scientific, Inc. | 1,637 | 236,137 | ||||||
|
| |||||||
Pharmaceuticals (0.5%) | ||||||||
Johnson & Johnson | 2,151 | 241,084 | ||||||
|
| |||||||
Total Health Care | 1,752,679 | |||||||
|
| |||||||
Industrials (2.1%) | ||||||||
Airlines (0.3%) | ||||||||
Southwest Airlines Co. | 3,435 | 153,235 | ||||||
|
| |||||||
Electrical Equipment (0.7%) |
| |||||||
Eaton Corp. plc | 5,386 | 340,772 | ||||||
|
| |||||||
Industrial Conglomerates (0.8%) |
| |||||||
General Electric Co. | 13,266 | 407,930 | ||||||
|
| |||||||
Trading Companies & Distributors (0.3%) |
| |||||||
MSC Industrial Direct Co., Inc., Class A | 1,931 | 149,653 | ||||||
|
| |||||||
Total Industrials | 1,051,590 | |||||||
|
| |||||||
Information Technology (4.8%) |
| |||||||
Communications Equipment (0.3%) |
| |||||||
Cisco Systems, Inc. | 6,367 | 175,029 | ||||||
|
| |||||||
Internet Software & Services (1.1%) |
| |||||||
Alphabet, Inc., Class A* | 432 | 305,804 | ||||||
Facebook, Inc., Class A* | 2,116 | 248,800 | ||||||
|
| |||||||
554,604 | ||||||||
|
| |||||||
IT Services (1.3%) | ||||||||
International Business Machines Corp. | 1,225 | 178,776 | ||||||
PayPal Holdings, Inc.* | 3,699 | 144,927 | ||||||
Visa, Inc., Class A | 2,392 | 184,758 | ||||||
Western Union Co. | 7,353 | 147,060 | ||||||
|
| |||||||
655,521 | ||||||||
|
| |||||||
Semiconductors & Semiconductor Equipment (0.5%) |
| |||||||
Intel Corp. | 8,351 | 252,868 | ||||||
|
| |||||||
Software (1.0%) | ||||||||
Microsoft Corp. | 6,186 | 308,496 | ||||||
Oracle Corp. | 5,247 | 209,145 | ||||||
|
| |||||||
517,641 | ||||||||
|
| |||||||
Technology Hardware, Storage & Peripherals (0.6%) |
| |||||||
Apple, Inc. | 3,339 | 312,998 | ||||||
|
| |||||||
Total Information Technology | 2,468,661 | |||||||
|
|
See Notes to Financial Statements.
21
1290 FUNDS
1290 DOUBLELINE DYNAMIC ALLOCATION FUND
PORTFOLIO OF INVESTMENTS (Continued)
April 30, 2016 (Unaudited)
Number of Shares | Value (Note 1) | |||||||
Materials (0.6%) | ||||||||
Chemicals (0.6%) | ||||||||
Air Products & Chemicals, Inc. | 1,283 | $ | 187,177 | |||||
International Flavors & Fragrances, Inc. | 1,076 | 128,550 | ||||||
|
| |||||||
315,727 | ||||||||
|
| |||||||
Total Materials | 315,727 | |||||||
|
| |||||||
Telecommunication Services (0.6%) |
| |||||||
Diversified Telecommunication Services (0.6%) |
| |||||||
Verizon Communications, Inc. | 6,034 | 307,372 | ||||||
|
| |||||||
Total Telecommunication Services | 307,372 | |||||||
|
| |||||||
Utilities (0.6%) | ||||||||
Electric Utilities (0.3%) | ||||||||
PG&E Corp. | 2,541 | 147,886 | ||||||
|
| |||||||
Multi-Utilities (0.3%) | ||||||||
Sempra Energy | 1,675 | 173,111 | ||||||
|
| |||||||
Total Utilities | 320,997 | |||||||
|
| |||||||
Total Common Stocks (21.6%) | 11,070,940 | |||||||
|
| |||||||
INVESTMENT COMPANIES: |
| |||||||
Investment Companies(4.2%) | ||||||||
DoubleLine Floating Rate Fund‡ | 180,041 | 1,769,805 | ||||||
DoubleLine Global Bond Fund‡ | 36,550 | 386,330 | ||||||
|
| |||||||
Total Investment Companies (4.2%) | 2,156,135 | |||||||
|
| |||||||
Principal Amount | Value (Note 1) | |||||||
SHORT-TERM INVESTMENT: | ||||||||
Government Securities (21.4%) |
| |||||||
U.S. Treasury Bills | ||||||||
0.13%, 6/9/16 (p) | $ | 3,000,000 | 2,999,557 | |||||
0.25%, 9/1/16 (p) | 2,000,000 | 1,998,255 | ||||||
0.41%, 1/5/17 (p) | $ | 3,000,000 | $ | 2,991,580 | ||||
0.48%, 3/2/17 (p) | 3,000,000 | 2,987,843 | ||||||
|
| |||||||
Total Government Securities | 10,977,235 | |||||||
|
| |||||||
Total Short-Term Investment (21.4%) | 10,977,235 | |||||||
|
| |||||||
Total Investments (91.6%) | 46,935,504 | |||||||
Other Assets Less Liabilities (8.4%) | 4,296,534 | |||||||
|
| |||||||
Net Assets (100%) | $ | 51,232,038 | ||||||
|
|
* | Non-income producing. |
‡ | All, or a portion, of the security is an affiliated company as defined under the Investment Company Act of 1940. |
§ | Securities exempt from registration under Rule 144A of the Securities Act of 1933. These securities may only be resold to qualified institutional buyers. At April 30, 2016, the market value of these securities amounted to $1,844,088 or 3.6% of net assets. Securities denoted with “§” but without “b” have been determined to be liquid under the guidelines established by the Board of Trustees. To the extent any securities might provide a right to demand registration, such rights have not been relied upon when determining liquidity. |
(b) | Illiquid Security. At April 30, 2016, the market value of these securities amounted to $2,433,679 or 4.8% of net assets. |
(l) | Floating Rate Security. Rate disclosed is as of April 30, 2016. |
(m) | Regulation S is an exemption for securities offerings that are made outside of the United States and do not involve direct selling efforts in the United States. Resale restrictions may apply for purposes of the Securities Act of 1933. At April 30, 2016, the market value of these securities amounted to $2,869,440 or 5.6% of net assets. |
(p) | Yield to maturity. |
(y) | Securities are perpetual and, thus, do not have a predetermined maturity date. The coupon rate for these securities are fixed for a period of time and may be structured to adjust thereafter. The date shown, if applicable, reflects the next call date. The coupon rate shown is the rate in effect as of April 30, 2016. |
Glossary:
CMO | — Collateralized Mortgage Obligation |
Investments in companies which were affiliates for the period ended April 30, 2016, were as follows:
Securities | Value March 8, 2016 | Purchases at Cost | Sales at Cost | Value April 30, 2016 | Dividend Income | Realized Gain (Loss)† | ||||||||||||||||||
DoubleLine Floating Rate Fund | $ | — | $ | 1,750,000 | $ | — | $ | 1,769,805 | $ | 10,208 | $ | — | ||||||||||||
DoubleLine Global Bond Fund | — | 375,000 | — | 386,330 | 426 | — | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
$ | — | $ | 2,125,000 | $ | — | $ | 2,156,135 | $ | 10,634 | $ | — | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
† | When applicable, realized gain includes net distributions of realized gain received from underlying funds. |
See Notes to Financial Statements.
22
1290 FUNDS
1290 DOUBLELINE DYNAMIC ALLOCATION FUND
PORTFOLIO OF INVESTMENTS (Continued)
April 30, 2016 (Unaudited)
Total Return Swaps
Swap Counterparty | Payments Made by the Fund | Payments Received by the Fund | Maturity Date | Notional Amount | Unrealized Appreciation/ (Depreciation) | |||||||||||
Barclays Bank plc | 0.400% | Shiller Barclays CAPE US Sector II ER USD Index | 4/3/17 | $ | 10,000,000 | $ | 219,765 | |||||||||
Barclays Bank plc | 0.470% | Shiller Barclays CAPE US Sector ER USD Index | 5/9/16 | 1,500,000 | (9,701 | ) | ||||||||||
|
| |||||||||||||||
$ | 210,064 | |||||||||||||||
|
|
Glossary:
CAPE | — Cyclically Adjusted Price Earnings |
The following is a summary of the inputs used to value the Fund’s assets and liabilities carried at fair value as of April 30, 2016:
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
Various inputs are used in determining the value of the Fund’s investments. These inputs are summarized in the three broad levels listed below:
Investment Type | Level 1 Quoted Prices in Active Markets for Identical Securities | Level 2 Significant Other Observable Inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.) | Level 3 Significant Unobservable Inputs (including the Fund’s own assumptions in determining the fair value of investments) | Total | ||||||||||||
Assets: |
| |||||||||||||||
Asset-Backed and Mortgage-Backed Securities | ||||||||||||||||
Non-Agency CMO | $ | — | $ | 2,927,734 | $ | — | $ | 2,927,734 | ||||||||
Common Stocks | ||||||||||||||||
Consumer Discretionary | 1,249,075 | — | — | 1,249,075 | ||||||||||||
Consumer Staples | 1,036,701 | — | — | 1,036,701 | ||||||||||||
Energy | 600,239 | — | — | 600,239 | ||||||||||||
Financials | 1,967,899 | — | — | 1,967,899 | ||||||||||||
Health Care | 1,752,679 | — | — | 1,752,679 | ||||||||||||
Industrials | 1,051,590 | — | — | 1,051,590 | ||||||||||||
Information Technology | 2,468,661 | — | — | 2,468,661 | ||||||||||||
Materials | 315,727 | — | — | 315,727 | ||||||||||||
Telecommunication Services | 307,372 | — | — | 307,372 | ||||||||||||
Utilities | 320,997 | — | — | 320,997 | ||||||||||||
Corporate Bonds | ||||||||||||||||
Consumer Discretionary | — | 312,321 | — | 312,321 | ||||||||||||
Consumer Staples | — | 363,106 | — | 363,106 | ||||||||||||
Energy | — | 1,242,322 | — | 1,242,322 | ||||||||||||
Financials | — | 2,675,164 | — | 2,675,164 | ||||||||||||
Health Care | — | 571,919 | — | 571,919 | ||||||||||||
Industrials | — | 240,607 | — | 240,607 | ||||||||||||
Information Technology | — | 339,676 | — | 339,676 | ||||||||||||
Materials | — | 334,193 | — | 334,193 | ||||||||||||
Telecommunication Services | — | 453,240 | — | 453,240 | ||||||||||||
Utilities | — | 580,471 | — | 580,471 | ||||||||||||
Government Securities | ||||||||||||||||
Agency CMO | — | 5,001,512 | — | 5,001,512 | ||||||||||||
Foreign Governments | — | 266,600 | — | 266,600 | ||||||||||||
Supranational | — | 250,625 | — | 250,625 | ||||||||||||
U.S. Treasuries | — | 7,171,704 | — | 7,171,704 |
See Notes to Financial Statements.
23
1290 FUNDS
1290 DOUBLELINE DYNAMIC ALLOCATION FUND
PORTFOLIO OF INVESTMENTS (Continued)
April 30, 2016 (Unaudited)
Investment Type | Level 1 Quoted Prices in Active Markets for Identical Securities | Level 2 Significant Other Observable Inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.) | Level 3 Significant Unobservable Inputs (including the Fund’s own assumptions in determining the fair value of investments) | Total | ||||||||||||
Investment Companies | ||||||||||||||||
Investment Companies | $ | 2,156,135 | $ | — | $ | — | $ | 2,156,135 | ||||||||
Short-Term Investments | — | 10,977,235 | — | 10,977,235 | ||||||||||||
Total Return Swaps | — | 210,064 | — | 210,064 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Assets | $ | 13,227,075 | $ | 33,918,493 | $ | — | $ | 47,145,568 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total Liabilities | $ | — | $ | — | $ | — | $ | — | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total | $ | 13,227,075 | $ | 33,918,493 | $ | — | $ | 47,145,568 | ||||||||
|
|
|
|
|
|
|
|
There were no transfers between Levels 1, 2 or 3 during the period ended April 30, 2016.
Fair Values of Derivative Instruments as of April 30, 2016:
Statement of Assets and Liabilities | ||||||
Derivatives Not Accounted for as Hedging Instrument^ | Asset Derivatives | Fair Value | ||||
Equity contracts | Receivables, Net assets – Unrealized appreciation | $ | 219,765 | |||
|
| |||||
Liability Derivatives | ||||||
Equity contracts | Payables, Net assets – Unrealized depreciation | $ | (9,701 | ) | ||
|
|
The Effect of Derivative Instruments on the Statement of Operations for the period ended April 30, 2016:
Amount of Realized Gain or (Loss) on Derivatives Recognized in Income | ||||||||
Derivatives Not Accounted for as Hedging Instruments^ | Swaps | Total | ||||||
Equity contracts | $ | 87,965 | $ | 87,965 | ||||
|
|
|
| |||||
Amount of Unrealized Appreciation or (Depreciation) on Derivatives Recognized in Income | ||||||||
Derivatives Not Accounted for as Hedging Instruments^ | Swaps | Total | ||||||
Equity contracts | $ | 210,064 | $ | 210,064 | ||||
|
|
|
|
^ The Fund held swap contracts as a substitute for investing in conventional securities.
The Fund held swap contracts with an average notional value of approximately $11,500,000 for one month during the period ended April 30, 2016.
See Notes to Financial Statements.
24
1290 FUNDS
1290 DOUBLELINE DYNAMIC ALLOCATION FUND
PORTFOLIO OF INVESTMENTS (Continued)
April 30, 2016 (Unaudited)
The following table presents the Fund’s gross derivative assets and liabilities by counterparty net of amounts available for offset under netting arrangements and any related collateral received or pledged by the Fund as of April 30, 2016:
Counterparty | Gross Amount of Derivative Assets Presented in the Statement of Assets and Liabilities (a) | Derivatives Available for Offset | Collateral Received | Net Amount Due from Counterparty | ||||||||||||
Barclays Bank plc | $ | 219,765 | $ | (9,701 | ) | $ | — | $ | 210,064 | |||||||
|
|
|
|
|
|
|
| |||||||||
Counterparty | Gross Amount of Derivative Liabilities Presented in the Statement of Assets and Liabilities (a) | Derivatives Available for Offset | Collateral Received | Net Amount Due from Counterparty | ||||||||||||
Barclays Bank plc | $ | 9,701 | $ | (9,701 | ) | $ | — | $ | — | |||||||
|
|
|
|
|
|
|
|
(a) | For financial reporting purposes the Fund does not offset derivative assets and derivative liabilities subject to master netting arrangements in the Statement of Assets and Liabilities. |
Investment security transactions for the period ended April 30, 2016 were as follows:
Cost of Purchases: | ||||
Long-term investments other than U.S. government debt securities | $ | 31,457,013 | ||
Long-term U.S. government debt securities | 8,636,140 | |||
|
| |||
$ | 40,093,153 | |||
|
| |||
Net Proceeds of Sales and Redemptions: | ||||
Long-term investments other than U.S. government debt securities | $ | 3,336,175 | ||
Long-term U.S. government debt securities | 2,494,170 | |||
|
| |||
$ | 5,830,345 | |||
|
|
As of April 30, 2016, the gross unrealized appreciation (depreciation) of investments based on the aggregate cost of investments for Federal income tax purposes was as follows:
Aggregate gross unrealized appreciation | $ | 726,310 | ||
Aggregate gross unrealized depreciation | (102,912 | ) | ||
|
| |||
Net unrealized appreciation | $ | 623,398 | ||
|
| |||
Federal income tax cost of investments | $ | 46,312,106 | ||
|
|
See Notes to Financial Statements.
25
1290 FUNDS
1290 DOUBLELINE DYNAMIC ALLOCATION FUND
STATEMENT OF ASSETS AND LIABILITIES
April 30, 2016 (Unaudited)
ASSETS |
| |||
Investments at value: | ||||
Affiliated Issuers (Cost $2,125,000) | $ | 2,156,135 | ||
Unaffiliated Issuers (Cost $44,187,106) | 44,779,369 | |||
Cash | 4,800,875 | |||
Receivable for securities sold | 418,570 | |||
Market value on OTC swap contracts | 219,765 | |||
Dividends, interest and other receivables | 162,313 | |||
Deferred offering cost | 19,417 | |||
Receivable for Fund shares sold | 18,720 | |||
Other assets | 44,872 | |||
|
| |||
Total assets | 52,620,036 | |||
|
| |||
LIABILITIES | ||||
Foreign currency overdraft payable | 320,000 | |||
Payable for securities purchased | 1,010,030 | |||
Investment management fees payable | 12,296 | |||
Market value on OTC swap contracts | 9,701 | |||
Administrative fees payable | 6,312 | |||
Transfer agent fees payable | 972 | |||
Trustees’ fees payable | 675 | |||
Distribution fees payable – Class R | 42 | |||
Distribution fees payable – Class A | 36 | |||
Accrued expenses | 27,934 | |||
|
| |||
Total liabilities | 1,387,998 | |||
|
| |||
NET ASSETS | $ | 51,232,038 | ||
|
| |||
Net assets were comprised of: | ||||
Paid in capital | $ | 50,155,639 | ||
Accumulated undistributed net investment income (loss) | 63,546 | |||
Accumulated undistributed net realized gain (loss) on investments and swaps | 179,391 | |||
Net unrealized appreciation (depreciation) on investments and swaps | 833,462 | |||
|
| |||
Net assets | $ | 51,232,038 | ||
|
| |||
Class A | ||||
Net asset value and redemption price per share, $180,374 / 17,664 shares outstanding (unlimited amount authorized: $0.001 par value) | $ | 10.21 | ||
Maximum sales charge (5.50% of offering price) | 0.59 | |||
|
| |||
Maximum offering price per share | $ | 10.80 | ||
|
| |||
Class I | ||||
Net asset value and redemption price per share, $50,949,589 / 4,987,707 shares outstanding (unlimited amount authorized: $0.001 par value) | $ | 10.22 | ||
|
| |||
Class R | ||||
Net asset value and redemption price per share, $102,075 / 10,000 shares outstanding (unlimited amount authorized: $0.001 par value) | $ | 10.21 | ||
|
|
STATEMENT OF OPERATIONS
For the Period Ended April 30, 2016* (Unaudited)
INVESTMENT INCOME |
| |||
Interest | $ | 84,134 | ||
Dividends ($10,634 of dividend income received from affiliates) | 52,610 | |||
|
| |||
Total income | 136,744 | |||
|
| |||
EXPENSES | ||||
Investment management fees | 56,371 | |||
Professional fees | 21,561 | |||
Administrative fees | 11,274 | |||
Printing and mailing expenses | 4,929 | |||
Offering costs | 3,372 | |||
Transfer agent fees | 2,870 | |||
Custodian fees | 1,375 | |||
Trustees’ fees | 825 | |||
Registration and filing fees | 247 | |||
Distribution fees – Class R | 75 | |||
Distribution fees – Class A | 54 | |||
Miscellaneous | 68 | |||
|
| |||
Gross expenses | 103,021 | |||
Less: Waiver from investment adviser | (27,701 | ) | ||
Reimbursement from sub-adviser | (2,122 | ) | ||
|
| |||
Net expenses | 73,198 | |||
|
| |||
NET INVESTMENT INCOME (LOSS) | 63,546 | |||
|
| |||
REALIZED AND UNREALIZED GAIN (LOSS) | ||||
Realized gain (loss) on: | ||||
Investments | 91,426 | |||
Swaps | 87,965 | |||
|
| |||
Net realized gain (loss) | 179,391 | |||
|
| |||
Change in unrealized appreciation (depreciation) on: | ||||
Investments ($31,135 of change in unrealized appreciation (depreciation) from affiliates) | 623,398 | |||
Swaps | 210,064 | |||
|
| |||
Net change in unrealized appreciation (depreciation) | 833,462 | |||
|
| |||
NET REALIZED AND UNREALIZED GAIN (LOSS) | 1,012,853 | |||
|
| |||
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | $ | 1,076,399 | ||
|
|
* | The Fund commenced operations on March 8, 2016. |
See Notes to Financial Statements.
26
1290 FUNDS
1290 DOUBLELINE DYNAMIC ALLOCATION FUND
STATEMENT OF CHANGES IN NET ASSETS
March 8, 2016* to April 30, 2016 (Unaudited) | ||||
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS: |
| |||
Net investment income (loss) | $ | 63,546 | ||
Net realized gain (loss) on investments | 179,391 | |||
Net change in unrealized appreciation (depreciation) on investments | 833,462 | |||
|
| |||
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | 1,076,399 | |||
|
| |||
CAPITAL SHARES TRANSACTIONS: | ||||
Class A | ||||
Capital shares sold [ 17,664 shares ] | 177,639 | |||
|
| |||
Total Class A transactions | 177,639 | |||
|
| |||
Class I | ||||
Capital shares sold [ 4,987,707 shares ] | 49,878,000 | |||
|
| |||
Total Class I transactions | 49,878,000 | |||
|
| |||
Class R | ||||
Capital shares sold [ 10,000 shares ] | 100,000 | |||
|
| |||
Total Class R transactions | 100,000 | |||
|
| |||
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM CAPITAL SHARE TRANSACTIONS | 50,155,639 | |||
|
| |||
TOTAL INCREASE (DECREASE) IN NET ASSETS | 51,232,038 | |||
NET ASSETS: | ||||
Beginning of period | — | |||
|
| |||
End of period (a) | $ | 51,232,038 | ||
|
|
| ||
(a) Includes accumulated undistributed (overdistributed) net investment income (loss) of | $ | 63,546 | ||
|
| |||
* The Fund commenced operations on March 8, 2016. |
See Notes to Financial Statements.
27
1290 FUNDS
1290 DOUBLELINE DYNAMIC ALLOCATION FUND
FINANCIAL HIGHLIGHTS
Class A | March 8, 2016* to April 30, 2016 (Unaudited) | |||
Net asset value, beginning of period | $ | 10.00 | ||
|
| |||
Income (loss) from investment operations: | ||||
Net investment income (loss) (e) | 0.01 | |||
Net realized and unrealized gain (loss) on investments | 0.20 | |||
|
| |||
Total from investment operations | 0.21 | |||
|
| |||
Net asset value, end of period | $ | 10.21 | ||
|
| |||
Total return (b) | 2.10 | % | ||
|
| |||
Ratios/Supplemental Data: | ||||
Net assets, end of period (000’s) | $ | 180 | ||
Ratio of expenses to average net assets: | ||||
After waivers (a)(f) | 1.22 | % | ||
Before waivers (a)(f) | 1.49 | % | ||
Ratio of net investment income (loss) to average net assets: | ||||
After waivers (a)(f) | 0.73 | % | ||
Before waivers (a)(f) | 0.46 | % | ||
Portfolio turnover rate (z)^ | 15 | % | ||
Class I | March 8, 2016* to April 30, 2016 (Unaudited) | |||
Net asset value, beginning of period | $ | 10.00 | ||
|
| |||
Income (loss) from investment operations: | ||||
Net investment income (loss) (e) | 0.01 | |||
Net realized and unrealized gain (loss) on investments | 0.21 | |||
|
| |||
Total from investment operations | 0.22 | |||
|
| |||
Net asset value, end of period | $ | 10.22 | ||
|
| |||
Total return (b) | 2.10 | % | ||
|
| |||
Ratios/Supplemental Data: | ||||
Net assets, end of period (000’s) | $ | 50,950 | ||
Ratio of expenses to average net assets: | ||||
After waivers (a)(f) | 0.97 | % | ||
Before waivers (a)(f) | 1.23 | % | ||
Ratio of net investment income (loss) to average net assets: | ||||
After waivers (a)(f) | 0.85 | % | ||
Before waivers (a)(f) | 0.59 | % | ||
Portfolio turnover rate (z)^ | 15 | % |
See Notes to Financial Statements.
28
1290 FUNDS
1290 DOUBLELINE DYNAMIC ALLOCATION FUND
FINANCIAL HIGHLIGHTS (Continued)
Class R | March 8, 2016* to April 30, 2016 (Unaudited) | |||
Net asset value, beginning of period | $ | 10.00 | ||
|
| |||
Income (loss) from investment operations: | ||||
Net investment income (loss) (e) | 0.01 | |||
Net realized and unrealized gain (loss) on investments | 0.20 | |||
|
| |||
Total from investment operations | 0.21 | |||
|
| |||
Net asset value, end of period | $ | 10.21 | ||
|
| |||
Total return (b) | 2.10 | % | ||
|
| |||
Ratios/Supplemental Data: | ||||
Net assets, end of period (000’s) | $ | 102 | ||
Ratio of expenses to average net assets: | ||||
After waivers (a)(f) | 1.47 | % | ||
Before waivers (a)(f) | 1.72 | % | ||
Ratio of net investment income (loss) to average net assets: | ||||
After waivers (a)(f) | 0.34 | % | ||
Before waivers (a)(f) | 0.09 | % | ||
Portfolio turnover rate (z)^ | 15 | % |
* | Commencement of Operations. |
^ | Portfolio turnover rate excludes derivatives, if any. |
(a) | Ratios for periods less than one year are annualized. |
(b) | Total returns for periods less than one year are not annualized. |
(e) | Net investment income (loss) per share is based on average shares outstanding. |
(f) | Expenses do not include the expenses of the underlying funds (“indirect expenses”). |
(z) | Portfolio turnover rate for periods less than one year is not annualized. |
See Notes to Financial Statements.
29
1290 GAMCO SMALL/MID CAP VALUE FUND (Unaudited)
INVESTMENT ADVISER
Ø | 1290 Asset Managers® |
INVESTMENT SUB-ADVISER
Ø | GAMCO Asset Management, Inc. |
PERFORMANCE RESULTS
Total Returns as of 4/30/16 | ||||||||||||||
6 Months | 1 Year | Since Incept. | ||||||||||||
Fund – Class A Shares* | without Sales Charge | 2.17 | % | 0.12 | % | 3.69 | % | |||||||
with Sales Charge (a) | (3.48 | ) | (5.39 | ) | (0.23 | ) | ||||||||
Fund – Class C Shares*† | without Sales Charge | 2.34 | 0.38 | 3.96 | ||||||||||
with Sales Charge | 1.34 | (b) | (0.59 | ) (b) | 3.96 | |||||||||
Fund – Class I Shares* | 2.34 | 0.38 | 3.96 | |||||||||||
Fund – Class R Shares* | 2.07 | (0.08 | ) | 3.45 | ||||||||||
Russell 2500™ Value Index | 2.20 | (1.95 | ) | 0.15 | ||||||||||
* Date of inception 11/12/14.
† Class C Shares currently are not offered for sale.
(a) A 5.50% front-end sales charge was deducted.
(b) A 1.00% sales charge was deducted.
Returns for periods less than one year are not annualized.
Returns for periods greater than one year are annualized. |
|
The performance quoted is past performance and is not a guarantee of future results. Mutual funds are subject to certain market risks. Investment returns and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be higher or lower than the performance data shown. For the most current month-end performance data please call 1-888-310-0416 or visit www.1290Funds.com.
Fund performance may reflect the waiver of the Fund’s fees and reimbursement of expenses for certain periods since the inception date. Without these waivers and reimbursements, performance would have been lower. Also, performance shown in this section does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or redemption of Fund shares.
Fund Highlights
What helped performance during the six-month period ended April 30, 2016:
• | The Fund benefitted from overweight positions relative to the benchmark in consumer staples and industrial holdings over the period. |
• | Extremely low cost of capital, tax incentives and high levels of low yielding cash continued to spur takeover activity, although the pace was slower at the start of the year following record activity in 2015. Financial engineering in a handful of holdings also enhanced performance. |
• | Pep Boys — Manny, Moe & Jack (position closed following the deal’s close) rose significantly in the period. The stock languished for most of 2015 while on the auction block before Japan’s Bridgestone agreed to acquire the auto parts company at $15 per share. A bidding war ensued, with the winner Icahn Enterprises paying $1 billion, or $18.50 per share, at year end. |
• | Fund holdings levered to commodity prices were top performers; for example, Freeport-McMoran, Inc. rose over 75%. |
• | Navistar International Corp. rose sharply as it settled an SEC investigation regarding meeting its 2010 emissions standards. |
• | Avon Products, Inc. agreed to sell its struggling North American business to hedge fund Cerberus Capital Management. |
What hurt performance during the six-month period ended April 30, 2016:
• | Unfavorable currency movements weighed on several holdings, including Energizer Holdings, Inc. and Edgewell Personal Care Co. |
• | The stock price of broadcaster E.W. Scripps Co. fell due to losses from recent digital investments and recession fears. |
• | Hertz Global Holdings, Inc. declined on continuing concerns regarding rental car industry pricing, driven by excess fleeting that took place in the 2013-2014 period. |
• | Diebold, Inc. declined on lower demand for their hardware in emerging markets and despite strength in their ATM servicing business. |
Sector Weightings as of April 30, 2016 | % of Net Assets | |||
Industrials | 26.2 | % | ||
Consumer Discretionary | 21.4 | |||
Materials | 11.4 | |||
Utilities | 7.4 | |||
Consumer Staples | 7.2 | |||
Financials | 7.1 | |||
Investment Company | 5.4 | |||
Information Technology | 4.1 | |||
Telecommunication Services | 3.0 | |||
Health Care | 1.7 | |||
Cash and Other | 5.1 | |||
|
| |||
100.0 | % | |||
|
| |||
Holdings are subject to change without notice. |
UNDERSTANDING YOUR EXPENSES:
As a shareholder of the Fund, you incur two types of costs:
(1) transaction costs, including applicable sales charges and redemption fees; and (2) ongoing costs, including investment advisory fees, distribution and/or service (12b-1) fees (in the case of Class A, Class C and Class R shares of the Fund), and other Fund expenses. These examples are intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The examples are based on an investment of $1,000 invested at the beginning of the six-month period ended April 30, 2016 and held for the entire six-month period.
30
1290 GAMCO SMALL/MID CAP VALUE FUND (Unaudited)
Actual Expenses
The first line of the following table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the following 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 you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
EXAMPLE
Beginning Account Value 11/1/15 | Ending Account Value 4/30/16 | Expenses Paid During Period* 4/30/16 | ||||||||||
Class A |
| |||||||||||
Actual | $1,000.00 | $1,021.70 | $6.79 | |||||||||
Hypothetical (5% average return before expenses) | 1,000.00 | 1,018.15 | 6.77 | |||||||||
Class C** |
| |||||||||||
Actual | 1,000.00 | 1,023.40 | 5.53 | |||||||||
Hypothetical (5% average return before expenses) | 1,000.00 | 1,019.39 | 5.52 | |||||||||
Class I |
| |||||||||||
Actual | 1,000.00 | 1,023.40 | 5.53 | |||||||||
Hypothetical (5% average return before expenses) | 1,000.00 | 1,019.39 | 5.52 | |||||||||
Class R |
| |||||||||||
Actual | 1,000.00 | 1,020.70 | 8.04 | |||||||||
Hypothetical (5% average return before expenses) | 1,000.00 | 1,016.91 | 8.02 | |||||||||
* Expenses are equal to the Fund’s Class A, C, I and R shares annualized expense ratios of 1.35%, 1.10%, 1.10% and 1.60%, respectively, multiplied by the average account value over the period, and multiplied by 182/366 (to reflect the one-half year period).
** Class C shares currently are not offered for sale. |
|
31
1290 FUNDS
1290 GAMCO SMALL/MID CAP VALUE FUND
PORTFOLIO OF INVESTMENTS
April 30, 2016 (Unaudited)
Number of Shares | Value (Note 1) | |||||||
COMMON STOCKS: | ||||||||
Consumer Discretionary (21.4%) | ||||||||
Auto Components (4.9%) | ||||||||
Brembo S.p.A. | 500 | $ | 26,857 | |||||
Dana Holding Corp. | 9,000 | 116,370 | ||||||
Federal-Mogul Holdings Corp.* | 14,000 | 129,360 | ||||||
Superior Industries International, Inc. | 800 | 20,896 | ||||||
|
| |||||||
293,483 | ||||||||
|
| |||||||
Hotels, Restaurants & Leisure (0.8%) |
| |||||||
Cheesecake Factory, Inc. | 1,000 | 51,010 | ||||||
|
| |||||||
Household Durables (1.7%) | ||||||||
Hunter Douglas N.V. | 2,000 | 100,765 | ||||||
|
| |||||||
Media (8.1%) | ||||||||
Cablevision Systems Corp. – New York Group, Class A | 1,000 | 33,390 | ||||||
Clear Channel Outdoor Holdings, Inc., Class A | 4,000 | 20,440 | ||||||
DreamWorks Animation SKG, Inc., Class A* | 1,500 | 59,880 | ||||||
EW Scripps Co., Class A* | 5,000 | 75,900 | ||||||
Interpublic Group of Cos., Inc. | 1,500 | 34,410 | ||||||
Liberty Braves Group, Class C* | 2,000 | 29,840 | ||||||
Madison Square Garden Co., Class A* | 401 | 62,949 | ||||||
Meredith Corp. | 800 | 41,048 | ||||||
MSG Networks, Inc., Class A* | 5,000 | 85,450 | ||||||
Salem Media Group, Inc. | 5,008 | 38,912 | ||||||
|
| |||||||
482,219 | ||||||||
|
| |||||||
Multiline Retail (0.3%) | ||||||||
J.C. Penney Co., Inc.* | 2,000 | 18,560 | ||||||
|
| |||||||
Specialty Retail (3.8%) | ||||||||
Aaron’s, Inc. | 1,400 | 36,694 | ||||||
CST Brands, Inc. | 5,000 | 188,850 | ||||||
|
| |||||||
225,544 | ||||||||
|
| |||||||
Textiles, Apparel & Luxury Goods (1.8%) |
| |||||||
Tumi Holdings, Inc.* | 4,000 | 106,720 | ||||||
|
| |||||||
Total Consumer Discretionary | 1,278,301 | |||||||
|
| |||||||
Consumer Staples (7.2%) | ||||||||
Beverages (2.3%) | ||||||||
Cott Corp. | 3,000 | 39,780 | ||||||
Davide Campari-Milano S.p.A. | 2,000 | 19,306 | ||||||
National Beverage Corp.* | 1,000 | 46,740 | ||||||
Remy Cointreau S.A. | 400 | 33,197 | ||||||
|
| |||||||
139,023 | ||||||||
|
| |||||||
Food & Staples Retailing (0.6%) |
| |||||||
Ingles Markets, Inc., Class A | 1,000 | 36,070 | ||||||
|
| |||||||
Food Products (2.0%) | ||||||||
Maple Leaf Foods, Inc. | 2,600 | 53,836 | ||||||
Snyder’s-Lance, Inc. | 2,000 | 63,940 | ||||||
|
| |||||||
117,776 | ||||||||
|
| |||||||
Household Products (0.1%) | ||||||||
Energizer Holdings, Inc. | 200 | 8,698 | ||||||
|
| |||||||
Personal Products (2.2%) | ||||||||
Avon Products, Inc. | 10,000 | $ | 47,100 | |||||
Edgewell Personal Care Co. | 1,000 | 82,070 | ||||||
|
| |||||||
129,170 | ||||||||
|
| |||||||
Total Consumer Staples | 430,737 | |||||||
|
| |||||||
Financials (7.1%) | ||||||||
Banks (2.6%) | ||||||||
FCB Financial Holdings, Inc., Class A* | 3,000 | 104,850 | ||||||
Flushing Financial Corp. | 2,400 | 47,880 | ||||||
|
| |||||||
152,730 | ||||||||
|
| |||||||
Capital Markets (2.0%) | ||||||||
Cohen & Steers, Inc. | 1,200 | 47,124 | ||||||
Janus Capital Group, Inc. | 2,000 | 29,200 | ||||||
Waddell & Reed Financial, Inc., Class A | 2,000 | 40,680 | ||||||
|
| |||||||
117,004 | ||||||||
|
| |||||||
Insurance (0.5%) | ||||||||
National Interstate Corp. | 1,000 | 30,790 | ||||||
|
| |||||||
Real Estate Investment Trusts (REITs) (2.0%) |
| |||||||
Ryman Hospitality Properties, Inc. (REIT) | 1,300 | 66,989 | ||||||
Seritage Growth Properties (REIT), Class A | 1,000 | 53,370 | ||||||
|
| |||||||
120,359 | ||||||||
|
| |||||||
Total Financials | 420,883 | |||||||
|
| |||||||
Health Care (1.7%) | ||||||||
Health Care Equipment & Supplies (0.9%) |
| |||||||
Alere, Inc.* | 1,400 | 54,600 | ||||||
|
| |||||||
Health Care Providers & Services (0.8%) |
| |||||||
BioScrip, Inc.* | 1,500 | 3,960 | ||||||
Patterson Cos., Inc. | 1,000 | 43,350 | ||||||
|
| |||||||
47,310 | ||||||||
|
| |||||||
Total Health Care | 101,910 | |||||||
|
| |||||||
Industrials (26.2%) | ||||||||
Aerospace & Defense (2.0%) | ||||||||
B/E Aerospace, Inc. | 1,400 | 68,082 | ||||||
Textron, Inc. | 1,400 | 54,152 | ||||||
|
| |||||||
122,234 | ||||||||
|
| |||||||
Commercial Services & Supplies (0.9%) |
| |||||||
Brink’s Co. | 1,600 | 54,144 | ||||||
|
| |||||||
Construction & Engineering (0.3%) |
| |||||||
Layne Christensen Co.* | 2,000 | 17,780 | ||||||
|
| |||||||
Electrical Equipment (1.4%) |
| |||||||
PowerSecure International, Inc.* | 3,500 | 65,520 | ||||||
SL Industries, Inc.* | 400 | 15,992 | ||||||
|
| |||||||
81,512 | ||||||||
|
| |||||||
Machinery (16.8%) | ||||||||
Eastern Co. | 4,000 | 66,840 | ||||||
EnPro Industries, Inc. | 2,500 | 146,450 | ||||||
Federal Signal Corp. | 4,500 | 61,605 |
See Notes to Financial Statements.
32
1290 FUNDS
1290 GAMCO SMALL/MID CAP VALUE FUND
PORTFOLIO OF INVESTMENTS (Continued)
April 30, 2016 (Unaudited)
Number of Shares | Value (Note 1) | |||||||
Graco, Inc. | 1,600 | $ | 125,424 | |||||
ITT Corp. | 800 | 30,696 | ||||||
Mueller Industries, Inc. | 5,800 | 183,048 | ||||||
Mueller Water Products, Inc., Class A | 5,000 | 53,750 | ||||||
Navistar International Corp.* | 10,000 | 150,900 | ||||||
Trinity Industries, Inc. | 4,000 | 78,040 | ||||||
Twin Disc, Inc. | 3,200 | 42,400 | ||||||
Xylem, Inc. | 1,500 | 62,670 | ||||||
|
| |||||||
1,001,823 | ||||||||
|
| |||||||
Road & Rail (2.8%) | ||||||||
Hertz Global Holdings, Inc.* | 18,000 | 166,680 | ||||||
|
| |||||||
Trading Companies & Distributors (2.0%) |
| |||||||
GATX Corp. | 1,300 | 59,722 | ||||||
Kaman Corp. | 1,500 | 63,135 | ||||||
|
| |||||||
122,857 | ||||||||
|
| |||||||
Total Industrials | 1,567,030 | |||||||
|
| |||||||
Information Technology (4.1%) | ||||||||
Communications Equipment (0.3%) |
| |||||||
EchoStar Corp., Class A* | 500 | 20,460 | ||||||
|
| |||||||
Electronic Equipment, Instruments & Components (1.0%) |
| |||||||
Rofin-Sinar Technologies, Inc.* | 1,800 | 57,942 | ||||||
|
| |||||||
Internet Software & Services (1.6%) | ||||||||
Gogo, Inc.* | 4,600 | 48,714 | ||||||
Internap Corp.* | 22,000 | 50,160 | ||||||
|
| |||||||
98,874 | ||||||||
|
| |||||||
Semiconductors & Semiconductor Equipment (0.3%) |
| |||||||
Sevcon, Inc.* | 1,500 | 16,740 | ||||||
|
| |||||||
Technology Hardware, Storage & Peripherals (0.9%) |
| |||||||
Diebold, Inc. | 2,000 | 52,540 | ||||||
|
| |||||||
Total Information Technology | 246,556 | |||||||
|
| |||||||
Materials (11.4%) | ||||||||
Chemicals (7.7%) |
| |||||||
Ashland, Inc. | 400 | 44,640 | ||||||
Chemtura Corp.* | 2,800 | 77,980 | ||||||
Chr Hansen Holding A/S | 1,000 | 62,233 | ||||||
Hawkins, Inc. | 1,200 | 46,956 | ||||||
International Flavors & Fragrances, Inc. | 100 | 11,947 | ||||||
Tredegar Corp. | 4,000 | 63,840 | ||||||
Valspar Corp. | 1,400 | 149,366 | ||||||
|
| |||||||
456,962 | ||||||||
|
| |||||||
Containers & Packaging (1.1%) |
| |||||||
Myers Industries, Inc. | 5,000 | 67,400 | ||||||
|
| |||||||
Metals & Mining (2.6%) |
| |||||||
Ampco-Pittsburgh Corp. | 3,400 | 64,906 | ||||||
Freeport-McMoRan, Inc. | 6,500 | 91,000 | ||||||
|
| |||||||
155,906 | ||||||||
|
| |||||||
Total Materials | 680,268 | |||||||
|
| |||||||
Telecommunication Services (3.0%) | ||||||||
Diversified Telecommunication Services (0.7%) |
| |||||||
Cable & Wireless Communications plc | 40,000 | 43,016 | ||||||
|
| |||||||
Wireless Telecommunication Services (2.3%) |
| |||||||
Millicom International Cellular S.A. | 1,000 | $ | 57,500 | |||||
Millicom International Cellular S.A. (SDR) | 1,000 | 57,780 | ||||||
U.S. Cellular Corp.* | 500 | 21,320 | ||||||
|
| |||||||
136,600 | ||||||||
|
| |||||||
Total Telecommunication Services | 179,616 | |||||||
|
| |||||||
Utilities (7.4%) | ||||||||
Electric Utilities (3.0%) |
| |||||||
El Paso Electric Co. | 200 | 9,020 | ||||||
Empire District Electric Co. | 5,000 | 168,350 | ||||||
|
| |||||||
177,370 | ||||||||
|
| |||||||
Gas Utilities (4.4%) |
| |||||||
National Fuel Gas Co. | 1,200 | 66,600 | ||||||
Piedmont Natural Gas Co., Inc. | 1,200 | 71,760 | ||||||
Questar Corp. | 5,000 | 125,350 | ||||||
|
| |||||||
263,710 | ||||||||
|
| |||||||
Total Utilities | 441,080 | |||||||
|
| |||||||
Total Common Stocks (89.5%) | 5,346,381 | |||||||
|
| |||||||
CONVERTIBLE PREFERRED STOCK: |
| |||||||
Health Care (0.0%) | ||||||||
Health Care Providers & Services (0.0%) |
| |||||||
BioScrip, Inc. | 4 | 227 | ||||||
|
| |||||||
Total Convertible Preferred Stock (0.0%) | 227 | |||||||
|
| |||||||
Number of Warrants | Value (Note 1) | |||||||
WARRANTS: | ||||||||
Health Care (0.0%) | ||||||||
Health Care Providers & Services (0.0%) |
| |||||||
BioScrip, Inc., expiring 6/30/25*† | 22 | 13 | ||||||
|
| |||||||
Number of Shares | Value (Note 1) | |||||||
SHORT-TERM INVESTMENT: |
| |||||||
Investment Company (5.4%) | ||||||||
JPMorgan Prime Money Market Fund, Institutional Class Shares | 320,147 | 320,147 | ||||||
|
| |||||||
Total Short-Term Investment (5.4%) | 320,147 | |||||||
|
| |||||||
Total Investments (94.9%) | 5,666,768 | |||||||
Other Assets Less Liabilities (5.1%) | 305,331 | |||||||
|
| |||||||
Net Assets (100%) | $ | 5,972,099 | ||||||
|
|
* | Non-income producing. |
† | Securities (totaling $240 or 0.0% of net assets) held at fair value by management. |
Glossary:
SDR | — Swedish Depositary Receipt |
See Notes to Financial Statements.
33
1290 FUNDS
1290 GAMCO SMALL/MID CAP VALUE FUND
PORTFOLIO OF INVESTMENTS (Continued)
April 30, 2016 (Unaudited)
The following is a summary of the inputs used to value the Fund’s assets and liabilities carried at fair value as of April 30, 2016:
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
Various inputs are used in determining the value of the Fund’s investments. These inputs are summarized in the three broad levels listed below:
Investment Type | Level 1 Quoted Prices in Active Markets for Identical Securities | Level 2 Significant Other Observable Inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.) (a) | Level 3 assumptions in | Total | ||||||||||||
Assets: | ||||||||||||||||
Common Stocks | ||||||||||||||||
Consumer Discretionary | $ | 1,150,679 | $ | 127,622 | $ | — | $ | 1,278,301 | ||||||||
Consumer Staples | 378,234 | 52,503 | — | 430,737 | ||||||||||||
Financials | 420,883 | — | — | 420,883 | ||||||||||||
Health Care | 101,910 | — | — | 101,910 | ||||||||||||
Industrials | 1,484,198 | 82,832 | — | 1,567,030 | ||||||||||||
Information Technology | 171,874 | 74,682 | — | 246,556 | ||||||||||||
Materials | 618,035 | 62,233 | — | 680,268 | ||||||||||||
Telecommunication Services | 21,320 | 158,296 | — | 179,616 | ||||||||||||
Utilities | 441,080 | — | — | 441,080 | ||||||||||||
Convertible Preferred Stocks | ||||||||||||||||
Health Care | — | — | 227 | 227 | ||||||||||||
Short-Term Investments | 320,147 | — | — | 320,147 | ||||||||||||
Warrants | ||||||||||||||||
Health Care | — | — | 13 | 13 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Assets | $ | 5,108,360 | $ | 558,168 | $ | 240 | $ | 5,666,768 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total Liabilities | $ | — | $ | — | $ | — | $ | — | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total | $ | 5,108,360 | $ | 558,168 | $ | 240 | $ | 5,666,768 | ||||||||
|
|
|
|
|
|
|
|
(a) | Securities with a market value of $124,340 transferred from Level 1 to Level 2 at the end of the period due to inactive trading. |
There were no additional transfers between Levels 1, 2 or 3 during the six months ended April 30, 2016.
The Effect of Derivative Instruments on the Statement of Operations for the six months ended April 30, 2016:
Amount of Realized Gain or (Loss) on Derivatives Recognized in Income | ||||||||
Derivatives Not Accounted for as | Forward Foreign Currency Contracts | Total | ||||||
Foreign exchange contracts | $ | 15 | $ | 15 | ||||
|
|
|
|
^ The Fund held forward foreign currency contracts as hedging.
The Fund held forward foreign currency contracts with an average settlement value of approximately $26,000 for one month during the six months ended April 30, 2016.
See Notes to Financial Statements.
34
1290 FUNDS
1290 GAMCO SMALL/MID CAP VALUE FUND
PORTFOLIO OF INVESTMENTS (Continued)
April 30, 2016 (Unaudited)
Investment security transactions for the six months ended April 30, 2016 were as follows:
Cost of Purchases: | ||||
Long-term investments other than U.S. government debt securities | $ | 3,277,213 | ||
Net Proceeds of Sales and Redemptions: | ||||
Long-term investments other than U.S. government debt securities | $ | 2,192,749 |
As of April 30, 2016, the gross unrealized appreciation (depreciation) of investments based on the aggregate cost of investments for Federal income tax purposes was as follows:
Aggregate gross unrealized appreciation | $ | 411,005 | ||
Aggregate gross unrealized depreciation | (292,555 | ) | ||
|
| |||
Net unrealized appreciation | $ | 118,450 | ||
|
| |||
Federal income tax cost of investments | $ | 5,548,318 | ||
|
|
For the six-month period ended April 30, 2016, the Fund incurred approximately $3,750 as brokerage commissions with Gabelli & Co., an affiliated broker/dealer.
See Notes to Financial Statements.
35
1290 FUNDS
1290 GAMCO SMALL/MID CAP VALUE FUND
STATEMENT OF ASSETS AND LIABILITIES
April 30, 2016 (Unaudited)
ASSETS | ||||
Investments at value (Cost $5,540,485) | $ | 5,666,768 | ||
Cash | 233,000 | |||
Foreign cash (Cost $2,305) | 2,368 | |||
Receivable for securities sold | 102,970 | |||
Receivable for Fund shares sold | 54,440 | |||
Receivable from investment adviser | 7,864 | |||
Dividends, interest and other receivables | 1,373 | |||
Other assets | 146 | |||
|
| |||
Total assets | 6,068,929 | |||
|
| |||
LIABILITIES | ||||
Payable for securities purchased | 80,740 | |||
Payable for Fund shares redeemed | 4,730 | |||
Distribution fees payable – Class A | 88 | |||
Distribution fees payable – Class R | 45 | |||
Trustees’ fees payable | 7 | |||
Accrued expenses | 11,220 | |||
|
| |||
Total liabilities | 96,830 | |||
|
| |||
NET ASSETS | $ | 5,972,099 | ||
|
| |||
Net assets were comprised of: | ||||
Paid in capital | $ | 5,786,492 | ||
Accumulated undistributed net investment income (loss) | 9,424 | |||
Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions | 49,828 | |||
Net unrealized appreciation (depreciation) on investments and foreign currency translations | 126,355 | |||
|
| |||
Net assets | $ | 5,972,099 | ||
|
| |||
Class A | ||||
Net asset value and redemption price per share, $472,238 / 46,325 shares outstanding (unlimited amount authorized: $0.001 par value) | $ | 10.19 | ||
Maximum sales charge (5.50% of offering price) | 0.59 | |||
|
| |||
Maximum offering price per share | $ | 10.78 | ||
|
| |||
Class C** | ||||
Net asset value per share, $103,865 / 10,179 shares outstanding (unlimited amount authorized: $0.001 par value)(a) | $ | 10.20 | ||
|
| |||
Class I | ||||
Net asset value and redemption price per share, $5,284,330 / 517,907 shares outstanding (unlimited amount authorized: $0.001 par value) | $ | 10.20 | ||
|
| |||
Class R | ||||
Net asset value and redemption price per share, $111,666 / 10,988 shares outstanding (unlimited amount authorized: $0.001 par value) | $ | 10.16 | ||
|
|
** | Class C shares currently are not offered for sale. |
(a) | Redemption price for Class C shares varies based on length of time the shares are held. |
STATEMENT OF OPERATIONS
For the Six Months Ended April 30, 2016 (Unaudited)
INVESTMENT INCOME | ||||
Dividends (net of $204 foreign withholding tax) | $ | 45,026 | ||
Interest | 213 | |||
|
| |||
Total income | 45,239 | |||
|
| |||
EXPENSES | ||||
Professional fees | 25,962 | |||
Investment advisory fees | 18,024 | |||
Transfer agent fees | 17,447 | |||
Registration and filing fees | 15,602 | |||
Offering costs | 4,499 | |||
Administrative fees | 3,605 | |||
Custodian fees | 3,045 | |||
Distribution fees – Class R | 1,553 | |||
Printing and mailing expenses | 1,346 | |||
Distribution fees – Class A | 1,115 | |||
Distribution fees – Class C | 1,087 | |||
Trustees’ fees | 267 | |||
Miscellaneous | 6,381 | |||
|
| |||
Gross expenses | 99,933 | |||
Less: Waiver from investment adviser | (21,629 | ) | ||
Waiver from distributor | (1,087 | ) | ||
Reimbursement from investment adviser | (48,134 | ) | ||
|
| |||
Net expenses | 29,083 | |||
|
| |||
NET INVESTMENT INCOME (LOSS) | 16,156 | |||
|
| |||
REALIZED AND UNREALIZED GAIN (LOSS) | ||||
Realized gain (loss) on: | ||||
Investments | 58,171 | |||
Foreign currency transactions | 43 | |||
|
| |||
Net realized gain (loss) | 58,214 | |||
|
| |||
Change in unrealized appreciation (depreciation) on: | ||||
Investments | 168,590 | |||
Foreign currency translations | 100 | |||
|
| |||
Net change in unrealized appreciation (depreciation) | 168,690 | |||
|
| |||
NET REALIZED AND UNREALIZED GAIN (LOSS) | 226,904 | |||
|
| |||
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | $ | 243,060 | ||
|
|
See Notes to Financial Statements.
36
1290 FUNDS
1290 GAMCO SMALL/MID CAP VALUE FUND
STATEMENT OF CHANGES IN NET ASSETS
Six Months Ended April 30, 2016 (Unaudited) | November 12, 2014* to October 31, 2015 | |||||||
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS: |
| |||||||
Net investment income (loss) | $ | 16,156 | $ | (763 | ) | |||
Net realized gain (loss) on investments and foreign currency transactions | 58,214 | 108,663 | ||||||
Net change in unrealized appreciation (depreciation) on investments and foreign currency translations | 168,690 | (42,335 | ) | |||||
|
|
|
| |||||
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | 243,060 | 65,565 | ||||||
|
|
|
| |||||
DIVIDENDS AND DISTRIBUTIONS: | ||||||||
Dividends from net investment income | ||||||||
Class A | (103 | ) | (5,222 | ) | ||||
Class C | (655 | ) | (1,822 | ) | ||||
Class I | (6,325 | ) | (6,867 | ) | ||||
Class R | — | (4,943 | ) | |||||
|
|
|
| |||||
(7,083 | ) | (18,854 | ) | |||||
|
|
|
| |||||
Distributions from net realized capital gains | ||||||||
Class A | (27,401 | ) | — | |||||
Class C | (6,672 | ) | — | |||||
Class I | (64,471 | ) | — | |||||
Class R | (20,133 | ) | — | |||||
|
|
|
| |||||
(118,677 | ) | — | ||||||
|
|
|
| |||||
TOTAL DIVIDENDS AND DISTRIBUTIONS | (125,760 | ) | (18,854 | ) | ||||
|
|
|
| |||||
CAPITAL SHARES TRANSACTIONS: | ||||||||
Class A | ||||||||
Capital shares sold [ 16,477 and 97,654 shares, respectively ] | 164,457 | 984,337 | ||||||
Capital shares issued in reinvestment of dividends[ 774 and 512 shares, respectively ] | 7,419 | 5,222 | ||||||
Capital shares repurchased [ (68,141) and (3,951) shares, respectively ] | (685,188 | ) | (38,838 | ) | ||||
|
|
|
| |||||
Total Class A transactions | (513,312 | ) | 950,721 | |||||
|
|
|
| |||||
Class C** | ||||||||
Capital shares sold [ 0 and 25,000 shares, respectively ] | — | 250,000 | ||||||
Capital shares issued in reinvestment of dividends[ 0 and 179 shares, respectively ] | — | 1,822 | ||||||
Capital shares repurchased [ (15,000) and (1,000) shares, respectively ] | (150,800 | ) | (9,800 | ) | ||||
|
|
|
| |||||
Total Class C transactions | (150,800 | ) | 242,022 | |||||
|
|
|
| |||||
Class I | ||||||||
Capital shares sold [ 293,278 and 242,308 shares, respectively ] | 2,822,609 | 2,480,175 | ||||||
Capital shares issued in reinvestment of dividends[ 5,090 and 674 shares, respectively ] | 48,758 | 6,867 | ||||||
Capital shares repurchased [ (15,575) and (10,868) shares, respectively ] | (149,744 | ) | (108,719 | ) | ||||
|
|
|
| |||||
Total Class I transactions | 2,721,623 | 2,378,323 | ||||||
|
|
|
| |||||
Class R | ||||||||
Capital shares sold [ 0 and 75,489 shares, respectively ] | — | 754,900 | ||||||
Capital shares issued in reinvestment of dividends [ 14 and 485 shares, respectively ] | 129 | 4,943 | ||||||
Capital shares repurchased [ (65,000) and (3,000) shares, respectively ] | (651,091 | ) | (29,370 | ) | ||||
|
|
|
| |||||
Total Class R transactions | (650,962 | ) | 730,473 | |||||
|
|
|
| |||||
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM CAPITAL SHARE TRANSACTIONS | 1,406,549 | 4,301,539 | ||||||
|
|
|
| |||||
TOTAL INCREASE (DECREASE) IN NET ASSETS | 1,523,849 | 4,348,250 | ||||||
NET ASSETS: | ||||||||
Beginning of period | 4,448,250 | 100,000 | ||||||
|
|
|
| |||||
End of period (a) | $ | 5,972,099 | $ | 4,448,250 | ||||
|
|
|
|
| ||||
(a) Includes accumulated undistributed (overdistributed) net investment income (loss) of | $ | 9,424 | $ | 351 | ||||
|
|
|
| |||||
* The Fund commenced operations on November 12, 2014. | ||||||||
** Class C shares currently are not offered for sale. |
See Notes to Financial Statements.
37
1290 FUNDS
1290 GAMCO SMALL/MID CAP VALUE FUND
FINANCIAL HIGHLIGHTS
Class A | Six Months Ended April 30, 2016 (Unaudited) | November 12, 2014* to October 31, 2015 | ||||||
Net asset value, beginning of period | $ | 10.25 | $ | 10.00 | ||||
|
|
|
| |||||
Income (loss) from investment operations: | ||||||||
Net investment income (loss) (e) | 0.03 | (0.01 | ) | |||||
Net realized and unrealized gain (loss) on investments and foreign currency transactions | 0.18 | 0.33 | ||||||
|
|
|
| |||||
Total from investment operations | 0.21 | 0.32 | ||||||
|
|
|
| |||||
Less distributions: | ||||||||
Dividends from net investment income | — | # | (0.07 | ) | ||||
Distributions from net realized gains | (0.27 | ) | — | |||||
|
|
|
| |||||
Total dividends and distributions | (0.27 | ) | (0.07 | ) | ||||
|
|
|
| |||||
Net asset value, end of period | $ | 10.19 | $ | 10.25 | ||||
|
|
|
| |||||
Total return (b) | 2.17 | % | 3.20 | % | ||||
|
|
|
| |||||
Ratios/Supplemental Data: | ||||||||
Net assets, end of period (000’s) | $ | 472 | $ | 997 | ||||
Ratio of expenses to average net assets: | ||||||||
After waivers and reimbursements (a) | 1.35 | % | 1.35 | % | ||||
Before waivers and reimbursements (a) | 4.33 | % | 9.28 | % | ||||
Ratio of net investment income (loss) to average net assets: | ||||||||
After waivers and reimbursements (a) | 0.70 | % | (0.10 | )%(l) | ||||
Before waivers and reimbursements (a) | (2.28 | )% | (8.03 | )%(l) | ||||
Portfolio turnover rate (z)^ | 48 | % | 95 | % |
Class C** | Six Months Ended April 30, 2016 (Unaudited) | November 12, 2014* to October 31, 2015 | ||||||
Net asset value, beginning of period | $ | 10.27 | $ | 10.00 | ||||
|
|
|
| |||||
Income (loss) from investment operations: | ||||||||
Net investment income (loss) (e) | 0.05 | 0.01 | ||||||
Net realized and unrealized gain (loss) on investments and foreign currency transactions | 0.18 | 0.33 | ||||||
|
|
|
| |||||
Total from investment operations | 0.23 | 0.34 | ||||||
|
|
|
| |||||
Less distributions: | ||||||||
Dividends from net investment income | (0.03 | ) | (0.07 | ) | ||||
Distributions from net realized gains | (0.27 | ) | — | |||||
|
|
|
| |||||
Total dividends and distributions | (0.30 | ) | (0.07 | ) | ||||
|
|
|
| |||||
Net asset value, end of period | $ | 10.20 | $ | 10.27 | ||||
|
|
|
| |||||
Total return (b) | 2.34 | % | 3.43 | % | ||||
|
|
|
| |||||
Ratios/Supplemental Data: | ||||||||
Net assets, end of period (000’s) | $ | 104 | $ | 259 | ||||
Ratio of expenses to average net assets: | ||||||||
After waivers and reimbursements (a) | 1.10 | % | 1.10 | % | ||||
Before waivers and reimbursements (a) | 5.09 | % | 10.23 | % | ||||
Ratio of net investment income (loss) to average net assets: | ||||||||
After waivers and reimbursements (a) | 0.95 | % | 0.15 | %(l) | ||||
Before waivers and reimbursements (a) | (3.04 | )% | (8.98 | )%(l) | ||||
Portfolio turnover rate (z)^ | 48 | % | 95 | % |
See Notes to Financial Statements.
38
1290 FUNDS
1290 GAMCO SMALL/MID CAP VALUE FUND
FINANCIAL HIGHLIGHTS (Continued)
Class I | Six Months Ended April 30, 2016 (Unaudited) | November 12, 2014* to October 31, 2015 | ||||||
Net asset value, beginning of period | $ | 10.27 | $ | 10.00 | ||||
|
|
|
| |||||
Income (loss) from investment operations: | ||||||||
Net investment income (loss) (e) | 0.03 | 0.02 | ||||||
Net realized and unrealized gain (loss) on investments and foreign currency transactions | 0.20 | 0.32 | ||||||
|
|
|
| |||||
Total from investment operations | 0.23 | 0.34 | ||||||
|
|
|
| |||||
Less distributions: | ||||||||
Dividends from net investment income | (0.03 | ) | (0.07 | ) | ||||
Distributions from net realized gains | (0.27 | ) | — | |||||
|
|
|
| |||||
Total dividends and distributions | (0.30 | ) | (0.07 | ) | ||||
|
|
|
| |||||
Net asset value, end of period | $ | 10.20 | $ | 10.27 | ||||
|
|
|
| |||||
Total return (b) | 2.34 | % | 3.43 | % | ||||
|
|
|
| |||||
Ratios/Supplemental Data: | ||||||||
Net assets, end of period (000’s) | $ | 5,284 | $ | 2,416 | ||||
Ratio of expenses to average net assets: | ||||||||
After waivers and reimbursements (a) | 1.10 | % | 1.10 | % | ||||
Before waivers and reimbursements (a) | 3.95 | % | 8.56 | % | ||||
Ratio of net investment income (loss) to average net assets: | ||||||||
After waivers and reimbursements (a) | 0.67 | % | 0.16 | %(l) | ||||
Before waivers and reimbursements (a) | (2.18 | )% | (7.30 | )%(l) | ||||
Portfolio turnover rate (z)^ | 48 | % | 95 | % |
Class R | Six Months Ended April 30, 2016 (Unaudited) | November 12, 2014* to October 31, 2015 | ||||||
Net asset value, beginning of period | $ | 10.23 | $ | 10.00 | ||||
|
|
|
| |||||
Income (loss) from investment operations: | ||||||||
Net investment income (loss) (e) | 0.03 | (0.04 | ) | |||||
Net realized and unrealized gain (loss) on investments and foreign currency transactions | 0.17 | 0.34 | ||||||
|
|
|
| |||||
Total from investment operations | 0.20 | 0.30 | ||||||
|
|
|
| |||||
Less distributions: | ||||||||
Dividends from net investment income | — | (0.07 | ) | |||||
Distributions from net realized gains | (0.27 | ) | — | |||||
|
|
|
| |||||
Total dividends and distributions | (0.27 | ) | (0.07 | ) | ||||
|
|
|
| |||||
Net asset value, end of period | $ | 10.16 | $ | 10.23 | ||||
|
|
|
| |||||
Total return (b) | 2.07 | % | 2.96 | % | ||||
|
|
|
| |||||
Ratios/Supplemental Data: | ||||||||
Net assets, end of period (000’s) | $ | 112 | $ | 777 | ||||
Ratio of expenses to average net assets: | ||||||||
After waivers and reimbursements (a) | 1.60 | % | 1.60 | % | ||||
Before waivers and reimbursements (a) | 4.62 | % | 9.73 | % | ||||
Ratio of net investment income (loss) to average net assets: | ||||||||
After waivers and reimbursements (a) | 0.53 | % | (0.35 | )%(l) | ||||
Before waivers and reimbursements (a) | (2.48 | )% | (8.49 | )%(l) | ||||
Portfolio turnover rate (z)^ | 48 | % | 95 | % |
* | Commencement of Operations. |
** | Class C shares currently are not offered for sale. |
^ | Portfolio turnover rate excludes derivatives, if any. |
(a) | Ratios for periods less than one year are annualized. |
(b) | Total returns for periods less than one year are not annualized. |
(e) | Net investment income (loss) per share is based on average shares outstanding. |
(l) | The annualized ratio of net investment income to average net assets may not be indicative of operating results for a full year. |
(z) | Portfolio turnover rate for periods less than one year is not annualized. |
See Notes to Financial Statements.
39
1290 GLOBAL EQUITY MANAGERS FUND (Unaudited)
INVESTMENT ADVISER
Ø | 1290 Asset Managers® |
INVESTMENT SUB-ADVISERS
Ø | OppenheimerFunds, Inc. |
Ø | Templeton Investment Counsel, LLC |
PERFORMANCE RESULTS
Total Returns as of 4/30/16 | ||||||||||||
6 Months | Since Incept. | |||||||||||
Fund – Class A Shares* | without Sales Charge | (6.40 | )% | (9.11 | )% | |||||||
with Sales Charge (a | ) | (11.59 | ) | (14.09 | ) | |||||||
Fund – Class I Shares* | (6.38 | ) | (9.00 | ) | ||||||||
Fund – Class R Shares* | (6.49 | ) | (9.30 | ) | ||||||||
MSCI World (Net) Index | (1.05 | ) | (1.89 | ) | ||||||||
* Date of inception 7/6/15.
(a) A 5.50% front-end sales charge was deducted.
Returns for periods less than one year are not annualized.
Returns for periods greater than one year are annualized. |
|
The performance quoted is past performance and is not a guarantee of future results. Mutual funds are subject to certain market risks. Investment returns and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be higher or lower than the performance data shown. For the most current month-end performance data please call 1-888-310-0416 or visit www.1290Funds.com.
Fund performance may reflect the waiver of the Fund’s fees and reimbursement of expenses for certain periods since the inception date. Without these waivers and reimbursements, performance would have been lower. Also, performance shown in this section does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or redemption of Fund shares.
OppenheimerFunds, Inc.
Overview — OppenheimerFunds, Inc.
For the six-months ended April 30, 2016, the political season and unrest in the Middle East and its impact on Europe have all served to hurt our holdings. The present lack of growth worldwide, the threat of trade disruptions and currency volatility all add headwinds to our growth-oriented investment style. We believe this too shall pass. We are generally invested in what we view as robust businesses with long-term advantages that are financially strong. We think this provides a strong fundamental basis for higher returns, though the recent evidence may be to the contrary.
At period end, the Fund had its largest overweight positions in information technology, health care, consumer discretionary and industrials. The Fund had its most significant underweight positions in energy, consumer staples, materials and utilities. On a country basis, the Fund had its largest overweight positions in Germany, Japan and France, with its most significant underweight positions in the United States, Canada and Australia. Despite being underweight the United States relative to the benchmark, the Fund had its largest allocation to that country on an absolute basis at period end.
Fund Highlights
What helped performance during the six-month period ended April 30, 2016:
• | The Fund outperformed the benchmark within the Telecommunication Services sector, due to stock selection. |
• | Top performing holdings of the Fund this reporting period were S&P Global, Inc. (Financials) (United States), Facebook, Inc. (Information Technology) (United States), KDDI Corporation (Telecommunication Services) (Japan), Keyence Corporation (Information Technology) (Japan) and Colgate-Palmolive Company (Consumer Staples) (United States). |
• | S&P Global Inc., formerly McGraw Hill Financial, Inc., is a provider of transparent and independent ratings, benchmarks, analytics and data to capital and commodity markets across the world. The company reported strong fourth quarter 2015 results and was rebranded S&P Global from McGraw Hill Financial following a shareholder vote. |
• | Despite investor pessimism over Facebook’s ability to navigate successfully the shift from desktop to mobile, we had confidence the talented management team would be able to monetize its 1 billion users. The increasing penetration of broadband and ubiquity of mobile devices have fueled the move toward mobile Internet usage and social networking. We believe Facebook uses and monetizes data more effectively than any of the other global players in the industry and presents optionality for future growth, especially with video and Instagram. |
• | KDDI is a telecommunications company based in Japan. Increased use of data streaming on smartphones in Japan helped drive the performance of mobile carriers, including KDDI. |
• | Keyence engages in the development, manufacture and sale of industrial automation and inspection equipment. Shares of Keyence have performed well so far in 2016. |
• | Consumer products company Colgate-Palmolive extended its restructuring program, which had a positive impact on its shares. |
What hurt performance during the six-month period ended April 30, 2016:
• | The Fund’s underperformance during the reporting period was due largely to weaker relative stock selection in the financials and health care sectors. |
• | Detractors from performance this reporting period included SunEdison, Inc. (Information Technology) (United States), Credit Suisse Group AG (Financials) (Switzerland), Clovis Oncology, Inc. (Health Care) (United States), Dai-Ichi Life Insurance Company, Limited (Financials) (Japan) and Celldex Therapeutics, Inc. (Health Care) (United States). |
• | SunEdison, Inc. is one of the world’s largest and most geographically diverse low cost renewable energy developers. Our investment thesis in SunEdison was predicated on growth of solar demand, which in turn would increase demand for SunEdison’s EPC (Engineering, Procurement and Construction) expertise. The reversal of low debt costs in the energy market that resulted from widening high yield spreads challenged SunEdison’s growth rate. Further, obligations were supposed to be non-recourse to the parent segment; however, this did not turn out to be the |
40
1290 GLOBAL EQUITY MANAGERS FUND (Unaudited)
case. The company is now filing for bankruptcy and is in talks with creditors for a loan to tide it over during the process. |
• | Credit Suisse Group AG is a global investment bank and wealth manager based in Switzerland. We own Credit Suisse for its renowned wealth management business, attracted to its profitability, sticky clients/assets, and the capital light nature of the business. The stock underperformed due in part to a fourth-quarter headline net loss of 5.8 billion Swiss francs (“CHF”), primarily driven by the investment banking segment. However, on an adjusted pre-tax basis, the loss was only CHF 1.1 billion. Declining interest rates around most of the world compounded the underperformance. Credit Suisse is accelerating cost reductions and is restructuring, focusing on wealth management and paring back investment banking to a targeted 38% of risk-weighted assets. We are also encouraged by the company’s meaningful business in Asia — a fast growing market. |
• | Clovis Oncology, Inc.’s share price declined following the release of clinical trial data that appeared disappointing. |
• | Dai-Ichi Life Insurance is a Japan-based life insurance company that declined in a volatile period. |
• | Celldex Therapeutics, Inc. is one of the Fund’s holdings in biotechnology, an area that presents the greatest opportunity for exponential growth, in our opinion. Celldex focuses on developing biological therapeutics, including glembatumumab, an anti-body conjugate for breast cancer, and rindopepimut, a novel anticancer vaccine for glioblastoma. In addition to the negative sentiment surrounding biotech during the first two months of 2016, Celldex underperformed after it stopped phase 3 clinical trials for Rintega (rindopepimut) for futility. |
Templeton Investment Counsel, LLC
Overview — Templeton Investment Counsel, LLC
The Fund maintains a full and diverse array of stocks we believe are undervalued from sectors and regions around the world. We believe that while stocks are vulnerable to near-term volatility, the asset class globally has the potential for long-term gains. Within equities, growth stocks have generally outperformed value stocks since 2006, one of the longest stretches of outperformance since at least the Great Depression. Yet, for the first time in a decade, U.S. value stocks outperformed growth for the fourth straight month in April 2016. International value stocks experienced a lesser recovery in the first quarter, though April marked an expansion of the value theme into international markets and the banking sector as well.
Fund Highlights
What helped performance during the six-month period ended April 30, 2016:
• | Stock selection and overweightings in the energy and materials sectors contributed to performance relative to the benchmark as commodity prices rallied in the second half of the review period. Several of the Fund’s biggest contributors come from these sectors, including U.K.-listed integrated oil firm Royal Dutch Shell plc and Swiss-based mining and commodities trading firm Glencore plc. |
• | Stock selection and an underweighting in the information technology sector also aided relative performance, led by U.S. semiconductor firm Applied Materials, Inc. |
• | From a regional standpoint, the eurozone contributed to relative performance. |
What hurt performance during the six-month period ended April 30, 2016:
• | Stock selection and an overweighting in the financials sector detracted from relative performance. European banks were some of the biggest detractors. |
• | Stock selection and an overweighting in health care also hurt relative results. After a period of strong performance, health care stocks generally declined due to political discussions surrounding drug pricing and tax laws. |
• | Stock selection and an underweighting in consumer staples also negatively impacted relative performance. |
• | From a regional standpoint, an underweighted position and stock selection in the U.S. detracted. |
Sector Weightings as of April 30, 2016 | Market Value | % of Net Assets | ||||||
Financials | $5,741,620 | 21.1 | % | |||||
Information Technology | 4,759,591 | 17.4 | ||||||
Health Care | 4,368,501 | 16.0 | ||||||
Consumer Discretionary | 3,594,821 | 13.2 | ||||||
Industrials | 2,812,505 | 10.3 | ||||||
Energy | 1,953,962 | 7.2 | ||||||
Consumer Staples | 1,353,119 | 5.0 | ||||||
Materials | 945,485 | 3.5 | ||||||
Telecommunication Services | 886,909 | 3.2 | ||||||
Cash and Other | 853,339 | 3.1 | ||||||
|
| |||||||
100.0 | % | |||||||
|
| |||||||
Holdings are subject to change without notice. |
|
UNDERSTANDING YOUR EXPENSES:
As a shareholder of the Fund, you incur two types of costs:
(1) transaction costs, including applicable sales charges and redemption fees; and (2) ongoing costs, including investment advisory fees, distribution and/or service (12b-1) fees (in the case of Class A and Class R shares of the Fund), and other Fund expenses. These examples are intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The examples are based on an investment of $1,000 invested at the beginning of the six-month period ended April 30, 2016 and held for the entire six-month period.
Actual Expenses
The first line of the following table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply
41
1290 GLOBAL EQUITY MANAGERS FUND (Unaudited)
the result by the number in the first line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the following 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 you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
EXAMPLE
Beginning Account Value 11/1/15 | Ending Account Value 4/30/16 | Expenses Paid During 4/30/16 | ||||||||||
Class A |
| |||||||||||
Actual | $1,000.00 | $936.05 | $6.74 | |||||||||
Hypothetical (5% average return before expenses) | 1,000.00 | 1,017.90 | 7.02 | |||||||||
Class I | ||||||||||||
Actual | 1,000.00 | 936.17 | 5.54 | |||||||||
Hypothetical (5% average return before expenses) | 1,000.00 | 1,019.14 | 5.77 | |||||||||
Class R | ||||||||||||
Actual | 1,000.00 | 935.05 | 7.94 | |||||||||
Hypothetical (5% average return before expenses) | 1,000.00 | 1,016.66 | 8.27 | |||||||||
* Expenses are equal to the Fund’s Class A, I and R shares annualized expense ratios of 1.40%, 1.15% and 1.65%, respectively, multiplied by the average account value over the period, and multiplied by 182/366 (to reflect the one-half year period). |
|
42
1290 FUNDS
1290 GLOBAL EQUITY MANAGERS FUND
PORTFOLIO OF INVESTMENTS
April 30, 2016 (Unaudited)
Number of Shares | Value (Note 1) | |||||||
COMMON STOCKS: | ||||||||
Brazil (0.5%) | ||||||||
Embraer S.A. (ADR) | 5,612 | $ | 129,637 | |||||
|
| |||||||
Canada (0.4%) | ||||||||
Suncor Energy, Inc. | 4,000 | 117,415 | ||||||
|
| |||||||
Cayman Islands (0.1%) | ||||||||
Theravance Biopharma, Inc.* | 840 | 17,430 | ||||||
|
| |||||||
China (1.6%) | ||||||||
China Life Insurance Co., Ltd., Class H | 25,000 | 58,206 | ||||||
CRRC Corp., Ltd., Class H | 69,000 | 67,338 | ||||||
JD.com, Inc. (ADR)* | 6,277 | 160,440 | ||||||
Sinopharm Group Co., Ltd., Class H | 19,600 | 84,142 | ||||||
Weichai Power Co., Ltd., Class H | 44,000 | 53,093 | ||||||
|
| |||||||
423,219 | ||||||||
|
| |||||||
Denmark (0.2%) | ||||||||
FLSmidth & Co. A/S | 1,147 | 44,541 | ||||||
|
| |||||||
France (7.4%) | ||||||||
Airbus Group SE | 5,020 | 313,906 | ||||||
BNP Paribas S.A. | 4,380 | 231,908 | ||||||
Cie de Saint-Gobain | 3,350 | 153,418 | ||||||
Cie Generale des Etablissements Michelin | 1,440 | 150,295 | ||||||
Kering | 1,020 | 174,784 | ||||||
LVMH Moet Hennessy Louis Vuitton SE | 1,670 | 277,465 | ||||||
Sanofi | 1,800 | 148,625 | ||||||
Societe Generale S.A. | 2,910 | 114,124 | ||||||
Technip S.A.* | 3,730 | 218,293 | ||||||
Total S.A. | 3,100 | 155,936 | ||||||
Zodiac Aerospace | 3,400 | 79,713 | ||||||
|
| |||||||
2,018,467 | ||||||||
|
| |||||||
Germany (7.1%) | ||||||||
Allianz SE (Registered) | 1,478 | 250,896 | ||||||
Bayer AG (Registered) | 2,764 | 318,866 | ||||||
Bayerische Motoren Werke (BMW) AG (Preference) (q) | 3,200 | 254,109 | ||||||
Deutsche Bank AG (Registered) | 5,226 | 98,557 | ||||||
Deutsche Lufthansa AG (Registered) | 6,440 | 99,993 | ||||||
HeidelbergCement AG | 1,040 | 92,398 | ||||||
Linde AG | 790 | 120,672 | ||||||
Merck KGaA* | 860 | 80,818 | ||||||
Muenchener Rueckversicherungs-Gesellschaft AG in Muenchen (Registered) | 490 | 90,866 | ||||||
SAP SE | 4,663 | 364,786 | ||||||
Siemens AG (Registered) | 1,626 | 169,652 | ||||||
|
| |||||||
1,941,613 | ||||||||
|
| |||||||
Hong Kong (1.4%) | ||||||||
Cheung Kong Property Holdings Ltd. | 7,000 | 48,054 | ||||||
China Mobile Ltd. | 6,500 | 74,537 | ||||||
CK Hutchison Holdings Ltd. | 5,000 | 59,947 | ||||||
Haier Electronics Group Co., Ltd. | 48,000 | 81,063 | ||||||
Swire Pacific Ltd., Class A | 5,000 | 54,371 | ||||||
Swire Properties Ltd. | 23,000 | $ | 59,895 | |||||
|
| |||||||
377,867 | ||||||||
|
| |||||||
India (0.6%) | ||||||||
ICICI Bank Ltd. (ADR) | 22,770 | 160,529 | ||||||
|
| |||||||
Ireland (1.1%) | ||||||||
CRH plc | 7,350 | 213,517 | ||||||
Shire plc | 1,340 | 83,428 | ||||||
|
| |||||||
296,945 | ||||||||
|
| |||||||
Israel (0.8%) |
| |||||||
Teva Pharmaceutical Industries Ltd. (ADR) | 3,898 | 212,246 | ||||||
|
| |||||||
Italy (1.7%) | ||||||||
Banca Monte dei Paschi di Siena S.p.A.* | 57,638 | 46,628 | ||||||
Brunello Cucinelli S.p.A. | 2,432 | 47,759 | ||||||
Eni S.p.A. | 6,531 | 106,192 | ||||||
Intesa Sanpaolo S.p.A. | 23,042 | 63,850 | ||||||
Prysmian S.p.A. | 2,740 | 64,600 | ||||||
Tod’s S.p.A. | 643 | 44,397 | ||||||
UniCredit S.p.A. | 25,547 | 98,698 | ||||||
|
| |||||||
472,124 | ||||||||
|
| |||||||
Japan (9.4%) | ||||||||
Dai-ichi Life Insurance Co., Ltd. | 12,100 | 149,763 | ||||||
FANUC Corp. | 600 | 90,486 | ||||||
KDDI Corp. | 8,200 | 238,599 | ||||||
Keyence Corp. | 400 | 245,175 | ||||||
Konica Minolta, Inc. | 9,900 | 87,902 | ||||||
Kyocera Corp. | 3,400 | 170,643 | ||||||
Murata Manufacturing Co., Ltd. | 2,500 | 333,455 | ||||||
Nidec Corp. | 3,000 | 223,696 | ||||||
Nintendo Co., Ltd. | 300 | 41,347 | ||||||
Nissan Motor Co., Ltd. | 24,200 | 220,445 | ||||||
Nomura Holdings, Inc. | 11,900 | 51,479 | ||||||
Rakuten, Inc. | 4,900 | 54,647 | ||||||
SoftBank Group Corp. | 2,000 | 108,272 | ||||||
Sumitomo Mitsui Financial Group, Inc. | 4,100 | 127,278 | ||||||
Suntory Beverage & Food Ltd. | 3,800 | 169,580 | ||||||
Suzuki Motor Corp. | 2,400 | 67,001 | ||||||
Toshiba Corp.* | 25,000 | 53,704 | ||||||
Toyota Motor Corp. | 2,500 | 128,924 | ||||||
|
| |||||||
2,562,396 | ||||||||
|
| |||||||
Netherlands (3.0%) | ||||||||
Akzo Nobel N.V. | 2,070 | 146,695 | ||||||
ING Groep N.V. (CVA) | 14,640 | 179,286 | ||||||
NN Group N.V. | 2,340 | 81,079 | ||||||
QIAGEN N.V.* | 3,350 | 75,069 | ||||||
Royal Dutch Shell plc, Class A | 190 | 4,940 | ||||||
Royal Dutch Shell plc, Class B | 9,125 | 238,127 | ||||||
SBM Offshore N.V. | 7,690 | 102,980 | ||||||
|
| |||||||
828,176 | ||||||||
|
| |||||||
Norway (0.4%) | ||||||||
Statoil ASA | 3,360 | 59,381 | ||||||
Telenor ASA | 3,510 | 60,419 | ||||||
|
| |||||||
119,800 | ||||||||
|
|
See Notes to Financial Statements.
43
1290 FUNDS
1290 GLOBAL EQUITY MANAGERS FUND
PORTFOLIO OF INVESTMENTS (Continued)
April 30, 2016 (Unaudited)
Number of Shares | Value (Note 1) | |||||||
Portugal (0.4%) | ||||||||
Galp Energia SGPS S.A. | 7,340 | $ | 100,814 | |||||
|
| |||||||
Russia (0.3%) | ||||||||
MMC Norilsk Nickel PJSC (ADR) | 5,624 | 83,066 | ||||||
|
| |||||||
Singapore (0.7%) | ||||||||
DBS Group Holdings Ltd. | 6,200 | 70,444 | ||||||
Singapore Telecommunications Ltd. | 40,500 | 116,243 | ||||||
|
| |||||||
186,687 | ||||||||
|
| |||||||
South Korea (1.9%) | ||||||||
Hana Financial Group, Inc. | 2,186 | 49,211 | ||||||
Hyundai Mobis Co., Ltd. | 430 | 98,310 | ||||||
KB Financial Group, Inc. (ADR) | 2,090 | 63,557 | ||||||
POSCO (ADR) | 1,327 | 69,031 | ||||||
Samsung Electronics Co., Ltd. (GDR) (m) | 460 | 250,700 | ||||||
|
| |||||||
530,809 | ||||||||
|
| |||||||
Spain (2.1%) |
| |||||||
Banco Bilbao Vizcaya Argentaria S.A. | 16,272 | 111,477 | ||||||
Industria de Diseno Textil S.A. | 7,993 | 256,587 | ||||||
Repsol S.A. | 6,500 | 85,183 | ||||||
Telefonica S.A. | 11,692 | 127,480 | ||||||
|
| |||||||
580,727 | ||||||||
|
| |||||||
Sweden (1.8%) | ||||||||
Assa Abloy AB, Class B | 11,401 | 239,081 | ||||||
Getinge AB, Class B | 4,750 | 100,437 | ||||||
Telefonaktiebolaget LM Ericsson, Class B | 19,887 | 160,969 | ||||||
|
| |||||||
500,487 | ||||||||
|
| |||||||
Switzerland (5.3%) | ||||||||
Chubb Ltd. | 1,080 | 127,289 | ||||||
Credit Suisse Group AG (Registered)* | 16,096 | 244,468 | ||||||
Glencore plc* | 64,340 | 153,143 | ||||||
Nestle S.A. (Registered) | 1,690 | 125,962 | ||||||
Novartis AG (Registered) | 1,020 | 77,832 | ||||||
Roche Holding AG | 1,231 | 311,183 | ||||||
Swiss Reinsurance AG | 1,270 | 112,662 | ||||||
UBS Group AG (Registered) | 16,715 | 289,241 | ||||||
|
| |||||||
1,441,780 | ||||||||
|
| |||||||
Taiwan (0.3%) | ||||||||
Taiwan Semiconductor Manufacturing Co., Ltd. (ADR) | 3,009 | 70,982 | ||||||
|
| |||||||
Thailand (0.3%) | ||||||||
Bangkok Bank PCL (NVDR) | 17,300 | 81,225 | ||||||
|
| |||||||
United Kingdom (8.2%) | ||||||||
Aviva plc | 19,360 | 122,317 | ||||||
BAE Systems plc | 11,720 | 81,736 | ||||||
Barclays plc | 45,820 | 114,819 | ||||||
BP plc | 35,796 | 195,484 | ||||||
Circassia Pharmaceuticals plc* | 24,240 | 95,700 | ||||||
Earthport plc* | 61,430 | 15,483 | ||||||
GlaxoSmithKline plc | 8,940 | 190,585 | ||||||
HSBC Holdings plc | 20,800 | 138,901 | ||||||
Kingfisher plc | 27,220 | $ | 144,732 | |||||
Lloyds Banking Group plc | 90,570 | 88,758 | ||||||
Noble Corp. plc | 4,760 | 53,455 | ||||||
Prudential plc | 11,600 | 228,392 | ||||||
Sky plc | 7,810 | 107,098 | ||||||
Standard Chartered plc | 13,774 | 111,115 | ||||||
Tesco plc* | 46,470 | 116,855 | ||||||
Unilever plc | 5,750 | 256,627 | ||||||
Vodafone Group plc | 50,380 | 161,359 | ||||||
|
| |||||||
2,223,416 | ||||||||
|
| |||||||
United States (39.9%) | ||||||||
3M Co. | 1,340 | 224,289 | ||||||
ACADIA Pharmaceuticals, Inc.* | 3,300 | 106,590 | ||||||
Adobe Systems, Inc.* | 2,140 | 201,631 | ||||||
Aetna, Inc. | 3,260 | 366,000 | ||||||
Allergan plc* | 910 | 197,070 | ||||||
Alphabet, Inc., Class A* | 620 | 438,885 | ||||||
Alphabet, Inc., Class C* | 430 | 297,994 | ||||||
American Express Co. | 950 | 62,158 | ||||||
American International Group, Inc. | 1,680 | 93,778 | ||||||
Amgen, Inc. | 1,380 | 218,454 | ||||||
Anthem, Inc. | 1,760 | 247,755 | ||||||
Applied Materials, Inc. | 6,950 | 142,266 | ||||||
Baker Hughes, Inc. | 3,480 | 168,293 | ||||||
Best Buy Co., Inc. | 2,230 | 71,538 | ||||||
Biogen, Inc.* | 500 | 137,495 | ||||||
BioMarin Pharmaceutical, Inc.* | 1,120 | 94,842 | ||||||
Bluebird Bio, Inc.* | 1,020 | 45,237 | ||||||
Capital One Financial Corp. | 2,120 | 153,467 | ||||||
Celldex Therapeutics, Inc.* | 6,940 | 27,760 | ||||||
Chesapeake Energy Corp.* | 170 | 1,168 | ||||||
Chevron Corp. | 1,020 | 104,224 | ||||||
Cigna Corp. | 260 | 36,020 | ||||||
Cisco Systems, Inc. | 4,660 | 128,103 | ||||||
Citigroup, Inc. | 9,370 | 433,644 | ||||||
Colgate-Palmolive Co. | 4,700 | 333,324 | ||||||
Comcast Corp., Class A | 3,570 | 216,913 | ||||||
CVS Health Corp. | 1,810 | 181,905 | ||||||
eBay, Inc.* | 4,590 | 112,134 | ||||||
Eli Lilly & Co. | 1,040 | 78,551 | ||||||
Emerson Electric Co. | 2,020 | 110,353 | ||||||
Facebook, Inc., Class A* | 2,500 | 293,950 | ||||||
FedEx Corp. | 430 | 70,997 | ||||||
FNF Group | 3,180 | 101,442 | ||||||
Foot Locker, Inc. | 1,630 | 100,147 | ||||||
General Motors Co. | 2,990 | 95,082 | ||||||
Gilead Sciences, Inc. | 4,070 | 359,015 | ||||||
Goldman Sachs Group, Inc. | 1,180 | 193,650 | ||||||
Halliburton Co. | 5,860 | 242,077 | ||||||
Hewlett Packard Enterprise Co. | 2,190 | 36,485 | ||||||
HP, Inc. | 2,190 | 26,871 | ||||||
Humana, Inc. | 80 | 14,166 | ||||||
International Game Technology plc (Italian Stock Exchange) | 40 | 693 | ||||||
International Game Technology plc (New York Stock Exchange) | 4,300 | 74,562 | ||||||
Intuit, Inc. | 2,760 | 278,456 | ||||||
Ionis Pharmaceuticals, Inc.* | 1,130 | 46,296 | ||||||
JPMorgan Chase & Co. | 3,080 | 194,656 |
See Notes to Financial Statements.
44
1290 FUNDS
1290 GLOBAL EQUITY MANAGERS FUND
PORTFOLIO OF INVESTMENTS (Continued)
April 30, 2016 (Unaudited)
Number of Shares | Value (Note 1) | |||||||
Knowles Corp.* | 6,340 | $ | 84,766 | |||||
LyondellBasell Industries N.V., Class A | 810 | 66,963 | ||||||
MacroGenics, Inc.* | 2,250 | 46,260 | ||||||
Macy’s, Inc. | 1,330 | 52,655 | ||||||
Maxim Integrated Products, Inc. | 7,130 | 254,684 | ||||||
McDonald’s Corp. | 470 | 59,450 | ||||||
Merck & Co., Inc. | 1,330 | 72,937 | ||||||
Microsoft Corp. | 6,410 | 319,667 | ||||||
Morgan Stanley | 1,920 | 51,955 | ||||||
News Corp., Class A | 5,130 | 63,715 | ||||||
Oracle Corp. | 2,610 | 104,035 | ||||||
PayPal Holdings, Inc.* | 5,660 | 221,759 | ||||||
Pfizer, Inc. | 4,260 | 139,345 | ||||||
Rockwell Collins, Inc. | 860 | 75,843 | ||||||
S&P Global, Inc. | 3,890 | 415,646 | ||||||
Sage Therapeutics, Inc.* | 460 | 17,337 | ||||||
St. Jude Medical, Inc. | 1,480 | 112,776 | ||||||
Stanley Black & Decker, Inc. | 900 | 100,728 | ||||||
SunTrust Banks, Inc./Georgia | 2,920 | 121,881 | ||||||
Tiffany & Co. | 2,180 | 155,543 | ||||||
Twenty-First Century Fox, Inc., Class A | 3,470 | 105,002 | ||||||
Twitter, Inc.* | 5,230 | 76,463 | ||||||
United Parcel Service, Inc., Class B | 2,910 | 305,754 | ||||||
Vertex Pharmaceuticals, Inc.* | 410 | 34,579 | ||||||
Walgreens Boots Alliance, Inc. | 2,130 | 168,866 | ||||||
Walt Disney Co. | 3,210 | 331,465 | ||||||
Zimmer Biomet Holdings, Inc. | 1,500 | 173,655 | ||||||
|
| |||||||
10,894,115 | ||||||||
|
| |||||||
Total Investments (96.9%) | 26,416,513 | |||||||
Other Assets Less Liabilities (3.1%) | 853,339 | |||||||
|
| |||||||
Net Assets (100%) | $ | 27,269,852 | ||||||
|
|
* | Non-income producing. |
(m) | Regulation S is an exemption for securities offerings that are made outside of the United States and do not involve direct selling efforts in the United States. Resale restrictions may apply for purposes of the Securities Act of 1933. At April 30, 2016, the market value of these securities amounted to $250,700 or 0.9% of net assets. |
(q) | Preference Shares are a special type of equity investment that shares in the earnings of the company, has limited voting rights, and receives a greater dividend than applicable Common Shares. |
Glossary:
ADR | — American Depositary Receipt |
CVA | — Dutch Certification |
GDR | — Global Depositary Receipt |
NVDR | — Non-Voting Depositary Receipt |
Sector Weightings as of April 30, 2016 | Market Value | % of Net Assets | ||||||
Financials | $5,741,620 | 21.1 | % | |||||
Information Technology | 4,759,591 | 17.4 | ||||||
Health Care | 4,368,501 | 16.0 | ||||||
Consumer Discretionary | 3,594,821 | 13.2 | ||||||
Industrials | 2,812,505 | 10.3 | ||||||
Energy | 1,953,962 | 7.2 | ||||||
Consumer Staples | 1,353,119 | 5.0 | ||||||
Materials | 945,485 | 3.5 | ||||||
Telecommunication Services | 886,909 | 3.2 | ||||||
Cash and Other | 853,339 | 3.1 | ||||||
|
| |||||||
100.0 | % | |||||||
|
| |||||||
Holdings are subject to change without notice. |
|
At April 30, 2016, the Fund had outstanding foreign currency contracts to buy/sell foreign currencies as follows: (Note 1)
Foreign Currency Buy Contract | Counterparty | Local Contract Buy Amount (000’s) | U.S. $ Current Value | U.S. $ Settlement Value | Unrealized Appreciation/ (Depreciation) | |||||||||||||
Hong Kong Dollar vs. U.S. Dollar, expiring 5/4/16 | JPMorgan Chase Bank | 42 | $ | 5,373 | $ | 5,372 | $ | 1 | ||||||||||
|
|
See Notes to Financial Statements.
45
1290 FUNDS
1290 GLOBAL EQUITY MANAGERS FUND
PORTFOLIO OF INVESTMENTS (Continued)
April 30, 2016 (Unaudited)
The following is a summary of the inputs used to value the Fund’s assets and liabilities carried at fair value as of April 30, 2016:
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
Various inputs are used in determining the value of the Fund’s investments. These inputs are summarized in the three broad levels listed below:
Investment Type | Level 1 Quoted Prices in Active Markets for Identical Securities | Level 2 Significant Other Observable Inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.) | Level 3 assumptions in | Total | ||||||||||||
Assets: |
| |||||||||||||||
Common Stocks | ||||||||||||||||
Consumer Discretionary | $ | 1,487,205 | $ | 2,107,616 | $ | — | $ | 3,594,821 | ||||||||
Consumer Staples | 684,095 | 669,024 | — | 1,353,119 | ||||||||||||
Energy | 686,632 | 1,267,330 | — | 1,953,962 | ||||||||||||
Financials | 2,173,652 | 3,567,968 | — | 5,741,620 | ||||||||||||
Health Care | 2,801,816 | 1,566,685 | — | 4,368,501 | ||||||||||||
Industrials | 1,017,601 | 1,794,904 | — | 2,812,505 | ||||||||||||
Information Technology | 3,089,131 | 1,670,460 | — | 4,759,591 | ||||||||||||
Materials | 219,060 | 726,425 | — | 945,485 | ||||||||||||
Telecommunication Services | — | 886,909 | — | 886,909 | ||||||||||||
Forward Currency Contracts | — | 1 | — | 1 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Assets | $ | 12,159,192 | $ | 14,257,322 | $ | — | $ | 26,416,514 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total Liabilities | $ | — | $ | — | $ | — | $ | — | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total | $ | 12,159,192 | $ | 14,257,322 | $ | — | $ | 26,416,514 | ||||||||
|
|
|
|
|
|
|
|
There were no transfers between Levels 1, 2 or 3 during the six months ended April 30, 2016.
Fair Values of Derivative Instruments as of April 30, 2016:
Statement of Assets and Liabilities | ||||||
Derivatives Not Accounted for as | Asset Derivatives | Fair Value | ||||
Foreign exchange contracts | Receivables | $ | 1 | |||
|
|
The Effect of Derivative Instruments on the Statement of Operations for the period ended April 30, 2016:
Amount of Realized Gain or (Loss) on Derivatives Recognized in Income | ||||||||
Derivatives Not Accounted for as | Forward Foreign Currency Contracts | Total | ||||||
Foreign exchange contracts | $ | (180 | ) | $ | (180 | ) | ||
|
|
|
| |||||
Amount of Unrealized Appreciation or (Depreciation) on Derivatives Recognized in Income | ||||||||
Derivatives Not Accounted for as | Forward Foreign Currency Contracts | Total | ||||||
Foreign exchange contracts | $ | 1 | $ | 1 | ||||
|
|
|
|
^ The Fund held forward foreign currency contracts as hedging.
See Notes to Financial Statements.
46
1290 FUNDS
1290 GLOBAL EQUITY MANAGERS FUND
PORTFOLIO OF INVESTMENTS (Continued)
April 30, 2016 (Unaudited)
The Fund held forward foreign currency contracts with an average settlement value of approximately $5,000 for one month, during the six-month period ended April 30, 2016.
The following table presents the Fund’s gross derivative assets and liabilities by counterparty net of amounts available for offset under netting arrangements and any related collateral received or pledged by the Fund as of April 30, 2016:
Counterparty | Gross Amount of Derivative Assets Presented in the Statement of Assets and Liabilities (a) | Derivatives Available for Offset | Collateral Received | Net Amount Due from Counterparty | ||||||||||||
JPMorgan Chase Bank | $ | 1 | $ | — | $ | — | $ | 1 | ||||||||
|
|
|
|
|
|
|
|
(a) | For financial reporting purposes the Fund does not offset derivative assets and derivative liabilities subject to master netting arrangements in the Statement of Assets and Liabilities. |
Investment security transactions for the six months ended April 30, 2016 were as follows:
Cost of Purchases: | ||||
Long-term investments other than U.S. government debt securities | $ | 1,301,894 | ||
Net Proceeds of Sales and Redemptions: | ||||
Long-term investments other than U.S. government debt securities | $ | 1,327,589 |
As of April 30, 2016, the gross unrealized appreciation (depreciation) of investments based on the aggregate cost of investments for Federal income tax purposes was as follows:
Aggregate gross unrealized appreciation | $ | 971,548 | ||
Aggregate gross unrealized depreciation | (3,414,215 | ) | ||
|
| |||
Net unrealized depreciation | $ | (2,442,667 | ) | |
|
| |||
Federal income tax cost of investments | $ | 28,859,180 | ||
|
|
For the six-month period ended April 30, 2016, the Fund incurred approximately $147 as brokerage commissions with Sanford C. Bernstein & Co., LLC,. an affiliated broker/dealer.
See Notes to Financial Statements.
47
1290 FUNDS
1290 GLOBAL EQUITY MANAGERS FUND
STATEMENT OF ASSETS AND LIABILITIES
April 30, 2016 (Unaudited)
ASSETS | ||||
Investments at value (Cost $28,837,315) | $ | 26,416,513 | ||
Cash | 746,151 | |||
Foreign cash (Cost $14) | 14 | |||
Receivable for securities sold | 158,105 | |||
Dividends, interest and other receivables | 82,501 | |||
Deferred offering cost | 4,993 | |||
Unrealized appreciation on forward foreign currency contracts | 1 | |||
Other assets | 724 | |||
|
| |||
Total assets | 27,409,002 | |||
|
| |||
LIABILITIES | ||||
Payable for securities purchased | 128,332 | |||
Administrative fees payable | 3,331 | |||
Investment management fees payable | 3,127 | |||
Transfer agent fees payable | 627 | |||
Trustees’ fees payable | 118 | |||
Distribution fees payable – Class R | 37 | |||
Distribution fees payable – Class A | 19 | |||
Accrued expenses | 3,559 | |||
|
| |||
Total liabilities | 139,150 | |||
|
| |||
NET ASSETS | $ | 27,269,852 | ||
|
| |||
Net assets were comprised of: | ||||
Paid in capital | $ | 30,007,866 | ||
Accumulated undistributed net investment income (loss) | 73,643 | |||
Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions | (393,172 | ) | ||
Net unrealized appreciation (depreciation) on investments and foreign currency translations | (2,418,485 | ) | ||
|
| |||
Net assets | $ | 27,269,852 | ||
|
| |||
Class A | ||||
Net asset value and redemption price per share, $95,562 / 10,528 shares outstanding (unlimited amount authorized: $0.001 par value) | $ | 9.08 | ||
Maximum sales charge (5.50% of offering price) | 0.53 | |||
|
| |||
Maximum offering price per share | $ | 9.61 | ||
|
| |||
Class I | ||||
Net asset value and redemption price per share, $27,083,613 / 2,981,272 shares outstanding (unlimited amount authorized: $0.001 par value) | $ | 9.08 | ||
|
| |||
Class R | ||||
Net asset value and redemption price per share, $90,677 / 10,000 shares outstanding (unlimited amount authorized: $0.001 par value) | $ | 9.07 | ||
|
|
STATEMENT OF OPERATIONS
For the Six Months Ended April 30, 2016 (Unaudited)
INVESTMENT INCOME |
| |||
Dividends (net of $17,990 foreign withholding tax) | $ | 277,572 | ||
Interest | 664 | |||
|
| |||
Total income | 278,236 | |||
|
| |||
EXPENSES | ||||
Investment management fees | 107,448 | |||
Professional fees | 42,103 | |||
Administrative fees | 20,147 | |||
Offering costs | 13,565 | |||
Registration and filing fees | 12,537 | |||
Transfer agent fees | 10,449 | |||
Custodian fees | 9,509 | |||
Printing and mailing expenses | 7,976 | |||
Trustees’ fees | 1,606 | |||
Distribution fees – Class R | 223 | |||
Distribution fees – Class A | 118 | |||
Miscellaneous | 7,463 | |||
|
| |||
Gross expenses | 233,144 | |||
Less: Waiver from investment adviser | (78,556 | ) | ||
|
| |||
Net expenses | 154,588 | |||
|
| |||
NET INVESTMENT INCOME (LOSS) | 123,648 | |||
|
| |||
REALIZED AND UNREALIZED GAIN (LOSS) | ||||
Realized gain (loss) on: | ||||
Investments | (295,610 | ) | ||
Foreign currency transactions | (2,211 | ) | ||
|
| |||
Net realized gain (loss) | (297,821 | ) | ||
|
| |||
Change in unrealized appreciation (depreciation) on: | ||||
Investments | (1,664,882 | ) | ||
Foreign currency translations | 2,476 | |||
|
| |||
Net change in unrealized appreciation (depreciation) | (1,662,406 | ) | ||
|
| |||
NET REALIZED AND UNREALIZED GAIN (LOSS) | (1,960,227 | ) | ||
|
| |||
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | $ | (1,836,579 | ) | |
|
|
See Notes to Financial Statements.
48
1290 FUNDS
1290 GLOBAL EQUITY MANAGERS FUND
STATEMENT OF CHANGES IN NET ASSETS
Six Months Ended April 30, 2016 (Unaudited) | July 6, 2015* to October 31, 2015 | |||||||
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS: |
| |||||||
Net investment income (loss) | $ | 123,648 | $ | 22,226 | ||||
Net realized gain (loss) on investments and foreign currency transactions | (297,821 | ) | (114,086 | ) | ||||
Net change in unrealized appreciation (depreciation) on investments and foreign currency translations | (1,662,406 | ) | (756,079 | ) | ||||
|
|
|
| |||||
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | (1,836,579 | ) | (847,939 | ) | ||||
|
|
|
| |||||
DIVIDENDS: | ||||||||
Dividends from net investment income | ||||||||
Class A | (98 | ) | — | |||||
Class I | (62,297 | ) | — | |||||
|
|
|
| |||||
TOTAL DIVIDENDS: | (62,395 | ) | — | |||||
|
|
|
| |||||
CAPITAL SHARES TRANSACTIONS: | ||||||||
Class A | ||||||||
Capital shares sold [ 0 and 10,528 shares, respectively ] | — | 105,000 | ||||||
Capital shares issued in reinvestment of dividends[ 0# and 0 shares, respectively ] | 5 | — | ||||||
Capital shares repurchased [ 0# and 0 shares, respectively ] | (5 | ) | — | |||||
|
|
|
| |||||
Total Class A transactions | — | 105,000 | ||||||
|
|
|
| |||||
Class I | ||||||||
Capital shares sold [ 690 and 2,980,580 shares, respectively ] | 6,000 | 29,805,750 | ||||||
Capital shares issued in reinvestment of dividends[ 2 and 0 shares, respectively ] | 15 | — | ||||||
|
|
|
| |||||
Total Class I transactions | 6,015 | 29,805,750 | ||||||
|
|
|
| |||||
Class R | ||||||||
Capital shares sold [ 0 and 10,000 shares, respectively ] | — | 100,000 | ||||||
|
|
|
| |||||
Total Class R transactions | — | 100,000 | ||||||
|
|
|
| |||||
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM CAPITAL SHARE TRANSACTIONS | 6,015 | 30,010,750 | ||||||
|
|
|
| |||||
TOTAL INCREASE (DECREASE) IN NET ASSETS | (1,892,959 | ) | 29,162,811 | |||||
NET ASSETS: | ||||||||
Beginning of period | 29,162,811 | — | ||||||
|
|
|
| |||||
End of period (a) | $ | 27,269,852 | $ | 29,162,811 | ||||
|
|
|
|
| ||||
(a) Includes accumulated undistributed (overdistributed) net investment income (loss) of | $ | 73,643 | $ | 12,390 | ||||
|
|
|
| |||||
* The Fund commenced operations on July 6, 2015. | ||||||||
# Number of shares is less than 0.5. |
See Notes to Financial Statements.
49
1290 FUNDS
1290 GLOBAL EQUITY MANAGERS FUND
FINANCIAL HIGHLIGHTS
Class A | Six Months Ended April 30, 2016 (Unaudited) | July 6, 2015* to October 31, 2015 | ||||||
Net asset value, beginning of period | $ | 9.71 | $ | 10.00 | ||||
|
|
|
| |||||
Income (loss) from investment operations: | ||||||||
Net investment income (loss) (e) | 0.03 | ## | — | # | ||||
Net realized and unrealized gain (loss) on investments and foreign currency transactions | (0.65 | ) | (0.29 | ) | ||||
|
|
|
| |||||
Total from investment operations | (0.62 | ) | (0.29 | ) | ||||
|
|
|
| |||||
Less distributions: | ||||||||
Dividends from net investment income | (0.01 | ) | — | |||||
|
|
|
| |||||
Net asset value, end of period | $ | 9.08 | $ | 9.71 | ||||
|
|
|
| |||||
Total return (b) | (6.40 | )% | (2.90 | )% | ||||
|
|
|
| |||||
Ratios/Supplemental Data: | ||||||||
Net assets, end of period (000’s) | $ | 96 | $ | 102 | ||||
Ratio of expenses to average net assets: | ||||||||
After waivers (a) | 1.40 | % | 1.40 | % | ||||
Before waivers (a) | 1.99 | % | 1.93 | % | ||||
Ratio of net investment income (loss) to average net assets: | ||||||||
After waivers (a) | 0.67 | %(aa) | — | %‡‡(l) | ||||
Before waivers (a) | 0.09 | %(aa) | (0.54 | )%(l) | ||||
Portfolio turnover rate (z)^ | 5 | % | 3 | % | ||||
Class I | Six Months Ended April 30, 2016 (Unaudited) | July 6, 2015* to October 31, 2015 | ||||||
Net asset value, beginning of period | $ | 9.72 | $ | 10.00 | ||||
|
|
|
| |||||
Income (loss) from investment operations: | ||||||||
Net investment income (loss) (e) | 0.04 | ## | 0.01 | |||||
Net realized and unrealized gain (loss) on investments and foreign currency transactions | (0.66 | ) | (0.29 | ) | ||||
|
|
|
| |||||
Total from investment operations | (0.62 | ) | (0.28 | ) | ||||
|
|
|
| |||||
Less distributions: | ||||||||
Dividends from net investment income | (0.02 | ) | — | |||||
|
|
|
| |||||
Net asset value, end of period | $ | 9.08 | $ | 9.72 | ||||
|
|
|
| |||||
Total return (b) | (6.38 | )% | (2.80 | )% | ||||
|
|
|
| |||||
Ratios/Supplemental Data: | ||||||||
Net assets, end of period (000’s) | $ | 27,084 | $ | 28,964 | ||||
Ratio of expenses to average net assets: | ||||||||
After waivers (a) | 1.15 | % | 1.15 | % | ||||
Before waivers (a) | 1.74 | % | 1.68 | % | ||||
Ratio of net investment income (loss) to average net assets: | ||||||||
After waivers (a) | 0.92 | %(bb) | 0.24 | %(l) | ||||
Before waivers (a) | 0.34 | %(bb) | (0.28 | )%(l) | ||||
Portfolio turnover rate (z)^ | 5 | % | 3 | % |
See Notes to Financial Statements.
50
1290 FUNDS
1290 GLOBAL EQUITY MANAGERS FUND
FINANCIAL HIGHLIGHTS (Continued)
Class R | Six Months Ended April 30, 2016 (Unaudited) | July 6, 2015* to October 31, 2015 | ||||||
Net asset value, beginning of period | $ | 9.70 | $ | 10.00 | ||||
|
|
|
| |||||
Income (loss) from investment operations: | ||||||||
Net investment income (loss) (e) | 0.02 | ## | (0.01 | ) | ||||
Net realized and unrealized gain (loss) on investments and foreign currency transactions | (0.65 | ) | (0.29 | ) | ||||
|
|
|
| |||||
Total from investment operations | (0.63 | ) | (0.30 | ) | ||||
|
|
|
| |||||
Net asset value, end of period | $ | 9.07 | $ | 9.70 | ||||
|
|
|
| |||||
Total return (b) | (6.49 | )% | (3.00 | )% | ||||
|
|
|
| |||||
Ratios/Supplemental Data: | ||||||||
Net assets, end of period (000’s) | $ | 91 | $ | 97 | ||||
Ratio of expenses to average net assets: | ||||||||
After waivers (a) | 1.65 | % | 1.65 | % | ||||
Before waivers (a) | 2.24 | % | 2.18 | % | ||||
Ratio of net investment income (loss) to average net assets: | ||||||||
After waivers (a) | 0.42 | %(cc) | (0.26 | )%(l) | ||||
Before waivers (a) | (0.16 | )%(cc) | (0.78 | )%(l) | ||||
Portfolio turnover rate (z)^ | 5 | % | 3 | % |
* | Commencement of Operations. |
‡‡ | Amount is less than 0.005%. |
# | Per share amount is less than $0.005. |
## | Includes income resulting from a special dividend. Without this dividend the per share income amounts would be $(0.02), $(0.01) and (0.04) for Class A, Class I and Class R, respectively. |
^ | Portfolio turnover rate excludes derivatives, if any. |
(a) | Ratios for periods less than one year are annualized. |
(b) | Total returns for periods less than one year are not annualized. |
(e) | Net investment income (loss) per share is based on average shares outstanding. |
(l) | The annualized ratio of net investment income to average net assets may not be indicative of operating results for a full year. |
(z) | Portfolio turnover rate for periods less than one year is not annualized. |
(aa) | Includes income resulting from a special dividend. Without this dividend, the ratios for Class A would be (0.55)% for income after waivers and (1.13)% for income before waivers. |
(bb) | Includes income resulting from a special dividend. Without this dividend, the ratios for Class I would be (0.30)% for income after waivers and (0.88)% for income before waivers. |
(cc) | Includes income resulting from a special dividend. Without this dividend, the ratios for Class R would be (0.80)% for income after waivers and (1.39)% for income before waivers. |
See Notes to Financial Statements.
51
1290 GLOBAL TALENTS FUND (Unaudited)
INVESTMENT ADVISER
Ø | 1290 Asset Managers® |
INVESTMENT SUB-ADVISERS
Ø | AXA Investment Managers, Inc. |
PERFORMANCE RESULTS
Total Returns as of 4/30/16 | ||||||||
Since Incept. | ||||||||
Fund – Class A Shares* | without Sales Charge | 0.30 | % | |||||
with Sales Charge (a | ) | (5.20 | ) | |||||
Fund – Class I Shares* | 0.30 | |||||||
Fund – Class R Shares* | 0.20 | |||||||
MSCI ACWI (Net) Index | 2.44 | |||||||
* Date of inception 4/11/16.
(a) A 5.50% front-end sales charge was deducted.
Returns for periods less than one year are not annualized. |
|
The performance quoted is past performance and is not a guarantee of future results. Mutual funds are subject to certain market risks. Investment returns and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be higher or lower than the performance data shown. For the most current month-end performance data please call 1-888-310-0416 or visit www.1290Funds.com.
Fund performance may reflect the waiver of the Fund’s fees and reimbursement of expenses for certain periods since the inception date. Without these waivers and reimbursements, performance would have been lower. Also, performance shown in this section does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or redemption of Fund shares.
There is insufficient history available to provide meaningful highlights in this report. Please see the 1290funds.com website for more information about the Fund, its investment process and performance.
Sector Weightings as of April 30, 2016 | Market Value | % of Net Assets | ||||||
Consumer Discretionary | $3,729,734 | 18.6 | % | |||||
Health Care | 3,719,878 | 18.5 | ||||||
Information Technology | 3,639,322 | 18.1 | ||||||
Financials | 3,179,265 | 15.9 | ||||||
Consumer Staples | 1,814,182 | 9.0 | ||||||
Industrials | 1,422,956 | 7.1 | ||||||
Energy | 916,871 | 4.6 | ||||||
Telecommunication Services | 787,201 | 3.9 | ||||||
Materials | 737,737 | 3.7 | ||||||
Cash and Other | 111,005 | 0.6 | ||||||
|
| |||||||
100.0 | % | |||||||
|
| |||||||
Holdings are subject to change without notice. |
|
UNDERSTANDING YOUR EXPENSES:
As a shareholder of the Fund, you incur two types of costs:
(1) transaction costs, including applicable sales charges and redemption fees; and (2) ongoing costs, including investment advisory fees, distribution and/or service (12b-1) fees (in the case of Class A and Class R shares of the Fund), and other Fund expenses. These examples are intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The examples are based on an investment of $1,000 invested at the beginning of the six-month period ended April 30, 2016 and held for the entire six-month period.
Actual Expenses
The first line of the following table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the following 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 you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Please note that while the Fund commenced operations on April 12, 2016, the “Hypothetical Expenses Paid during the period’ reflect projected activity for the full six months for the purpose of comparability.
52
1290 GLOBAL TALENTS FUND (Unaudited)
EXAMPLE
Beginning Account Value 11/1/15† | Ending Account Value 4/30/16 | Expenses Paid During Period* 11/1/15 - 4/30/16 | ||||||||||
Class A |
| |||||||||||
Actual | $1,000.00 | $1,003.00 | $0.73 | |||||||||
Hypothetical (5% average return before expenses) | 1,000.00 | 1,017.90 | 7.02 | |||||||||
Class I | ||||||||||||
Actual | 1,000.00 | 1,003.00 | 0.60 | |||||||||
Hypothetical (5% average return before expenses) | 1,000.00 | 1,019.14 | 5.77 | |||||||||
Class R | ||||||||||||
Actual | 1,000.00 | 1,002.00 | 0.86 | |||||||||
Hypothetical (5% average return before expenses) | 1,000.00 | 1,016.66 | 8.27 | |||||||||
† Commenced operations on April 12, 2016.
* Expenses are equal to the Fund’s Class A, I and R shares annualized expense ratios of 1.40%, 1.15% and 1.65%, respectively, multiplied by the average account value over the period, and multiplied by 182/366 for the hypothetical example (to reflect the one-half year period), and multiplied by 19/366 for the actual example (to reflect the actual number of days the Fund was in operation in the period). |
|
53
1290 FUNDS
1290 GLOBAL TALENTS FUND
PORTFOLIO OF INVESTMENTS
April 30, 2016 (Unaudited)
Number of Shares | Value (Note 1) | |||||||
COMMON STOCKS: | ||||||||
Belgium (1.7%) |
| |||||||
Anheuser-Busch InBev S.A./N.V. | 2,799 | $ | 346,460 | |||||
|
| |||||||
Chile (1.3%) |
| |||||||
Antofagasta plc | 37,623 | 265,629 | ||||||
|
| |||||||
China (2.0%) |
| |||||||
Alibaba Group Holding Ltd. (ADR)* | 5,074 | 390,394 | ||||||
|
| |||||||
Finland (1.3%) |
| |||||||
Sampo Oyj, Class A | 5,869 | 256,245 | ||||||
|
| |||||||
France (6.9%) |
| |||||||
Christian Dior SE | 1,436 | 252,152 | ||||||
Dassault Systemes S.A. | 4,676 | 365,696 | ||||||
Financiere de L’Odet | 465 | 448,321 | ||||||
Iliad S.A. | 1,447 | 316,217 | ||||||
|
| |||||||
1,382,386 | ||||||||
|
| |||||||
Germany (6.9%) |
| |||||||
Continental AG | 1,505 | 330,529 | ||||||
Fresenius SE & Co. KGaA | 6,430 | 467,677 | ||||||
Hella KGaA Hueck & Co. | 5,398 | 206,290 | ||||||
Henkel AG & Co. KGaA (Preference)(q) | 3,261 | 372,206 | ||||||
|
| |||||||
1,376,702 | ||||||||
|
| |||||||
Hong Kong (1.3%) |
| |||||||
CK Hutchison Holdings Ltd. | 22,500 | 269,760 | ||||||
|
| |||||||
Israel (1.5%) |
| |||||||
Check Point Software Technologies Ltd.* | 3,696 | 306,288 | ||||||
|
| |||||||
Italy (1.6%) |
| |||||||
Luxottica Group S.p.A. | 5,952 | 324,206 | ||||||
|
| |||||||
Japan (8.1%) |
| |||||||
Rakuten, Inc. | 27,700 | 308,923 | ||||||
SoftBank Group Corp. | 8,700 | 470,984 | ||||||
THK Co., Ltd. | 15,100 | 306,465 | ||||||
Unicharm Corp. | 25,200 | 528,929 | ||||||
|
| |||||||
1,615,301 | ||||||||
|
| |||||||
Jordan (3.1%) |
| |||||||
Hikma Pharmaceuticals plc | 19,338 | 622,756 | ||||||
|
| |||||||
Luxembourg (1.1%) |
| |||||||
Tenaris S.A. (ADR) | 8,137 | 220,269 | ||||||
|
| |||||||
Mexico (3.0%) |
| |||||||
Banregio Grupo Financiero S.A.B. de C.V. | 53,200 | 318,804 | ||||||
Fomento Economico Mexicano S.A.B. de C.V. | 29,800 | 277,273 | ||||||
|
| |||||||
596,077 | ||||||||
|
| |||||||
Philippines (1.9%) |
| |||||||
Bank of the Philippine Islands | 200,730 | 387,439 | ||||||
|
| |||||||
South Africa (1.7%) |
| |||||||
Naspers Ltd., Class N | 2,481 | 340,418 | ||||||
|
| |||||||
Spain (1.5%) |
| |||||||
Industria de Diseno Textil S.A. | 9,464 | 303,808 | ||||||
|
| |||||||
Switzerland (3.2%) |
| |||||||
Roche Holding AG | 2,528 | $ | 639,049 | |||||
|
| |||||||
United Kingdom (1.4%) |
| |||||||
Booker Group plc | 122,225 | 289,314 | ||||||
|
| |||||||
United States (49.9%) |
| |||||||
Alexion Pharmaceuticals, Inc.* | 2,936 | 408,926 | ||||||
Alphabet, Inc., Class A* | 690 | 488,437 | ||||||
Amazon.com, Inc.* | 999 | 658,930 | ||||||
Apple, Inc. | 4,392 | 411,706 | ||||||
Bank of the Ozarks, Inc. | 7,573 | 312,765 | ||||||
Berkshire Hathaway, Inc., Class B* | 4,365 | 635,020 | ||||||
BlackRock, Inc. | 916 | 326,398 | ||||||
Cerner Corp.* | 5,797 | 325,444 | ||||||
Charles Schwab Corp. | 15,570 | 442,344 | ||||||
Chipotle Mexican Grill, Inc.* | 648 | 272,789 | ||||||
Concho Resources, Inc.* | 2,929 | 340,262 | ||||||
DexCom, Inc.* | 5,840 | 375,979 | ||||||
Ecolab, Inc. | 4,106 | 472,108 | ||||||
EOG Resources, Inc. | 4,313 | 356,340 | ||||||
Facebook, Inc., Class A* | 3,583 | 421,289 | ||||||
FedEx Corp. | 2,413 | 398,410 | ||||||
Gilead Sciences, Inc. | 5,057 | 446,078 | ||||||
IPG Photonics Corp.* | 4,162 | 360,721 | ||||||
Oracle Corp. | 8,359 | 333,190 | ||||||
O’Reilly Automotive, Inc.* | 1,256 | 329,926 | ||||||
QUALCOMM, Inc. | 4,443 | 224,460 | ||||||
Starbucks Corp. | 7,145 | 401,763 | ||||||
Stryker Corp. | 3,981 | 433,969 | ||||||
Synchronoss Technologies, Inc.* | 10,851 | 337,141 | ||||||
Wells Fargo & Co. | 10,009 | 500,250 | ||||||
|
| |||||||
10,014,645 | ||||||||
|
| |||||||
Total Investments (99.4%) | 19,947,146 | |||||||
Other Assets Less Liabilities (0.6%) | 111,005 | |||||||
|
| |||||||
Net Assets (100%) | $ | 20,058,151 | ||||||
|
|
* | Non-income producing. |
(q) | Preference Shares are a special type of equity investment that shares in the earnings of the company, has limited voting rights, and receives a greater dividend than applicable Common Shares. |
Glossary:
ADR | — American Depositary Receipt |
See Notes to Financial Statements.
54
1290 FUNDS
1290 GLOBAL TALENTS FUND
PORTFOLIO OF INVESTMENTS (Continued)
April 30, 2016 (Unaudited)
Sector Weightings as of April 30, 2016 | Market Value | % of Net Assets | ||||||
Consumer Discretionary | $3,729,734 | 18.6 | % | |||||
Health Care | 3,719,878 | 18.5 | ||||||
Information Technology | 3,639,322 | 18.1 | ||||||
Financials | 3,179,265 | 15.9 | ||||||
Consumer Staples | 1,814,182 | 9.0 | ||||||
Industrials | 1,422,956 | 7.1 | ||||||
Energy | 916,871 | 4.6 | ||||||
Telecommunication Services | 787,201 | 3.9 | ||||||
Materials | 737,737 | 3.7 | ||||||
Cash and Other | 111,005 | 0.6 | ||||||
|
| |||||||
100.0 | % | |||||||
|
| |||||||
Holdings are subject to change without notice. |
|
The following is a summary of the inputs used to value the Fund’s assets and liabilities carried at fair value as of April 30, 2016:
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
Various inputs are used in determining the value of the Fund’s investments. These inputs are summarized in the three broad levels listed below:
Investment Type | Level 1 Active Markets for Identical Securities | Level 2 Observable Inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.) | Level 3 Inputs (including the Fund’s own assumptions in determining the fair | Total | ||||||||||||
Assets: |
| |||||||||||||||
Common Stocks | ||||||||||||||||
Consumer Discretionary | $ | 1,663,408 | $ | 2,066,326 | $ | — | $ | 3,729,734 | ||||||||
Consumer Staples | 277,273 | 1,536,909 | — | 1,814,182 | ||||||||||||
Energy | 916,871 | — | — | 916,871 | ||||||||||||
Financials | 2,535,581 | 643,684 | — | 3,179,265 | ||||||||||||
Health Care | 1,990,396 | 1,729,482 | — | 3,719,878 | ||||||||||||
Industrials | 398,410 | 1,024,546 | — | 1,422,956 | ||||||||||||
Information Technology | 3,273,626 | 365,696 | — | 3,639,322 | ||||||||||||
Materials | 472,108 | 265,629 | — | 737,737 | ||||||||||||
Telecommunication Services | — | 787,201 | — | 787,201 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Assets | $ | 11,527,673 | $ | 8,419,473 | $ | — | $ | 19,947,146 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total Liabilities | $ | — | $ | — | $ | — | $ | — | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total | $ | 11,527,673 | $ | 8,419,473 | $ | — | $ | 19,947,146 | ||||||||
|
|
|
|
|
|
|
|
There were no transfers between Levels 1, 2 or 3 during the period ended April 30, 2016.
See Notes to Financial Statements.
55
1290 FUNDS
1290 GLOBAL TALENTS FUND
PORTFOLIO OF INVESTMENTS (Continued)
April 30, 2016 (Unaudited)
Fair Values of Derivative Instruments as of April 30, 2016:
The Effect of Derivative Instruments on the Statement of Operations for the period ended April 30, 2016:
Amount of Realized Gain or (Loss) on Derivatives Recognized in Income | ||||||||||
Derivatives Not Accounted for as | Forward Foreign Currency Contracts | Total | ||||||||
Foreign exchange contracts | $ | 959 | $ | 959 | ||||||
|
|
|
|
^ The Fund held forward foreign currency contracts as hedging.
The Fund held forward foreign currency contracts with an average settlement value of approximately $658,000, during the period ended April 30, 2016.
Investment security transactions for the period ended April 30, 2016 were as follows:
Cost of Purchases: | ||||
Long-term investments other than U.S. government debt securities | $ | 19,903,197 | ||
Net Proceeds of Sales and Redemptions: | ||||
Long-term investments other than U.S. government debt securities | $ | — |
As of April 30, 2016, the gross unrealized appreciation (depreciation) of investments based on the aggregate cost of investments for Federal income tax purposes was as follows:
Aggregate gross unrealized appreciation | $ | 468,289 | ||
Aggregate gross unrealized depreciation | (424,340 | ) | ||
|
| |||
Net unrealized appreciation | $ | 43,949 | ||
|
| |||
Federal income tax cost of investments | $ | 19,903,197 | ||
|
|
See Notes to Financial Statements.
56
1290 FUNDS
1290 GLOBAL TALENTS FUND
STATEMENT OF ASSETS AND LIABILITIES
April 30, 2016 (Unaudited)
ASSETS |
| |||
Investments at value (Cost $19,903,197) | $ | 19,947,146 | ||
Cash | 58,938 | |||
Dividends, interest and other receivables | 21,118 | |||
Deferred offering cost | 8,769 | |||
Other assets | 33,715 | |||
|
| |||
Total assets | 20,069,686 | |||
|
| |||
LIABILITIES | ||||
Administrative fees payable | 1,591 | |||
Transfer agent fees payable | 1,446 | |||
Investment management fees payable | 1,357 | |||
Trustees’ fees payable | 81 | |||
Distribution fees payable – Class R | 26 | |||
Distribution fees payable – Class A | 13 | |||
Accrued expenses | 7,021 | |||
|
| |||
Total liabilities | 11,535 | |||
|
| |||
NET ASSETS | $ | 20,058,151 | ||
|
| |||
Net assets were comprised of: | ||||
Paid in capital | $ | 20,004,000 | ||
Accumulated undistributed net investment income (loss) | 16,769 | |||
Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions | (6,836 | ) | ||
Net unrealized appreciation (depreciation) on investments and foreign currency translations | 44,218 | |||
|
| |||
Net assets | $ | 20,058,151 | ||
|
| |||
Class A | ||||
Net asset value and redemption price per share, $100,259 / 10,000 shares outstanding (unlimited amount authorized: $0.001 par value) | $ | 10.03 | ||
Maximum sales charge (5.50% of offering price) | 0.58 | |||
|
| |||
Maximum offering price per share | $ | 10.61 | ||
|
| |||
Class I | ||||
Net asset value and redemption price per share, $19,857,647 / 1,980,389 shares outstanding (unlimited amount authorized: $0.001 par value) | $ | 10.03 | ||
|
| |||
Class R | ||||
Net asset value and redemption price per share, $100,245 / 10,000 shares outstanding (unlimited amount authorized: $0.001 par value) | $ | 10.02 | ||
|
|
STATEMENT OF OPERATIONS
For the Period Ended April 30, 2016* (Unaudited)
INVESTMENT INCOME |
| |||
Dividends (net of $5,605 foreign withholding tax) | $ | 29,006 | ||
|
| |||
EXPENSES | ||||
Investment management fees | 8,483 | |||
Professional fees | 5,356 | |||
Administrative fees | 1,591 | |||
Transfer agent fees | 1,446 | |||
Printing and mailing expenses | 675 | |||
Custodian fees | 637 | |||
Offering costs | 481 | |||
Trustees’ fees | 81 | |||
Distribution fees – Class R | 26 | |||
Distribution fees – Class A | 13 | |||
Miscellaneous | 575 | |||
|
| |||
Gross expenses | 19,364 | |||
Less: Waiver from investment adviser | (7,127 | ) | ||
|
| |||
Net expenses | 12,237 | |||
|
| |||
NET INVESTMENT INCOME (LOSS) | 16,769 | |||
|
| |||
REALIZED AND UNREALIZED GAIN (LOSS) | ||||
Realized gain (loss) on: | ||||
Foreign currency transactions | (6,836 | ) | ||
Change in unrealized appreciation (depreciation) on: | ||||
Investments | 43,949 | |||
Foreign currency translations | 269 | |||
|
| |||
Net change in unrealized appreciation (depreciation) | 44,218 | |||
|
| |||
NET REALIZED AND UNREALIZED GAIN (LOSS) | 37,382 | |||
|
| |||
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | $ | 54,151 | ||
|
|
* | The Fund commenced operations on April 12, 2016. |
See Notes to Financial Statements.
57
1290 FUNDS
1290 GLOBAL TALENTS FUND
STATEMENT OF CHANGES IN NET ASSETS
April 12, 2016* to April 30, 2016 (Unaudited) | ||||
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS: |
| |||
Net investment income (loss) | $ | 16,769 | ||
Net realized gain (loss) on investments and foreign currency transactions | (6,836 | ) | ||
Net change in unrealized appreciation (depreciation) on investments and foreign currency translations | 44,218 | |||
|
| |||
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | 54,151 | |||
|
| |||
CAPITAL SHARES TRANSACTIONS: | ||||
Class A | ||||
Capital shares sold [ 10,000 shares ] | 100,000 | |||
|
| |||
Total Class A transactions | 100,000 | |||
|
| |||
Class I | ||||
Capital shares sold [ 1,980,389 shares ] | 19,804,000 | |||
|
| |||
Total Class I transactions | 19,804,000 | |||
|
| |||
Class R | ||||
Capital shares sold [ 10,000 shares ] | 100,000 | |||
|
| |||
Total Class R transactions | 100,000 | |||
|
| |||
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM CAPITAL SHARE TRANSACTIONS | 20,004,000 | |||
|
| |||
TOTAL INCREASE (DECREASE) IN NET ASSETS | 20,058,151 | |||
NET ASSETS: | ||||
Beginning of period | — | |||
|
| |||
End of period (a) | $ | 20,058,151 | ||
|
|
| ||
(a) Includes accumulated undistributed (overdistributed) net investment income (loss) of | $ | 16,769 | ||
|
| |||
* The Fund commenced operations on April 12, 2016. |
See Notes to Financial Statements.
58
1290 FUNDS
1290 GLOBAL TALENTS FUND
FINANCIAL HIGHLIGHTS
Class A | April 12, 2016* to April 30, 2016 (Unaudited) | |||
Net asset value, beginning of period | $ | 10.00 | ||
|
| |||
Income (loss) from investment operations: | ||||
Net investment income (loss) (e) | 0.01 | |||
Net realized and unrealized gain (loss) on investments and foreign currency transactions | 0.02 | |||
|
| |||
Total from investment operations | 0.03 | |||
|
| |||
Net asset value, end of period | $ | 10.03 | ||
|
| |||
Total return (b) | 0.30 | % | ||
|
| |||
Ratios/Supplemental Data: | ||||
Net assets, end of period (000’s) | $ | 100 | ||
Ratio of expenses to average net assets: | ||||
After waivers (a) | 1.40 | % | ||
Before waivers (a) | 1.68 | % | ||
Ratio of net investment income (loss) to average net assets: | ||||
After waivers (a) | 1.34 | % | ||
Before waivers (a) | 1.05 | % | ||
Portfolio turnover rate (z)^ | 0 | % | ||
Class I | April 12, 2016* to April 30, 2016 (Unaudited) | |||
Net asset value, beginning of period | $ | 10.00 | ||
|
| |||
Income (loss) from investment operations: | ||||
Net investment income (loss) (e) | 0.01 | |||
Net realized and unrealized gain (loss) on investments and foreign currency transactions | 0.02 | |||
|
| |||
Total from investment operations | 0.03 | |||
|
| |||
Net asset value, end of period | $ | 10.03 | ||
|
| |||
Total return (b) | 0.30 | % | ||
|
| |||
Ratios/Supplemental Data: | ||||
Net assets, end of period (000’s) | $ | 19,858 | ||
Ratio of expenses to average net assets: | ||||
After waivers (a) | 1.15 | % | ||
Before waivers (a) | 1.44 | % | ||
Ratio of net investment income (loss) to average net assets: | ||||
After waivers (a) | 1.58 | % | ||
Before waivers (a) | 1.30 | % | ||
Portfolio turnover rate (z)^ | 0 | % |
See Notes to Financial Statements.
59
1290 FUNDS
1290 GLOBAL TALENTS FUND
FINANCIAL HIGHLIGHTS (Continued)
Class R | April 12, 2016* to April 30, 2016 (Unaudited) | |||
Net asset value, beginning of period | $ | 10.00 | ||
|
| |||
Income (loss) from investment operations: | ||||
Net investment income (loss) (e) | 0.01 | |||
Net realized and unrealized gain (loss) on investments and foreign currency transactions | 0.01 | |||
|
| |||
Total from investment operations | 0.02 | |||
|
| |||
Net asset value, end of period | $ | 10.02 | ||
|
| |||
Total return (b) | 0.20 | % | ||
|
| |||
Ratios/Supplemental Data: | ||||
Net assets, end of period (000’s) | $ | 100 | ||
Ratio of expenses to average net assets: | ||||
After waivers (a) | 1.65 | % | ||
Before waivers (a) | 1.94 | % | ||
Ratio of net investment income (loss) to average net assets: | ||||
After waivers (a) | 1.08 | % | ||
Before waivers (a) | 0.80 | % | ||
Portfolio turnover rate (z)^ | 0 | % |
* | Commencement of Operations. |
^ | Portfolio turnover rate excludes derivatives, if any. |
(a) | Ratios for periods less than one year are annualized. |
(b) | Total returns for periods less than one year are not annualized. |
(e) | Net investment income (loss) per share is based on average shares outstanding. |
(z) | Portfolio turnover rate for periods less than one year is not annualized. |
See Notes to Financial Statements.
60
1290 HIGH YIELD BOND FUND (Unaudited)
INVESTMENT ADVISER
Ø | 1290 Asset Managers® |
INVESTMENT SUB-ADVISER
Ø | AXA Investment Managers, Inc. |
PERFORMANCE RESULTS
Total Returns as of 4/30/16 | ||||||||||||||||
6 Months | 1 Year | Since Incept. | ||||||||||||||
Fund – Class A Shares* | without Sales Charge | 0.08 | % | (3.60 | )% | (1.75 | )% | |||||||||
with Sales Charge (a | ) | (4.41 | ) | (7.92 | ) | (4.78 | ) | |||||||||
Fund – Class C Shares*† | without Sales Charge | 0.21 | (3.36 | ) | (1.50 | ) | ||||||||||
with Sales Charge | (0.75 | ) (b) | (4.25 | ) (b) | (1.50 | ) | ||||||||||
Fund – Class I Shares* | 0.21 | (3.36 | ) | (1.50 | ) | |||||||||||
Fund – Class R Shares* | (0.04 | ) | (3.84 | ) | (1.99 | ) | ||||||||||
BofA Merrill Lynch U.S. High Yield Master II Index | 2.25 | (1.34 | ) | 0.19 | ||||||||||||
* Date of inception 11/12/14.
† Class C Shares currently are not offered for sale.
(a) A 4.50% front-end sales charge was deducted.
(b) A 1.00% sales charge was deducted. Returns for periods less than one year are not annualized.
Returns for periods greater than one year are annualized. |
|
The performance quoted is past performance and is not a guarantee of future results. Mutual funds are subject to certain market risks. Investment returns and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be higher or lower than the performance data shown. For the most current month-end performance data please call 1-888-310-0416 or visit www.1290Funds.com.
Fund performance may reflect the waiver of the Fund’s fees and reimbursement of expenses for certain periods since the inception date. Without these waivers and reimbursements, performance would have been lower. Also, performance shown in this section does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or redemption of Fund shares.
AXA Investment Managers, Inc.
Overview — AXA Investment Managers, Inc.
The U.S. high yield market sold off during the period October 31, 2015 through February 11, 2016 due to a number of macro factors including lower commodity prices and concerns related to global growth. The U.S. high yield market rallied sharply in the February 11, 2016 through April 30, 2016 period due to a stabilization of commodity prices, reduced fears surrounding the trajectory of global economic growth and improved investor sentiment. During this time period, volatility was elevated in the U.S. high yield market. Within U.S. high yield, more highly rated double-B bonds outperformed both single-B rated and triple-C rated securities. The best performing sectors within the U.S. high yield index during the six month period ended April 30, 2016 were the basic industry and capital goods sectors while the worst performing sectors were the energy and transportation sectors.
Fund Highlights
What helped performance during the six-month period ended April 30, 2016:
• | The top contributors to return for the period were debt positions in ACE Cash Express, Inc. DynCorp International and Bombardier Inc. ACE Cash Express, Inc., a consumer focused, specialty finance company, reported strong earnings for its most recent reporting period. DynCorp International provides sophisticated aviation, logistics, training, intelligence and operational solutions. DynCorp bonds were a top contributor to return largely due to the announced extension of a major contract. Bombardier Inc. is a manufacturer of aerospace and rail transportation products. The announcement of multiple equity investments made into the company, which will bolster its liquidity position in the near to intermediate term, and the announcement of multiple large orders for the company’s C-Series planes all aided performance during the period. |
• | During the period from October 31, 2015 through February 11, 2016, the Fund’s relative performance benefitted from its overweight to the outperforming technology and electronics sectors and also benefitted from its underweight positioning within the energy sector, which significantly underperformed. |
• | During the rally which occurred between February 11, 2016 and April 30, 2016 the Fund’s overweight position within the highest yielding portion of the market, which outperformed, and its underweight to the better quality more interest rate sensitive portion of the market, which underperformed, both had positive impacts on relative performance. |
What hurt performance during the six-month period ended April 30, 2016:
• | The bottom contributors to return for the period were debt positions in Intelsat, Jackson Holdings S.A., Neovia Logistics Intermediate Holdings Corp., and Speedy Cash Intermediate Holdings Corp. Intelsat is a global satellite services company which provided earnings guidance for 2016 which was below expectations and announced that they are assessing opportunities in the capital markets to improve their balance sheet. Neovia Logistics is an industrial contract logistics provider which announced that they will pay the next coupon on the 10% notes in-kind rather than in cash due to lackluster earnings results. Speedy Cash is a consumer focused, specialty finance company whose recent earnings declined in-line with the company’s plan as part of their operational and financial improvement initiatives. |
• | During the sell off from October 31, 2015 through February 11, 2016 the Fund’s overweight to the highest yielding segment of the market detracted from relative performance since this segment underperformed. The Fund’s underweight positioning within the banking sector, which outperformed, detracted from performance. Also, during the same period, negative security selection within the telecommunications and retail sectors detracted from relative performance. |
• | Relative underperformance during the rally which occurred between February 11, 2016 and April 30, 2016 was partially due to negative security selection, particularly within the highest yielding segment of the market, as a lack of ownership in the most speculative credits limited the return of the strategy relative to the benchmark. |
61
1290 HIGH YIELD BOND FUND (Unaudited)
Sector Weightings as of April 30, 2016 | % of Net Assets | |||
Industrials | 16.0 | % | ||
Consumer Discretionary | 14.6 | |||
Energy | 10.4 | |||
Health Care | 10.2 | |||
Telecommunication Services | 9.8 | |||
Financials | 9.4 | |||
Materials | 9.2 | |||
Information Technology | 8.9 | |||
Consumer Staples | 5.2 | |||
Investment Company | 3.4 | |||
Utilities | 1.5 | |||
Cash and Other | 1.4 | |||
|
| |||
100.0 | % | |||
|
| |||
Holdings are subject to change without notice. |
UNDERSTANDING YOUR EXPENSES:
As a shareholder of the Fund, you incur two types of costs:
(1) transaction costs, including applicable sales charges and redemption fees; and (2) ongoing costs, including investment advisory fees, distribution and/or service (12b-1) fees (in the case of Class A, Class C and Class R shares of the Fund), and other Fund expenses. These examples are intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The examples are based on an investment of $1,000 invested at the beginning of the six-month period ended April 30, 2016 and held for the entire six-month period.
Actual Expenses
The first line of the following table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the following 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 you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
EXAMPLE
Beginning Account Value 11/1/15 | Ending Account Value 4/30/16 | Expenses Paid During 4/30/16 | ||||||||||
Class A |
| |||||||||||
Actual | $1,000.00 | $1,000.81 | $5.28 | |||||||||
Hypothetical (5% average return before expenses) | 1,000.00 | 1,019.59 | 5.33 | |||||||||
Class C** |
| |||||||||||
Actual | 1,000.00 | 1,002.08 | 4.03 | |||||||||
Hypothetical (5% average return before expenses) | 1,000.00 | 1,020.83 | 4.07 | |||||||||
Class I |
| |||||||||||
Actual | 1,000.00 | 1,002.08 | 4.11 | |||||||||
Hypothetical (5% average return before expenses) | 1,000.00 | 1,020.76 | 4.15 | |||||||||
Class R |
| |||||||||||
Actual | 1,000.00 | 999.59 | 6.51 | |||||||||
Hypothetical (5% average return before expenses) | 1,000.00 | 1,018.35 | 6.58 | |||||||||
* Expenses are equal to the Fund’s Class A, C, I and R shares annualized expense ratios of 1.06%, 0.81%, 0.83% and 1.31%, respectively, multiplied by the average account value over the period, and multiplied by 182/366 (to reflect the one-half year period).
** Class C shares currently are not offered for sale. |
|
62
1290 FUNDS
1290 HIGH YIELD BOND FUND
PORTFOLIO OF INVESTMENTS
April 30, 2016 (Unaudited)
Principal Amount | Value (Note 1) | |||||||
LONG-TERM DEBT SECURITIES: | ||||||||
Corporate Bonds (95.2%) | ||||||||
Consumer Discretionary (14.6%) | ||||||||
Auto Components (0.8%) | ||||||||
Schaeffler Holding Finance B.V. | ||||||||
6.875%, 8/15/18 PIK§ | $ | 200,000 | $ | 204,625 | ||||
|
| |||||||
Distributors (0.4%) | ||||||||
American Tire Distributors, Inc. | ||||||||
10.250%, 3/1/22§ | 107,000 | 95,765 | ||||||
|
| |||||||
Hotels, Restaurants & Leisure (3.8%) |
| |||||||
Eldorado Resorts, Inc. | ||||||||
7.000%, 8/1/23 | 87,000 | 90,262 | ||||||
LTF Merger Sub, Inc. | ||||||||
8.500%, 6/15/23§ | 107,000 | 104,793 | ||||||
MGM Resorts International | ||||||||
11.375%, 3/1/18 | 235,000 | 270,250 | ||||||
NCL Corp., Ltd. | ||||||||
5.250%, 11/15/19§ | 90,000 | 91,350 | ||||||
Pinnacle Entertainment, Inc. | ||||||||
8.750%, 5/15/20 | 145,000 | 149,234 | ||||||
5.625%, 5/1/24 (b)§ | 38,000 | 37,810 | ||||||
Royal Caribbean Cruises Ltd. | ||||||||
5.250%, 11/15/22 | 90,000 | 96,192 | ||||||
7.500%, 10/15/27 | 80,000 | 92,200 | ||||||
Viking Cruises Ltd. | ||||||||
8.500%, 10/15/22§ | 116,000 | 109,040 | ||||||
|
| |||||||
1,041,131 | ||||||||
|
| |||||||
Household Durables (0.5%) | ||||||||
American Greetings Corp. | ||||||||
7.375%, 12/1/21 | 52,000 | 53,430 | ||||||
Century Intermediate Holding Co. 2 | ||||||||
9.750%, 2/15/19 PIK§ | 90,000 | 91,125 | ||||||
|
| |||||||
144,555 | ||||||||
|
| |||||||
Media (8.3%) | ||||||||
Acosta, Inc. | ||||||||
7.750%, 10/1/22§ | 95,000 | 88,112 | ||||||
Altice Luxembourg S.A. | ||||||||
7.750%, 5/15/22§ | 200,000 | 199,400 | ||||||
Cablevision Systems Corp. | ||||||||
7.750%, 4/15/18 | 145,000 | 151,887 | ||||||
CCOH Safari LLC | ||||||||
5.750%, 2/15/26§ | 224,000 | 230,720 | ||||||
Cequel Communications Holdings I LLC/Cequel Capital Corp. |
| |||||||
6.375%, 9/15/20§ | 162,000 | 165,451 | ||||||
5.125%, 12/15/21§ | 90,000 | 85,500 | ||||||
CSC Holdings LLC | ||||||||
7.875%, 2/15/18 | 80,000 | 86,400 | ||||||
DISH DBS Corp. | ||||||||
7.875%, 9/1/19 | 110,000 | 121,688 | ||||||
5.875%, 11/15/24 | 100,000 | 93,600 | ||||||
Gray Television, Inc. | ||||||||
7.500%, 10/1/20 | 85,000 | 88,613 | ||||||
McGraw-Hill Global Education Holdings LLC/McGraw-Hill Global Education Finance |
| |||||||
9.750%, 4/1/21 | 137,000 | 146,878 | ||||||
7.875%, 5/15/24 (b)§ | 67,000 | 68,675 | ||||||
MHGE Parent LLC/MHGE Parent Finance, Inc. |
| |||||||
8.500%, 8/1/19§ | 281,000 | 279,946 | ||||||
Nexstar Broadcasting, Inc. | ||||||||
6.875%, 11/15/20 | $ | 115,000 | $ | 119,887 | ||||
6.125%, 2/15/22§ | 21,000 | 20,974 | ||||||
Numericable-SFR S.A. | ||||||||
4.875%, 5/15/19§ | 200,000 | 207,400 | ||||||
Sirius XM Radio, Inc. | ||||||||
5.375%, 4/15/25§ | 100,000 | 102,000 | ||||||
|
| |||||||
2,257,131 | ||||||||
|
| |||||||
Multiline Retail (0.2%) | ||||||||
99 Cents Only Stores LLC | ||||||||
11.000%, 12/15/19 | 140,000 | 60,725 | ||||||
|
| |||||||
Specialty Retail (0.5%) | ||||||||
L Brands, Inc. | ||||||||
6.875%, 11/1/35 | 110,000 | 121,000 | ||||||
|
| |||||||
Textiles, Apparel & Luxury Goods (0.1%) |
| |||||||
Wolverine World Wide, Inc. | ||||||||
6.125%, 10/15/20 | 35,000 | 36,225 | ||||||
|
| |||||||
Total Consumer Discretionary | 3,961,157 | |||||||
|
| |||||||
Consumer Staples (5.2%) | ||||||||
Beverages (1.4%) | ||||||||
Constellation Brands, Inc. | ||||||||
4.750%, 12/1/25 | 42,000 | 44,440 | ||||||
DS Services of America, Inc. | ||||||||
10.000%, 9/1/21§ | 113,000 | 127,690 | ||||||
Innovation Ventures LLC/Innovation Ventures Finance Corp. |
| |||||||
9.500%, 8/15/19§ | 197,000 | 203,156 | ||||||
|
| |||||||
375,286 | ||||||||
|
| |||||||
Food & Staples Retailing (2.3%) |
| |||||||
BI-LO LLC/BI-LO Finance Corp. | ||||||||
8.625%, 9/15/18 PIK§ | 187,000 | 138,848 | ||||||
Pomegranate Merger Sub, Inc. | ||||||||
9.750%, 5/1/23 (b)§ | 106,000 | 104,211 | ||||||
Rite Aid Corp. | ||||||||
9.250%, 3/15/20 | 100,000 | 105,125 | ||||||
6.750%, 6/15/21 | 50,000 | 52,565 | ||||||
6.125%, 4/1/23§ | 100,000 | 106,440 | ||||||
U.S. Foods, Inc. | ||||||||
8.500%, 6/30/19 | 115,000 | 117,737 | ||||||
|
| |||||||
624,926 | ||||||||
|
| |||||||
Food Products (1.2%) | ||||||||
JBS USA LLC/JBS USA Finance, Inc. |
| |||||||
8.250%, 2/1/20§ | 140,000 | 145,950 | ||||||
5.750%, 6/15/25§ | 214,000 | 195,810 | ||||||
|
| |||||||
341,760 | ||||||||
|
| |||||||
Personal Products (0.3%) |
| |||||||
Prestige Brands, Inc. | ||||||||
6.375%, 3/1/24§ | 71,000 | 74,550 | ||||||
|
| |||||||
Total Consumer Staples | 1,416,522 | |||||||
|
| |||||||
Energy (10.4%) | ||||||||
Oil, Gas & Consumable Fuels (10.4%) |
| |||||||
Antero Resources Corp. | ||||||||
5.625%, 6/1/23 | 100,000 | 97,000 | ||||||
Artsonig Pty Ltd. | ||||||||
11.500%, 4/1/19 PIK (b)§ | 142,921 | 14,292 |
See Notes to Financial Statements.
63
1290 FUNDS
1290 HIGH YIELD BOND FUND
PORTFOLIO OF INVESTMENTS (Continued)
April 30, 2016 (Unaudited)
Principal Amount | Value (Note 1) | |||||||
Blue Racer Midstream LLC/Blue Racer Finance Corp. |
| |||||||
6.125%, 11/15/22§ | $ | 171,000 | $ | 150,266 | ||||
Calumet Specialty Products Partners LP/Calumet Finance Corp. |
| |||||||
7.625%, 1/15/22 | 155,000 | 103,850 | ||||||
7.750%, 4/15/23 | 80,000 | 53,200 | ||||||
Carrizo Oil & Gas, Inc. | ||||||||
6.250%, 4/15/23 | 70,000 | 67,200 | ||||||
Concho Resources, Inc. | ||||||||
7.000%, 1/15/21 | 120,000 | 124,524 | ||||||
Crestwood Midstream Partners LP/Crestwood Midstream Finance Corp. |
| |||||||
6.125%, 3/1/22 | 145,000 | 132,327 | ||||||
6.250%, 4/1/23§ | 124,000 | 112,220 | ||||||
CrownRock LP/CrownRock Finance, Inc. |
| |||||||
7.750%, 2/15/23§ | 30,000 | 30,900 | ||||||
EP Energy LLC/Everest Acquisition Finance, Inc. |
| |||||||
9.375%, 5/1/20 | 31,000 | 20,305 | ||||||
6.375%, 6/15/23 | 50,000 | 28,875 | ||||||
Genesis Energy LP/Genesis Energy Finance Corp. |
| |||||||
5.750%, 2/15/21 | 180,000 | 169,650 | ||||||
6.750%, 8/1/22 | 40,000 | 38,304 | ||||||
6.000%, 5/15/23 | 45,000 | 41,625 | ||||||
5.625%, 6/15/24 | 125,000 | 113,437 | ||||||
Oasis Petroleum, Inc. | ||||||||
6.875%, 3/15/22 | 90,000 | 80,100 | ||||||
ONEOK, Inc. | ||||||||
7.500%, 9/1/23 | 138,000 | 139,725 | ||||||
PBF Holding Co. LLC/PBF Finance Corp. |
| |||||||
7.000%, 11/15/23§ | 140,000 | 136,500 | ||||||
PBF Logistics LP/PBF Logistics Finance Corp. |
| |||||||
6.875%, 5/15/23 | 174,000 | 168,345 | ||||||
Rice Energy, Inc. | ||||||||
7.250%, 5/1/23 | 65,000 | 65,487 | ||||||
Rose Rock Midstream LP/Rose Rock Finance Corp. |
| |||||||
5.625%, 7/15/22 | 145,000 | 119,172 | ||||||
5.625%, 11/15/23 | 109,000 | 85,361 | ||||||
Sanchez Energy Corp. | ||||||||
7.750%, 6/15/21 | 90,000 | 74,025 | ||||||
6.125%, 1/15/23 | 20,000 | 15,100 | ||||||
Southern Star Central Corp. | ||||||||
5.125%, 7/15/22§ | 100,000 | 96,066 | ||||||
Summit Midstream Holdings LLC/Summit Midstream Finance Corp. |
| |||||||
7.500%, 7/1/21 | 95,000 | 86,153 | ||||||
5.500%, 8/15/22 | 160,000 | 129,000 | ||||||
Targa Resources Partners LP/Targa Resources Partners Finance Corp. |
| |||||||
6.750%, 3/15/24§ | 117,000 | 117,585 | ||||||
Western Refining Logistics LP/WNRL Finance Corp. |
| |||||||
7.500%, 2/15/23 | 171,000 | 159,885 | ||||||
Whiting Petroleum Corp. | ||||||||
5.750%, 3/15/21 | 75,000 | 62,348 | ||||||
|
| |||||||
Total Energy | 2,832,827 | |||||||
|
| |||||||
Financials (9.4%) | ||||||||
Banks (0.2%) | ||||||||
Creditcorp. | ||||||||
12.000%, 7/15/18§ | 113,000 | 58,760 | ||||||
|
| |||||||
Consumer Finance (2.5%) | ||||||||
AerCap Ireland Capital Ltd./AerCap Global Aviation Trust |
| |||||||
4.500%, 5/15/21 | 170,000 | 175,525 | ||||||
4.625%, 7/1/22 | $ | 150,000 | $ | 155,250 | ||||
Ally Financial, Inc. | ||||||||
3.500%, 7/18/16 | 69,000 | 68,224 | ||||||
4.625%, 5/19/22 | 92,000 | 94,576 | ||||||
Speedy Cash Intermediate Holdings Corp. |
| |||||||
10.750%, 5/15/18§ | 26,000 | 17,647 | ||||||
TMX Finance LLC/TitleMax Finance Corp. |
| |||||||
8.500%, 9/15/18§ | 208,000 | 162,370 | ||||||
|
| |||||||
673,592 | ||||||||
|
| |||||||
Diversified Financial Services (3.9%) | ||||||||
ACE Cash Express, Inc. | ||||||||
11.000%, 2/1/19§ | 375,000 | 181,406 | ||||||
Alphabet Holding Co., Inc. | ||||||||
7.750%, 11/1/17 PIK | 175,000 | 176,260 | �� | |||||
DFC Finance Corp. | ||||||||
10.500%, 6/15/20§ | 274,000 | 172,291 | ||||||
Opal Acquisition, Inc. | ||||||||
8.875%, 12/15/21§ | 155,000 | 126,325 | ||||||
Prospect Holding Co. LLC/Prospect Holding Finance Co. |
| |||||||
10.250%, 10/1/18§ | 155,000 | 53,862 | ||||||
Speedy Group Holdings Corp. | ||||||||
12.000%, 11/15/17§ | 230,000 | 92,000 | ||||||
Stearns Holdings LLC | ||||||||
9.375%, 8/15/20§ | 271,000 | 258,128 | ||||||
|
| |||||||
1,060,272 | ||||||||
|
| |||||||
Insurance (1.4%) | ||||||||
Hub Holdings LLC/Hub Holdings Finance, Inc. |
| |||||||
8.125%, 7/15/19 PIK§ | 183,000 | 171,448 | ||||||
HUB International Ltd. | ||||||||
7.875%, 10/1/21§ | 225,000 | 220,078 | ||||||
|
| |||||||
391,526 | ||||||||
|
| |||||||
Real Estate Investment Trusts (REITs) (0.4%) |
| |||||||
Equinix, Inc. | ||||||||
5.875%, 1/15/26 | 110,000 | 116,116 | ||||||
|
| |||||||
Real Estate Management & Development (1.0%) |
| |||||||
Greystar Real Estate Partners LLC | ||||||||
8.250%, 12/1/22§ | 110,000 | 114,744 | ||||||
Howard Hughes Corp. | ||||||||
6.875%, 10/1/21§ | 80,000 | 80,800 | ||||||
Realogy Group LLC/Realogy Co-Issuer Corp. |
| |||||||
5.250%, 12/1/21§ | 69,000 | 72,019 | ||||||
|
| |||||||
267,563 | ||||||||
|
| |||||||
Total Financials | 2,567,829 | |||||||
|
| |||||||
Health Care (10.2%) | ||||||||
Health Care Equipment & Supplies (1.2%) |
| |||||||
Alere, Inc. | ||||||||
7.250%, 7/1/18 | 183,000 | 188,032 | ||||||
Greatbatch Ltd. | ||||||||
9.125%, 11/1/23§ | 95,000 | 94,525 | ||||||
Immucor, Inc. | ||||||||
11.125%, 8/15/19 | 57,000 | 50,160 | ||||||
|
| |||||||
332,717 | ||||||||
|
| |||||||
Health Care Providers & Services (4.0%) |
| |||||||
Centene Corp. | ||||||||
6.125%, 2/15/24§ | 60,000 | 63,037 |
See Notes to Financial Statements.
64
1290 FUNDS
1290 HIGH YIELD BOND FUND
PORTFOLIO OF INVESTMENTS (Continued)
April 30, 2016 (Unaudited)
Principal Amount | Value (Note 1) | |||||||
CHS/Community Health Systems, Inc. | ||||||||
8.000%, 11/15/19 | $ | 80,000 | $ | 80,504 | ||||
HCA, Inc. | ||||||||
3.750%, 3/15/19 | 18,000 | 18,421 | ||||||
7.690%, 6/15/25 | 41,000 | 43,742 | ||||||
5.875%, 2/15/26 | 154,000 | 159,482 | ||||||
5.250%, 6/15/26 | 135,000 | 139,901 | ||||||
IASIS Healthcare LLC/IASIS Capital Corp. |
| |||||||
8.375%, 5/15/19 | 80,000 | 75,600 | ||||||
LifePoint Health, Inc. | ||||||||
6.625%, 10/1/20 | 95,000 | 98,562 | ||||||
RegionalCare Hospital Partners Holdings, Inc. |
| |||||||
8.250%, 5/1/23 (b)§ | 109,000 | 112,543 | ||||||
Team Health, Inc. | ||||||||
7.250%, 12/15/23§ | 100,000 | 106,250 | ||||||
Tenet Healthcare Corp. | ||||||||
8.000%, 8/1/20 | 81,000 | 83,633 | ||||||
8.125%, 4/1/22 | 65,000 | 67,275 | ||||||
WellCare Health Plans, Inc. | ||||||||
5.750%, 11/15/20 | 25,000 | 26,000 | ||||||
|
| |||||||
1,074,950 | ||||||||
|
| |||||||
Pharmaceuticals (5.0%) |
| |||||||
Capsugel S.A. | ||||||||
7.000%, 5/15/19 PIK§ | 243,000 | 243,759 | ||||||
Concordia Healthcare Corp. | ||||||||
9.500%, 10/21/22§ | 25,000 | 25,360 | ||||||
7.000%, 4/15/23§ | 150,000 | 138,750 | ||||||
DPx Holdings B.V. | ||||||||
7.500%, 2/1/22§ | 161,000 | 163,013 | ||||||
Endo Finance LLC/Endo Finco, Inc. | ||||||||
7.750%, 1/15/22§ | 58,000 | 59,595 | ||||||
JLL/Delta Dutch Pledgeco B.V. | ||||||||
8.750%, 5/1/20 PIK§ | 251,000 | 248,490 | ||||||
Valeant Pharmaceuticals International, Inc. |
| |||||||
6.750%, 8/15/18§ | 115,000 | 110,975 | ||||||
7.000%, 10/1/20§ | 90,000 | 82,800 | ||||||
7.500%, 7/15/21§ | 140,000 | 128,100 | ||||||
6.125%, 4/15/25§ | 205,000 | 170,150 | ||||||
|
| |||||||
1,370,992 | ||||||||
|
| |||||||
Total Health Care | 2,778,659 | |||||||
|
| |||||||
Industrials (16.0%) | ||||||||
Aerospace & Defense (2.4%) |
| |||||||
Bombardier, Inc. | ||||||||
6.125%, 1/15/23§ | 80,000 | 69,600 | ||||||
7.500%, 3/15/25§ | 177,000 | 157,866 | ||||||
DynCorp International, Inc. | ||||||||
10.375%, 7/1/17 | 315,000 | 257,906 | ||||||
TransDigm, Inc. | ||||||||
7.500%, 7/15/21 | 160,000 | 167,040 | ||||||
|
| |||||||
652,412 | ||||||||
|
| |||||||
Air Freight & Logistics (0.6%) |
| |||||||
DH Services Luxembourg Sarl | ||||||||
7.750%, 12/15/20§ | 153,000 | 150,514 | ||||||
|
| |||||||
Building Products (1.4%) |
| |||||||
Nortek, Inc. | ||||||||
8.500%, 4/15/21 | 175,000 | 181,344 | ||||||
Standard Industries, Inc. | ||||||||
5.500%, 2/15/23§ | 100,000 | 104,630 | ||||||
6.000%, 10/15/25§ | $ | 90,000 | $ | 96,975 | ||||
|
| |||||||
382,949 | ||||||||
|
| |||||||
Commercial Services & Supplies (2.4%) |
| |||||||
Covanta Holding Corp. | ||||||||
5.875%, 3/1/24 | 115,000 | 113,850 | ||||||
Jaguar Holding Co. II/Pharmaceutical Product Development LLC |
| |||||||
6.375%, 8/1/23§ | 179,000 | 185,533 | ||||||
Multi-Color Corp. | ||||||||
6.125%, 12/1/22§ | 75,000 | 76,406 | ||||||
Mustang Merger Corp. | ||||||||
8.500%, 8/15/21§ | 150,000 | 156,094 | ||||||
Prime Security Services Borrower LLC/Prime Finance, Inc. |
| |||||||
9.250%, 5/15/23 (b)§ | 112,000 | 116,200 | ||||||
|
| |||||||
648,083 | ||||||||
|
| |||||||
Construction & Engineering (0.9%) |
| |||||||
Michael Baker Holdings LLC/Michael Baker Finance Corp. |
| |||||||
8.875%, 4/15/19 PIK§ | 98,870 | 72,917 | ||||||
Michael Baker International LLC/CDL Acquisition Co., Inc. |
| |||||||
8.250%, 10/15/18§ | 180,000 | 172,800 | ||||||
|
| |||||||
245,717 | ||||||||
|
| |||||||
Electrical Equipment (1.2%) |
| |||||||
Global Brass & Copper, Inc. | ||||||||
9.500%, 6/1/19 | 215,000 | 225,481 | ||||||
International Wire Group Holdings, Inc. |
| |||||||
8.500%, 10/15/17§ | 100,000 | 99,000 | ||||||
|
| |||||||
324,481 | ||||||||
|
| |||||||
Machinery (2.4%) |
| |||||||
Case New Holland Industrial, Inc. | ||||||||
7.875%, 12/1/17 | 147,000 | 156,467 | ||||||
Manitowoc Foodservice, Inc. | ||||||||
9.500%, 2/15/24§ | 34,000 | 37,570 | ||||||
Park-Ohio Industries, Inc. | ||||||||
8.125%, 4/1/21 | 165,000 | 168,506 | ||||||
SPL Logistics Escrow LLC/SPL Logistics Finance Corp. |
| |||||||
8.875%, 8/1/20§ | 185,000 | 151,700 | ||||||
Waterjet Holdings, Inc. | ||||||||
7.625%, 2/1/20§ | 145,000 | 144,275 | ||||||
|
| |||||||
658,518 | ||||||||
|
| |||||||
Road & Rail (1.5%) |
| |||||||
Neovia Logistics Intermediate Holdings LLC/Logistics Intermediate Finance Corp. |
| |||||||
10.000%, 2/15/18 PIK (b)§ | 138,000 | 72,450 | ||||||
OPE KAG Finance Sub, Inc. | ||||||||
7.875%, 7/31/23§ | 202,000 | 204,904 | ||||||
Watco Cos. LLC/Watco Finance Corp. | ||||||||
6.375%, 4/1/23§ | 120,000 | 118,800 | ||||||
|
| |||||||
396,154 | ||||||||
|
| |||||||
Trading Companies & Distributors (3.2%) |
| |||||||
Aircastle Ltd. | ||||||||
5.000%, 4/1/23 | 72,000 | 73,354 | ||||||
HD Supply, Inc. | ||||||||
7.500%, 7/15/20 | 200,000 | 211,560 | ||||||
International Lease Finance Corp. | ||||||||
5.875%, 4/1/19 | 110,000 | 117,975 | ||||||
6.250%, 5/15/19 | 143,000 | 154,797 | ||||||
8.625%, 1/15/22 | 100,000 | 120,620 |
See Notes to Financial Statements.
65
1290 FUNDS
1290 HIGH YIELD BOND FUND
PORTFOLIO OF INVESTMENTS (Continued)
April 30, 2016 (Unaudited)
Principal Amount | Value (Note 1) | |||||||
Intrepid Aviation Group Holdings LLC/Intrepid Finance Co. |
| |||||||
6.875%, 2/15/19§ | $ | 195,000 | $ | 176,963 | ||||
Optimas OE Solutions Holding LLC/Optimas OE Solutions, Inc. |
| |||||||
8.625%, 6/1/21§ | 40,000 | 28,425 | ||||||
|
| |||||||
883,694 | ||||||||
|
| |||||||
Total Industrials | 4,342,522 | |||||||
|
| |||||||
Information Technology (8.9%) | ||||||||
Communications Equipment (1.6%) | ||||||||
Aegis Merger Sub, Inc. | ||||||||
10.250%, 2/15/23§ | 126,000 | 120,803 | ||||||
CommScope Holding Co., Inc. | ||||||||
6.625%, 6/1/20 PIK§ | 85,000 | 88,187 | ||||||
CommScope Technologies Finance LLC |
| |||||||
6.000%, 6/15/25§ | 165,000 | 168,300 | ||||||
ViaSat, Inc. | ||||||||
6.875%, 6/15/20 | 56,000 | 57,645 | ||||||
|
| |||||||
434,935 | ||||||||
|
| |||||||
Electronic Equipment, Instruments & Components (0.6%) |
| |||||||
CPI International, Inc. | ||||||||
8.750%, 2/15/18 | 165,000 | 161,391 | ||||||
|
| |||||||
Internet Software & Services (1.1%) | ||||||||
j2 Cloud Services, Inc. | ||||||||
8.000%, 8/1/20 | 105,000 | 109,134 | ||||||
Rackspace Hosting, Inc. | ||||||||
6.500%, 1/15/24§ | 190,000 | 187,397 | ||||||
|
| |||||||
296,531 | ||||||||
|
| |||||||
IT Services (0.7%) | ||||||||
Alliance Data Systems Corp. | ||||||||
5.375%, 8/1/22§ | 196,000 | 187,915 | ||||||
|
| |||||||
Semiconductors & Semiconductor Equipment (1.1%) |
| |||||||
Advanced Micro Devices, Inc. | ||||||||
6.750%, 3/1/19 | 190,000 | 159,125 | ||||||
Freescale Semiconductor, Inc. | ||||||||
5.000%, 5/15/21§ | 76,000 | 78,280 | ||||||
6.000%, 1/15/22§ | 64,000 | 67,840 | ||||||
|
| |||||||
305,245 | ||||||||
|
| |||||||
Software (3.8%) | ||||||||
BCP Singapore VI Cayman Financing Co., Ltd. |
| |||||||
8.000%, 4/15/21§ | 155,000 | 124,000 | ||||||
BMC Software Finance, Inc. | ||||||||
8.125%, 7/15/21§ | 125,000 | 92,037 | ||||||
BMC Software, Inc. | ||||||||
7.250%, 6/1/18 | 35,000 | 30,888 | ||||||
Boxer Parent Co., Inc. | ||||||||
9.000%, 10/15/19 PIK§ | 345,000 | 253,359 | ||||||
Ensemble S Merger Sub, Inc. | ||||||||
9.000%, 9/30/23§ | 261,000 | 259,043 | ||||||
Infor Software Parent LLC/Infor Software Parent, Inc. |
| |||||||
7.125%, 5/1/21 PIK§ | 138,000 | 116,265 | ||||||
Informatica LLC | ||||||||
7.125%, 7/15/23§ | 158,000 | 153,655 | ||||||
|
| |||||||
1,029,247 | ||||||||
|
| |||||||
Total Information Technology | 2,415,264 | |||||||
|
| |||||||
Materials (9.2%) | ||||||||
Chemicals (5.1%) | ||||||||
Axalta Coating Systems U.S. Holdings, Inc./Axalta Coating Systems Dutch Holding B |
| |||||||
7.375%, 5/1/21§ | $ | 150,000 | $ | 158,062 | ||||
Eco Services Operations LLC/Eco Finance Corp. |
| |||||||
8.500%, 11/1/22§ | 117,000 | 112,320 | ||||||
Huntsman International LLC | ||||||||
4.875%, 11/15/20 | 150,000 | 151,125 | ||||||
INEOS Group Holdings S.A. | ||||||||
6.125%, 8/15/18§ | 200,000 | 203,250 | ||||||
Nexeo Solutions LLC/Nexeo Solutions Finance Corp. |
| |||||||
8.375%, 3/1/18 | 181,000 | 180,783 | ||||||
Nufarm Australia Ltd. | ||||||||
6.375%, 10/15/19§ | 185,000 | 187,312 | ||||||
Rayonier AM Products, Inc. | ||||||||
5.500%, 6/1/24§ | 277,000 | 233,546 | ||||||
Rentech Nitrogen Partners LP/Rentech Nitrogen Finance Corp. |
| |||||||
6.500%, 4/15/21§ | 145,000 | 145,997 | ||||||
|
| |||||||
1,372,395 | ||||||||
|
| |||||||
Construction Materials (0.5%) | ||||||||
Summit Materials LLC/Summit Materials Finance Corp. |
| |||||||
6.125%, 7/15/23 | 137,000 | 138,027 | ||||||
|
| |||||||
Containers & Packaging (2.4%) | ||||||||
Berry Plastics Corp. | ||||||||
5.125%, 7/15/23 | 61,000 | 61,751 | ||||||
Beverage Packaging Holdings Luxembourg II S.A./Beverage Packaging Holdings II Is |
| |||||||
5.625%, 12/15/16§ | 153,000 | 153,191 | ||||||
BWAY Holding Co. | ||||||||
9.125%, 8/15/21§ | 295,000 | 282,831 | ||||||
Coveris Holding Corp. | ||||||||
10.000%, 6/1/18§ | 150,000 | 148,406 | ||||||
|
| |||||||
646,179 | ||||||||
|
| |||||||
Metals & Mining (1.2%) | ||||||||
ArcelorMittal | ||||||||
8.000%, 10/15/39 | 185,000 | 176,791 | ||||||
Kaiser Aluminum Corp. | ||||||||
5.875%, 5/15/24 (b)§ | 24,000 | 24,570 | ||||||
Novelis, Inc. | ||||||||
8.375%, 12/15/17 | 70,000 | 71,400 | ||||||
Prince Mineral Holding Corp. | ||||||||
11.500%, 12/15/19§ | 72,000 | 62,820 | ||||||
|
| |||||||
335,581 | ||||||||
|
| |||||||
Total Materials | 2,492,182 | |||||||
|
| |||||||
Telecommunication Services (9.8%) | ||||||||
Diversified Telecommunication Services (4.4%) |
| |||||||
CCO Holdings LLC/CCO Holdings Capital Corp. |
| |||||||
7.375%, 6/1/20 | 27,000 | 28,046 | ||||||
6.500%, 4/30/21 | 25,000 | 25,870 | ||||||
5.875%, 5/1/27§ | 198,000 | 202,950 | ||||||
Columbus International, Inc. | ||||||||
7.375%, 3/30/21§ | 200,000 | 212,440 | ||||||
Intelsat Jackson Holdings S.A. | ||||||||
7.250%, 10/15/20 | 220,000 | 160,600 | ||||||
Intelsat Luxembourg S.A. | ||||||||
8.125%, 6/1/23 | 304,000 | 99,560 |
See Notes to Financial Statements.
66
1290 FUNDS
1290 HIGH YIELD BOND FUND
PORTFOLIO OF INVESTMENTS (Continued)
April 30, 2016 (Unaudited)
Principal Amount | Value (Note 1) | |||||||
Sprint Capital Corp. | ||||||||
8.750%, 3/15/32 | $ | 341,000 | $ | 271,948 | ||||
Windstream Services LLC | ||||||||
7.750%, 10/15/20 | 92,000 | 83,214 | ||||||
6.375%, 8/1/23 | 140,000 | 106,050 | ||||||
|
| |||||||
1,190,678 | ||||||||
|
| |||||||
Wireless Telecommunication Services (5.4%) |
| |||||||
Altice Financing S.A. | ||||||||
7.500%, 5/15/26 (b)§ | 200,000 | 199,760 | ||||||
Digicel Group Ltd. | ||||||||
8.250%, 9/30/20§ | 215,000 | 196,187 | ||||||
Digicel Ltd. | ||||||||
6.750%, 3/1/23§ | 200,000 | 179,875 | ||||||
Sprint Communications, Inc. | ||||||||
9.125%, 3/1/17 | 25,000 | 25,783 | ||||||
Sprint Corp. | ||||||||
7.875%, 9/15/23 | 410,000 | 318,775 | ||||||
7.125%, 6/15/24 | 190,000 | 142,500 | ||||||
Syniverse Holdings, Inc. | ||||||||
9.125%, 1/15/19 | 65,000 | 32,256 | ||||||
T-Mobile USA, Inc. | ||||||||
6.542%, 4/28/20 | 106,000 | 108,915 | ||||||
6.625%, 11/15/20 | 100,000 | 102,810 | ||||||
6.375%, 3/1/25 | 145,000 | 152,613 | ||||||
|
| |||||||
1,459,474 | ||||||||
|
| |||||||
Total Telecommunication Services | 2,650,152 | |||||||
|
| |||||||
Utilities (1.5%) | ||||||||
Independent Power and Renewable Electricity Producers (1.5%) |
| |||||||
AES Corp. | ||||||||
3.635%, 6/1/19(l) | 110,000 | 107,668 | ||||||
Talen Energy Supply LLC | ||||||||
6.500%, 5/1/18 | 71,000 | 72,598 | ||||||
4.625%, 7/15/19 (b)§ | 88,000 | 80,520 | ||||||
4.600%, 12/15/21 | 200,000 | 156,000 | ||||||
|
| |||||||
Total Utilities | 416,786 | |||||||
|
| |||||||
Total Corporate Bonds | 25,873,900 | |||||||
|
| |||||||
Total Long-Term Debt Securities (95.2%) | 25,873,900 | |||||||
|
| |||||||
Number of Shares | Value (Note 1) | |||||||
SHORT-TERM INVESTMENT: | ||||||||
Investment Company (3.4%) | ||||||||
JPMorgan Prime Money Market Fund, Institutional Class Shares | 910,724 | 910,724 | ||||||
|
| |||||||
Total Short-Term Investment (3.4%) | 910,724 | |||||||
|
| |||||||
Total Investments (98.6%) | 26,784,624 | |||||||
Other Assets Less Liabilities (1.4%) | 372,080 | |||||||
|
| |||||||
Net Assets (100%) | $ | 27,156,704 | ||||||
|
|
§ | Securities exempt from registration under Rule 144A of the Securities Act of 1933. These securities may only be resold to qualified institutional buyers. At April 30, 2016, the market value of these securities amounted to $14,541,135 or 53.5% of net assets. Securities denoted with “§” but without “b” have been determined to be liquid under the guidelines established by the Board of Trustees. To the extent any securities might provide a right to demand registration, such rights have not been relied upon when determining liquidity. |
(b) | Illiquid Security. At April 30, 2016, the market value of these securities amounted to $831,031 or 3.1% of net assets. |
(l) | Floating Rate Security. Rate disclosed is as of April 30, 2016. |
Glossary:
PIK | — Payment-in Kind Security |
Country Diversification As a Percentage of Total Net Assets | ||||
Australia | 0.7 | % | ||
Barbados | 0.8 | |||
Bermuda | 2.4 | |||
Canada | 3.2 | |||
Cayman Islands | 0.4 | |||
France | 0.8 | |||
Ireland | 1.2 | |||
Liberia | 0.7 | |||
Luxembourg | 5.8 | |||
Netherlands | 2.3 | |||
United States | 80.3 | |||
Cash and Other | 1.4 | |||
|
| |||
100.0 | % | |||
|
|
See Notes to Financial Statements.
67
1290 FUNDS
1290 HIGH YIELD BOND FUND
PORTFOLIO OF INVESTMENTS (Continued)
April 30, 2016 (Unaudited)
The following is a summary of the inputs used to value the Fund’s assets and liabilities carried at fair value as of April 30, 2016:
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
Various inputs are used in determining the value of the Fund’s investments. These inputs are summarized in the three broad levels listed below:
Investment Type | Level 1 Quoted Prices in Active Markets for Identical Securities | Level 2 Significant Other Observable Inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.) | Level 3 Significant Unobservable Inputs (including the Fund’s own assumptions in determining the fair value of investments) | Total | ||||||||||||
Assets: |
| |||||||||||||||
Corporate Bonds | ||||||||||||||||
Consumer Discretionary | $ | — | $ | 3,961,157 | $ | — | $ | 3,961,157 | ||||||||
Consumer Staples | — | 1,416,522 | — | 1,416,522 | ||||||||||||
Energy | — | 2,832,827 | — | 2,832,827 | ||||||||||||
Financials | — | 2,567,829 | — | 2,567,829 | ||||||||||||
Health Care | — | 2,778,659 | — | 2,778,659 | ||||||||||||
Industrials | — | 4,342,522 | — | 4,342,522 | ||||||||||||
Information Technology | — | 2,415,264 | — | 2,415,264 | ||||||||||||
Materials | — | 2,492,182 | — | 2,492,182 | ||||||||||||
Telecommunication Services | — | 2,650,152 | — | 2,650,152 | ||||||||||||
Utilities | — | 416,786 | — | 416,786 | ||||||||||||
Short-Term Investments | 910,724 | — | — | 910,724 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Assets | $ | 910,724 | $ | 25,873,900 | $ | — | $ | 26,784,624 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total Liabilities | $ | — | $ | — | $ | — | $ | — | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total | $ | 910,724 | $ | 25,873,900 | $ | — | $ | 26,784,624 | ||||||||
|
|
|
|
|
|
|
|
There were no transfers between Levels 1, 2 or 3 during the six months ended April 30, 2016.
The Fund held no derivatives contracts during the six months ended April 30, 2016.
Investment security transactions for the six months ended April 30, 2016 were as follows:
Cost of Purchases: | ||||
Long-term investments other than U.S. government debt securities | $ | 9,964,721 | ||
Net Proceeds of Sales and Redemptions: | ||||
Long-term investments other than U.S. government debt securities | $ | 9,645,971 |
As of April 30, 2016, the gross unrealized appreciation (depreciation) of investments based on the aggregate cost of investments for Federal income tax purposes was as follows:
Aggregate gross unrealized appreciation | $ | 260,203 | ||
Aggregate gross unrealized depreciation | (2,339,255 | ) | ||
|
| |||
Net unrealized depreciation | $ | (2,079,052 | ) | |
|
| |||
Federal income tax cost of investments | $ | 28,863,676 | ||
|
|
See Notes to Financial Statements.
68
1290 FUNDS
1290 HIGH YIELD BOND FUND
STATEMENT OF ASSETS AND LIABILITIES
April 30, 2016 (Unaudited)
ASSETS | ||||
Investments at value (Cost $28,858,583) | $ | 26,784,624 | ||
Cash | 514,413 | |||
Dividends, interest and other receivables | 523,641 | |||
Due from Custodian | 134,400 | |||
Receivable for securities sold | 99,590 | |||
Receivable for Fund shares sold | 62,000 | |||
Other assets | 702 | |||
|
| |||
Total assets | 28,119,370 | |||
|
| |||
LIABILITIES | ||||
Payable for securities purchased | 757,637 | |||
Dividends and distributions payable | 147,648 | |||
Administrative fees payable | 2,402 | |||
Transfer agent fees payable | 852 | |||
Payable for Fund shares redeemed | 718 | |||
Distribution fees payable – Class R | 77 | |||
Distribution fees payable – Class A | 65 | |||
Accrued expenses | 53,267 | |||
|
| |||
Total liabilities | 962,666 | |||
|
| |||
NET ASSETS | $ | 27,156,704 | ||
|
| |||
Net assets were comprised of: | ||||
Paid in capital | $ | 30,826,211 | ||
Accumulated undistributed net investment income (loss) | (160,767 | ) | ||
Accumulated undistributed net realized gain (loss) on investments | (1,434,781 | ) | ||
Net unrealized appreciation (depreciation) on investments | (2,073,959 | ) | ||
|
| |||
Net assets | $ | 27,156,704 | ||
|
| |||
Class A | ||||
Net asset value and redemption price per share, $321,875 / 36,744 shares outstanding (unlimited amount authorized: $0.001 par value) | $ | 8.76 | ||
Maximum sales charge (4.50% of offering price) | 0.41 | |||
|
| |||
Maximum offering price per share | $ | 9.17 | ||
|
| |||
Class C** | ||||
Net asset value per share, $124,318 / 14,192 shares outstanding (unlimited amount authorized: $0.001 par value) (a) | $ | 8.76 | ||
|
| |||
Class I | ||||
Net asset value and redemption price per share, $26,521,443 / 3,027,164 shares outstanding (unlimited amount authorized: $0.001 par value) | $ | 8.76 | ||
|
| |||
Class R | ||||
Net asset value and redemption price per share, $189,068 / 21,583 shares outstanding (unlimited amount authorized: $0.001 par value) | $ | 8.76 | ||
|
|
** | Class C shares currently are not offered for sale. |
(a) | Redemption price for Class C shares varies based on length of time the shares are held. |
STATEMENT OF OPERATIONS
For the Six Months Ended April 30, 2016 (Unaudited)
INVESTMENT INCOME | ||||
Interest | $ | 1,061,864 | ||
Dividends | 629 | |||
|
| |||
Total income | 1,062,493 | |||
|
| |||
EXPENSES | ||||
Investment advisory fees | 78,522 | |||
Professional fees | 45,649 | |||
Administrative fees | 19,631 | |||
Registration and filing fees | 16,723 | |||
Distribution fees – Class R | 16,324 | |||
Transfer agent fees | 14,762 | |||
Distribution fees – Class C | 10,946 | |||
Distribution fees – Class A | 8,243 | |||
Printing and mailing expenses | 7,880 | |||
Offering costs | 4,517 | |||
Custodian fees | 4,202 | |||
Trustees’ fees | 1,585 | |||
Miscellaneous | 9,126 | |||
|
| |||
Gross expenses | 238,110 | |||
Less: Waiver from investment adviser | (95,854 | ) | ||
Waiver from distributor | (10,946 | ) | ||
|
| |||
Net expenses | 131,310 | |||
|
| |||
NET INVESTMENT INCOME (LOSS) | 931,183 | |||
|
| |||
REALIZED AND UNREALIZED GAIN (LOSS) | ||||
Net realized gain (loss) on investments | (937,345 | ) | ||
Net change in unrealized appreciation (depreciation) on investments | 9,520 | |||
|
| |||
NET REALIZED AND UNREALIZED GAIN (LOSS) | (927,825 | ) | ||
|
| |||
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | $ | 3,358 | ||
|
|
See Notes to Financial Statements.
69
1290 FUNDS
1290 HIGH YIELD BOND FUND
STATEMENT OF CHANGES IN NET ASSETS
Six Months Ended April 30, 2016 (Unaudited) | November 12, 2014* to October 31, 2015 | |||||||
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS: |
| |||||||
Net investment income (loss) | $ | 931,183 | $ | 1,814,670 | ||||
Net realized gain (loss) on investments | (937,345 | ) | (497,436 | ) | ||||
Net change in unrealized appreciation (depreciation) on investments | 9,520 | (2,083,479 | ) | |||||
|
|
|
| |||||
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | 3,358 | (766,245 | ) | |||||
|
|
|
| |||||
DIVIDENDS : | ||||||||
Dividends from net investment income | ||||||||
Class A | (306,733 | ) | (543,877 | ) | ||||
Class C | (104,571 | ) | (188,219 | ) | ||||
Class I | (462,630 | ) | (566,312 | ) | ||||
Class R | (296,051 | ) | (521,731 | ) | ||||
|
|
|
| |||||
TOTAL DIVIDENDS : | (1,169,985 | ) | (1,820,139 | ) | ||||
|
|
|
| |||||
CAPITAL SHARES TRANSACTIONS: | ||||||||
Class A | ||||||||
Capital shares sold [ 11,357 and 903,006 shares, respectively ] | 95,821 | 9,028,852 | ||||||
Capital shares issued in reinvestment of dividends[ 390 and 12,168 shares, respectively ] | 3,369 | 117,753 | ||||||
Capital shares repurchased [ (890,138) and (3,039) shares, respectively ] | (7,600,205 | ) | (28,864 | ) | ||||
|
|
|
| |||||
Total Class A transactions | (7,501,015 | ) | 9,117,741 | |||||
|
|
|
| |||||
Class C** | ||||||||
Capital shares sold [ 0 and 300,000 shares, respectively ] | — | 3,000,000 | ||||||
Capital shares issued in reinvestment of dividends[ 0 and 4,194 shares, respectively ] | — | 40,595 | ||||||
Capital shares repurchased [ (290,000) and (1,002) shares, respectively ] | (2,475,997 | ) | (9,518 | ) | ||||
|
|
|
| |||||
Total Class C transactions | (2,475,997 | ) | 3,031,077 | |||||
|
|
|
| |||||
Class I | ||||||||
Capital shares sold [ 2,109,153 and 905,016 shares, respectively ] | 18,011,632 | 9,048,244 | ||||||
Capital shares issued in reinvestment of dividends[ 980 and 12,757 shares, respectively ] | 8,470 | 123,438 | ||||||
Capital shares repurchased [ (722) and (3,020) shares, respectively ] | (9,987 | ) | (28,690 | ) | ||||
|
|
|
| |||||
Total Class I transactions | 18,010,115 | 9,142,992 | ||||||
|
|
|
| |||||
Class R | ||||||||
Capital shares sold [ 0 and 899,999 shares, respectively ] | — | 9,000,000 | ||||||
Capital shares issued in reinvestment of dividends[ 0 and 11,589 shares, respectively ] | — | 112,157 | ||||||
Capital shares repurchased [ (890,000) and (3,005) shares, respectively ] | (7,598,807 | ) | (28,548 | ) | ||||
|
|
|
| |||||
Total Class R transactions | (7,598,807 | ) | 9,083,609 | |||||
|
|
|
| |||||
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM CAPITAL SHARE TRANSACTIONS | 434,296 | 30,375,419 | ||||||
|
|
|
| |||||
TOTAL INCREASE (DECREASE) IN NET ASSETS | (732,331 | ) | 27,789,035 | |||||
NET ASSETS: | ||||||||
Beginning of period | 27,889,035 | 100,000 | ||||||
|
|
|
| |||||
End of period (a) | $ | 27,156,704 | $ | 27,889,035 | ||||
|
|
|
|
| ||||
(a) Includes accumulated undistributed (overdistributed) net investment income (loss) of | $ | (160,767 | ) | $ | 78,035 | |||
|
|
|
| |||||
* The Fund commenced operations on November 12, 2014. | ||||||||
** Class C shares currently are not offered for sale. |
See Notes to Financial Statements.
70
1290 FUNDS
1290 HIGH YIELD BOND FUND
FINANCIAL HIGHLIGHTS
Class A | Six Months Ended April 30, 2016 (Unaudited) | November 12, 2014* to October 31, 2015 | ||||||
Net asset value, beginning of period | $ | 9.15 | $ | 10.00 | ||||
|
|
|
| |||||
Income (loss) from investment operations: | ||||||||
Net investment income (loss) (e) | 0.30 | 0.59 | ||||||
Net realized and unrealized gain (loss) on investments | (0.31 | ) | (0.84 | ) | ||||
|
|
|
| |||||
Total from investment operations | (0.01 | ) | (0.25 | ) | ||||
|
|
|
| |||||
Less distributions: | ||||||||
Dividends from net investment income | (0.38 | ) | (0.60 | ) | ||||
|
|
|
| |||||
Net asset value, end of period | $ | 8.76 | $ | 9.15 | ||||
|
|
|
| |||||
Total return (b) | 0.08 | % | (2.62 | )% | ||||
|
|
|
| |||||
Ratios/Supplemental Data: | ||||||||
Net assets, end of period (000’s) | $ | 322 | $ | 8,372 | ||||
Ratio of expenses to average net assets: | ||||||||
After waivers and reimbursements (a) | 1.06 | % | 1.05 | % | ||||
Before waivers and reimbursements (a) | 1.81 | % | 2.45 | % | ||||
Ratio of net investment income (loss) to average net assets: | ||||||||
After waivers and reimbursements (a) | 7.10 | % | 6.39 | %(l) | ||||
Before waivers and reimbursements (a) | 6.35 | % | 4.99 | %(l) | ||||
Portfolio turnover rate (z)^ | 38 | % | 57 | % | ||||
Class C** | Six Months Ended April 30, 2016 (Unaudited) | November 12, 2014* to October 31, 2015 | ||||||
Net asset value, beginning of period | $ | 9.15 | $ | 10.00 | ||||
|
|
|
| |||||
Income (loss) from investment operations: | ||||||||
Net investment income (loss) (e) | 0.31 | 0.62 | ||||||
Net realized and unrealized gain (loss) on investments | (0.31 | ) | (0.85 | ) | ||||
|
|
|
| |||||
Total from investment operations | — | # | (0.23 | ) | ||||
|
|
|
| |||||
Less distributions: | ||||||||
Dividends from net investment income | (0.39 | ) | (0.62 | ) | ||||
|
|
|
| |||||
Net asset value, end of period | $ | 8.76 | $ | 9.15 | ||||
|
|
|
| |||||
Total return (b) | 0.21 | % | (2.39 | )% | ||||
|
|
|
| |||||
Ratios/Supplemental Data: | ||||||||
Net assets, end of period (000’s) | $ | 124 | $ | 2,783 | ||||
Ratio of expenses to average net assets: | ||||||||
After waivers and reimbursements (a) | 0.81 | % | 0.80 | % | ||||
Before waivers and reimbursements (a) | 2.56 | % | 3.20 | % | ||||
Ratio of net investment income (loss) to average net assets: | ||||||||
After waivers and reimbursements (a) | 7.35 | % | 6.64 | %(l) | ||||
Before waivers and reimbursements (a) | 5.60 | % | 4.24 | %(l) | ||||
Portfolio turnover rate (z)^ | 38 | % | 57 | % |
See Notes to Financial Statements.
71
1290 FUNDS
1290 HIGH YIELD BOND FUND
FINANCIAL HIGHLIGHTS (Continued)
Class I | Six Months Ended April 30, 2016 (Unaudited) | November 12, 2014* to October 31, 2015 | ||||||
Net asset value, beginning of period | $ | 9.15 | $ | 10.00 | ||||
|
|
|
| |||||
Income (loss) from investment operations: | ||||||||
Net investment income (loss) (e) | 0.31 | 0.62 | ||||||
Net realized and unrealized gain (loss) on investments | (0.31 | ) | (0.85 | ) | ||||
|
|
|
| |||||
Total from investment operations | — | # | (0.23 | ) | ||||
|
|
|
| |||||
Less distributions: | ||||||||
Dividends from net investment income | (0.39 | ) | (0.62 | ) | ||||
|
|
|
| |||||
Net asset value, end of period | $ | 8.76 | $ | 9.15 | ||||
|
|
|
| |||||
Total return (b) | 0.21 | % | (2.39 | )% | ||||
|
|
|
| |||||
Ratios/Supplemental Data: | ||||||||
Net assets, end of period (000’s) | $ | 26,521 | $ | 8,395 | ||||
Ratio of expenses to average net assets: | ||||||||
After waivers and reimbursements (a) | 0.83 | % | 0.80 | % | ||||
Before waivers and reimbursements (a) | 1.53 | % | 2.20 | % | ||||
Ratio of net investment income (loss) to average net assets: | ||||||||
After waivers and reimbursements (a) | 7.25 | % | 6.64 | %(l) | ||||
Before waivers and reimbursements (a) | 6.54 | % | 5.24 | %(l) | ||||
Portfolio turnover rate (z)^ | 38 | % | 57 | % | ||||
Class R | Six Months Ended April 30, 2016 (Unaudited) | November 12, 2014* to October 31, 2015 | ||||||
Net asset value, beginning of period | $ | 9.15 | $ | 10.00 | ||||
|
|
|
| |||||
Income (loss) from investment operations: | ||||||||
Net investment income (loss) (e) | 0.29 | 0.57 | ||||||
Net realized and unrealized gain (loss) on investments | (0.31 | ) | (0.85 | ) | ||||
|
|
|
| |||||
Total from investment operations | (0.02 | ) | (0.28 | ) | ||||
|
|
|
| |||||
Less distributions: | ||||||||
Dividends from net investment income | (0.37 | ) | (0.57 | ) | ||||
|
|
|
| |||||
Net asset value, end of period | $ | 8.76 | $ | 9.15 | ||||
|
|
|
| |||||
Total return (b) | (0.04 | )% | (2.86 | )% | ||||
|
|
|
| |||||
Ratios/Supplemental Data: | ||||||||
Net assets, end of period (000’s) | $ | 189 | $ | 8,339 | ||||
Ratio of expenses to average net assets: | ||||||||
After waivers and reimbursements (a) | 1.31 | % | 1.30 | % | ||||
Before waivers and reimbursements (a) | 2.06 | % | 2.70 | % | ||||
Ratio of net investment income (loss) to average net assets: | ||||||||
After waivers and reimbursements (a) | 6.86 | % | 6.14 | %(l) | ||||
Before waivers and reimbursements (a) | 6.10 | % | 4.74 | %(l) | ||||
Portfolio turnover rate (z)^ | 38 | % | 57 | % |
* | Commencement of Operations. |
** | Class C shares currently are not offered for sale. |
^ | Portfolio turnover rate excludes derivatives, if any. |
# | Per share amount is less than $0.005. |
(a) | Ratios for periods less than one year are annualized. |
(b) | Total returns for periods less than one year are not annualized. |
(e) | Net investment income (loss) per share is based on average shares outstanding. |
(l) | The annualized ratio of net investment income to average net assets may not be indicative of operating results for a full year. |
(z) | Portfolio turnover rate for periods less than one year is not annualized. |
See Notes to Financial Statements.
72
1290 MULTI-ALTERNATIVE STRATEGIES FUND (Unaudited)
INVESTMENT ADVISER
Ø | 1290 Asset Managers® |
PERFORMANCE RESULTS
Total Returns as of 4/30/16 | ||||||||||||
6 Months | Since Incept. | |||||||||||
Fund – Class A Shares* | without Sales Charge | 2.28 | % | (0.78 | )% | |||||||
with Sales Charge (a | ) | (3.30 | ) | (6.22 | ) | |||||||
Fund – Class I Shares* | 2.41 | (0.56 | ) | |||||||||
Fund – Class R Shares* | 2.16 | (1.01 | ) | |||||||||
BofA Merrill Lynch 3-Month U.S.Treasury | 0.14 | 0.15 | ||||||||||
* Date of inception 7/6/15
(a) A 5.50% front-end sales charge was deducted.
Returns for periods less than one year are not annualized.
Returns for periods greater than one year are annualized.
|
|
The performance quoted is past performance and is not a guarantee of future results. Mutual funds are subject to certain market risks. Investment returns and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be higher or lower than the performance data shown. For the most current month-end performance data please call 1-888-310-0416 or visit www.1290Funds.com.
Fund performance may reflect the waiver of the Fund’s fees and reimbursement of expenses for certain periods since the inception date. Without these waivers and reimbursements, performance would have been lower. Also, performance shown in this section does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or redemption of Fund shares.
What helped performance during the six-month period ended April 30, 2016:
• | A long investor position in gold was the largest contributor to performance as risk appetite decreased amid market volatility. |
• | Real Estate Investment Trusts (REITs) rallied, outpacing the broader U.S. stock market. |
• | The Fund’s holding in Treasury Inflation-Protected Securities (TIPS) contributed to returns as inflation expectations continued to rise after dovish comments from Federal Reserve Chair Janet Yellen. |
What hurt performance during the six-month period ended April 30, 2016:
• | Commodities lagged other alternative assets in the first quarter, detracting from relative performance for the period, though still generating a positive return. |
• | Exposure to convertibles detracted as the first quarter was characterized by wide swings in market sentiment. |
• | Managed Futures Strategy performance was hurt by the sharp recovery in commodity prices during the second half of the first quarter of 2016. |
Table by Asset Class (as a percentage of Total Investment Companies) | ||||
As of April 30, 2016 | ||||
Alternatives | 91.0 | % | ||
Fixed Income | 9.0 |
Top 10 Holdings (as a percentage of Total Investment Companies) | ||||
As of April 30, 2016 | ||||
SPDR® Barclays Convertible Securities ETF | 9.2 | % | ||
WisdomTree Managed Futures Strategy Fund | 9.1 | |||
IQ Merger Arbitrage ETF | 9.1 | |||
ProShares Hedge Replication ETF | 9.0 | |||
iShares® TIPS Bond ETF | 9.0 | |||
PowerShares DB G10 Currency Harvest Fund | 8.9 | |||
ProShares RAFI Long/Short | 8.5 | |||
PowerShares Multi-Strategy Alternative Portfolio | 8.5 | |||
PowerShares DB Gold Fund | 7.3 | |||
PowerShares DB Commodity Index Tracking Fund | 5.0 | |||
Holdings are subject to change without notice. |
UNDERSTANDING YOUR EXPENSES:
As a shareholder of the Fund, you incur two types of costs:
(1) transaction costs, including applicable sales charges and redemption fees; and (2) ongoing costs, including investment advisory fees, distribution and/or service (12b-1) fees (in the case of Class A and Class R shares of the Fund), and other Fund expenses. These examples are intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The examples are based on an investment of $1,000 invested at the beginning of the six-month period ended April 30, 2016 and held for the entire six-month period.
Actual Expenses
The first line of the following table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the following 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 you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
73
1290 MULTI-ALTERNATIVE STRATEGIES FUND (Unaudited)
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), redemption fees, or exchange fees. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
EXAMPLE
Beginning Account Value 11/1/15 | Ending Account Value 4/30/16 | Expenses Paid During Period* 11/1/15 - 4/30/16 | ||||||||||
Class A |
| |||||||||||
Actual | $1,000.00 | $1,022.84 | $4.87 | |||||||||
Hypothetical (5% average return before expenses) | 1,000.00 | 1,020.05 | 4.86 | |||||||||
Class I | ||||||||||||
Actual | 1,000.00 | 1,024.08 | 3.64 | |||||||||
Hypothetical (5% average return before expenses) | 1,000.00 | 1,021.27 | 3.64 | |||||||||
Class R | ||||||||||||
Actual | 1,000.00 | 1,021.59 | 6.05 | |||||||||
Hypothetical (5% average return before expenses) | 1,000.00 | 1,018.88 | 6.04 | |||||||||
* Expenses are equal to the Fund’s Class A, I and R shares annualized expense ratios of 0.97%, 0.72% and 1.20%, respectively, multiplied by the average account value over the period, and multiplied by 182/366 (to reflect the one-half year period).
|
|
74
1290 FUNDS
1290 MULTI-ALTERNATIVE STRATEGIES FUND
PORTFOLIO OF INVESTMENTS
April 30, 2016 (Unaudited)
Number of Shares | Value (Note 1) | |||||||
INVESTMENT COMPANIES: | ||||||||
IQ Merger Arbitrage ETF | 33,870 | $ | 965,634 | |||||
iShares® Commodities Select Strategy ETF | 11,610 | 374,771 | ||||||
iShares® MSCI Global Agriculture Producers ETF | 6,780 | 158,618 | ||||||
iShares® TIPS Bond ETF | 8,370 | 961,546 | ||||||
PowerShares Multi-Strategy Alternative Portfolio*‡ | 40,170 | 904,628 | ||||||
ProShares Hedge Replication ETF | 22,910 | 961,927 | ||||||
ProShares RAFI Long/Short | 23,100 | 909,447 | ||||||
SPDR® Barclays Convertible Securities ETF | 22,430 | 974,359 | ||||||
Vanguard Global ex-U.S. Real Estate ETF | 9,090 | 496,587 | ||||||
Vanguard REIT ETF | 5,880 | 481,160 | ||||||
WisdomTree Managed Futures Strategy Fund* | 22,610 | 971,099 | ||||||
|
| |||||||
Total Investment Companies (74.7%) | 8,159,776 | |||||||
|
| |||||||
OTHER EXCHANGE TRADED FUNDS (ETFs): |
| |||||||
PowerShares DB Base Metals Fund* | 13,050 | $ | 172,782 | |||||
PowerShares DB Commodity Index Tracking Fund* | 36,200 | 527,796 | ||||||
PowerShares DB G10 Currency Harvest Fund* | 40,320 | 949,133 | ||||||
PowerShares DB Gold Fund* | 18,280 | 773,244 | ||||||
PowerShares DB Silver Fund* | 2,250 | 63,810 | ||||||
|
| |||||||
Total Other Exchange Traded Funds (ETFs) (22.8%) | 2,486,765 | |||||||
|
| |||||||
Total Investments (97.5%) | 10,646,541 | |||||||
Other Assets Less Liabilities (2.5%) | 270,027 | |||||||
|
| |||||||
Net Assets (100%) | $ | 10,916,568 | ||||||
|
|
* | Non-income producing. |
‡ | All, or a portion, of the security is an affiliated company as defined under the Investment Company Act of 1940. |
Investments in companies which were affiliates for the six months ended April 30, 2016, were as follows:
Securities | Value October 31, 2015 | Purchases at Cost | Sales at Cost | Value April 30, 2016 | Dividend Income | Realized Gain (Loss)† | ||||||||||||||||||
PowerShares Multi-Strategy Alternative Portfolio | $ | 882,982 | $ | 24,751 | $ | — | $ | 904,628 | $ | — | $ | — | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
† | When applicable, realized gain includes net distributions of realized gain received from underlying funds. |
The following is a summary of the inputs used to value the Fund’s assets and liabilities carried at fair value as of April 30, 2016:
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
Various inputs are used in determining the value of the Fund’s investments. These inputs are summarized in the three broad levels listed below:
Investment Type | Level 1 Quoted Prices in Active Markets for Identical Securities | Level 2 Significant Other Observable Inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.) | Level 3 Significant Unobservable Inputs (including the Fund’s own assumptions in determining the fair value of investments) | Total | ||||||||||||
Assets: | ||||||||||||||||
Investment Companies | ||||||||||||||||
Exchange Traded Funds (ETFs) | $ | 8,159,776 | $ | — | $ | — | $ | 8,159,776 | ||||||||
Other Exchange Traded Funds (ETFs) | 2,486,765 | — | — | 2,486,765 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Assets | $ | 10,646,541 | $ | — | $ | — | $ | 10,646,541 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total Liabilities | $ | — | $ | — | $ | — | $ | — | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total | $ | 10,646,541 | $ | — | $ | — | $ | 10,646,541 | ||||||||
|
|
|
|
|
|
|
|
See Notes to Financial Statements.
75
1290 FUNDS
1290 MULTI-ALTERNATIVE STRATEGIES FUND
PORTFOLIO OF INVESTMENTS (Continued)
April 30, 2016 (Unaudited)
There were no transfers between Levels 1, 2 or 3 during the six months ended April 30, 2016.
The Fund held no derivatives contracts during the six months ended April 30, 2016.
Investment security transactions for the six months ended April 30, 2016 were as follows:
Cost of Purchases: | ||||
Investment Companies | $ | 878,929 | ||
Net Proceeds of Sales and Redemptions: | ||||
Investment Companies | $ | 155,682 |
As of April 30, 2016, the gross unrealized appreciation (depreciation) of investments based on the aggregate cost of investments for Federal income tax purposes was as follows:
Aggregate gross unrealized appreciation | $ | 167,495 | ||
Aggregate gross unrealized depreciation | (259,419 | ) | ||
|
| |||
Net unrealized depreciation | $ | (91,924 | ) | |
|
| |||
Federal income tax cost of investments | $ | 10,738,465 | ||
|
|
See Notes to Financial Statements.
76
1290 FUNDS
1290 MULTI-ALTERNATIVE STRATEGIES FUND
STATEMENT OF ASSETS AND LIABILITIES
April 30, 2016 (Unaudited)
ASSETS | ||||
Investments at value: | ||||
Affiliated Issuers (Cost $930,073) | $ | 904,628 | ||
Unaffiliated Issuers (Cost $9,808,392) | 9,741,913 | |||
Cash | 122,168 | |||
Receivable for Fund shares sold | 133,500 | |||
Receivable from investment adviser | 7,613 | |||
Deferred offering cost | 5,090 | |||
Other assets | 28,161 | |||
|
| |||
Total assets | 10,943,073 | |||
|
| |||
LIABILITIES | ||||
Trustees’ fees payable | 75 | |||
Distribution fees payable – Class R | 40 | |||
Distribution fees payable – Class A | 29 | |||
Transfer agent fees payable | 28 | |||
Accrued expenses | 26,333 | |||
|
| |||
Total liabilities | 26,505 | |||
|
| |||
NET ASSETS | $ | 10,916,568 | ||
|
| |||
Net assets were comprised of: | ||||
Paid in capital | $ | 11,030,302 | ||
Accumulated undistributed net investment income (loss) | (44,003 | ) | ||
Accumulated undistributed net realized gain (loss) on investments | 22,193 | |||
Net unrealized appreciation (depreciation) on investments | (91,924 | ) | ||
|
| |||
Net assets | $ | 10,916,568 | ||
|
| |||
Class A | ||||
Net asset value and redemption price per share, $152,368 / 15,463 shares outstanding (unlimited amount authorized: $0.001 par value) | $ | 9.85 | ||
Maximum sales charge (5.50% of offering price) | 0.57 | |||
|
| |||
Maximum offering price per share | $ | 10.42 | ||
|
| |||
Class I | ||||
Net asset value and redemption price per share, $10,665,757 / 1,081,683 shares outstanding (unlimited amount authorized: $0.001 par value) | $ | 9.86 | ||
|
| |||
Class R | ||||
Net asset value and redemption price per share, $98,443 / 10,000 shares outstanding (unlimited amount authorized: $0.001 par value) | $ | 9.84 | ||
|
|
STATEMENT OF OPERATIONS
For the Six Months Ended April 30, 2016 (Unaudited)
INVESTMENT INCOME | ||||
Dividends | $ | 76,208 | ||
Interest | 99 | |||
|
| |||
Total income | 76,307 | |||
|
| |||
EXPENSES | ||||
Professional fees | 27,971 | |||
Investment management fees | 25,322 | |||
Offering costs | 13,827 | |||
Registration and filing fees | 12,030 | |||
Transfer agent fees | 11,267 | |||
Administrative fees | 7,597 | |||
Printing and mailing expenses | 3,003 | |||
Custodian fees | 984 | |||
Trustees’ fees | 603 | |||
Distribution fees – Class R | 237 | |||
Distribution fees – Class A | 146 | |||
Miscellaneous | 2,866 | |||
|
| |||
Gross expenses | 105,853 | |||
Less: Waiver from investment adviser | (32,919 | ) | ||
Reimbursement from investment manager | (35,954 | ) | ||
|
| |||
Net expenses | 36,980 | |||
|
| |||
NET INVESTMENT INCOME (LOSS) | 39,327 | |||
|
| |||
REALIZED AND UNREALIZED GAIN (LOSS) | ||||
Net realized gain (loss) on investments | (450 | ) | ||
Net distributions of realized gain received from underlying funds | 22,643 | |||
|
| |||
Net realized gain (loss) | 22,193 | |||
|
| |||
Net change in unrealized appreciation (depreciation) on investments (($3,105) of change in unrealized appreciation (depreciation) from affiliates) | 199,331 | |||
|
| |||
NET REALIZED AND UNREALIZED GAIN (LOSS) | 221,524 | |||
|
| |||
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | $ | 260,851 | ||
|
|
See Notes to Financial Statements.
77
1290 FUNDS
1290 MULTI-ALTERNATIVE STRATEGIES FUND
STATEMENT OF CHANGES IN NET ASSETS
Six Months Ended April 30, 2016 (Unaudited) | July 6, 2015* to October 31, 2015 | |||||||
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS: |
| |||||||
Net investment income (loss) | $ | 39,327 | $ | (1,245 | ) | |||
Net realized gain (loss) on investments and net distributions of realized gain received from underlying funds | 22,193 | — | ||||||
Net change in unrealized appreciation (depreciation) on investments | 199,331 | (291,255 | ) | |||||
|
|
|
| |||||
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | 260,851 | (292,500 | ) | |||||
|
|
|
| |||||
DIVIDENDS : | ||||||||
Dividends from net investment income | ||||||||
Class A | (818 | ) | — | |||||
Class I | (83,945 | ) | — | |||||
Class R | (569 | ) | — | |||||
|
|
|
| |||||
TOTAL DIVIDENDS : | (85,332 | ) | — | |||||
|
|
|
| |||||
CAPITAL SHARES TRANSACTIONS: | ||||||||
Class A | ||||||||
Capital shares sold [ 3,950 and 11,499 shares, respectively ] | 38,226 | 114,431 | ||||||
Capital shares issued in reinvestment of dividends [ 14 and 0 shares, respectively ] | 132 | — | ||||||
|
|
|
| |||||
Total Class A transactions | 38,358 | 114,431 | ||||||
|
|
|
| |||||
Class I | ||||||||
Capital shares sold [ 93,238 and 987,889 shares, respectively ] | 898,459 | 9,877,050 | ||||||
Capital shares issued in reinvestment of dividends [ 556 and 0 shares, respectively ] | 5,251 | — | ||||||
|
|
|
| |||||
Total Class I transactions | 903,710 | 9,877,050 | ||||||
|
|
|
| |||||
Class R | ||||||||
Capital shares sold [ 0 and 10,000 shares, respectively ] | — | 100,000 | ||||||
|
|
|
| |||||
Total Class R transactions | — | 100,000 | ||||||
|
|
|
| |||||
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM CAPITAL SHARE TRANSACTIONS | 942,068 | 10,091,481 | ||||||
|
|
|
| |||||
TOTAL INCREASE (DECREASE) IN NET ASSETS | 1,117,587 | 9,798,981 | ||||||
NET ASSETS: | ||||||||
Beginning of period | 9,798,981 | — | ||||||
|
|
|
| |||||
End of period (a) | $ | 10,916,568 | $ | 9,798,981 | ||||
|
|
|
|
| ||||
(a) Includes accumulated undistributed (overdistributed) net investment income (loss) of | $ | (44,003 | ) | $ | 2,002 | |||
|
|
|
| |||||
* The Fund commenced operations on July 6, 2015. |
See Notes to Financial Statements.
78
1290 FUNDS
1290 MULTI-ALTERNATIVE STRATEGIES FUND
FINANCIAL HIGHLIGHTS
Class A | Six Months Ended April 30, 2016 (Unaudited) | July 6, 2015* to October 31, 2015 | ||||||
Net asset value, beginning of period | $ | 9.70 | $ | 10.00 | ||||
|
|
|
| |||||
Income (loss) from investment operations: | ||||||||
Net investment income (loss) (e)(x) | 0.02 | (0.01 | ) | |||||
Net realized and unrealized gain (loss) on investments | 0.20 | (0.29 | ) | |||||
|
|
|
| |||||
Total from investment operations | 0.22 | (0.30 | ) | |||||
|
|
|
| |||||
Less distributions: | ||||||||
Dividends from net investment income | (0.07 | ) | — | |||||
|
|
|
| |||||
Net asset value, end of period | $ | 9.85 | $ | 9.70 | ||||
|
|
|
| |||||
Total return (b) | 2.28 | % | (3.00 | )% | ||||
|
|
|
| |||||
Ratios/Supplemental Data: | ||||||||
Net assets, end of period (000’s) | $ | 152 | $ | 112 | ||||
Ratio of expenses to average net assets: | ||||||||
After waivers and reimbursements (a)(f) | 0.97 | %(j) | 0.96 | %(j) | ||||
Before waivers and reimbursements (a)(f) | 2.34 | % | 2.26 | % | ||||
Ratio of net investment income (loss) to average net assets: | ||||||||
After waivers and reimbursements (a)(f)(x) | 0.50 | % | (0.25 | )%(l) | ||||
Before waivers and reimbursements (a)(f)(x) | (0.87 | )% | (1.55 | )%(l) | ||||
Portfolio turnover rate (z)^ | 2 | % | 0 | % | ||||
Class I | Six Months Ended April 30, 2016 (Unaudited) | July 6, 2015* to October 31, 2015 | ||||||
Net asset value, beginning of period | $ | 9.71 | $ | 10.00 | ||||
|
|
|
| |||||
Income (loss) from investment operations: | ||||||||
Net investment income (loss) (e)(x) | 0.04 | — | # | |||||
Net realized and unrealized gain (loss) on investments | 0.19 | (0.29 | ) | |||||
|
|
|
| |||||
Total from investment operations | 0.23 | (0.29 | ) | |||||
|
|
|
| |||||
Less distributions: | ||||||||
Dividends from net investment income | (0.08 | ) | — | |||||
|
|
|
| |||||
Net asset value, end of period | $ | 9.86 | $ | 9.71 | ||||
|
|
|
| |||||
Total return (b) | 2.41 | % | (2.90 | )% | ||||
|
|
|
| |||||
Ratios/Supplemental Data: | ||||||||
Net assets, end of period (000’s) | $ | 10,666 | $ | 9,591 | ||||
Ratio of expenses to average net assets: | ||||||||
After waivers and reimbursements (a)(f) | 0.72 | %(j) | 0.72 | %(j) | ||||
Before waivers and reimbursements (a)(f) | 2.08 | % | 1.97 | % | ||||
Ratio of net investment income (loss) to average net assets: | ||||||||
After waivers and reimbursements (a)(f)(x) | 0.78 | % | (0.03 | )%(l) | ||||
Before waivers and reimbursements (a)(f)(x) | (0.58 | )% | (1.29 | )%(l) | ||||
Portfolio turnover rate (z)^ | 2 | % | 0 | % |
See Notes to Financial Statements.
79
1290 FUNDS
1290 MULTI-ALTERNATIVE STRATEGIES FUND
FINANCIAL HIGHLIGHTS (Continued)
Class R | Six Months Ended April 30, 2016 (Unaudited) | July 6, 2015* to October 31, 2015 | ||||||
Net asset value, beginning of period | $ | 9.69 | $ | 10.00 | ||||
|
|
|
| |||||
Income (loss) from investment operations: | ||||||||
Net investment income (loss) (e)(x) | 0.01 | (0.02 | ) | |||||
Net realized and unrealized gain (loss) on investments | 0.20 | (0.29 | ) | |||||
|
|
|
| |||||
Total from investment operations | 0.21 | (0.31 | ) | |||||
|
|
|
| |||||
Less distributions: | ||||||||
Dividends from net investment income | (0.06 | ) | — | |||||
|
|
|
| |||||
Net asset value, end of period | $ | 9.84 | $ | 9.69 | ||||
|
|
|
| |||||
Total return (b) | 2.16 | % | (3.10 | )% | ||||
|
|
|
| |||||
Ratios/Supplemental Data: | ||||||||
Net assets, end of period (000’s) | $ | 98 | $ | 97 | ||||
Ratio of expenses to average net assets: | ||||||||
After waivers and reimbursements (a)(f) | 1.20 | %(j) | 1.21 | %(j) | ||||
Before waivers and reimbursements (a)(f) | 2.58 | % | 2.47 | % | ||||
Ratio of net investment income (loss) to average net assets: | ||||||||
After waivers and reimbursements (a)(f)(x) | 0.30 | % | (0.53 | )%(l) | ||||
Before waivers and reimbursements (a)(f)(x) | (1.08 | )% | (1.78 | )%(l) | ||||
Portfolio turnover rate (z)^ | 2 | % | 0 | % |
* | Commencement of Operations. |
# | Per share amount is less than $0.005. |
^ | Portfolio turnover rate excludes derivatives, if any. |
(a) | Ratios for periods less than one year are annualized. |
(b) | Total returns for periods less than one year are not annualized. |
(e) | Net investment income (loss) per share is based on average shares outstanding. |
(f) | Expenses do not include the expenses of the underlying funds (“indirect expenses”). |
(j) | Including direct and indirect expenses, the net expense ratio after waivers would be 1.65% for Class A, 1.40% for Class I and 1.90% for Class R. |
(l) | The annualized ratio of net investment income to average net assets may not be indicative of operating results for a full year. |
(x) | Recognition of net investment income is affected by the timing of dividend declarations by the underlying funds in which the Fund invests. |
(z) | Portfolio turnover rate for periods less than one year is not annualized. |
See Notes to Financial Statements.
80
1290 SMARTBETA EQUITY FUND (Unaudited)
INVESTMENT ADVISER
Ø | 1290 Asset Managers® |
INVESTMENT SUB-ADVISER
Ø | AXA Rosenberg Investment Management LLC |
PERFORMANCE RESULTS
Total Returns as of 4/30/16 | ||||||||||||||||
6 Months | 1 Year | Since Incept. | ||||||||||||||
Fund – Class A Shares* | without Sales Charge | 1.48 | % | 1.18 | % | 2.87 | % | |||||||||
with Sales Charge (a | ) | (4.14 | ) | (4.40 | ) | (1.02 | ) | |||||||||
Fund – Class C Shares*† | without Sales Charge | 1.54 | 1.34 | 3.07 | ||||||||||||
with Sales Charge | 0.54 | (b) | 0.35 | (b) | 3.07 | |||||||||||
Fund – Class I Shares* | 1.64 | 1.44 | 3.14 | |||||||||||||
Fund – Class R Shares* | 1.32 | 0.92 | 2.59 | |||||||||||||
MSCI World (Net) Index | (1.05 | ) | (4.17 | ) | 0.14 | |||||||||||
* Date of inception 11/12/14.
† Class C Shares currently are not offered for sale.
(a) A 5.50% front-end sales charge was deducted.
(b) A 1.00% front end sales charge was deducted.
Returns for periods less than one year are not annualized.
Returns for periods greater than one year are annualized. |
|
The performance quoted is past performance and is not a guarantee of future results. Mutual funds are subject to certain market risks. Investment returns and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be higher or lower than the performance data shown. For the most current month-end performance data please call 1-888-310-0416 or visit www.1290Funds.com.
Fund performance may reflect the waiver of the Fund’s fees and reimbursement of expenses for certain periods since the inception date. Without these waivers and reimbursements, performance would have been lower. Also, performance shown in this section does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or redemption of Fund shares.
AXA Rosenberg Investment Management LLC
Overview — AXA Rosenberg Investment Management LLC
During the six month period ended April 30, 2016, low volatility equities outperformed high volatility equities, particularly at the beginning of 2016, as growing fears of a slowdown in the global economy led to increased bouts of market volatility and investors showed a preference for more defensive investment styles. Having underperformed in 2015, value styles stabilized in early 2016, particularly those focused on high dividend yield stocks.
We believe that the late-stage earnings expansion phase that dominated 2015 will continue into 2016. In decelerating growth environments like these, investors have historically rewarded stocks that continue to deliver earnings — those with ‘quality’ profiles — because of their earnings growth predictability and stability. In the near-term, therefore, there appears to be a case to be made for investing in these quality stocks; we believe this should prove beneficial for the Fund’s strategic focus on companies with higher earnings sustainability. We also believe that further bouts of market-wide volatility are likely as markets react and adjust to central bank policy changes and unstable commodity prices. The strategy’s long-term focus, lower volatility profile and high level of diversification are designed to attempt to limit the impact of these events on the risk/return outcome of the fund.
Fund Highlights
What helped performance during the six-month period ended April 30, 2016:
• | Companies with higher levels of earnings quality, as measured by our proprietary Earnings Sustainability filter, were rewarded over the period, which was beneficial for the Fund’s performance. At an individual stock level, the positions in McDonald’s Corp. and TransCanada Corp., which the strategy measured as having high earnings quality, were among the largest contributors to performance over the period. |
• | Over the period low volatility equities outperformed high volatility names, particularly during the opening months of 2016 when markets fell sharply, and rising market volatility meant the defensive attributes of low volatility equity were rewarded. This trend meant the strategy’s avoidance of companies with higher volatility such as Apple, Inc. and Bank of America Corp. was rewarded. |
What hurt performance during the six-month period ended April 30, 2016:
• | After several quarters in which the Fund’s low exposure to energy stocks benefited returns, this underweight positioning hurt performance toward the end of the period under review as the sector rallied amid a recovery in oil prices. Lower-than-benchmark positions in Chevron Corp. and Royal Dutch Shell plc were among the largest detractors from performance at a stock level. |
• | At an individual stock level, not holding Amazon.com, Inc. or Facebook, Inc. weighed on performance as both stocks rallied. The strategy filtered out these names on the basis of their perceived high volatility and speculative valuations. |
Sector Weightings as of April 30, 2016 | % of Net Assets | |||
Consumer Staples | 18.4 | % | ||
Financials | 16.5 | |||
Industrials | 14.7 | |||
Health Care | 12.8 | |||
Consumer Discretionary | 12.0 | |||
Information Technology | 9.2 | |||
Utilities | 6.5 | |||
Materials | 3.5 | |||
Telecommunication Services | 2.7 | |||
Energy | 1.8 | |||
Investment Company | 0.3 | |||
Cash and Other | 1.6 | |||
|
| |||
100.0 | % | |||
|
| |||
Holdings are subject to change without notice. |
81
1290 SMARTBETA EQUITY FUND (Unaudited)
UNDERSTANDING YOUR EXPENSES:
As a shareholder of the Fund, you incur two types of costs:
(1) transaction costs, including applicable sales charges and redemption fees; and (2) ongoing costs, including investment advisory fees, distribution and/or service (12b-1) fees (in the case of Class A, Class C and Class R shares of the Fund), and other Fund expenses. These examples are intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The examples are based on an investment of $1,000 invested at the beginning of the six-month period ended April 30, 2016 and held for the entire six-month period.
Actual Expenses
The first line of the following table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the following 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 you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
EXAMPLE
Beginning Account Value 11/1/15 | Ending Account Value 4/30/16 | Expenses Paid During Period* 11/1/15 - 4/30/16 | ||||||||||
Class A | ||||||||||||
Actual | $1,000.00 | $1,014.77 | $6.76 | |||||||||
Hypothetical (5% average return before expenses) | 1,000.00 | 1,018.15 | 6.77 | |||||||||
Class C** |
| |||||||||||
Actual | 1,000.00 | 1,015.40 | 5.51 | |||||||||
Hypothetical (5% average return before expenses) | 1,000.00 | 1,019.39 | 5.52 | |||||||||
Class I |
| |||||||||||
Actual | 1,000.00 | 1,016.39 | 5.51 | |||||||||
Hypothetical (5% average return before expenses) | 1,000.00 | 1,019.39 | 5.52 | |||||||||
Class R |
| |||||||||||
Actual | 1,000.00 | 1,013.17 | 8.01 | |||||||||
Hypothetical (5% average return before expenses) | 1,000.00 | 1,016.91 | 8.02 | |||||||||
* Expenses are equal to the Fund’s Class A, C, I and R shares annualized expense ratios of 1.35%, 1.10%, 1.10% and 1.60%, respectively, multiplied by the average account value over the period, and multiplied by 182/366 (to reflect the one-half year period).
** Class C shares currently are not offered for sale. |
|
82
1290 FUNDS
1290 SMARTBETA EQUITY FUND
PORTFOLIO OF INVESTMENTS
April 30, 2016 (Unaudited)
Number of Shares | Value (Note 1) | |||||||
COMMON STOCKS: | ||||||||
Consumer Discretionary (12.0%) | ||||||||
Auto Components (0.6%) | ||||||||
Bridgestone Corp. | 600 | $ | 22,609 | |||||
Continental AG | 70 | 15,373 | ||||||
Delphi Automotive plc | 200 | 14,726 | ||||||
Valeo S.A. | 90 | 14,268 | ||||||
|
| |||||||
66,976 | ||||||||
|
| |||||||
Automobiles (0.6%) | ||||||||
Fuji Heavy Industries Ltd. | 400 | 13,486 | ||||||
General Motors Co. | 900 | 28,620 | ||||||
Isuzu Motors Ltd. | 1,000 | 10,933 | ||||||
Toyota Motor Corp. | 300 | 15,471 | ||||||
|
| |||||||
68,510 | ||||||||
|
| |||||||
Distributors (0.3%) | ||||||||
Genuine Parts Co. | 300 | 28,791 | ||||||
|
| |||||||
Hotels, Restaurants & Leisure (2.3%) | ||||||||
Compass Group plc | 2,000 | 35,623 | ||||||
InterContinental Hotels Group plc | 200 | 7,975 | ||||||
McDonald’s Corp. | 700 | 88,543 | ||||||
Oriental Land Co., Ltd. | 100 | 7,050 | ||||||
Sodexo S.A. | 100 | 10,098 | ||||||
Starbucks Corp. | 800 | 44,984 | ||||||
Tatts Group Ltd. | 2,200 | 6,306 | ||||||
TUI AG | 500 | 7,240 | ||||||
Whitbread plc | 200 | 11,315 | ||||||
Yum! Brands, Inc. | 400 | 31,824 | ||||||
|
| |||||||
250,958 | ||||||||
|
| |||||||
Household Durables (0.2%) | ||||||||
Barratt Developments plc | 800 | 6,224 | ||||||
Persimmon plc | 300 | 8,710 | ||||||
Taylor Wimpey plc | 3,000 | 8,079 | ||||||
Techtronic Industries Co., Ltd. | 500 | 1,879 | ||||||
|
| |||||||
24,892 | ||||||||
|
| |||||||
Leisure Products (0.2%) | ||||||||
Shimano, Inc. | 100 | 14,726 | ||||||
|
| |||||||
Media (1.8%) | ||||||||
Comcast Corp., Class A | 400 | 24,304 | ||||||
DISH Network Corp., Class A* | 200 | 9,858 | ||||||
ITV plc | 2,000 | 6,581 | ||||||
Omnicom Group, Inc. | 200 | 16,594 | ||||||
Publicis Groupe S.A. | 200 | 14,801 | ||||||
SES S.A. (FDR) | 400 | 10,912 | ||||||
Singapore Press Holdings Ltd. | 2,000 | 6,038 | ||||||
Sky plc | 600 | 8,228 | ||||||
Thomson Reuters Corp. | 700 | 28,810 | ||||||
Walt Disney Co. | 400 | 41,304 | ||||||
Wolters Kluwer N.V. | 400 | 15,222 | ||||||
WPP plc | 400 | 9,328 | ||||||
|
| |||||||
191,980 | ||||||||
|
| |||||||
Multiline Retail (0.6%) | ||||||||
Dollar General Corp. | 300 | 24,573 | ||||||
Dollar Tree, Inc.* | 200 | 15,942 | ||||||
Next plc | 240 | 17,832 | ||||||
Target Corp. | 100 | 7,950 | ||||||
|
| |||||||
66,297 | ||||||||
|
| |||||||
Specialty Retail (4.2%) | ||||||||
Advance Auto Parts, Inc. | 100 | $ | 15,610 | |||||
AutoZone, Inc.* | 100 | 76,523 | ||||||
Hennes & Mauritz AB, Class B* | 1,000 | 35,552 | ||||||
Home Depot, Inc. | 700 | 93,723 | ||||||
Industria de Diseno Textil S.A. | 1,000 | 32,102 | ||||||
L Brands, Inc. | 200 | 15,658 | ||||||
Lowe’s Cos., Inc. | 500 | 38,010 | ||||||
Nitori Holdings Co., Ltd. | 100 | 9,433 | ||||||
O’Reilly Automotive, Inc.* | 100 | 26,268 | ||||||
Ross Stores, Inc. | 400 | 22,712 | ||||||
TJX Cos., Inc. | 900 | 68,238 | ||||||
Tractor Supply Co. | 100 | 9,466 | ||||||
USS Co., Ltd. | 500 | 8,048 | ||||||
|
| |||||||
451,343 | ||||||||
|
| |||||||
Textiles, Apparel & Luxury Goods (1.2%) |
| |||||||
Burberry Group plc | 400 | 6,949 | ||||||
Cie Financiere Richemont S.A. (Registered) | 200 | 13,302 | ||||||
Coach, Inc. | 200 | 8,054 | ||||||
Hanesbrands, Inc. | 300 | 8,709 | ||||||
Luxottica Group S.p.A. | 300 | 16,341 | ||||||
NIKE, Inc., Class B | 700 | 41,258 | ||||||
Under Armour, Inc., Class A* | 100 | 4,394 | ||||||
Under Armour, Inc., Class C* | 100 | 4,080 | ||||||
VF Corp. | 400 | 25,220 | ||||||
|
| |||||||
128,307 | ||||||||
|
| |||||||
Total Consumer Discretionary | 1,292,780 | |||||||
|
| |||||||
Consumer Staples (18.4%) | ||||||||
Beverages (3.6%) | ||||||||
Anheuser-Busch InBev S.A./N.V. | 200 | 24,756 | ||||||
Asahi Group Holdings Ltd. | 600 | 19,417 | ||||||
Brown-Forman Corp., Class B | 200 | 19,264 | ||||||
Coca-Cola Co. | 2,100 | 94,080 | ||||||
Constellation Brands, Inc., Class A | 100 | 15,606 | ||||||
Diageo plc | 1,800 | 48,551 | ||||||
Dr. Pepper Snapple Group, Inc. | 300 | 27,273 | ||||||
Heineken N.V. | 200 | 18,744 | ||||||
Monster Beverage Corp.* | 100 | 14,422 | ||||||
PepsiCo, Inc. | 900 | 92,664 | ||||||
Pernod-Ricard S.A. | 100 | 10,796 | ||||||
|
| |||||||
385,573 | ||||||||
|
| |||||||
Food & Staples Retailing (3.4%) | ||||||||
Alimentation Couche-Tard, Inc., Class B | 300 | 13,151 | ||||||
Costco Wholesale Corp. | 500 | 74,065 | ||||||
CVS Health Corp. | 800 | 80,400 | ||||||
Koninklijke Ahold N.V. | 1,200 | 26,107 | ||||||
Kroger Co. | 800 | 28,312 | ||||||
Lawson, Inc. | 100 | 7,882 | ||||||
Metro, Inc. | 200 | 6,693 | ||||||
Seven & i Holdings Co., Ltd. | 700 | 29,180 | ||||||
Sysco Corp. | 900 | 41,463 | ||||||
Wal-Mart Stores, Inc. | 400 | 26,748 | ||||||
Wesfarmers Ltd. | 400 | 13,008 | ||||||
Woolworths Ltd. | 800 | 13,449 | ||||||
|
| |||||||
360,458 | ||||||||
|
|
See Notes to Financial Statements.
83
1290 FUNDS
1290 SMARTBETA EQUITY FUND
PORTFOLIO OF INVESTMENTS (Continued)
April 30, 2016 (Unaudited)
Number of Shares | Value (Note 1) | |||||||
Food Products (3.4%) | ||||||||
Campbell Soup Co. | 200 | $ | 12,342 | |||||
ConAgra Foods, Inc. | 200 | 8,912 | ||||||
General Mills, Inc. | 900 | 55,206 | ||||||
Hershey Co. | 200 | 18,622 | ||||||
Hormel Foods Corp. | 500 | 19,275 | ||||||
J.M. Smucker Co. | 200 | 25,396 | ||||||
Kellogg Co. | 300 | 23,043 | ||||||
Kerry Group plc, Class A | 300 | 26,749 | ||||||
McCormick & Co., Inc. (Non-Voting) | 200 | 18,756 | ||||||
Mead Johnson Nutrition Co. | 200 | 17,430 | ||||||
Mondelez International, Inc., Class A | 1,600 | 68,736 | ||||||
Nestle S.A. (Registered) | 1,000 | 74,534 | ||||||
|
| |||||||
369,001 | ||||||||
|
| |||||||
Household Products (3.4%) | ||||||||
Church & Dwight Co., Inc. | 200 | 18,540 | ||||||
Clorox Co. | 200 | 25,046 | ||||||
Colgate-Palmolive Co. | 900 | 63,828 | ||||||
Henkel AG & Co. KGaA (Preference) (q) | 300 | 34,241 | ||||||
Kimberly-Clark Corp. | 500 | 62,595 | ||||||
Procter & Gamble Co. | 1,300 | 104,156 | ||||||
Reckitt Benckiser Group plc | 600 | 58,335 | ||||||
|
| |||||||
366,741 | ||||||||
|
| |||||||
Personal Products (1.9%) | ||||||||
Beiersdorf AG | 100 | 8,972 | ||||||
Estee Lauder Cos., Inc., Class A | 200 | 19,174 | ||||||
Kao Corp. | 600 | 33,693 | ||||||
L’Oreal S.A. | 270 | 48,987 | ||||||
Unilever N.V. (CVA) | 1,200 | 52,716 | ||||||
Unilever plc | 1,000 | 44,631 | ||||||
|
| |||||||
208,173 | ||||||||
|
| |||||||
Tobacco (2.7%) | ||||||||
Altria Group, Inc. | 1,300 | 81,523 | ||||||
British American Tobacco plc | 900 | 54,837 | ||||||
Imperial Brands plc | 600 | 32,600 | ||||||
Japan Tobacco, Inc. | 600 | 24,981 | ||||||
Philip Morris International, Inc. | 800 | 78,496 | ||||||
Reynolds American, Inc. | 300 | 14,880 | ||||||
|
| |||||||
287,317 | ||||||||
|
| |||||||
Total Consumer Staples | 1,977,263 | |||||||
|
| |||||||
Energy (1.8%) | ||||||||
Oil, Gas & Consumable Fuels (1.8%) |
| |||||||
Exxon Mobil Corp. | 1,200 | 106,080 | ||||||
Total S.A. | 900 | 45,272 | ||||||
TransCanada Corp. | 1,100 | 45,676 | ||||||
|
| |||||||
Total Energy | 197,028 | |||||||
|
| |||||||
Financials (16.5%) | ||||||||
Banks (7.4%) | ||||||||
Australia & New Zealand Banking Group Ltd. | 700 | 12,918 | ||||||
Bank of Montreal | 900 | 58,632 | ||||||
Bank of Nova Scotia | 1,600 | 83,908 | ||||||
BB&T Corp. | 400 | 14,152 | ||||||
Canadian Imperial Bank of Commerce | 700 | $ | 56,538 | |||||
Commonwealth Bank of Australia | 400 | 22,473 | ||||||
Concordia Financial Group Ltd.* | 2,000 | 9,632 | ||||||
DBS Group Holdings Ltd. | 1,000 | 11,362 | ||||||
Hang Seng Bank Ltd. | 800 | 14,542 | ||||||
Lloyds Banking Group plc | 24,000 | 23,520 | ||||||
M&T Bank Corp. | 200 | 23,664 | ||||||
Mizuho Financial Group, Inc. | 7,300 | 11,174 | ||||||
National Bank of Canada | 500 | 17,869 | ||||||
Nordea Bank AB | 2,000 | 19,414 | ||||||
Oversea-Chinese Banking Corp., Ltd. | 1,000 | 6,521 | ||||||
PNC Financial Services Group, Inc. | 400 | 35,112 | ||||||
Resona Holdings, Inc. | 1,500 | 5,392 | ||||||
Royal Bank of Canada | 1,400 | 86,943 | ||||||
Shizuoka Bank Ltd. | 1,000 | 7,559 | ||||||
Sumitomo Mitsui Financial Group, Inc. | 400 | 12,417 | ||||||
Svenska Handelsbanken AB, Class A | 1,200 | 15,974 | ||||||
Toronto-Dominion Bank | 1,800 | 80,123 | ||||||
U.S. Bancorp | 1,800 | 76,842 | ||||||
United Overseas Bank Ltd. | 1,000 | 13,830 | ||||||
Wells Fargo & Co. | 1,500 | 74,970 | ||||||
|
| |||||||
795,481 | ||||||||
|
| |||||||
Capital Markets (0.4%) | ||||||||
T. Rowe Price Group, Inc. | 200 | 15,058 | ||||||
UBS Group AG (Registered) | 1,800 | 31,148 | ||||||
|
| |||||||
46,206 | ||||||||
|
| |||||||
Consumer Finance (0.9%) | ||||||||
American Express Co. | 700 | 45,801 | ||||||
Discover Financial Services | 400 | 22,508 | ||||||
Provident Financial plc | 200 | 8,516 | ||||||
Synchrony Financial* | 800 | 24,456 | ||||||
|
| |||||||
101,281 | ||||||||
|
| |||||||
Diversified Financial Services (1.6%) |
| |||||||
ASX Ltd. | 200 | 6,650 | ||||||
Berkshire Hathaway, Inc., Class B* | 700 | 101,836 | ||||||
Deutsche Boerse AG | 200 | 16,418 | ||||||
Moody’s Corp. | 200 | 19,144 | ||||||
S&P Global, Inc. | 200 | 21,370 | ||||||
Singapore Exchange Ltd. | 1,000 | 5,599 | ||||||
|
| |||||||
171,017 | ||||||||
|
| |||||||
Insurance (3.6%) | ||||||||
AIA Group Ltd. | 2,400 | 14,449 | ||||||
Allianz SE (Registered) | 160 | 27,161 | ||||||
Allstate Corp. | 200 | 13,010 | ||||||
Aon plc | 300 | 31,536 | ||||||
Arch Capital Group Ltd.* | 200 | 14,098 | ||||||
Cincinnati Financial Corp. | 200 | 13,202 | ||||||
Hannover Rueck SE | 100 | 11,402 | ||||||
Insurance Australia Group Ltd. | 1,400 | 6,142 | ||||||
Intact Financial Corp. | 200 | 14,800 | ||||||
Marsh & McLennan Cos., Inc. | 700 | 44,205 | ||||||
Medibank Pvt Ltd. | 1,800 | 4,298 |
See Notes to Financial Statements.
84
1290 FUNDS
1290 SMARTBETA EQUITY FUND
PORTFOLIO OF INVESTMENTS (Continued)
April 30, 2016 (Unaudited)
Number of Shares | Value (Note 1) | |||||||
Muenchener Rueckversicherungs-Gesellschaft AG in Muenchen (Registered) | 140 | $ | 25,962 | |||||
Progressive Corp. | 900 | 29,340 | ||||||
Prudential plc | 900 | 17,720 | ||||||
Sampo Oyj, Class A | 600 | 26,197 | ||||||
SCOR SE | 400 | 13,619 | ||||||
Suncorp Group Ltd. | 300 | 2,851 | ||||||
Swiss Reinsurance AG | 400 | 35,484 | ||||||
T&D Holdings, Inc. | 400 | 3,936 | ||||||
Tokio Marine Holdings, Inc. | 300 | 10,030 | ||||||
Travelers Cos., Inc. | 100 | 10,990 | ||||||
Zurich Insurance Group AG* | 50 | 11,191 | ||||||
|
| |||||||
381,623 | ||||||||
|
| |||||||
Real Estate Investment Trusts (REITs) (2.0%) |
| |||||||
British Land Co. plc (REIT) | 700 | 7,354 | ||||||
CapitaLand Mall Trust (REIT) | 3,000 | 4,618 | ||||||
Dexus Property Group (REIT) | 1,200 | 7,683 | ||||||
Equity Residential (REIT) | 200 | 13,614 | ||||||
GPT Group (REIT) | 3,000 | 11,474 | ||||||
Public Storage (REIT) | 200 | 48,962 | ||||||
Scentre Group (REIT) | 5,300 | 18,900 | ||||||
Simon Property Group, Inc. (REIT) | 300 | 60,351 | ||||||
Stockland (REIT) | 1,300 | 4,319 | ||||||
Unibail-Rodamco SE (REIT) | 100 | 26,794 | ||||||
Westfield Corp. (REIT) | 1,000 | 7,679 | ||||||
|
| |||||||
211,748 | ||||||||
|
| |||||||
Real Estate Management & Development (0.6%) |
| |||||||
Brookfield Asset Management, Inc., Class A | 800 | 27,034 | ||||||
Daito Trust Construction Co., Ltd. | 100 | 14,358 | ||||||
Daiwa House Industry Co., Ltd. | 1,000 | 27,016 | ||||||
|
| |||||||
68,408 | ||||||||
|
| |||||||
Total Financials | 1,775,764 | |||||||
|
| |||||||
Health Care (12.8%) | ||||||||
Biotechnology (1.8%) | ||||||||
Actelion Ltd. (Registered)* | 100 | 16,157 | ||||||
Amgen, Inc. | 300 | 47,490 | ||||||
Biogen, Inc.* | 100 | 27,499 | ||||||
Celgene Corp.* | 400 | 41,364 | ||||||
CSL Ltd. | 200 | 15,995 | ||||||
Gilead Sciences, Inc. | 500 | 44,105 | ||||||
|
| |||||||
192,610 | ||||||||
|
| |||||||
Health Care Equipment & Supplies (2.4%) |
| |||||||
Becton Dickinson and Co. | 200 | 32,252 | ||||||
C.R. Bard, Inc. | 100 | 21,217 | ||||||
Coloplast A/S, Class B | 200 | 14,998 | ||||||
Edwards Lifesciences Corp.* | 200 | 21,242 | ||||||
Hoya Corp. | 400 | 15,614 | ||||||
Medtronic plc | 600 | 47,490 | ||||||
Smith & Nephew plc | 1,000 | 16,891 | ||||||
St. Jude Medical, Inc. | 300 | 22,860 | ||||||
Stryker Corp. | 400 | 43,604 | ||||||
Sysmex Corp. | 100 | 6,360 | ||||||
Zimmer Biomet Holdings, Inc. | 100 | 11,577 | ||||||
|
| |||||||
254,105 | ||||||||
|
| |||||||
Health Care Providers & Services (2.0%) |
| |||||||
AmerisourceBergen Corp. | 100 | $ | 8,510 | |||||
Cardinal Health, Inc. | 400 | 31,384 | ||||||
Fresenius SE & Co. KGaA | 400 | 29,093 | ||||||
HCA Holdings, Inc.* | 300 | 24,186 | ||||||
Henry Schein, Inc.* | 100 | 16,870 | ||||||
McKesson Corp. | 200 | 33,564 | ||||||
Ramsay Health Care Ltd. | 100 | 4,939 | ||||||
UnitedHealth Group, Inc. | 500 | 65,840 | ||||||
|
| |||||||
214,386 | ||||||||
|
| |||||||
Life Sciences Tools & Services (0.2%) |
| |||||||
Thermo Fisher Scientific, Inc. | 100 | 14,425 | ||||||
Waters Corp.* | 100 | 13,016 | ||||||
|
| |||||||
27,441 | ||||||||
|
| |||||||
Pharmaceuticals (6.4%) |
| |||||||
AbbVie, Inc. | 400 | 24,400 | ||||||
Astellas Pharma, Inc. | 1,400 | 19,284 | ||||||
AstraZeneca plc | 200 | 11,479 | ||||||
Bayer AG (Registered) | 360 | 41,531 | ||||||
Eli Lilly & Co. | 900 | 67,977 | ||||||
GlaxoSmithKline plc | 2,400 | 51,164 | ||||||
Johnson & Johnson | 1,000 | 112,080 | ||||||
Merck & Co., Inc. | 1,500 | 82,260 | ||||||
Novartis AG (Registered) | 600 | 45,783 | ||||||
Novo Nordisk A/S, Class B | 800 | 44,667 | ||||||
Pfizer, Inc. | 2,700 | 88,317 | ||||||
Roche Holding AG | 200 | 50,558 | ||||||
Sanofi | 200 | 16,514 | ||||||
Shire plc | 300 | 18,678 | ||||||
Zoetis, Inc. | 400 | 18,812 | ||||||
|
| |||||||
693,504 | ||||||||
|
| |||||||
Total Health Care | 1,382,046 | |||||||
|
| |||||||
Industrials (14.7%) | ||||||||
Aerospace & Defense (4.2%) |
| |||||||
Airbus Group SE | 400 | 25,012 | ||||||
BAE Systems plc | 2,000 | 13,948 | ||||||
Boeing Co. | 400 | 53,920 | ||||||
General Dynamics Corp. | 300 | 42,156 | ||||||
Honeywell International, Inc. | 500 | 57,135 | ||||||
Lockheed Martin Corp. | 300 | 69,714 | ||||||
Northrop Grumman Corp. | 300 | 61,878 | ||||||
Raytheon Co. | 300 | 37,905 | ||||||
Rockwell Collins, Inc. | 200 | 17,638 | ||||||
Rolls-Royce Holdings plc*† | 56,800 | 83 | ||||||
Rolls-Royce Holdings plc* | 800 | 7,826 | ||||||
Safran S.A. | 200 | 13,780 | ||||||
Singapore Technologies Engineering Ltd. | 2,000 | 4,789 | ||||||
United Technologies Corp. | 400 | 41,748 | ||||||
|
| |||||||
447,532 | ||||||||
|
| |||||||
Air Freight & Logistics (1.0%) |
| |||||||
Deutsche Post AG (Registered) | 1,200 | 35,231 | ||||||
United Parcel Service, Inc., Class B | 700 | 73,549 | ||||||
|
| |||||||
108,780 | ||||||||
|
| |||||||
Airlines (0.0%) | ||||||||
Japan Airlines Co., Ltd. | 100 | 3,665 | ||||||
|
|
See Notes to Financial Statements.
85
1290 FUNDS
1290 SMARTBETA EQUITY FUND
PORTFOLIO OF INVESTMENTS (Continued)
April 30, 2016 (Unaudited)
Number of Shares | Value (Note 1) | |||||||
Building Products (0.6%) | ||||||||
Assa Abloy AB, Class B | 1,200 | $ | 25,164 | |||||
Daikin Industries Ltd. | 200 | 16,213 | ||||||
Geberit AG (Registered) | 50 | 19,196 | ||||||
|
| |||||||
60,573 | ||||||||
|
| |||||||
Commercial Services & Supplies (1.0%) |
| |||||||
Brambles Ltd. | 1,300 | 12,336 | ||||||
Cintas Corp. | 100 | 8,978 | ||||||
Republic Services, Inc. | 400 | 18,828 | ||||||
Secom Co., Ltd. | 300 | 23,350 | ||||||
Stericycle, Inc.* | 100 | 9,556 | ||||||
Waste Management, Inc. | 600 | 35,274 | ||||||
|
| |||||||
108,322 | ||||||||
|
| |||||||
Construction & Engineering (0.1%) |
| |||||||
Vinci S.A. | 200 | 14,941 | ||||||
|
| |||||||
Electrical Equipment (0.7%) |
| |||||||
AMETEK, Inc. | 200 | 9,618 | ||||||
Emerson Electric Co. | 500 | 27,315 | ||||||
Legrand S.A. | 300 | 17,086 | ||||||
Mitsubishi Electric Corp. | 1,000 | 10,898 | ||||||
Rockwell Automation, Inc. | 100 | 11,347 | ||||||
|
| |||||||
76,264 | ||||||||
|
| |||||||
Industrial Conglomerates (1.4%) |
| |||||||
3M Co. | 300 | 50,214 | ||||||
CK Hutchison Holdings Ltd. | 684 | 8,201 | ||||||
Danaher Corp. | 200 | 19,350 | ||||||
Keihan Holdings Co., Ltd. | 2,000 | 14,619 | ||||||
Roper Technologies, Inc. | 100 | 17,609 | ||||||
Siemens AG (Registered) | 400 | 41,735 | ||||||
|
| |||||||
151,728 | ||||||||
|
| |||||||
Machinery (1.7%) | ||||||||
Atlas Copco AB, Class A | 700 | 18,114 | ||||||
Cummins, Inc. | 100 | 11,703 | ||||||
Deere & Co. | 300 | 25,233 | ||||||
FANUC Corp. | 100 | 15,081 | ||||||
Illinois Tool Works, Inc. | 300 | 31,356 | ||||||
Kone Oyj, Class B | 300 | 13,686 | ||||||
Kubota Corp. | 1,000 | 15,021 | ||||||
Makita Corp. | 100 | 6,359 | ||||||
Schindler Holding AG | 100 | 18,211 | ||||||
SMC Corp. | 100 | 24,938 | ||||||
|
| |||||||
179,702 | ||||||||
|
| |||||||
Marine (0.1%) | ||||||||
Kuehne + Nagel International AG (Registered) | 100 | 14,406 | ||||||
|
| |||||||
Professional Services (0.8%) |
| |||||||
Capita plc | 500 | 7,313 | ||||||
Equifax, Inc. | 200 | 24,050 | ||||||
Experian plc | 400 | 7,312 | ||||||
Intertek Group plc | 200 | 9,518 | ||||||
SGS S.A. (Registered) | 7 | 15,404 | ||||||
Verisk Analytics, Inc.* | 300 | 23,274 | ||||||
|
| |||||||
86,871 | ||||||||
|
| |||||||
Road & Rail (2.2%) | ||||||||
Canadian National Railway Co. | 900 | $ | 55,419 | |||||
Canadian Pacific Railway Ltd. | 100 | 14,428 | ||||||
Central Japan Railway Co. | 100 | 17,828 | ||||||
ComfortDelGro Corp., Ltd. | 3,000 | 6,447 | ||||||
East Japan Railway Co. | 300 | 27,028 | ||||||
Hankyu Hanshin Holdings, Inc. | 1,000 | 6,396 | ||||||
MTR Corp., Ltd. | 2,500 | 12,376 | ||||||
Nagoya Railroad Co., Ltd. | 1,000 | 5,122 | ||||||
Tobu Railway Co., Ltd. | 3,000 | 15,560 | ||||||
Union Pacific Corp. | 600 | 52,338 | ||||||
West Japan Railway Co. | 300 | 18,434 | ||||||
|
| |||||||
231,376 | ||||||||
|
| |||||||
Trading Companies & Distributors (0.9%) |
| |||||||
Ashtead Group plc | 600 | 7,956 | ||||||
Brenntag AG | 200 | 11,727 | ||||||
Bunzl plc | 600 | 17,876 | ||||||
Fastenal Co. | 200 | 9,358 | ||||||
ITOCHU Corp. | 1,500 | 19,338 | ||||||
Mitsui & Co., Ltd. | 800 | 9,831 | ||||||
W.W. Grainger, Inc. | 100 | 23,452 | ||||||
|
| |||||||
99,538 | ||||||||
|
| |||||||
Transportation Infrastructure (0.0%) |
| |||||||
Transurban Group | 300 | 2,641 | ||||||
|
| |||||||
Total Industrials | 1,586,339 | |||||||
|
| |||||||
Information Technology (9.2%) | ||||||||
Communications Equipment (0.5%) |
| |||||||
Cisco Systems, Inc. | 1,600 | 43,984 | ||||||
Motorola Solutions, Inc. | 100 | 7,519 | ||||||
|
| |||||||
51,503 | ||||||||
|
| |||||||
Electronic Equipment, Instruments & Components (0.3%) |
| |||||||
Amphenol Corp., Class A | 300 | 16,749 | ||||||
Murata Manufacturing Co., Ltd. | 100 | 13,338 | ||||||
|
| |||||||
30,087 | ||||||||
|
| |||||||
Internet Software & Services (0.3%) |
| |||||||
Alphabet, Inc., Class A* | 30 | 21,236 | ||||||
Yahoo! Japan Corp. | 1,300 | 5,914 | ||||||
|
| |||||||
27,150 | ||||||||
|
| |||||||
IT Services (4.2%) |
| |||||||
Accenture plc, Class A | 400 | 45,168 | ||||||
Amadeus IT Holding S.A., Class A | 400 | 18,202 | ||||||
Automatic Data Processing, Inc. | 700 | 61,908 | ||||||
Cognizant Technology Solutions Corp., Class A* | 400 | 23,348 | ||||||
Fiserv, Inc.* | 300 | 29,316 | ||||||
International Business Machines Corp. | 500 | 72,970 | ||||||
MasterCard, Inc., Class A | 700 | 67,893 | ||||||
Nomura Research Institute Ltd. | 300 | 10,716 | ||||||
Obic Co., Ltd. | 100 | 5,324 | ||||||
Paychex, Inc. | 500 | 26,060 | ||||||
Visa, Inc., Class A | 1,200 | 92,688 | ||||||
|
| |||||||
453,593 | ||||||||
|
|
See Notes to Financial Statements.
86
1290 FUNDS
1290 SMARTBETA EQUITY FUND
PORTFOLIO OF INVESTMENTS (Continued)
April 30, 2016 (Unaudited)
Number of Shares | Value (Note 1) | |||||||
Semiconductors & Semiconductor Equipment (1.3%) |
| |||||||
ARM Holdings plc | 1,200 | $ | 16,438 | |||||
Broadcom Ltd. | 200 | 29,150 | ||||||
Lam Research Corp. | 100 | 7,640 | ||||||
Linear Technology Corp. | 200 | 8,896 | ||||||
QUALCOMM, Inc. | 600 | 30,312 | ||||||
Texas Instruments, Inc. | 700 | 39,928 | ||||||
Xilinx, Inc. | 200 | 8,616 | ||||||
|
| |||||||
140,980 | ||||||||
|
| |||||||
Software (1.9%) |
| |||||||
Electronic Arts, Inc.* | 300 | 18,555 | ||||||
Intuit, Inc. | 300 | 30,267 | ||||||
Microsoft Corp. | 1,200 | 59,844 | ||||||
Oracle Corp. | 1,200 | 47,832 | ||||||
SAP SE | 500 | 39,115 | ||||||
Synopsys, Inc.* | 200 | 9,504 | ||||||
|
| |||||||
205,117 | ||||||||
|
| |||||||
Technology Hardware, Storage & Peripherals (0.7%) |
| |||||||
Apple, Inc. | 600 | 56,244 | ||||||
Canon, Inc. | 800 | 22,899 | ||||||
|
| |||||||
79,143 | ||||||||
|
| |||||||
Total Information Technology | 987,573 | |||||||
|
| |||||||
Materials (3.5%) | ||||||||
Chemicals (3.2%) | ||||||||
Air Liquide S.A. | 400 | 45,344 | ||||||
E.I. du Pont de Nemours & Co. | 400 | 26,364 | ||||||
Ecolab, Inc. | 400 | 45,992 | ||||||
Givaudan S.A. (Registered) | 9 | 17,732 | ||||||
International Flavors & Fragrances, Inc. | 100 | 11,947 | ||||||
Johnson Matthey plc | 200 | 8,437 | ||||||
Kuraray Co., Ltd. | 500 | 6,440 | ||||||
LyondellBasell Industries N.V., Class A | 200 | 16,534 | ||||||
Monsanto Co. | 300 | 28,104 | ||||||
Novozymes A/S, Class B | 400 | 19,170 | ||||||
PPG Industries, Inc. | 200 | 22,078 | ||||||
Praxair, Inc. | 400 | 46,984 | ||||||
Sherwin-Williams Co. | 100 | 28,731 | ||||||
Shin-Etsu Chemical Co., Ltd. | 200 | 11,373 | ||||||
Symrise AG | 200 | 13,250 | ||||||
|
| |||||||
348,480 | ||||||||
|
| |||||||
Construction Materials (0.1%) |
| |||||||
James Hardie Industries plc (CDI) | 400 | 5,635 | ||||||
|
| |||||||
Containers & Packaging (0.2%) |
| |||||||
Amcor Ltd. | 1,500 | 17,564 | ||||||
|
| |||||||
Total Materials | 371,679 | |||||||
|
| |||||||
Telecommunication Services (2.7%) | ||||||||
Diversified Telecommunication Services (2.2%) |
| |||||||
AT&T, Inc. | 2,000 | 77,640 | ||||||
BT Group plc | 4,000 | 25,903 | ||||||
Deutsche Telekom AG (Registered) | 700 | 12,251 | ||||||
Nippon Telegraph & Telephone Corp. | 600 | 26,923 | ||||||
Singapore Telecommunications Ltd. | 8,000 | $ | 22,962 | |||||
Swisscom AG (Registered) | 30 | 15,214 | ||||||
Telia Co. AB | 3,000 | 14,327 | ||||||
Telstra Corp., Ltd. | 4,900 | 19,970 | ||||||
Verizon Communications, Inc. | 500 | 25,470 | ||||||
|
| |||||||
240,660 | ||||||||
|
| |||||||
Wireless Telecommunication Services (0.5%) |
| |||||||
KDDI Corp. | 600 | 17,458 | ||||||
NTT DoCoMo, Inc. | 1,500 | 35,903 | ||||||
|
| |||||||
53,361 | ||||||||
|
| |||||||
Total Telecommunication Services | 294,021 | |||||||
|
| |||||||
Utilities (6.5%) | ||||||||
Electric Utilities (3.3%) |
| |||||||
American Electric Power Co., Inc. | 700 | 44,450 | ||||||
CLP Holdings Ltd. | 2,000 | 18,499 | ||||||
Duke Energy Corp. | 500 | 39,390 | ||||||
Eversource Energy | 400 | 22,576 | ||||||
NextEra Energy, Inc. | 500 | 58,790 | ||||||
PG&E Corp. | 200 | 11,640 | ||||||
PPL Corp. | 600 | 22,584 | ||||||
Southern Co. | 1,200 | 60,120 | ||||||
SSE plc | 1,200 | 26,476 | ||||||
Terna Rete Elettrica Nazionale S.p.A. | 3,000 | 16,915 | ||||||
Xcel Energy, Inc. | 800 | 32,024 | ||||||
|
| |||||||
353,464 | ||||||||
|
| |||||||
Gas Utilities (0.5%) |
| |||||||
Hong Kong & China Gas Co., Ltd. | 6,000 | 11,200 | ||||||
Osaka Gas Co., Ltd. | 3,000 | 10,980 | ||||||
Snam S.p.A. | 3,000 | 18,309 | ||||||
Tokyo Gas Co., Ltd. | 3,000 | 13,411 | ||||||
|
| |||||||
53,900 | ||||||||
|
| |||||||
Multi-Utilities (2.4%) |
| |||||||
AGL Energy Ltd. | 600 | 8,344 | ||||||
Ameren Corp. | 200 | 9,600 | ||||||
CMS Energy Corp. | 400 | 16,272 | ||||||
Consolidated Edison, Inc. | 300 | 22,380 | ||||||
Dominion Resources, Inc. | 800 | 57,176 | ||||||
DTE Energy Co. | 300 | 26,748 | ||||||
National Grid plc | 3,000 | 42,730 | ||||||
Public Service Enterprise Group, Inc. | 300 | 13,839 | ||||||
SCANA Corp. | 100 | 6,869 | ||||||
Sempra Energy | 400 | 41,340 | ||||||
WEC Energy Group, Inc. | 200 | 11,642 | ||||||
|
| |||||||
256,940 | ||||||||
|
| |||||||
Water Utilities (0.3%) |
| |||||||
American Water Works Co., Inc. | 300 | 21,828 | ||||||
Severn Trent plc | 300 | 9,762 | ||||||
United Utilities Group plc | 600 | 8,237 | ||||||
|
| |||||||
39,827 | ||||||||
|
| |||||||
Total Utilities | 704,131 | |||||||
|
| |||||||
Total Common Stocks (98.1%) | 10,568,624 | |||||||
|
|
See Notes to Financial Statements.
87
1290 FUNDS
1290 SMARTBETA EQUITY FUND
PORTFOLIO OF INVESTMENTS (Continued)
April 30, 2016 (Unaudited)
Number of Shares | Value (Note 1) | |||||||
SHORT-TERM INVESTMENT: |
| |||||||
Investment Company (0.3%) | ||||||||
JPMorgan Prime Money Market Fund, Institutional Class Shares | 37,176 | $ | 37,176 | |||||
|
| |||||||
Total Short-Term Investment (0.3%) | 37,176 | |||||||
|
| |||||||
Total Investments (98.4%) | 10,605,800 | |||||||
Other Assets Less Liabilities (1.6%) | 169,164 | |||||||
|
| |||||||
Net Assets (100%) | $ | 10,774,964 | ||||||
|
|
* | Non-income producing. |
† | Security (totaling $83 or 0.0% of net assets) held at fair value by management. |
(q) | Preference Shares are a special type of equity investment that shares in the earnings of the company, has limited voting rights, and receives a greater dividend than applicable Common Shares. |
Glossary:
CDI | — Chess Depositary Interest |
CVA | — Dutch Certification |
FDR | — Finnish Depositary Receipt |
Country Diversification As a Percentage of Total Net Assets | ||||
Australia | 2.0 | % | ||
Belgium | 0.2 | |||
Bermuda | 0.1 | |||
Canada | 5.2 | |||
Denmark | 0.7 | |||
Finland | 0.4 | |||
France | 3.0 | |||
Germany | 3.4 | |||
Hong Kong | 0.8 | |||
Ireland | 1.4 | |||
Italy | 0.5 | |||
Japan | 7.3 | |||
Luxembourg | 0.1 | |||
Netherlands | 0.6 | |||
Singapore | 1.0 | |||
Spain | 0.5 | |||
Sweden | 1.2 | |||
Switzerland | 3.5 | |||
United Kingdom | 7.5 | |||
United States | 59.0 | |||
Cash and Other | 1.6 | |||
|
| |||
100.0 | % | |||
|
|
Foreign cash on the statement of assets and liabilities is maintained at JPMorgan or its affiliates and is comprised of the following (in USD): AUD 3,172, CAD 2,957, CHF 5,366, DKK 15,762, EUR 2,633, GBP 4,335, HKD 5,221, JPY 24,595, NOK 15,501, SEK 1,363, and SGD 1,694.
See Notes to Financial Statements.
88
1290 FUNDS
1290 SMARTBETA EQUITY FUND
PORTFOLIO OF INVESTMENTS (Continued)
April 30, 2016 (Unaudited)
The following is a summary of the inputs used to value the Fund’s assets and liabilities carried at fair value as of April 30, 2016:
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
Various inputs are used in determining the value of the Fund’s investments. These inputs are summarized in the three broad levels listed below:
Investment Type | Level 1 Quoted Prices in Active Markets for Identical Securities | Level 2 Significant Other Observable Inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.) | Level 3 assumptions in | Total | ||||||||||||
Assets: | ||||||||||||||||
Common Stocks | ||||||||||||||||
Consumer Discretionary | $ | 864,746 | $ | 428,034 | $ | — | $ | 1,292,780 | ||||||||
Consumer Staples | 1,270,097 | 707,166 | — | 1,977,263 | ||||||||||||
Energy | 151,756 | 45,272 | — | 197,028 | ||||||||||||
Financials | 1,180,068 | 595,696 | — | 1,775,764 | ||||||||||||
Health Care | 962,341 | 419,705 | — | 1,382,046 | ||||||||||||
Industrials | 934,343 | 651,913 | 83 | 1,586,339 | ||||||||||||
Information Technology | 855,627 | 131,946 | — | 987,573 | ||||||||||||
Materials | 226,734 | 144,945 | — | 371,679 | ||||||||||||
Telecommunication Services | 103,110 | 190,911 | — | 294,021 | ||||||||||||
Utilities | 519,268 | 184,863 | — | 704,131 | ||||||||||||
Short-Term Investments | 37,176 | — | — | 37,176 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Assets | $ | 7,105,266 | $ | 3,500,451 | $ | 83 | $ | 10,605,800 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total Liabilities | $ | — | $ | — | $ | — | $ | — | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total | $ | 7,105,266 | $ | 3,500,451 | $ | 83 | $ | 10,605,800 | ||||||||
|
|
|
|
|
|
|
|
There were no transfers between Levels 1, 2 or 3 during the six months ended April 30, 2016.
The Fund held no derivatives contracts during the six months ended April 30, 2016.
Investment security transactions for the six months ended April 30, 2016 were as follows:
Cost of Purchases: | ||||
Long-term investments other than U.S. government debt securities | $ | 1,572,691 | ||
Net Proceeds of Sales and Redemptions: | ||||
Long-term investments other than U.S. government debt securities | $ | 1,405,316 |
As of April 30, 2016, the gross unrealized appreciation (depreciation) of investments based on the aggregate cost of investments for Federal income tax purposes was as follows:
Aggregate gross unrealized appreciation | $ | 780,648 | ||
Aggregate gross unrealized depreciation | (404,580 | ) | ||
|
| |||
Net unrealized appreciation | $ | 376,068 | ||
|
| |||
Federal income tax cost of investments | $ | 10,229,732 | ||
|
|
See Notes to Financial Statements.
89
1290 FUNDS
1290 SMARTBETA EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES
April 30, 2016 (Unaudited)
ASSETS | ||||
Investments at value (Cost $10,227,477) | $ | 10,605,800 | ||
Cash | 5,000 | |||
Foreign cash (Cost $79,649) | 82,599 | |||
Receivable for Fund shares sold | 73,726 | |||
Dividends, interest and other receivables | 32,473 | |||
Receivable from investment adviser | 3,364 | |||
Other assets | 283 | |||
|
| |||
Total assets | 10,803,245 | |||
|
| |||
LIABILITIES | ||||
Transfer agent fees payable | 676 | |||
Distribution fees payable – Class R | 45 | |||
Distribution fees payable – Class A | 41 | |||
Accrued expenses | 27,519 | |||
|
| |||
Total liabilities | 28,281 | |||
|
| |||
NET ASSETS | $ | 10,774,964 | ||
|
| |||
Net assets were comprised of: | ||||
Paid in capital | $ | 10,474,452 | ||
Accumulated undistributed net investment income (loss) | 45,242 | |||
Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions | (126,672 | ) | ||
Net unrealized appreciation (depreciation) on investments and foreign currency translations | 381,942 | |||
|
| |||
Net assets | $ | 10,774,964 | ||
|
| |||
Class A | ||||
Net asset value and redemption price per share, $236,184 / 23,073 shares outstanding (unlimited amount authorized: $0.001 par value) | $ | 10.24 | ||
Maximum sales charge (5.50% of offering price) | 0.60 | |||
|
| |||
Maximum offering price per share | $ | 10.84 | ||
|
| |||
Class C** | ||||
Net asset value per share, $105,832 / 10,332 shares outstanding (unlimited amount authorized: $0.001 par value) (a) | $ | 10.24 | ||
|
| |||
Class I | ||||
Net asset value and redemption price per share, $10,322,610 / 1,007,592 shares outstanding (unlimited amount authorized: $0.001 par value) | $ | 10.24 | ||
|
| |||
Class R | ||||
Net asset value and redemption price per share, $110,338 / 10,787 shares outstanding (unlimited amount authorized: $0.001 par value) | $ | 10.23 | ||
|
|
** | Class C shares currently are not offered for sale. |
(a) | Redemption price for Class C shares varies based on length of time the shares are held. |
STATEMENT OF OPERATIONS
For the Six Months Ended April 30, 2016 (Unaudited)
INVESTMENT INCOME | ||||
Dividends (net of $7,161 foreign withholding tax) | $ | 136,288 | ||
|
| |||
EXPENSES | ||||
Investment advisory fees | 35,548 | |||
Professional fees | 30,814 | |||
Registration and filing fees | 15,302 | |||
Transfer agent fees | 14,650 | |||
Administrative fees | 7,617 | |||
Distribution fees – Class R | 6,192 | |||
Custodian fees | 5,631 | |||
Offering costs | 4,501 | |||
Distribution fees – Class C | 4,196 | |||
Distribution fees – Class A | 3,183 | |||
Printing and mailing expenses | 2,991 | |||
Trustees’ fees | 600 | |||
Miscellaneous | 8,124 | |||
|
| |||
Gross expenses | 139,349 | |||
Less: Waiver from investment adviser | (43,165 | ) | ||
Waiver from distributor | (4,196 | ) | ||
Reimbursement from investment adviser | (26,814 | ) | ||
|
| |||
Net expenses | 65,174 | |||
|
| |||
NET INVESTMENT INCOME (LOSS) | 71,114 | |||
|
| |||
REALIZED AND UNREALIZED GAIN (LOSS) | ||||
Realized gain (loss) on: | ||||
Investments | (100,890 | ) | ||
Foreign currency transactions | 2,023 | |||
|
| |||
Net realized gain (loss) | (98,867 | ) | ||
|
| |||
Change in unrealized appreciation (depreciation) on: | ||||
Investments | 187,780 | |||
Foreign currency translations | 2,825 | |||
|
| |||
Net change in unrealized appreciation (depreciation) | 190,605 | |||
|
| |||
NET REALIZED AND UNREALIZED GAIN (LOSS) | 91,738 | |||
|
| |||
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | $ | 162,852 | ||
|
|
See Notes to Financial Statements.
90
1290 FUNDS
1290 SMARTBETA EQUITY FUND
STATEMENT OF CHANGES IN NET ASSETS
Six Months Ended April 30, 2016 (Unaudited) | November 12, 2014* to October 31, 2015 | |||||||
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS: |
| |||||||
Net investment income (loss) | $ | 71,114 | $ | 114,706 | ||||
Net realized gain (loss) on investments and foreign currency transactions | (98,867 | ) | (35,562 | ) | ||||
Net change in unrealized appreciation (depreciation) on investments and foreign currency translations | 190,605 | 191,337 | ||||||
|
|
|
| |||||
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | 162,852 | 270,481 | ||||||
|
|
|
| |||||
DIVIDENDS: | ||||||||
Dividends from net investment income | ||||||||
Class A | (45,245 | ) | (8,917 | ) | ||||
Class C | (17,317 | ) | (3,310 | ) | ||||
Class I | (54,271 | ) | (9,973 | ) | ||||
Class R | (36,365 | ) | (7,860 | ) | ||||
|
|
|
| |||||
TOTAL DIVIDENDS: | (153,198 | ) | (30,060 | ) | ||||
|
|
|
| |||||
CAPITAL SHARES TRANSACTIONS: | ||||||||
Class A | ||||||||
Capital shares sold [ 9,085 and 302,997 shares, respectively ] | 91,424 | 3,029,603 | ||||||
Capital shares issued in reinvestment of dividends [ 111 and 894 shares, respectively ] | 1,104 | 8,917 | ||||||
Capital shares repurchased [ (290,014) and (3,000) shares, respectively ] | (2,947,306 | ) | (29,250 | ) | ||||
|
|
|
| |||||
Total Class A transactions | (2,854,778 | ) | 3,009,270 | |||||
|
|
|
| |||||
Class C** | ||||||||
Capital shares sold [ 0 and 100,000 shares, respectively ] | — | 1,000,000 | ||||||
Capital shares issued in reinvestment of dividends [ 0 and 332 shares, respectively ] | — | 3,310 | ||||||
Capital shares repurchased [ (90,000) and (1,000) shares, respectively ] | (915,126 | ) | (9,760 | ) | ||||
|
|
|
| |||||
Total Class C transactions | (915,126 | ) | 993,550 | |||||
|
|
|
| |||||
Class I | ||||||||
Capital shares sold [ 693,650 and 313,048 shares, respectively ] | 7,047,132 | 3,132,516 | ||||||
Capital shares issued in reinvestment of dividends [ 234 and 999 shares, respectively ] | 2,319 | 9,973 | ||||||
Capital shares repurchased [ (10) and (3,329) shares, respectively ] | (371 | ) | (32,668 | ) | ||||
|
|
|
| |||||
Total Class I transactions | 7,049,080 | 3,109,821 | ||||||
|
|
|
| |||||
Class R | ||||||||
Capital shares sold [ 0 and 300,000 shares, respectively ] | — | 3,000,000 | ||||||
Capital shares issued in reinvestment of dividends [ 0 and 787 shares, respectively ] | — | 7,860 | ||||||
Capital shares repurchased [ (290,000) and (3,000) shares, respectively ] | (2,945,538 | ) | (29,250 | ) | ||||
|
|
|
| |||||
Total Class R transactions | (2,945,538 | ) | 2,978,610 | |||||
|
|
|
| |||||
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM CAPITAL SHARE TRANSACTIONS | 333,638 | 10,091,251 | ||||||
|
|
|
| |||||
TOTAL INCREASE (DECREASE) IN NET ASSETS | 343,292 | 10,331,672 | ||||||
NET ASSETS: | ||||||||
Beginning of period | 10,431,672 | 100,000 | ||||||
|
|
|
| |||||
End of period (a) | $ | 10,774,964 | $ | 10,431,672 | ||||
|
|
|
|
| ||||
(a) Includes accumulated undistributed (overdistributed) net investment income (loss) of | $ | 45,242 | $ | 127,326 | ||||
|
|
|
| |||||
* The Fund commenced operations on November 12, 2014. | ||||||||
** Class C shares currently are not offered for sale. |
See Notes to Financial Statements.
91
1290 FUNDS
1290 SMARTBETA EQUITY FUND
FINANCIAL HIGHLIGHTS
Class A | Six Months Ended April 30, 2016 (Unaudited) | November 12, 2014* to October 31, 2015 | ||||||
Net asset value, beginning of period | $ | 10.24 | $ | 10.00 | ||||
|
|
|
| |||||
Income (loss) from investment operations: | ||||||||
Net investment income (loss) (e) | 0.06 | 0.11 | ||||||
Net realized and unrealized gain (loss) on investments and foreign currency transactions | 0.09 | 0.16 | ||||||
|
|
|
| |||||
Total from investment operations | 0.15 | 0.27 | ||||||
|
|
|
| |||||
Less distributions: | ||||||||
Dividends from net investment income | (0.15 | ) | (0.03 | ) | ||||
|
|
|
| |||||
Net asset value, end of period | $ | 10.24 | $ | 10.24 | ||||
|
|
|
| |||||
Total return (b) | 1.48 | % | 2.70 | % | ||||
|
|
|
| |||||
Ratios/Supplemental Data: | ||||||||
Net assets, end of period (000’s) | $ | 236 | $ | 3,111 | ||||
Ratio of expenses to average net assets: | ||||||||
After waivers and reimbursements (a) | 1.35 | % | 1.35 | % | ||||
Before waivers and reimbursements (a) | 2.76 | % | 4.21 | % | ||||
Ratio of net investment income (loss) to average net assets: | ||||||||
After waivers and reimbursements (a) | 1.24 | % | 1.14 | %(l) | ||||
Before waivers and reimbursements (a) | (0.17 | )% | (1.73 | )%(l) | ||||
Portfolio turnover rate (z)^ | 14 | % | 29 | % | ||||
Class C** | Six Months Ended April 30, 2016 (Unaudited) | November 12, 2014* to October 31, 2015 | ||||||
Net asset value, beginning of period | $ | 10.26 | $ | 10.00 | ||||
|
|
|
| |||||
Income (loss) from investment operations: | ||||||||
Net investment income (loss) (e) | 0.07 | 0.14 | ||||||
Net realized and unrealized gain (loss) on investments and foreign currency transactions | 0.08 | 0.15 | ||||||
|
|
|
| |||||
Total from investment operations | 0.15 | 0.29 | ||||||
|
|
|
| |||||
Less distributions: | ||||||||
Dividends from net investment income | (0.17 | ) | (0.03 | ) | ||||
|
|
|
| |||||
Net asset value, end of period | $ | 10.24 | $ | 10.26 | ||||
|
|
|
| |||||
Total return (b) | 1.54 | % | 2.94 | % | ||||
|
|
|
| |||||
Ratios/Supplemental Data: | ||||||||
Net assets, end of period (000’s) | $ | 106 | $ | 1,029 | ||||
Ratio of expenses to average net assets: | ||||||||
After waivers and reimbursements (a) | 1.10 | % | 1.10 | % | ||||
Before waivers and reimbursements (a) | 3.51 | % | 4.96 | % | ||||
Ratio of net investment income (loss) to average net assets: | ||||||||
After waivers and reimbursements (a) | 1.49 | % | 1.39 | %(l) | ||||
Before waivers and reimbursements (a) | (0.91 | )% | (2.48 | )%(l) | ||||
Portfolio turnover rate (z)^ | 14 | % | 29 | % |
See Notes to Financial Statements.
92
1290 FUNDS
1290 SMARTBETA EQUITY FUND
FINANCIAL HIGHLIGHTS (Continued)
Class I | Six Months Ended April 30, 2016 (Unaudited) | November 12, 2014* to October 31, 2015 | ||||||
Net asset value, beginning of period | $ | 10.26 | $ | 10.00 | ||||
|
|
|
| |||||
Income (loss) from investment operations: | ||||||||
Net investment income (loss) (e) | 0.09 | 0.14 | ||||||
Net realized and unrealized gain (loss) on investments and foreign currency transactions | 0.06 | 0.15 | ||||||
|
|
|
| |||||
Total from investment operations | 0.15 | 0.29 | ||||||
|
|
|
| |||||
Less distributions: |
| |||||||
Dividends from net investment income | (0.17 | ) | (0.03 | ) | ||||
|
|
|
| |||||
Net asset value, end of period | $ | 10.24 | $ | 10.26 | ||||
|
|
|
| |||||
Total return (b) | 1.64 | % | 2.94 | % | ||||
|
|
|
| |||||
Ratios/Supplemental Data: | ||||||||
Net assets, end of period (000’s) | $ | 10,323 | $ | 3,218 | ||||
Ratio of expenses to average net assets: | ||||||||
After waivers and reimbursements (a) | 1.10 | % | 1.10 | % | ||||
Before waivers and reimbursements (a) | 2.44 | % | 3.96 | % | ||||
Ratio of net investment income (loss) to average net assets: | ||||||||
After waivers and reimbursements (a) | 1.72 | % | 1.38 | %(l) | ||||
Before waivers and reimbursements (a) | 0.38 | % | (1.48 | )%(l) | ||||
Portfolio turnover rate (z)^ | 14 | % | 29 | % | ||||
Class R | Six Months Ended April 30, 2016 (Unaudited) | November 12, 2014* to October 31, 2015 | ||||||
Net asset value, beginning of period | $ | 10.22 | $ | 10.00 | ||||
|
|
|
| |||||
Income (loss) from investment operations: | ||||||||
Net investment income (loss) (e) | 0.05 | 0.09 | ||||||
Net realized and unrealized gain (loss) on investments and foreign currency transactions | 0.08 | 0.16 | ||||||
|
|
|
| |||||
Total from investment operations | 0.13 | 0.25 | ||||||
|
|
|
| |||||
Less distributions: | ||||||||
Dividends from net investment income | (0.12 | ) | (0.03 | ) | ||||
|
|
|
| |||||
Net asset value, end of period | $ | 10.23 | $ | 10.22 | ||||
|
|
|
| |||||
Total return (b) | 1.32 | % | 2.47 | % | ||||
|
|
|
| |||||
Ratios/Supplemental Data: | ||||||||
Net assets, end of period (000’s) | $ | 110 | $ | 3,073 | ||||
Ratio of expenses to average net assets: | ||||||||
After waivers and reimbursements (a) | 1.60 | % | 1.60 | % | ||||
Before waivers and reimbursements (a) | 3.01 | % | 4.46 | % | ||||
Ratio of net investment income (loss) to average net assets: | ||||||||
After waivers and reimbursements (a) | 0.99 | % | 0.89 | %(l) | ||||
Before waivers and reimbursements (a) | (0.42 | )% | (1.98 | )%(l) | ||||
Portfolio turnover rate (z)^ | 14 | % | 29 | % |
* | Commencement of Operations. |
** | Class C shares currently are not offered for sale. |
^ | Portfolio turnover rate excludes derivatives, if any. |
(a) | Ratios for periods less than one year are annualized. |
(b) | Total returns for periods less than one year are not annualized. |
(e) | Net investment income (loss) per share is based on average shares outstanding. |
(l) | The annualized ratio of net investment income to average net assets may not be indicative of operating results for a full year. |
(z) | Portfolio turnover rate for periods less than one year is not annualized. |
See Notes to Financial Statements.
93
1290 UNCONSTRAINED BOND MANAGERS FUND (Unaudited)
INVESTMENT ADVISER
Ø | 1290 Asset Managers® |
INVESTMENT SUB-ADVISERS
Ø | Pacific Investment Management Company LLC (PIMCO) |
Ø | TCW Investment Management Company |
PERFORMANCE RESULTS
Total Returns as of 4/30/16 | ||||||||||||
6 Months | Since Incept. | |||||||||||
Fund – Class A Shares* | without Sales Charge | 0.73 | % | (0.82 | )% | |||||||
with Sales Charge (a | ) | (3.78 | ) | (5.28 | ) | |||||||
Fund – Class I Shares* | 0.84 | (0.66 | ) | |||||||||
Fund – Class R Shares* | 0.53 | (1.08 | ) | |||||||||
BofA Merrill Lynch USD 3-Month Deposit Offered Rate Constant Maturity Index | 0.21 | 0.30 | ||||||||||
* Date of inception 7/6/15.
(a) A 4.50% front-end sales charge was deducted.
Returns for periods less than one year are not annualized.
Returns for periods greater than one year are annualized. |
|
The performance quoted is past performance and is not a guarantee of future results. Mutual funds are subject to certain market risks. Investment returns and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be higher or lower than the performance data shown. For the most current month-end performance data please call 1-888-310-0416 or visit www.1290Funds.com.
Fund performance may reflect the waiver of the Fund’s fees and reimbursement of expenses for certain periods since the inception date. Without these waivers and reimbursements, performance would have been lower. Also, performance shown in this section does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or redemption of Fund shares.
Pacific Investment Management Company LLC (PIMCO)
What helped performance during the six-month period ended April 30, 2016:
• | Long exposure to Brazilian local interest rates contributed to performance as yields fell across the curve. |
• | Long U.S. dollar exposure versus the Chinese yuan, as well as tactical long exposure to the Brazilian real, benefitted performance as the yuan depreciated while the real appreciated relative to the dollar. |
• | An allocation to investment grade corporates was beneficial to performance as spreads narrowed. |
• | Exposure to Treasury Inflation-Protected Securities (TIPS) benefitted performance as U.S. growth and inflation expectations recovered alongside rebounding oil prices. |
What hurt performance during the six-month period ended April 30, 2016:
• | A short position to U.S. interest rates, particularly to the front- and back-end of the yield curve, detracted from performance as rates rallied. |
• | Exposure to non-agency mortgage backed securities (MBS) detracted from performance in parallel with broad risk-off market moves during the end of the period. |
• | Defensive positioning versus the euro and Japanese yen detracted as the U.S. dollar fell versus these currencies. |
TCW Investment Management Company (TCW)
What helped performance during the six-month period ended April 30, 2016:
• | Exposure to corporate and non-corporate credit, which outpaced duration matched Treasuries, contributed to returns as non-U.S. sovereign credit and commodity-related industrial sectors rallied considerably in the second half of the period. |
• | Among corporates, a focus on communications and consumer non-cyclical credits benefitted performance as these sectors were two of the best performers, outpacing duration-matched Treasuries. Other notable contributors included midstream energy credits and domestic banks. |
• | Outside of the corporate space, exposure to corporate mortgage backed securities (CMBS) and non-agency residential mortgage backed securities (MBS) (particularly subprime and alt-A securities) was additive. |
• | Meanwhile, Fund duration of approximately 1.4 years contributed to returns as Treasury rates beyond 2-Year maturities fell. |
What hurt performance during the six-month period ended April 30, 2016:
• | While exposure to subprime and alt-A non-agency residential MBS was additive, several prime non agency MBS holdings experienced price weakness during the period and detracted on the margin. |
• | Within the asset-backed securities (ABS) sector, small balance commercial loans weighed modestly on returns as these securities did not fare as well as other non-traditional ABS such as student loans. |
94
1290 UNCONSTRAINED BOND MANAGERS FUND (Unaudited)
Sector Weightings as of April 30, 2016 | % of Net Assets | |||
Asset-Backed and Mortgage-Backed Securities | 39.9 | % | ||
Government Securities | 20.9 | |||
Financials | 11.3 | |||
Health Care | 1.9 | |||
Telecommunication Services | 1.5 | |||
Energy | 1.4 | |||
Utilities | 1.3 | |||
Industrials | 1.2 | |||
Consumer Discretionary | 0.9 | |||
Consumer Staples | 0.6 | |||
Information Technology | 0.4 | |||
Options Purchased | 0.1 | |||
Cash and Other | 18.6 | |||
|
| |||
100.0 | % | |||
|
| |||
Holdings are subject to change without notice. |
UNDERSTANDING YOUR EXPENSES:
As a shareholder of the Fund, you incur two types of costs:
(1) transaction costs, including applicable sales charges and redemption fees; and (2) ongoing costs, including investment advisory fees, distribution and/or service (12b-1) fees (in the case of Class A and Class R shares of the Fund), and other Fund expenses. These examples are intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The examples are based on an investment of $1,000 invested at the beginning of the six-month period ended April 30, 2016 and held for the entire six-month period.
Actual Expenses
The first line of the following table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the following 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 you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
EXAMPLE
Beginning Account Value 11/1/15 | Ending Account Value 4/30/16 | Expenses Paid During Period* 4/30/16 | ||||||||||
Class A | ||||||||||||
Actual | $1,000.00 | $1,007.31 | $6.99 | |||||||||
Hypothetical (5% average return before expenses) | 1,000.00 | 1,017.90 | 7.02 | |||||||||
Class I | ||||||||||||
Actual | 1,000.00 | 1,008.36 | 5.74 | |||||||||
Hypothetical (5% average return before expenses) | 1,000.00 | 1,019.14 | 5.77 | |||||||||
Class R | ||||||||||||
Actual | 1,000.00 | 1,005.26 | 8.23 | |||||||||
Hypothetical (5% average return before expenses) | 1,000.00 | 1,016.66 | 8.27 | |||||||||
* Expenses are equal to the Fund’s Class A, I and R shares annualized expense ratios of 1.40%, 1.15% and 1.65%, respectively, multiplied by the average account value over the period, and multiplied by 182/366 (to reflect the one-half year period). |
|
95
1290 FUNDS
1290 UNCONSTRAINED BOND MANAGERS FUND
PORTFOLIO OF INVESTMENTS
April 30, 2016 (Unaudited)
Principal Amount | Value (Note 1) | |||||||
LONG-TERM DEBT SECURITIES: |
| |||||||
Asset-Backed and Mortgage-Backed Securities (39.9%) |
| |||||||
Asset-Backed Securities (21.0%) | ||||||||
ABFC Trust, | ||||||||
Series 2007-NC1 A2 | $ | 250,000 | $ | 179,111 | ||||
ACE Securities Corp. Home Equity Loan Trust, |
| |||||||
Series 2005-HE6 M1 | 200,000 | 164,857 | ||||||
Ameriquest Mortgage Securities, Inc. Asset-Backed Pass-Through Certificates, |
| |||||||
Series 2004-R9 M2 | 159,615 | 158,047 | ||||||
BA Credit Card Trust, | ||||||||
Series 2014-A2 A | 90,000 | 90,061 | ||||||
Bear Stearns Asset Backed Securities I Trust, |
| |||||||
Series 2007-HE2 2A2 | 297,034 | 283,925 | ||||||
Brazos Higher Education Authority, Inc., |
| |||||||
Series 2005-2 A10 | 88,668 | 88,481 | ||||||
Series 2011-1 A2 | 60,391 | 60,305 | ||||||
Chase Funding Trust, | ||||||||
Series 2002-3 2A1 | 4,349 | 3,996 | ||||||
Citigroup Mortgage Loan Trust, | ||||||||
Series 2005-OPT3 M2 | 171,611 | 169,121 | ||||||
Series 2007-AHL1 A2B | 320,579 | 292,978 | ||||||
Series 2007-AMC1 A1 | 239,584 | 151,231 | ||||||
Series 2007-AMC3 A1 | 195,853 | 147,277 | ||||||
Series 2007-FS1 1A1 | 325,061 | 298,556 | ||||||
Series 2015-2 1A1 | 174,746 | 160,838 | ||||||
Countrywide Asset-Backed Certificates, | ||||||||
Series 2002-3 1A1 | 8,428 | 7,691 | ||||||
Series 2006-26 1A | 200,966 | 149,037 | ||||||
Series 2007-2 1A | 387,071 | 297,569 | ||||||
Series 2007-9 1A | 436,699 | 346,784 | ||||||
CWABS Asset-Backed Certificates Trust, |
| |||||||
Series 2005-3 MV5 | 200,000 | 174,340 | ||||||
Series 2006-14 2A2 | 339,909 | 328,409 | ||||||
Series 2006-18 2A2 | 457,422 | 424,994 | ||||||
Education Loan Asset-Backed Trust I, | ||||||||
Series 2013-1 A1 | 145,765 | 144,303 | ||||||
First Franklin Mortgage Loan Trust, |
| |||||||
Series 2005-FF10 A5 | $ | 500,000 | $ | 358,653 | ||||
Series 2005-FF5 M2 | 148,755 | 145,277 | ||||||
Series 2006-FF10 A4 | 135,514 | 131,393 | ||||||
First NLC Trust, |
| |||||||
Series 2007-1 A3 | 229,291 | 118,673 | ||||||
Greenpoint Manufactured Housing, |
| |||||||
Series 2000-1 A4 | 160,242 | 167,288 | ||||||
GSAMP Trust, |
| |||||||
Series 2005-HE4 M1 | 110,668 | 110,604 | ||||||
Series 2006-FM3 A2C | 313,208 | 161,706 | ||||||
Home Equity Asset Trust, |
| |||||||
Series 2005-3 M5 | 200,000 | 151,697 | ||||||
Honda Auto Receivables Owner Trust, |
| |||||||
Series 2015-2 A2 | 59,987 | 59,972 | ||||||
HSI Asset Securitization Corp. Trust, |
| |||||||
Series 2006-HE1 2A1 | 37,631 | 18,333 | ||||||
JP Morgan Mortgage Acquisition Trust, |
| |||||||
Series 2006-FRE2 M1 | 200,000 | 148,885 | ||||||
Series 2006-WMC2 A1 | 167,643 | 129,671 | ||||||
Series 2007-CH1 AV5 | 169,181 | 167,279 | ||||||
Series 2007-CH4 A4 | 600,000 | 550,312 | ||||||
Long Beach Mortgage Loan Trust, |
| |||||||
Series 2005-1 M2 | 120,065 | 118,740 | ||||||
Series 2005-2 M4 | 169,931 | 165,455 | ||||||
Series 2005-3 1A | 219,181 | 169,604 | ||||||
Series 2006-10 2A2 | 504,118 | 196,504 | ||||||
MASTR Asset Backed Securities Trust, |
| |||||||
Series 2006-AB1 A2 | 45,936 | 45,825 | ||||||
Series 2006-HE1 A4 | 334,753 | 322,630 | ||||||
MASTR Specialized Loan Trust, |
| |||||||
Series 2007-1 A | 403,088 | 221,115 | ||||||
Morgan Stanley ABS Capital I, Inc. Trust, |
| |||||||
Series 2007-HE3 A2A | 649,071 | 374,597 | ||||||
Series 2007-NC2 A1 | 204,946 | 144,666 | ||||||
Morgan Stanley Home Equity Loan Trust, |
| |||||||
Series 2006-3 A4 | 452,644 | 309,222 | ||||||
Series 2007-1 A3 | 325,386 | 176,550 |
See Notes to Financial Statements.
96
1290 FUNDS
1290 UNCONSTRAINED BOND MANAGERS FUND
PORTFOLIO OF INVESTMENTS (Continued)
April 30, 2016 (Unaudited)
Principal Amount | Value (Note 1) | |||||||
Navient Student Loan Trust, |
| |||||||
Series 2014-1 A3 | $ | 170,000 | $ | 161,605 | ||||
Series 2014-2 A | 151,806 | 143,142 | ||||||
Series 2016-2 A3 | 180,000 | 180,000 | ||||||
Nelnet Student Loan Trust, |
| |||||||
Series 2005-4 B | 138,061 | 102,464 | ||||||
Series 2006-2 B | 109,656 | 86,151 | ||||||
Series 2007-1 A3 | 180,000 | 169,044 | ||||||
Series 2014-2A A3 | 200,000 | 182,806 | ||||||
Series 2014-4A A2 | 85,000 | 76,193 | ||||||
Nissan Auto Receivables Owner Trust, |
| |||||||
Series 2015-A A2 | 47,158 | 47,148 | ||||||
Nomura Home Equity Loan, Inc. Home Equity Loan Trust, |
| |||||||
Series 2006-HE2 A4 | 205,000 | 175,257 | ||||||
NovaStar Mortgage Funding Trust, |
| |||||||
Series 2005-2 M1 | 129,445 | 128,687 | ||||||
Option One Mortgage Loan Trust, |
| |||||||
Series 2005-1 A4 | 149,473 | 150,531 | ||||||
RAMP Trust, |
| |||||||
Series 2006-RZ3 A2 | 114,986 | 114,723 | ||||||
Series 2007-RS2 A3 | 184,051 | 106,431 | ||||||
RASC Trust, |
| |||||||
Series 2005-KS10 M1 | 180,000 | 176,630 | ||||||
Series 2005-KS7 M3 | 180,000 | 177,431 | ||||||
Series 2006-KS9 AI3 | 356,189 | 317,002 | ||||||
SG Mortgage Securities Trust, |
| |||||||
Series 2007-NC1 A2 | 277,085 | 167,779 | ||||||
SLM Student Loan Trust, |
| |||||||
Series 2004-10 A6B | 150,000 | 147,711 | ||||||
Series 2004-10 B | 138,659 | 108,358 | ||||||
Series 2004-2 B | 128,555 | 104,042 | ||||||
Series 2006-9 A5 | 150,000 | 144,753 | ||||||
Series 2007-3 A4 | 200,000 | 185,783 | ||||||
Series 2007-6 B | 81,633 | 69,248 | ||||||
Series 2007-8 B | 135,652 | 112,941 | ||||||
Series 2008-2 B | $ | 100,000 | $ | 83,202 | ||||
Series 2008-3 A3 | 156,099 | 152,459 | ||||||
Series 2008-5 A4 | 163,037 | 163,668 | ||||||
Series 2008-9 B | 70,000 | 65,780 | ||||||
Series 2012-7 B | 100,000 | 88,758 | ||||||
Series 2013-4 A | 169,123 | 161,067 | ||||||
Series 2013-6 A2 | 116,426 | 115,930 | ||||||
Soundview Home Loan Trust, |
| |||||||
Series 2007-OPT1 2A1 | 254,829 | 151,705 | ||||||
Structured Asset Securities Corp. Mortgage Loan Trust, |
| |||||||
Series 2005-WF4 M6 | 500,000 | 335,077 | ||||||
Series 2006-GEL4 A3 | 200,000 | 185,598 | ||||||
Telos CLO Ltd., |
| |||||||
Series 2016-7A A | 300,000 | 300,050 | ||||||
Toyota Auto Receivables Owner Trust, |
| |||||||
Series 2014-B A3 | 70,136 | 70,106 | ||||||
Vermont Student Assistance Corp., |
| |||||||
Series 2012-1 A | 56,697 | 54,665 | ||||||
Wells Fargo Home Equity Asset-Backed Securities Trust, |
| |||||||
Series 2007-2 A3 | 190,249 | 161,595 | ||||||
|
| |||||||
14,412,082 | ||||||||
|
| |||||||
Non-Agency CMO (18.9%) | ||||||||
1211 Avenue of the Americas Trust, |
| |||||||
Series 2015-1211 A1A2 | 35,000 | 38,162 | ||||||
225 Liberty Street Trust, | ||||||||
Series 2016-225L A | 55,000 | 56,500 | ||||||
Alternative Loan Trust, |
| |||||||
Series 2005-76 1A1 | 165,199 | 147,109 | ||||||
Series 2006-HY12 A5 | 161,271 | 150,081 | ||||||
Series 2006-OA19 A1 | 432,317 | 318,418 | ||||||
BAMLL Commercial Mortgage Securities Trust, |
| |||||||
Series 2013-WBRK A | 55,000 | 56,183 | ||||||
Series 2015-200P A | 95,000 | 98,596 | ||||||
Banc of America Commercial Mortgage Trust, |
| |||||||
Series 2006-3 A4 | 82,505 | 82,506 | ||||||
Series 2006-6 A4 | 125,000 | 125,538 | ||||||
Series 2007-2 A4 | 192,441 | 194,725 |
See Notes to Financial Statements.
97
1290 FUNDS
1290 UNCONSTRAINED BOND MANAGERS FUND
PORTFOLIO OF INVESTMENTS (Continued)
April 30, 2016 (Unaudited)
Principal Amount | Value (Note 1) | |||||||
Bayview Commercial Asset Trust, |
| |||||||
Series 2004-3 A1 | $ | 166,700 | $ | 148,615 | ||||
Bear Stearns ALT-A Trust, |
| |||||||
Series 2004-9 3A1 | 164,157 | 157,455 | ||||||
Series 2005-10 22A1 | 356,764 | 296,507 | ||||||
Series 2005-2 2A4 | 152,397 | 139,285 | ||||||
CIM Trust, | ||||||||
Series 15-4AG A1 | 155,980 | 152,272 | ||||||
Citigroup Commercial Mortgage Trust, |
| |||||||
Series 2013-GC17 A4 | 40,000 | 44,345 | ||||||
COMM Mortgage Trust, |
| |||||||
Series 2013-CR12 A4 | 105,000 | 115,558 | ||||||
Series 2013-WWP A2 | 45,000 | 47,578 | ||||||
Series 2014-277P A | 50,000 | 53,631 | ||||||
Series 2015-3BP A | 55,000 | 56,954 | ||||||
Series 2016-787S A | 50,000 | 52,564 | ||||||
Series 2016-CR28 A4 | 110,000 | 118,567 | ||||||
Countrywide Home Loan Mortgage Pass-Through Trust, |
| |||||||
Series 2005-3 1A2 | 176,808 | 150,160 | ||||||
DBUBS Mortgage Trust, |
| |||||||
Series 2011-LC3A XA | 6,660,560 | 36,736 | ||||||
Deutsche Alt-A Securities Mortgage Loan Trust, |
| |||||||
Series 2007-2 2A1 | 183,182 | 145,082 | ||||||
DSLA Mortgage Loan Trust, |
| |||||||
Series 2006-AR2 2A1A | 72,444 | 58,774 | ||||||
First Horizon Alternative Mortgage Securities Trust, |
| |||||||
Series 2006-AA7 A1 | 191,928 | 154,104 | ||||||
First Horizon Mortgage Pass-Through Trust, |
| |||||||
Series 2005-AR4 2A1 | 178,813 | 153,279 | ||||||
GE Business Loan Trust, |
| |||||||
Series 2005-1A A3 | 132,929 | 122,696 | ||||||
Series 2007-1A A | 158,882 | 150,465 | ||||||
GS Mortgage Securities Trust, |
| |||||||
Series 2012-GC6 A2 | 111,594 | 111,939 | ||||||
Series 2012-GC6 XA | 858,823 | 73,401 | ||||||
Series 2013-GC13 XA | 4,843,372 | 38,626 | ||||||
GSR Mortgage Loan Trust, |
| |||||||
Series 2005-AR7 6A1 | 146,495 | 143,830 | ||||||
Impac CMB Trust, |
| |||||||
Series 2005-1 1A1 | $ | 104,669 | $ | 93,120 | ||||
Impac Secured Assets Trust, |
| |||||||
Series 2007-2 1A1A | 222,859 | 147,541 | ||||||
IndyMac INDX Mortgage Loan Trust, |
| |||||||
Series 2004-AR6 6A1 | 123,397 | 121,735 | ||||||
Series 2006-AR4 A1A | 256,982 | 210,734 | ||||||
Series 2007-AR15 2A1 | 297,245 | 230,784 | ||||||
JP Morgan Chase Commercial Mortgage Securities Trust, |
| |||||||
Series 2006-CB15 A4 | 88,621 | 88,621 | ||||||
Series 2006-CB16 A4 | 155,159 | 155,467 | ||||||
Series 2006-LDP9 A1A | 118,588 | 119,731 | ||||||
Series 2010-C2 A2 | 180,000 | 183,941 | ||||||
Series 2010-CNTR A1 | ||||||||
3.300%, 8/5/32§ | 90,022 | 92,673 | ||||||
Series 2011-C3 A3 | 165,000 | 171,633 | ||||||
Series 2011-C3 XA | 466,427 | 15,461 | ||||||
Series 2012-C6 XA | 762,465 | 52,413 | ||||||
JPMBB Commercial Mortgage Securities Trust, |
| |||||||
Series 2013-C14 XA | 2,505,634 | 79,021 | ||||||
Series 2013-C15 XA | 1,031,434 | 57,868 | ||||||
Lehman Brothers Small Balance Commercial, |
| |||||||
Series 2005-2A 1A | 119,438 | 109,751 | ||||||
Lehman XS Trust, |
| |||||||
Series 2005-5N 3A1A | 172,163 | 147,470 | ||||||
Series 2007-4N 1A2A | 429,409 | 341,608 | ||||||
Merrill Lynch Mortgage Investors Trust, |
| |||||||
Series 2004-HB1 A3 | 171,122 | 165,685 | ||||||
Series 2005-A9 2A1E | 156,103 | 146,732 | ||||||
Series 2006-2 2A | 151,465 | 149,628 | ||||||
Merrill Lynch Mortgage Trust, |
| |||||||
Series 2007-C1 A3 | 69,982 | 69,838 | ||||||
ML-CFC Commercial Mortgage Trust, |
| |||||||
Series 2007-6 A2 | 134,155 | 134,612 | ||||||
Morgan Stanley Bank of America Merrill Lynch Trust, |
| |||||||
Series 2013-C12 XA | 887,310 | �� | 34,526 | |||||
Series 2013-C7 A4 | 45,000 | 46,382 |
See Notes to Financial Statements.
98
1290 FUNDS
1290 UNCONSTRAINED BOND MANAGERS FUND
PORTFOLIO OF INVESTMENTS (Continued)
April 30, 2016 (Unaudited)
Principal Amount | Value (Note 1) | |||||||
Morgan Stanley Capital I Trust, |
| |||||||
Series 2007-IQ14 A2 | $ | 132,803 | $ | 132,646 | ||||
Series 2007-IQ14 A4 | 170,000 | 174,029 | ||||||
Series 2011-C3 A2 | 235,376 | 236,100 | ||||||
OBP Depositor LLC Trust, |
| |||||||
Series 2010-OBP A | 30,000 | 32,968 | ||||||
RALI Trust, |
| |||||||
Series 2006-QA10 A2 | 212,741 | 164,225 | ||||||
Series 2006-QA2 1A1 | 274,942 | 190,362 | ||||||
Series 2006-QA5 1A1 | 265,355 | 167,793 | ||||||
Residential Asset Securitization Trust, |
| |||||||
Series 2005-A10 A4 | 136,058 | 120,169 | ||||||
Sequoia Mortgage Trust, |
| |||||||
Series 2004-12 A1 | 162,745 | 154,275 | ||||||
Series 2004-6 A1 | 150,550 | 143,882 | ||||||
Structured Adjustable Rate Mortgage Loan Trust, |
| |||||||
Series 2004-20 1A1 | 185,524 | 169,904 | ||||||
Series 2004-8 3A | 157,039 | 154,971 | ||||||
Series 2005-12 3A1 | 150,600 | 138,567 | ||||||
Series 2005-15 1A1 | 192,005 | 155,967 | ||||||
Series 2005-16XS A1 | 152,069 | 137,727 | ||||||
Series 2005-17 5A1 | 183,058 | 163,140 | ||||||
Structured Asset Mortgage Investments II Trust, |
| |||||||
Series 2006-AR6 1A3 | 536,466 | 352,715 | ||||||
Series 2006-AR7 A10 | 194,411 | 168,690 | ||||||
VNDO Mortgage Trust, | ||||||||
Series 2012-6AVE A | 62,000 | 64,086 | ||||||
Wachovia Bank Commercial Mortgage Trust, |
| |||||||
Series 2006-C26 A3 | 49,038 | 49,034 | ||||||
Series 2007-C30 A3 | 166,540 | 167,250 | ||||||
Series 2007-C30 A5 | 175,000 | 178,215 | ||||||
Series 2007-C30 APB | 33,795 | 33,797 | ||||||
Series 2007-C32 A2 | 199,703 | 200,583 | ||||||
Series 2007-C32 APB | 84,370 | 84,932 | ||||||
Wachovia Mortgage Loan Trust, |
| |||||||
Series 2006-AMN1 A3 | 244,124 | 153,051 | ||||||
WaMu Mortgage Pass-Through Certificates Trust, |
| |||||||
Series 2005-AR11 A1A | $ | 161,115 | $ | 149,365 | ||||
Series 2005-AR13 A1A1 | 164,170 | 152,980 | ||||||
Series 2005-AR8 2A1A | 165,063 | 154,431 | ||||||
Series 2006-AR3 A1A | 172,976 | 157,730 | ||||||
Series 2007-HY3 1A1 | 180,458 | 147,067 | ||||||
Washington Mutual Mortgage Pass-Through Certificates WMALT Trust, |
| |||||||
Series 2007-OA1 2A | 310,083 | 209,110 | ||||||
Wells Fargo Mortgage Backed Securities Trust, |
| |||||||
Series 2004-I 1A1 | 54,635 | 56,087 | ||||||
Series 2006-AR10 5A6 | 300,100 | 284,703 | ||||||
Series 2006-AR12 1A1 | 152,652 | 143,813 | ||||||
Series 2006-AR4 1A1 | 147,874 | 136,473 | ||||||
Series 2006-AR8 3A2 | 151,554 | 143,479 | ||||||
WF-RBS Commercial Mortgage Trust, |
| |||||||
Series 2011-C3 A2 | 16,708 | 16,718 | ||||||
Series 2011-C4 A2 | 96,510 | 96,595 | ||||||
Series 2014-C23 XA | 933,283 | 36,128 | ||||||
|
| |||||||
12,930,973 | ||||||||
|
| |||||||
Total Asset-Backed and Mortgage-Backed Securities | 27,343,055 | |||||||
|
| |||||||
Corporate Bonds (20.5%) | ||||||||
Consumer Discretionary (0.9%) | ||||||||
Hotels, Restaurants & Leisure (0.1%) |
| |||||||
Churchill Downs, Inc. | ||||||||
5.375%, 12/15/21§ | 17,000 | 17,468 | ||||||
5.375%, 12/15/21 | 34,000 | 34,850 | ||||||
|
| |||||||
52,318 | ||||||||
|
| |||||||
Media (0.8%) | ||||||||
Cable One, Inc. | ||||||||
5.750%, 6/15/22§ | 35,000 | 35,984 | ||||||
CCO Safari II LLC | ||||||||
6.484%, 10/23/45§ | 90,000 | 105,840 | ||||||
Charter Communications/CCO Safari III LLC Term Loan |
| |||||||
3.500%, 1/20/23 | 100,000 | 100,304 | ||||||
DISH DBS Corp. | ||||||||
6.750%, 6/1/21 | 35,000 | 35,969 | ||||||
Numericable-SFR S.A. | ||||||||
7.375%, 5/1/26 (b)§ | 200,000 | 203,000 | ||||||
Sinclair Television Group, Inc. | ||||||||
5.875%, 3/15/26§ | 35,000 | 36,312 |
See Notes to Financial Statements.
99
1290 FUNDS
1290 UNCONSTRAINED BOND MANAGERS FUND
PORTFOLIO OF INVESTMENTS (Continued)
April 30, 2016 (Unaudited)
Principal Amount | Value (Note 1) | |||||||
Sirius XM Radio, Inc. | ||||||||
5.750%, 8/1/21 (b)§ | $ | 35,000 | $ | 36,663 | ||||
|
| |||||||
554,072 | ||||||||
|
| |||||||
Total Consumer Discretionary | 606,390 | |||||||
|
| |||||||
Consumer Staples (0.6%) | ||||||||
Beverages (0.3%) |
| |||||||
Anheuser-Busch InBev Finance, Inc. |
| |||||||
3.650%, 2/1/26 | 31,000 | 32,496 | ||||||
4.900%, 2/1/46 | 57,000 | 64,123 | ||||||
Constellation Brands, Inc. | ||||||||
6.000%, 5/1/22 | 53,000 | 60,155 | ||||||
DS Services of America, Inc. | ||||||||
10.000%, 9/1/21§ | 35,000 | 39,550 | ||||||
|
| |||||||
196,324 | ||||||||
|
| |||||||
Food & Staples Retailing (0.2%) |
| |||||||
CVS Health Corp. | ||||||||
4.875%, 7/20/35 | 70,000 | 78,426 | ||||||
Walgreens Boots Alliance, Inc. | ||||||||
4.800%, 11/18/44 | 30,000 | 30,645 | ||||||
|
| |||||||
109,071 | ||||||||
|
| |||||||
Food Products (0.1%) |
| |||||||
Pinnacle Foods Finance LLC/Pinnacle Foods Finance Corp. |
| |||||||
5.875%, 1/15/24§ | 35,000 | 36,925 | ||||||
TreeHouse Foods, Inc. | ||||||||
6.000%, 2/15/24§ | 52,000 | 55,318 | ||||||
|
| |||||||
92,243 | ||||||||
|
| |||||||
Personal Products (0.0%) |
| |||||||
NBTY, Inc. | ||||||||
7.625%, 5/15/21 (b)§ | 35,000 | 35,700 | ||||||
|
| |||||||
Total Consumer Staples | 433,338 | |||||||
|
| |||||||
Energy (1.4%) | ||||||||
Oil, Gas & Consumable Fuels (1.4%) |
| |||||||
Boardwalk Pipelines LP | ||||||||
5.750%, 9/15/19 | 100,000 | 103,479 | ||||||
BP Capital Markets plc | ||||||||
3.506%, 3/17/25 | 70,000 | 73,210 | ||||||
Devon Energy Corp. | ||||||||
5.850%, 12/15/25 | 20,000 | 20,974 | ||||||
Enbridge Energy Partners LP | ||||||||
5.875%, 10/15/25 | 40,000 | 42,244 | ||||||
Energy Transfer Equity LP | ||||||||
5.500%, 6/1/27 | 50,000 | 42,815 | ||||||
Energy Transfer Partners LP | ||||||||
3.654%, 11/1/66 (l) | 65,000 | 37,050 | ||||||
Petrobras Global Finance B.V. | ||||||||
3.500%, 2/6/17 | 100,000 | 98,720 | ||||||
7.875%, 3/15/19 | 200,000 | 197,000 | ||||||
5.750%, 1/20/20 | 100,000 | 91,750 | ||||||
Pioneer Natural Resources Co. | ||||||||
4.450%, 1/15/26 | 40,000 | 42,155 | ||||||
Regency Energy Partners LP/Regency Energy Finance Corp. |
| |||||||
5.000%, 10/1/22 | 150,000 | 147,094 | ||||||
Texas Eastern Transmission LP | ||||||||
2.800%, 10/15/22§ | $ | 100,000 | $ | 89,948 | ||||
|
| |||||||
Total Energy | 986,439 | |||||||
|
| |||||||
Financials (11.3%) | ||||||||
Banks (7.0%) |
| |||||||
ABN AMRO Bank N.V. | ||||||||
4.750%, 7/28/25§ | 200,000 | 204,136 | ||||||
Bank of America Corp. | ||||||||
3.875%, 8/1/25 | 600,000 | 621,237 | ||||||
3.500%, 4/19/26 | 200,000 | 202,021 | ||||||
Barclays Bank plc | ||||||||
7.625%, 11/21/22 | 200,000 | 217,860 | ||||||
Barclays plc | ||||||||
3.650%, 3/16/25 | 75,000 | 72,110 | ||||||
Capital One Bank USA N.A. | ||||||||
1.150%, 11/21/16 | 140,000 | 139,949 | ||||||
CIT Group, Inc. | ||||||||
5.250%, 3/15/18 | 35,000 | 36,277 | ||||||
Citigroup, Inc. | ||||||||
1.300%, 11/15/16 | 175,000 | 175,314 | ||||||
5.950%, 5/15/25 (l)(y) | 200,000 | 193,760 | ||||||
6.250%, 8/15/26 (l)(y) | 100,000 | 103,630 | ||||||
Cooperatieve Rabobank U.A. | ||||||||
8.375%, 7/26/16 (l)(m)(y) | 100,000 | 101,000 | ||||||
Credit Agricole S.A. | ||||||||
7.500%, 6/23/26 (l)(m)(y) | GBP | 100,000 | 133,710 | |||||
Credit Suisse Group Funding Guernsey Ltd. | ||||||||
3.750%, 3/26/25 | $ | 250,000 | 243,794 | |||||
4.550%, 4/17/26 (b)§ | 250,000 | 254,971 | ||||||
Discover Bank/Greenwood DE | ||||||||
2.000%, 2/21/18 | 75,000 | 74,875 | ||||||
HBOS plc | ||||||||
1.329%, 9/30/16 (l) | 75,000 | 74,625 | ||||||
HSBC Holdings plc | ||||||||
6.000%, 9/29/23 (l)(m)(y) | EUR | 200,000 | 221,281 | |||||
ICICI Bank Ltd. | ||||||||
6.375%, 4/30/22 (l)(m) | $ | 100,000 | 102,208 | |||||
JPMorgan Chase & Co. | ||||||||
3.150%, 7/5/16 | 150,000 | 150,616 | ||||||
7.900%, 4/30/18 (l)(y) | 200,000 | 201,000 | ||||||
2.550%, 10/29/20 | 105,000 | 106,389 | ||||||
2.115%, 3/1/21 (l) | 200,000 | 204,000 | ||||||
3.900%, 7/15/25 | 175,000 | 185,027 | ||||||
KBC Bank N.V. | ||||||||
8.000%, 1/25/23 (l)(m) | 200,000 | 218,250 | ||||||
Royal Bank of Scotland Group plc | ||||||||
1.875%, 3/31/17 | 90,000 | 89,928 | ||||||
7.500%, 8/10/20 (l)(y) | 100,000 | 92,950 | ||||||
6.000%, 12/19/23 | 35,000 | 35,763 | ||||||
Santander UK Group Holdings plc | ||||||||
2.875%, 10/16/20 | 85,000 | 84,816 | ||||||
Toronto-Dominion Bank | ||||||||
1.627%, 4/7/21 (l) | 100,000 | 99,918 | ||||||
Wells Fargo & Co. | ||||||||
2.600%, 7/22/20 | 100,000 | 102,357 | ||||||
3.000%, 4/22/26 | 85,000 | 84,619 | ||||||
|
| |||||||
4,828,391 | ||||||||
|
|
See Notes to Financial Statements.
100
1290 FUNDS
1290 UNCONSTRAINED BOND MANAGERS FUND
PORTFOLIO OF INVESTMENTS (Continued)
April 30, 2016 (Unaudited)
Principal Amount | Value (Note 1) | |||||||
Capital Markets (1.5%) |
| |||||||
Goldman Sachs Group, Inc. | ||||||||
2.236%, 11/29/23 (l) | $ | 250,000 | $ | 248,282 | ||||
3.500%, 1/23/25 | 100,000 | 100,970 | ||||||
Morgan Stanley | ||||||||
5.550%, 4/27/17 | 100,000 | 104,204 | ||||||
5.625%, 9/23/19 | 200,000 | 222,617 | ||||||
3.875%, 4/29/24 | 100,000 | 104,671 | ||||||
UBS AG | ||||||||
7.250%, 2/22/22 (l)(m) | 200,000 | 206,000 | ||||||
|
| |||||||
986,744 | ||||||||
|
| |||||||
Consumer Finance (0.8%) |
| |||||||
American Express Credit Corp. | ||||||||
2.800%, 9/19/16 | 100,000 | 100,742 | ||||||
Ford Motor Credit Co. LLC | ||||||||
8.000%, 12/15/16 | 150,000 | 156,222 | ||||||
3.157%, 8/4/20 | 200,000 | 205,884 | ||||||
General Motors Financial Co., Inc. | ||||||||
5.250%, 3/1/26 | 100,000 | 109,670 | ||||||
|
| |||||||
572,518 | ||||||||
|
| |||||||
Diversified Financial Services (0.4%) |
| |||||||
Bank of America N.A. | ||||||||
5.300%, 3/15/17 | 100,000 | 103,343 | ||||||
Berkshire Hathaway, Inc. | ||||||||
3.125%, 3/15/26 | 100,000 | 103,729 | ||||||
MSCI, Inc. | ||||||||
5.750%, 8/15/25§ | 35,000 | 37,233 | ||||||
Shell International Finance B.V. | ||||||||
3.250%, 5/11/25 | 50,000 | 51,389 | ||||||
|
| |||||||
295,694 | ||||||||
|
| |||||||
Insurance (0.2%) |
| |||||||
ZFS Finance USA Trust II | ||||||||
6.450%, 12/15/65 (l)§ | 100,000 | 100,500 | ||||||
|
| |||||||
Real Estate Investment Trusts (REITs) (1.1%) |
| |||||||
AvalonBay Communities, Inc. | ||||||||
5.750%, 9/15/16 | 150,000 | 152,426 | ||||||
DuPont Fabros Technology LP | ||||||||
5.875%, 9/15/21 | 35,000 | 36,487 | ||||||
HCP, Inc. | ||||||||
4.000%, 6/1/25 | 75,000 | 73,865 | ||||||
Ventas Realty LP | ||||||||
4.125%, 1/15/26 | 125,000 | 130,737 | ||||||
WEA Finance LLC/Westfield UK & Europe Finance plc | ||||||||
2.700%, 9/17/19§ | 200,000 | 202,412 | ||||||
Welltower, Inc. | ||||||||
4.250%, 4/1/26 | 150,000 | 155,383 | ||||||
|
| |||||||
751,310 | ||||||||
|
| |||||||
Thrifts & Mortgage Finance (0.3%) |
| |||||||
Abbey National Treasury Services plc | ||||||||
2.500%, 3/14/19 | 200,000 | 202,197 | ||||||
|
| |||||||
Total Financials | 7,737,354 | |||||||
|
| |||||||
Health Care (1.9%) | ||||||||
Biotechnology (0.4%) |
| |||||||
Amgen, Inc. | ||||||||
2.300%, 6/15/16 | 125,000 | 125,223 | ||||||
Biogen, Inc. | ||||||||
3.625%, 9/15/22 | $ | 55,000 | $ | 58,224 | ||||
Celgene Corp. | ||||||||
5.000%, 8/15/45 | 50,000 | 54,685 | ||||||
Gilead Sciences, Inc. | ||||||||
4.500%, 2/1/45 | 50,000 | 53,187 | ||||||
|
| |||||||
291,319 | ||||||||
|
| |||||||
Health Care Equipment & Supplies (0.3%) |
| |||||||
Boston Scientific Corp. | ||||||||
3.850%, 5/15/25 | 100,000 | 104,509 | ||||||
Hologic, Inc. | ||||||||
5.250%, 7/15/22§ | 35,000 | 36,575 | ||||||
Zimmer Biomet Holdings, Inc. | ||||||||
3.550%, 4/1/25 | 100,000 | 102,760 | ||||||
|
| |||||||
243,844 | ||||||||
|
| |||||||
Health Care Providers & Services (0.7%) |
| |||||||
Centene Corp. | ||||||||
5.625%, 2/15/21§ | 35,000 | 36,641 | ||||||
CHS/Community Health Systems, Inc. | ||||||||
5.125%, 8/15/18 | 35,000 | 35,525 | ||||||
DaVita HealthCare Partners, Inc. | ||||||||
5.000%, 5/1/25 | 100,000 | 100,000 | ||||||
Fresenius Medical Care U.S. Finance II, Inc. | ||||||||
4.750%, 10/15/24§ | 50,000 | 51,500 | ||||||
HCA, Inc. | ||||||||
4.750%, 5/1/23 | 70,000 | 71,750 | ||||||
Molina Healthcare, Inc. | ||||||||
5.375%, 11/15/22§ | 35,000 | 36,137 | ||||||
RegionalCare Hospital Partners Holdings, Inc. | ||||||||
8.250%, 5/1/23 (b)§ | 35,000 | 36,137 | ||||||
Tenet Healthcare Corp. | ||||||||
4.134%, 6/15/20 (l)§ | 35,000 | 35,046 | ||||||
6.000%, 10/1/20 | 17,000 | 18,062 | ||||||
4.500%, 4/1/21 | 17,000 | 17,298 | ||||||
WellCare Health Plans, Inc. | ||||||||
5.750%, 11/15/20 | 17,000 | 17,680 | ||||||
|
| |||||||
455,776 | ||||||||
|
| |||||||
Life Sciences Tools & Services (0.0%) |
| |||||||
Quintiles Transnational Corp. | ||||||||
4.875%, 5/15/23§ | 18,000 | 18,383 | ||||||
|
| |||||||
Pharmaceuticals (0.5%) |
| |||||||
AbbVie, Inc. | ||||||||
3.600%, 5/14/25 | 100,000 | 104,720 | ||||||
4.700%, 5/14/45 | 75,000 | 79,590 | ||||||
Actavis Funding SCS | ||||||||
3.800%, 3/15/25 | 70,000 | 71,751 | ||||||
Valeant Pharmaceuticals International, Inc. | ||||||||
5.625%, 12/1/21§ | 17,000 | 14,345 | ||||||
5.500%, 3/1/23§ | 50,000 | 42,500 | ||||||
5.875%, 5/15/23§ | 7,000 | 5,845 | ||||||
6.125%, 4/15/25§ | 7,000 | 5,810 | ||||||
|
| |||||||
324,561 | ||||||||
|
| |||||||
Total Health Care | 1,333,883 | |||||||
|
|
See Notes to Financial Statements.
101
1290 FUNDS
1290 UNCONSTRAINED BOND MANAGERS FUND
PORTFOLIO OF INVESTMENTS (Continued)
April 30, 2016 (Unaudited)
Principal Amount | Value (Note 1) | |||||||
Industrials (1.2%) | ||||||||
Airlines (0.7%) |
| |||||||
American Airlines, Inc. | ||||||||
Series 2011-1 A | ||||||||
5.250%, 1/31/21 | $ | 127,204 | $ | 135,473 | ||||
Continental Airlines Pass Through Trust |
| |||||||
Series 1998-1 A | ||||||||
6.648%, 9/15/17 | 69,298 | 70,469 | ||||||
Delta Air Lines, Inc. | ||||||||
Series 2002-1 G-1 | ||||||||
6.718%, 1/2/23 | 176,086 | 198,202 | ||||||
United Airlines, Inc. | ||||||||
Series 2009-2A | ||||||||
9.750%, 1/15/17 | 64,637 | 67,345 | ||||||
|
| |||||||
471,489 | ||||||||
|
| |||||||
Building Products (0.1%) |
| |||||||
Standard Industries, Inc. | ||||||||
5.125%, 2/15/21§ | 35,000 | 36,400 | ||||||
|
| |||||||
Commercial Services & Supplies (0.2%) |
| |||||||
Clean Harbors, Inc. | ||||||||
5.125%, 6/1/21§ | 35,000 | 35,350 | ||||||
Prime Security Services Borrower LLC/Prime Finance, Inc. | ||||||||
9.250%, 5/15/23 (b)§ | 100,000 | 103,750 | ||||||
|
| |||||||
139,100 | ||||||||
|
| |||||||
Trading Companies & Distributors (0.2%) |
| |||||||
International Lease Finance Corp. | ||||||||
7.125%, 9/1/18§ | 150,000 | 163,969 | ||||||
|
| |||||||
Total Industrials | 810,958 | |||||||
|
| |||||||
Information Technology (0.4%) | ||||||||
IT Services (0.1%) |
| |||||||
First Data Corp. | ||||||||
5.375%, 8/15/23§ | 35,000 | 36,137 | ||||||
7.000%, 12/1/23§ | 17,000 | 17,425 | ||||||
5.000%, 1/15/24§ | 35,000 | 35,242 | ||||||
|
| |||||||
88,804 | ||||||||
|
| |||||||
Semiconductors & Semiconductor Equipment (0.1%) |
| |||||||
Avago Technologies, Term Loan B | ||||||||
4.250%, 11/3/22 | 50,000 | 50,028 | ||||||
|
| |||||||
Software (0.1%) |
| |||||||
Microsoft Corp. | ||||||||
4.450%, 11/3/45 | 70,000 | 77,705 | ||||||
|
| |||||||
Technology Hardware, Storage & Peripherals (0.1%) |
| |||||||
Apple, Inc. | ||||||||
4.650%, 2/23/46 | 85,000 | 92,682 | ||||||
|
| |||||||
Total Information Technology | 309,219 | |||||||
|
| |||||||
Telecommunication Services (1.5%) |
| |||||||
Diversified Telecommunication Services (0.8%) |
| |||||||
AT&T, Inc. | ||||||||
4.350%, 6/15/45 | 75,000 | 70,372 | ||||||
Intelsat Jackson Holdings S.A. | ||||||||
5.500%, 8/1/23 | 70,000 | 44,366 | ||||||
8.000%, 2/15/24§ | 35,000 | 36,225 | ||||||
Level 3 Financing, Inc. | ||||||||
5.125%, 5/1/23 | 35,000 | 35,612 | ||||||
Verizon Communications, Inc. | ||||||||
5.150%, 9/15/23 | $ | 200,000 | $ | 229,793 | ||||
4.862%, 8/21/46 | 125,000 | 132,252 | ||||||
|
| |||||||
548,620 | ||||||||
|
| |||||||
Wireless Telecommunication Services (0.7%) |
| |||||||
Altice Financing S.A. | ||||||||
7.500%, 5/15/26 (b)§ | 200,000 | 199,760 | ||||||
Sprint Communications, Inc. | ||||||||
6.000%, 12/1/16 | 100,000 | 100,250 | ||||||
9.000%, 11/15/18§ | 48,000 | 50,760 | ||||||
Sprint Corp. | ||||||||
7.875%, 9/15/23 | 35,000 | 27,213 | ||||||
T-Mobile USA, Inc. | ||||||||
6.250%, 4/1/21 | 35,000 | 36,750 | ||||||
6.731%, 4/28/22 | 35,000 | 36,925 | ||||||
|
| |||||||
451,658 | ||||||||
|
| |||||||
Total Telecommunication Services | 1,000,278 | |||||||
|
| |||||||
Utilities (1.3%) | ||||||||
Electric Utilities (0.8%) |
| |||||||
Duke Energy Progress LLC | ||||||||
3.250%, 8/15/25 | 100,000 | 106,020 | ||||||
Florida Power & Light Co. | ||||||||
4.050%, 10/1/44 | 100,000 | 106,767 | ||||||
Jersey Central Power & Light Co. | ||||||||
5.625%, 5/1/16 | 100,000 | 99,999 | ||||||
Northern States Power Co. | ||||||||
4.125%, 5/15/44 | 100,000 | 107,111 | ||||||
Public Service Co. of New Mexico | ||||||||
3.850%, 8/1/25 | 100,000 | 101,960 | ||||||
|
| |||||||
521,857 | ||||||||
|
| |||||||
Gas Utilities (0.3%) |
| |||||||
Perusahaan Gas Negara Persero Tbk |
| |||||||
5.125%, 5/16/24§ | 200,000 | 207,000 | ||||||
|
| |||||||
Independent Power and Renewable Electricity Producers (0.0%) |
| |||||||
Dynegy, Inc. | ||||||||
5.875%, 6/1/23 | 29,000 | 26,227 | ||||||
|
| |||||||
Multi-Utilities (0.2%) |
| |||||||
Berkshire Hathaway Energy Co. | ||||||||
5.150%, 11/15/43 | 100,000 | 119,000 | ||||||
|
| |||||||
Total Utilities | 874,084 | |||||||
|
| |||||||
Total Corporate Bonds | 14,091,943 | |||||||
|
| |||||||
Government Securities (24.9%) | ||||||||
Agency CMO (10.1%) | ||||||||
Federal Farm Credit Bank | ||||||||
0.525%, 12/28/16 (l) | 285,000 | 286,481 | ||||||
0.650%, 5/30/17 (l) | 350,000 | 350,331 | ||||||
Federal Home Loan Mortgage Corp. |
| |||||||
0.444%, 4/20/17 (l) | 350,000 | 349,902 | ||||||
Federal National Mortgage Association | ||||||||
0.459%, 7/20/17 (l) | 350,000 | 350,172 | ||||||
0.447%, 10/5/17 (l) | 350,000 | 349,749 | ||||||
1.451%, 2/25/18 | 161,777 | 162,046 | ||||||
2.800%, 3/1/18 | 165,766 | 168,983 |
See Notes to Financial Statements.
102
1290 FUNDS
1290 UNCONSTRAINED BOND MANAGERS FUND
PORTFOLIO OF INVESTMENTS (Continued)
April 30, 2016 (Unaudited)
Principal Amount | Value (Note 1) | |||||||
0.672%, 6/25/18 (l) | $ | 229,255 | $ | 229,016 | ||||
0.662%, 9/25/18 (l) | 185,668 | 185,418 | ||||||
1.646%, 1/25/19 IO (l) | 1,123,212 | 34,455 | ||||||
4.550%, 10/1/19 | 77,307 | 84,558 | ||||||
4.910%, 10/1/19 | 63,722 | 70,357 | ||||||
4.520%, 11/1/19 | 64,167 | 70,255 | ||||||
1.039%, 7/25/20 IO (l) | 439,755 | 15,654 | ||||||
3.416%, 10/1/20 | 77,106 | 82,708 | ||||||
3.766%, 12/1/20 | 79,460 | 86,158 | ||||||
0.369%, 5/25/21 IO (l) | 5,557,869 | 60,566 | ||||||
1.366%, 7/25/21 IO (l) | 1,363,788 | 73,441 | ||||||
0.755%, 10/25/21 (l) | 45,255 | 44,908 | ||||||
0.540%, 11/25/22 IO (l) | 2,486,534 | 57,702 | ||||||
3.110%, 2/1/28 | 115,000 | 120,028 | ||||||
3.150%, 2/1/28 | 74,809 | 78,662 | ||||||
3.259%, 2/1/28 | 45,000 | 47,722 | ||||||
3.200%, 3/1/31 | 115,000 | 119,033 | ||||||
3.480%, 11/1/35 | 55,000 | 57,826 | ||||||
3.000%, 11/1/45 | 490,452 | 503,230 | ||||||
3.000%, 12/1/45 | 562,467 | 577,122 | ||||||
3.000%, 1/1/46 | 535,976 | 549,940 | ||||||
FHLMC Multifamily Structured Pass Through Certificates |
| |||||||
1.553%, 11/25/19 IO (l) | 1,124,714 | 47,192 | ||||||
1.331%, 4/25/20 IO (l) | 909,922 | 30,186 | ||||||
0.987%, 7/25/20 (l) | 102,880 | 102,602 | ||||||
0.817%, 5/25/22 (l) | 172,300 | 169,762 | ||||||
0.571%, 6/25/22 IO (l) | 1,586,124 | 29,085 | ||||||
0.845%, 12/25/22 | 1,550,000 | 66,056 | ||||||
1.577%, 1/25/23 IO (l) | 547,987 | 35,136 | ||||||
Government National Mortgage Association |
| |||||||
2.800%, 1/16/34 | 136,222 | 136,744 | ||||||
2.450%, 2/16/39 | 38,102 | 38,182 | ||||||
3.992%, 9/16/43 | 160,457 | 163,643 | ||||||
3.500%, 3/15/45 | 876,077 | 926,212 | ||||||
|
| |||||||
6,911,223 | ||||||||
|
| |||||||
Foreign Governments (3.3%) | ||||||||
Federative Republic of Brazil | ||||||||
(Zero Coupon), 7/1/16 | BRL | 3,000,000 | 851,933 | |||||
(Zero Coupon), 10/1/16 | 1,200,000 | 329,558 | ||||||
Hellenic Republic Government Bond |
| |||||||
3.375%, 7/17/17 (m) | EUR | 200,000 | 212,556 | |||||
3.800%, 8/8/17 | JPY | 5,000,000 | 42,523 | |||||
4.750%, 4/17/19 (m) | EUR | 100,000 | 102,579 | |||||
Republic of Croatia | ||||||||
6.625%, 7/14/20 (m) | $ | 100,000 | 109,750 | |||||
Republic of Slovenia | ||||||||
5.850%, 5/10/23 (m) | 300,000 | 345,248 | ||||||
Romanian Government International Bond | ||||||||
4.875%, 1/22/24 (m) | 90,000 | 98,438 | ||||||
United Mexican States | ||||||||
3.500%, 1/21/21 | 200,000 | 207,000 | ||||||
|
| |||||||
2,299,585 | ||||||||
|
| |||||||
Municipal Bonds (0.4%) | ||||||||
City of New York, General Obligation Bonds, Series D |
| |||||||
5.985%, 12/1/36 | 100,000 | 128,008 | ||||||
New York City Transitional Finance Authority |
| |||||||
5.267%, 5/1/27 | $ | 115,000 | $ | 135,876 | ||||
|
| |||||||
263,884 | ||||||||
|
| |||||||
U.S. Treasuries (11.1%) | ||||||||
U.S. Treasury Bonds | ||||||||
3.000%, 5/15/45 | 200,000 | 214,053 | ||||||
2.500%, 2/15/46 | 400,000 | 386,612 | ||||||
U.S. Treasury Notes | ||||||||
0.492%, 1/31/18 (l) | 600,000 | 601,299 | ||||||
1.875%, 10/31/22 | 3,800,000 | 3,876,000 | ||||||
0.125%, 7/15/24 TIPS | 2,496,475 | 2,517,433 | ||||||
|
| |||||||
7,595,397 | ||||||||
|
| |||||||
Total Government Securities | 17,070,089 | |||||||
|
| |||||||
Total Long-Term Debt Securities (85.3%) | 58,505,087 | |||||||
|
| |||||||
SHORT-TERM INVESTMENTS: | ||||||||
Government Securities (13.1%) |
| |||||||
Federal Home Loan Bank | ||||||||
0.260%, 5/6/16 (o)(p) | 3,500,000 | 3,499,850 | ||||||
0.240%, 5/10/16 (o)(p) | 220,000 | 219,985 | ||||||
0.240%, 5/13/16 (o)(p) | 300,000 | 299,974 | ||||||
0.230%, 5/25/16 (o)(p) | 200,000 | 199,968 | ||||||
0.230%, 5/27/16 (o)(p) | 200,000 | 199,966 | ||||||
0.230%, 6/3/16 (o)(p) | 200,000 | 199,957 | ||||||
0.230%, 6/10/16 (o)(p) | 100,000 | 99,973 | ||||||
0.240%, 6/24/16 (o)(p) | 400,000 | 399,856 | ||||||
U.S. Treasury Bills | ||||||||
0.190%, 7/21/16#(p) | 55,000 | 54,976 | ||||||
0.250%, 8/18/16 (p) | 670,000 | 669,493 | ||||||
0.330%, 10/6/16 (p) | 2,790,000 | 2,785,986 | ||||||
0.350%, 10/13/16 (p) | 380,000 | 379,390 | ||||||
|
| |||||||
Total Government Securities | 9,009,374 | |||||||
|
| |||||||
Total Short-Term Investments (13.1%) | 9,009,374 | |||||||
|
| |||||||
Number of Contracts | Value (Note 1) | |||||||
OPTIONS PURCHASED: | ||||||||
Interest Rate Swaptions Purchased (0.1%) |
| |||||||
Call Interest Rate Swaptions Purchased Payable (0.1%) |
| |||||||
Bank of America | ||||||||
1 year, June 2016 @ | 16,900,000 | 4,827 | ||||||
30 years, December 2018 @ | 1,150,000 | 52,562 | ||||||
JPMorgan Chase & Co. | ||||||||
30 years, September 2016 @ | 300,000 | 184 | ||||||
|
| |||||||
57,573 | ||||||||
|
| |||||||
Put Interest Rate Swaptions Purchased Receivable (0.0%) |
| |||||||
JPMorgan Chase & Co. | ||||||||
2 years, March 2017 @ | 2,300,000 | 8,736 | ||||||
|
| |||||||
66,309 | ||||||||
|
|
See Notes to Financial Statements.
103
1290 FUNDS
1290 UNCONSTRAINED BOND MANAGERS FUND
PORTFOLIO OF INVESTMENTS (Continued)
April 30, 2016 (Unaudited)
Number of Contracts | Value (Note 1) | |||||||
Put Option Purchased (0.0%) | ||||||||
Foreign Exchange Option May 2016 USD versus JPY | 1,500,000 | $ | 11,924 | |||||
|
| |||||||
Total Options Purchased (0.1%) | 78,233 | |||||||
|
| |||||||
Total Investments Before Options Written and Securities Sold Short (98.5%) | 67,592,694 | |||||||
|
| |||||||
OPTIONS WRITTEN: | ||||||||
Call Options Written (0.0%) | ||||||||
Euro-Bund | ||||||||
May 2016 @ EUR 163.00* | (1 | ) | (458 | ) | ||||
May 2016 @ EUR 165.00* | (2 | ) | (160 | ) | ||||
|
| |||||||
(618 | ) | |||||||
|
| |||||||
Interest Rate Swaptions Written (-0.1%) |
| |||||||
Call Interest Rate Swaptions Written Payable (0.0%) |
| |||||||
JPMorgan Chase & Co. | ||||||||
10 years, March 2017 @ | (200,000 | ) | (3,358 | ) | ||||
10 years, March 2017 @ | (300,000 | ) | (5,130 | ) | ||||
30 years, September 2016 @ | (300,000 | ) | (12,876 | ) | ||||
|
| |||||||
(21,364 | ) | |||||||
|
| |||||||
Put Interest Rate Swaptions Written Receivable (-0.1%) |
| |||||||
Bank of America | ||||||||
10 years, June 2016 @ | (200,000 | ) | (1,695 | ) | ||||
5 years, December 2018 @ | (5,800,000 | ) | (58,113 | ) | ||||
JPMorgan Chase & Co. | ||||||||
10 years, July 2016 @ | (300,000 | ) | (3,778 | ) | ||||
|
| |||||||
(63,586 | ) | |||||||
|
| |||||||
(84,950 | ) | |||||||
|
| |||||||
Put Options Written (0.0%) | ||||||||
10 Year U.S. Treasury Notes | ||||||||
May 2016 @ $128.50* | (8 | ) | (875 | ) | ||||
May 2016 @ $129.50* | (10 | ) | (3,438 | ) | ||||
Euro-Bund | ||||||||
May 2016 @ EUR 158.50* | (2 | ) | (229 | ) | ||||
June 2016 @ EUR 159.50* | (4 | ) | (4,076 | ) | ||||
Foreign Exchange Option May 2016 USD versus JPY | ||||||||
(Strike Price: JPY 100.00)* | (1,500,000 | ) | (64 | ) | ||||
|
| |||||||
(8,682 | ) | |||||||
|
| |||||||
Total Options Written (-0.1%) (Premiums Received $92,868) | (94,250 | ) | ||||||
|
| |||||||
Total Investments before Securities Sold Short (98.4%) | 67,498,444 | |||||||
|
| |||||||
Principal Amount | Value (Note 1) | |||||||
SECURITIES SOLD SHORT: | ||||||||
Agency CMO (-4.0%) | ||||||||
Federal National Mortgage Association | ||||||||
3.000%, 5/25/46 TBA | $ | (1,000,000 | ) | $ | (1,025,391 | ) | ||
3.500%, 5/25/46 TBA | (1,600,000 | ) | (1,677,125 | ) | ||||
|
| |||||||
Total Securities Sold Short (-4.0%) | (2,702,516 | ) | ||||||
|
| |||||||
Total Investments after Options Written and Securities Sold Short (94.4%) | 64,795,928 | |||||||
Other Assets Less Liabilities (5.6%) | 3,842,098 | |||||||
|
| |||||||
Net Assets (100%) | $ | 68,638,026 | ||||||
|
|
* | Non-income producing. |
§ | Securities exempt from registration under Rule 144A of the Securities Act of 1933. These securities may only be resold to qualified institutional buyers. At April 30, 2016, the market value of these securities amounted to $7,466,983 or 10.9% of net assets. Securities denoted with “§” but without “b” have been determined to be liquid under the guidelines established by the Board of Trustees. To the extent any securities might provide a right to demand registration, such rights have not been relied upon when determining liquidity. |
# | All, or a portion of security held by broker as collateral for financial futures contracts, with a total collateral value of $54,976. |
(b) | Illiquid Security. At April 30, 2016, the market value of these securities amounted to $1,365,492 or 2.0% of net assets. |
(e) | Step Bond - Coupon rate increases in increments to maturity. Rate disclosed is as of April 30, 2016. Maturity date disclosed is the ultimate maturity date. |
(l) | Floating Rate Security. Rate disclosed is as of April 30, 2016. |
(m) | Regulation S is an exemption for securities offerings that are made outside of the United States and do not involve direct selling efforts in the United States. Resale restrictions may apply for purposes of the Securities Act of 1933. At April 30, 2016, the market value of these securities amounted to $1,851,020 or 2.7% of net assets. |
(o) | Discount Note Security. Effective rate calculated as of April 30, 2016. |
(p) | Yield to maturity. |
(y) | Securities are perpetual and, thus, do not have a predetermined maturity date. The coupon rate for these securities are fixed for a period of time and may be structured to adjust thereafter. The date shown, if applicable, reflects the next call date. The coupon rate shown is the rate in effect as of April 30, 2016. |
Glossary:
BRL | — Brazilian Real |
CMO | — Collateralized Mortgage Obligation |
EUR | — European Currency Unit |
GBP | — British Pound |
IO | — Interest Only |
JPY | — Japanese Yen |
LIBOR | — London Interbank Offered Rate |
MXN | — Mexican Peso |
TBA | — To Be Announced; Security is subject to delayed delivery |
TIPS | — Treasury Inflation Protected Security |
USD | — U.S. Dollar |
See Notes to Financial Statements.
104
1290 FUNDS
1290 UNCONSTRAINED BOND MANAGERS FUND
PORTFOLIO OF INVESTMENTS (Continued)
April 30, 2016 (Unaudited)
At April 30, 2016, the Fund had the following futures contracts open: (Note 1)
Purchases | Number of Contracts | Expiration Date | Original Value | Value at 4/30/2016 | Unrealized Appreciation/ (Depreciation) | |||||||||||||||
10 Year U.S. Treasury Notes | 41 | June-16 | $ | 5,313,239 | $ | 5,332,563 | $ | 19,324 | ||||||||||||
5 Year U.S. Treasury Notes | 14 | June-16 | 1,694,451 | 1,692,797 | (1,654 | ) | ||||||||||||||
Euro-Bund | 6 | June-16 | 1,125,447 | 1,112,164 | (13,283 | ) | ||||||||||||||
|
| |||||||||||||||||||
$ | 4,387 | |||||||||||||||||||
|
| |||||||||||||||||||
Sales | ||||||||||||||||||||
10 Year U.S. Treasury Notes | 16 | June-16 | $ | 2,085,294 | $ | 2,081,000 | $ | 4,294 | ||||||||||||
90 Day Eurodollar | 7 | June-16 | 1,739,150 | 1,738,187 | 963 | |||||||||||||||
90 Day Eurodollar | 7 | September-16 | 1,736,613 | 1,736,350 | 263 | |||||||||||||||
90 Day Eurodollar | 41 | December-16 | 10,155,700 | 10,161,338 | (5,638 | ) | ||||||||||||||
90 Day Eurodollar | 7 | March-17 | 1,731,537 | 1,733,900 | (2,363 | ) | ||||||||||||||
Long Gilt Bond | 1 | June-16 | 176,536 | 174,754 | 1,782 | |||||||||||||||
U.S. Ultra Bond | 4 | June-16 | 697,335 | 685,375 | 11,960 | |||||||||||||||
|
| |||||||||||||||||||
$ | 11,261 | |||||||||||||||||||
|
| |||||||||||||||||||
$ | 15,648 | |||||||||||||||||||
|
|
At April 30, 2016, the Fund had outstanding foreign currency contracts to buy/sell foreign currencies as follows: (Note 1)
Foreign Currency Buy Contracts | Counterparty | Local Contract Buy Amount (000’s) | U.S. $ Current Value | U.S. $ Settlement Value | Unrealized Appreciation/ (Depreciation) | |||||||||||||
Brazilian Real vs. U.S. Dollar, expiring 5/3/16 | Deutsche Bank AG | 834 | $ | 242,479 | $ | 225,940 | $ | 16,539 | ||||||||||
Brazilian Real vs. U.S. Dollar, expiring 5/3/16 | Deutsche Bank AG | 582 | 169,090 | 161,922 | 7,168 | |||||||||||||
Brazilian Real vs. U.S. Dollar, expiring 6/2/16 | Deutsche Bank AG | 834 | 240,026 | 229,062 | 10,964 | |||||||||||||
Chinese Renminbi vs. U.S. Dollar, expiring 5/24/16 | Bank of America | 248 | 38,165 | 38,000 | 165 | |||||||||||||
Chinese Renminbi vs. U.S. Dollar, expiring 5/24/16 | Credit Suisse | 261 | 40,282 | 40,265 | 17 | |||||||||||||
Chinese Renminbi vs. U.S. Dollar, expiring 5/24/16 | Deutsche Bank AG | 196 | 30,192 | 30,136 | 56 | |||||||||||||
Chinese Renminbi vs. U.S. Dollar, expiring 5/24/16 | JPMorgan Chase Bank | 3,285 | 506,152 | 494,000 | 12,152 | |||||||||||||
Chinese Renminbi vs. U.S. Dollar, expiring 8/19/16 | Bank of America | 1,173 | 180,235 | 175,000 | 5,235 | |||||||||||||
Chinese Renminbi vs. U.S. Dollar, expiring 8/19/16 | Deutsche Bank AG | 1,550 | 238,110 | 236,000 | 2,110 | |||||||||||||
European Union Euro vs. U.S. Dollar, | Bank of America | 18 | 20,617 | 20,396 | 221 | |||||||||||||
European Union Euro vs. U.S. Dollar, | JPMorgan Chase Bank | 239 | 273,745 | 272,496 | 1,249 | |||||||||||||
Mexican Peso vs. U.S. Dollar, expiring 5/20/16 | Credit Suisse | 2,369 | 137,447 | 131,850 | 5,597 | |||||||||||||
Taiwan Dollar vs. U.S. Dollar, expiring 5/24/16 | JPMorgan Chase Bank | 8,507 | 263,806 | 259,000 | 4,806 | |||||||||||||
|
| |||||||||||||||||
$ | 66,279 | |||||||||||||||||
|
|
Foreign Currency Sell Contracts | Counterparty | Local Contract Sell Amount (000’s) | U.S. $ Settlement Value | U.S. $ Current Value | Unrealized Appreciation/ (Depreciation) | |||||||||||||
Australian Dollar vs. U.S. Dollar, expiring 5/3/16 | JPMorgan Chase Bank | 502 | $ | 384,403 | $ | 381,696 | $ | 2,707 | ||||||||||
Australian Dollar vs. U.S. Dollar, expiring 6/2/16 | JPMorgan Chase Bank | 502 | 382,638 | 381,209 | 1,429 | |||||||||||||
Brazilian Real vs. U.S. Dollar, expiring 5/3/16 | Bank of America | 582 | 164,000 | 169,090 | (5,090 | ) | ||||||||||||
Brazilian Real vs. U.S. Dollar, expiring 5/3/16 | Deutsche Bank AG | 834 | 231,202 | 242,479 | (11,277 | ) | ||||||||||||
Brazilian Real vs. U.S. Dollar, expiring 6/2/16 | Deutsche Bank AG | 582 | 160,497 | 167,380 | (6,883 | ) | ||||||||||||
Brazilian Real vs. U.S. Dollar, expiring 7/5/16 | Bank of America | 3,000 | 808,626 | 854,383 | (45,757 | ) | ||||||||||||
Brazilian Real vs. U.S. Dollar, expiring 10/4/16 | JPMorgan Chase Bank | 1,200 | 324,983 | 332,555 | (7,572 | ) | ||||||||||||
British Pound vs. U.S. Dollar, expiring 5/13/16 | Bank of America | 117 | 170,064 | 170,959 | (895 | ) | ||||||||||||
Canadian Dollar vs. U.S. Dollar, expiring 5/13/16 | Bank of America | 82 | 59,265 | 65,354 | (6,089 | ) | ||||||||||||
Chinese Renminbi vs. U.S. Dollar, | Bank of America | 9,892 | 1,472,399 | 1,524,160 | (51,761 | ) | ||||||||||||
Chinese Renminbi vs. U.S. Dollar, | Bank of America | 1,972 | 300,000 | 302,913 | (2,913 | ) |
See Notes to Financial Statements.
105
1290 FUNDS
1290 UNCONSTRAINED BOND MANAGERS FUND
PORTFOLIO OF INVESTMENTS (Continued)
April 30, 2016 (Unaudited)
Foreign Currency Sell Contracts | Counterparty | Local Contract Sell Amount (000’s) | U.S. $ Settlement Value | U.S. $ Current Value | Unrealized Appreciation/ (Depreciation) | |||||||||||||
Chinese Renminbi vs. U.S. Dollar, | Deutsche Bank AG | 1,313 | $ | 200,000 | $ | 201,696 | $ | (1,696 | ) | |||||||||
European Union Euro vs. U.S. Dollar, | JPMorgan Chase Bank | 1,002 | 1,130,910 | 1,147,669 | (16,759 | ) | ||||||||||||
Japanese Yen vs. U.S. Dollar, expiring 5/2/16 | Bank of America | 45,700 | 402,182 | 429,511 | (27,329 | ) | ||||||||||||
Japanese Yen vs. U.S. Dollar, expiring 5/2/16 | Bank of America | 14,000 | 126,963 | 131,579 | (4,616 | ) | ||||||||||||
Japanese Yen vs. U.S. Dollar, expiring 5/6/16 | Morgan Stanley | 18,580 | 171,000 | 174,638 | (3,638 | ) | ||||||||||||
Japanese Yen vs. U.S. Dollar, expiring 6/2/16 | JPMorgan Chase Bank | 111,500 | 1,031,621 | 1,048,666 | (17,045 | ) | ||||||||||||
Taiwan Dollar vs. U.S. Dollar, expiring 5/24/16 | JPMorgan Chase Bank | 8,502 | 257,326 | 263,657 | (6,331 | ) | ||||||||||||
|
| |||||||||||||||||
$ | (211,515 | ) | ||||||||||||||||
|
| |||||||||||||||||
$ | (145,236 | ) | ||||||||||||||||
|
|
Options Written:
Options written for the six months ended April 30, 2016 were as follows:
Total Number of Contracts | Total Premiums Received | |||||||
Options Outstanding – November 1, 2015 | 21,326,000 | $ | 160,261 | |||||
Options Written | 17,100,079 | 153,760 | ||||||
Options Terminated in Closing Purchase Transactions | (29,826,022 | ) | (209,127 | ) | ||||
Options Expired | (30 | ) | (12,026 | ) | ||||
Options Exercised | — | — | ||||||
|
|
|
| |||||
Options Outstanding – April 30, 2016 | 8,600,027 | $ | 92,868 | |||||
|
|
|
|
Inflation-Linked Swaps
Rates Exchange | ||||||||||||||||||||||||
Swap Counterparty | Payments Made by the Fund | Payments Received by the Fund | Notional Amount | Termination Date | Upfront Premium Received (Paid) | Unrealized Appreciation/ (Depreciation) | Market Value | |||||||||||||||||
Deutsche Bank AG | 0.740% | 1 month HICPXT Index | EUR | 2,200,000 | 1/26/20 | $ | 16,678 | $ | (49,709 | ) | $ | (33,031 | ) | |||||||||||
Deutsche Bank AG | 1 month UK-RPI | 3.300% | GBP | 240,000 | 11/15/30 | (396 | ) | 17,002 | 16,606 | |||||||||||||||
|
|
|
|
|
| |||||||||||||||||||
$ | 16,282 | $ | (32,707 | ) | $ | (16,425 | ) | |||||||||||||||||
|
|
|
|
|
|
Glossary:
HICPXT | — Harmonised Index of Consumer Prices ex Tobacco |
UK-RPI | — United Kingdom Retail Price Index |
Credit Default Swap Index Contracts-Sell Protection
Swap Counterparty | Reference Obligation | Contract Annual Fixed Rate | Notional Amount | Upfront Premium Received (Paid) | Maturity Date | Implied Credit Spread as of 4/30/16 | Unrealized Appreciation/ (Depreciation) | Market Value | ||||||||||||||||||||||
Bank of America | Volkswagen International Finance N.V. | 1.000 | % | EUR 100,000 | $ | (328 | ) | 12/20/16 | 0.380 | % | $ | 918 | $ | 590 | ||||||||||||||||
|
|
|
|
|
|
See Notes to Financial Statements.
106
1290 FUNDS
1290 UNCONSTRAINED BOND MANAGERS FUND
PORTFOLIO OF INVESTMENTS (Continued)
April 30, 2016 (Unaudited)
Centrally Cleared Credit Default Swap Index Contracts-Sell Protection
Swap Counterparty | Reference Obligation | Contract Annual Fixed Rate | Notional Amount | Upfront Premium Received (Paid) | Maturity Date | Implied Credit Spread as of 4/30/16 | Unrealized Appreciation/ (Depreciation) | Market Value | ||||||||||||||||||||||
Credit Suisse | CDX North America High Yield Index | 5.000 | % | $ | 50,000 | $ | 176 | 12/20/20 | 4.291 | % | $ | 1,513 | $ | 1,689 | ||||||||||||||||
Credit Suisse | CDX North America High Yield Index |
| 5.000 |
| 100,000 | 28 | 12/20/20 | 4.291 | 3,348 | 3,376 | ||||||||||||||||||||
Credit Suisse | CDX North America High Yield Index | 5.000 | 100,000 | (14 | ) | 12/20/20 | 4.291 | 3,390 | 3,376 | |||||||||||||||||||||
Credit Suisse | CDX North America High Yield Index | 5.000 | 100,000 | 801 | 12/20/20 | 4.291 | 2,575 | 3,376 | ||||||||||||||||||||||
Credit Suisse | CDX North America High Yield Index | 5.000 | 100,000 | 874 | 12/20/20 | 4.291 | 2,502 | 3,376 | ||||||||||||||||||||||
Credit Suisse | CDX North America High Yield Index | 5.000 | 100,000 | 309 | 12/20/20 | 4.291 | 3,067 | 3,376 | ||||||||||||||||||||||
Credit Suisse | CDX North America High Yield Index | 5.000 | 100,000 | (846 | ) | 12/20/20 | 4.291 | 4,222 | 3,376 | |||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||||||
$ | 1,328 | $ | 20,617 | $ | 21,945 | |||||||||||||||||||||||||
|
|
|
|
|
|
Interest Rate Swaps
Swap Counterparty | Payments Made by the Fund | Payments Received by the Fund | Notional Amount | Termination Date | Upfront Premium Received (Paid) | Unrealized Appreciation/ (Depreciation) | Market Value | |||||||||||||||||
Rates Type | ||||||||||||||||||||||||
Bank of America | 1 Day CDI | 12.230% | BRL 5,113,578 | 1/4/21 | $ | 20,192 | $ | (38,523 | ) | $ | (18,331 | ) | ||||||||||||
Credit Suisse | 1 Day CDI | 12.560% | 445,947 | 1/4/21 | (88 | ) | 2,611 | 2,523 | ||||||||||||||||
Deutsche Bank AG | 14.080% | 1 Day CDI | 53,209 | 1/4/21 | — | (1,393 | ) | (1,393 | ) | |||||||||||||||
|
|
|
|
|
| |||||||||||||||||||
$ | 20,104 | $ | (37,305 | ) | $ | (17,201 | ) | |||||||||||||||||
|
|
|
|
|
|
Glossary:
CDI | — Interbank Certificate of Deposit |
Centrally Cleared Interest Rate Swaps
Swap Counterparty | Payments Made | Payments Received | Notional Amount | Termination Date | Upfront Premium Received (Paid) | Unrealized Appreciation/ (Depreciation) | Market Value | |||||||||||||||||
Rates Type | ||||||||||||||||||||||||
Credit Suisse | 0.300% semi-annually | 6 month LIBOR semi-annually | JPY | 50,000,000 | 3/18/26 | $ | (6,514 | ) | $ | (1,324 | ) | $ | (7,838 | ) | ||||||||||
Credit Suisse | 2.250% semi-annually | 6 month LIBOR semi-annually | GBP | 100,000 | 3/16/46 | (8,505 | ) | (7,969 | ) | (16,474 | ) | |||||||||||||
Credit Suisse | 0.300% semi-annually | 6 month LIBOR semi-annually | JPY | 40,000,000 | 3/18/26 | (3,928 | ) | (2,342 | ) | (6,270 | ) | |||||||||||||
Goldman Sachs & Co. | 2.500% semi-annually | 3 month LIBOR quarterly | $ | 100,000 | 6/15/46 | (7,193 | ) | 805 | (6,388 | ) | ||||||||||||||
Goldman Sachs & Co. | 2.500% semi-annually | 3 month LIBOR quarterly | 200,000 | 6/15/46 | (16,918 | ) | 4,142 | (12,776 | ) | |||||||||||||||
Goldman Sachs & Co. | 2.500% semi-annually | 3 month LIBOR quarterly | 800,000 | 6/15/46 | (67,930 | ) | 16,827 | (51,103 | ) | |||||||||||||||
Goldman Sachs & Co. | 2.500% semi-annually | 3 month LIBOR quarterly | 150,000 | 6/15/46 | (15,453 | ) | 5,871 | (9,582 | ) | |||||||||||||||
Morgan Stanley | 2.000% semi-annually | 6 month LIBOR semi-annually | GBP | 400,000 | 3/18/22 | (5,202 | ) | (21,647 | ) | (26,849 | ) |
See Notes to Financial Statements.
107
1290 FUNDS
1290 UNCONSTRAINED BOND MANAGERS FUND
PORTFOLIO OF INVESTMENTS (Continued)
April 30, 2016 (Unaudited)
Swap Counterparty | Payments Made | Payments Received | Notional Amount | Termination Date | Upfront Premium Received (Paid) | Unrealized Appreciation/ (Depreciation) | Market Value | |||||||||||||||||
Rates Type | ||||||||||||||||||||||||
UBS AG | 3 month LIBOR quarterly | 2.000% semi-annually | $ | 700,000 | 12/16/20 | $ | 11,409 | $ | 18,145 | $ | 29,554 | |||||||||||||
UBS AG | 1.750% semi-annually | 3 month LIBOR quarterly | 7,000,000 | 12/16/18 | (50,877 | ) | (127,465 | ) | (178,342 | ) | ||||||||||||||
UBS AG | 2.500% semi-annually | 3 month LIBOR quarterly | 200,000 | 6/15/46 | (14,577 | ) | 1,801 | (12,776 | ) | |||||||||||||||
UBS AG | 5.150% monthly | 4 Week TIIE monthly | MXN | 400,000 | 2/12/21 | — | 131 | 131 | ||||||||||||||||
UBS AG | 3 month LIBOR quarterly | 2.000% semi-annually | $ | 700,000 | 12/16/20 | 15,798 | 13,756 | 29,554 | ||||||||||||||||
UBS AG | 2.500% semi-annually | 3 month LIBOR quarterly | 200,000 | 6/15/46 | (13,006 | ) | 230 | (12,776 | ) | |||||||||||||||
UBS AG | 2.000% semi-annually | 3 month LIBOR quarterly | 2,600,000 | 6/15/23 | (91,629 | ) | 2,139 | (89,490 | ) | |||||||||||||||
UBS AG | 2.500% semi-annually | 3 month LIBOR quarterly | 100,000 | 6/15/46 | (3,818 | ) | (2,570 | ) | (6,388 | ) | ||||||||||||||
UBS AG | 2.500% semi-annually | 3 month LIBOR quarterly | 100,000 | 6/15/46 | (7,213 | ) | 825 | (6,388 | ) | |||||||||||||||
UBS AG | 2.500% semi-annually | 3 month LIBOR quarterly | 200,000 | 6/15/46 | (13,208 | ) | 432 | (12,776 | ) | |||||||||||||||
UBS AG | 2.500% semi-annually | 3 month LIBOR quarterly | 200,000 | 6/15/46 | (14,630 | ) | 1,854 | (12,776 | ) | |||||||||||||||
UBS AG | 4 Week TIIE monthly | 5.780% monthly | MXN | 3,000,000 | 10/6/22 | 360 | 995 | 1,355 | ||||||||||||||||
UBS AG | 4 Week TIIE monthly | 5.780% monthly | 500,000 | 10/6/22 | 75 | 151 | 226 | |||||||||||||||||
UBS AG | 2.250% semi-annually | 3 month LIBOR quarterly | $ | 2,800,000 | 6/15/26 | 14,960 | (151,942 | ) | (136,982 | ) | ||||||||||||||
UBS AG | 2.250% semi-annually | 3 month LIBOR quarterly | 400,000 | 6/15/26 | 3,366 | (22,935 | ) | (19,569 | ) | |||||||||||||||
UBS AG | 1.250% semi-annually | 3 month LIBOR quarterly | 11,200,000 | 6/15/18 | 17,914 | (85,439 | ) | (67,525 | ) | |||||||||||||||
UBS AG | 2.500% semi-annually | 3 month LIBOR quarterly | 150,000 | 6/15/46 | (1,436 | ) | (8,146 | ) | (9,582 | ) | ||||||||||||||
UBS AG | 1.750% semi-annually | 3 month LIBOR quarterly | 600,000 | 12/14/17 | (3,287 | ) | (1,427 | ) | (4,714 | ) | ||||||||||||||
UBS AG | 5.170% monthly | 4 Week TIIE monthly | MXN | 500,000 | 2/12/21 | — | 144 | 144 | ||||||||||||||||
UBS AG | 2.300% semi-annually | 3 month LIBOR quarterly | $ | 700,000 | 12/3/25 | — | (45,282 | ) | (45,282 | ) | ||||||||||||||
UBS AG | 4 Week TIIE monthly | 5.780% monthly | MXN | 7,400,000 | 9/29/22 | 490 | 3,066 | 3,556 | ||||||||||||||||
UBS AG | 2.500% semi-annually | 3 month LIBOR quarterly | $ | 100,000 | 6/15/46 | (4,273 | ) | (2,115 | ) | (6,388 | ) | |||||||||||||
|
|
|
|
|
| |||||||||||||||||||
$ | (285,225 | ) | $ | (409,289 | ) | $ | (694,514 | ) | ||||||||||||||||
|
|
|
|
|
|
Glossary:
TIIE | — Interbank Equilibrium Interest Rate |
See Notes to Financial Statements.
108
1290 FUNDS
1290 UNCONSTRAINED BOND MANAGERS FUND
PORTFOLIO OF INVESTMENTS (Continued)
April 30, 2016 (Unaudited)
The following is a summary of the inputs used to value the Fund’s assets and liabilities carried at fair value as of April 30, 2016:
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
Various inputs are used in determining the value of the Fund’s investments. These inputs are summarized in the three broad levels listed below:
Investment Type | Level 1 Quoted Prices in Active Markets for Identical Securities | Level 2 Significant Other Observable Inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.) (a) | Level 3 assumptions in | Total | ||||||||||||
Assets: |
| |||||||||||||||
Asset-Backed and Mortgage-Backed Securities | ||||||||||||||||
Asset-Backed Securities | $ | — | $ | 14,412,082 | $ | — | $ | 14,412,082 | ||||||||
Non-Agency CMO | — | 12,930,973 | — | 12,930,973 | ||||||||||||
Centrally Cleared Credit Default Swaps | — | 20,617 | — | 20,617 | ||||||||||||
Centrally Cleared Interest Rate Swaps | — | 71,314 | — | 71,314 | ||||||||||||
Corporate Bonds | ||||||||||||||||
Consumer Discretionary | — | 606,390 | — | 606,390 | ||||||||||||
Consumer Staples | — | 433,338 | — | 433,338 | ||||||||||||
Energy | — | 986,439 | — | 986,439 | ||||||||||||
Financials | — | 7,737,354 | — | 7,737,354 | ||||||||||||
Health Care | — | 1,333,883 | — | 1,333,883 | ||||||||||||
Industrials | — | 810,958 | — | 810,958 | ||||||||||||
Information Technology | — | 309,219 | — | 309,219 | ||||||||||||
Telecommunication Services | — | 1,000,278 | — | 1,000,278 | ||||||||||||
Utilities | — | 874,084 | — | 874,084 | ||||||||||||
Credit Default Swaps | — | 918 | — | 918 | ||||||||||||
Forward Currency Contracts | — | 70,415 | — | 70,415 | ||||||||||||
Futures | 38,586 | — | — | 38,586 | ||||||||||||
Government Securities | ||||||||||||||||
Agency CMO | — | 6,845,167 | 66,056 | 6,911,223 | ||||||||||||
Foreign Governments | — | 2,299,585 | — | 2,299,585 | ||||||||||||
Municipal Bonds | — | 263,884 | — | 263,884 | ||||||||||||
U.S. Treasuries | — | 7,595,397 | — | 7,595,397 | ||||||||||||
Inflation-linked Swaps | — | 17,002 | — | 17,002 | ||||||||||||
Interest Rate Swaps | — | 2,611 | — | 2,611 | ||||||||||||
Options Purchased | ||||||||||||||||
Interest Rate Swaptions Purchased | — | 66,309 | — | 66,309 | ||||||||||||
Put Options Purchased | — | 11,924 | — | 11,924 | ||||||||||||
Short-Term Investments | — | 9,009,374 | — | 9,009,374 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Assets | $ | 38,586 | $ | 67,709,515 | $ | 66,056 | $ | 67,814,157 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Liabilities: | ||||||||||||||||
Centrally Cleared Interest Rate Swaps | $ | — | $ | (480,603 | ) | $ | — | $ | (480,603 | ) | ||||||
Forward Currency Contracts | — | (215,651 | ) | — | (215,651 | ) | ||||||||||
Futures | (22,938 | ) | — | — | (22,938 | ) | ||||||||||
Government Securities | ||||||||||||||||
Agency CMO | — | (2,702,516 | ) | — | (2,702,516 | ) | ||||||||||
Inflation-linked Swaps | — | (49,709 | ) | — | (49,709 | ) | ||||||||||
Interest Rate Swaps | — | (39,916 | ) | — | (39,916 | ) |
See Notes to Financial Statements.
109
1290 FUNDS
1290 UNCONSTRAINED BOND MANAGERS FUND
PORTFOLIO OF INVESTMENTS (Continued)
April 30, 2016 (Unaudited)
Investment Type | Level 1 Quoted Prices in Active Markets for Identical Securities | Level 2 Significant Other Observable Inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.) (a) | Level 3 assumptions in | Total | ||||||||||||
Options Written | ||||||||||||||||
Call Options Written | $ | (618 | ) | $ | — | $ | — | $ | (618 | ) | ||||||
Interest Rate Swaptions Written | — | (84,950 | ) | — | (84,950 | ) | ||||||||||
Put Options Written | (8,618 | ) | (64 | ) | — | (8,682 | ) | |||||||||
|
|
|
|
|
|
|
| |||||||||
Total Liabilities | $ | (32,174 | ) | $ | (3,573,409 | ) | $ | — | $ | (3,605,583 | ) | |||||
|
|
|
|
|
|
|
| |||||||||
Total | $ | 6,412 | $ | 64,136,106 | $ | 66,056 | $ | 64,208,574 | ||||||||
|
|
|
|
|
|
|
|
(a) | A security with a market value of $152,272 transferred from Level 3 to Level 2 at the end of the period due to active trading. |
There were no additional transfers between Levels 1, 2 or 3 during the six months ended April 30, 2016.
Fair Values of Derivative Instruments as of April 30, 2016:
Statement of Assets and Liabilities | ||||||
Derivatives Not Accounted for as | Asset Derivatives | Fair Value | ||||
Interest rate contracts | Receivables, Net assets – Unrealized appreciation | $ | 195,822 | |||
Foreign exchange contracts | Receivables | 82,339 | ||||
Credit contracts | Receivables | 21,535 | ||||
|
| |||||
Total | $ | 299,696 | ||||
|
| |||||
Liability Derivatives | ||||||
Interest rate contracts | Payables, Net assets – Unrealized depreciation | $ | (687,352 | ) | ||
Foreign exchange contracts | Payables | (215,715 | ) | |||
Credit contracts | Payables | — | ||||
|
| |||||
Total | $ | (903,067 | ) | |||
|
|
The Effect of Derivative Instruments on the Statement of Operations for the period ended April 30, 2016:
Amount of Realized Gain or (Loss) on Derivatives Recognized in Income | ||||||||||||||||||||
Derivatives Not Accounted for as | Options | Futures | Forward Currency Contracts | Swaps | Total | |||||||||||||||
Interest rate contracts | $ | 48,921 | $ | 70,499 | $ | — | $ | (521,794 | ) | $ | (402,374 | ) | ||||||||
Foreign exchange contracts | 20,812 | — | (70,044 | ) | — | (49,232 | ) | |||||||||||||
Credit contracts | 6,043 | — | — | (4,142 | ) | 1,901 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total | $ | 75,776 | $ | 70,499 | $ | (70,044 | ) | $ | (525,936 | ) | $ | (449,705 | ) | |||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Amount of Unrealized Appreciation or (Depreciation) on Derivatives Recognized in Income | ||||||||||||||||||||
Derivatives Not Accounted for as | Options | Futures | Forward Currency Contracts | Swaps | Total | |||||||||||||||
Interest rate contracts | $ | (1,893 | ) | $ | (3,258 | ) | $ | — | $ | 332,422 | $ | 327,271 | ||||||||
Foreign exchange contracts | (2,113 | ) | — | (106,261 | ) | — | (108,374 | ) | ||||||||||||
Credit contracts | (1,372 | ) | — | — | (16,058 | ) | (17,430 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total | $ | (5,378 | ) | $ | (3,258 | ) | $ | (106,261 | ) | $ | 316,364 | $ | 201,467 | |||||||
|
|
|
|
|
|
|
|
|
|
* Includes cumulative appreciation / depreciation of futures contracts and centrally cleared swaps as reported in the Portfolio of Investments. Only current day’s variation margin is reported within the Statement of Assets and Liabilities.
^ The Fund held options, forward foreign currency, futures and swap contracts as a substitute for investing in conventional securities, hedging and in an attempt to enhance returns.
See Notes to Financial Statements.
110
1290 FUNDS
1290 UNCONSTRAINED BOND MANAGERS FUND
PORTFOLIO OF INVESTMENTS (Continued)
April 30, 2016 (Unaudited)
The Fund held forward foreign currency contracts with an average settlement value of approximately $12,874,000, options with an average notional balance of approximately $187,000, swaps with an average notional balance of approximately $59,246,000 and futures contracts with an average notional balance of approximately $26,082,000, during the six months ended April 30, 2016.
The following table presents the Fund’s gross derivative assets and liabilities by counterparty net of amounts available for offset under netting arrangements and any related collateral received or pledged by the Fund as of April 30, 2016:
Counterparty | Gross Amount of Derivative Assets Presented in the Statement of Assets and Liabilities (a) | Derivatives Available for Offset | Collateral Received | Net Amount Due from Counterparty | ||||||||||||
Bank of America | $ | 75,852 | $ | (75,852 | ) | $ | — | $ | — | |||||||
Credit Suisse | 8,225 | — | — | 8,225 | ||||||||||||
Deutsche Bank AG | 53,839 | (53,839 | ) | — | — | |||||||||||
JPMorgan Chase Bank | 31,263 | (31,263 | ) | — | — | |||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | $ | 169,179 | $ | (160,954 | ) | $ | — | $ | 8,225 | |||||||
|
|
|
|
|
|
|
| |||||||||
Counterparty | Gross Amount of Derivative Liabilities Presented in the Statement of Assets and Liabilities (a) | Derivatives Available for Offset | Collateral Received | Net Amount Due from Counterparty | ||||||||||||
Bank of America | $ | 242,845 | $ | (75,852 | ) | $ | 299,000 | $ | (132,007 | ) | ||||||
Deutsche Bank AG | 70,958 | (53,839 | ) | — | 17,119 | |||||||||||
JPMorgan Chase Bank | 72,849 | (31,263 | ) | — | 41,586 | |||||||||||
Morgan Stanley | 3,638 | — | — | 3,638 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | $ | 390,290 | $ | (160,954 | ) | $ | 299,000 | $ | (69,664 | ) | ||||||
|
|
|
|
|
|
|
|
(a) | For financial reporting purposes the Fund does not offset derivative assets and derivative liabilities subject to master netting arrangements in the Statement of Assets and Liabilities. |
Investment security transactions for the six months ended April 30, 2016 were as follows:
Cost of Purchases: | ||||
Long-term investments other than U.S. government debt securities | $ | 53,940,840 | ||
Long-term U.S. government debt securities | 5,369,485 | |||
|
| |||
$ | 59,310,325 | |||
|
| |||
Net Proceeds of Sales and Redemptions: | ||||
Long-term investments other than U.S. government debt securities | $ | 44,579,665 | ||
Long-term U.S. government debt securities | 1,733,033 | |||
|
| |||
$ | 46,312,698 | |||
|
|
As of April 30, 2016, the gross unrealized appreciation (depreciation) of investments based on the aggregate cost of investments for Federal income tax purposes was as follows:
Aggregate gross unrealized appreciation | $ | 974,778 | ||
Aggregate gross unrealized depreciation | (600,355 | ) | ||
|
| |||
Net unrealized appreciation | $ | 374,423 | ||
|
| |||
Federal income tax cost of investments | $ | 67,218,271 | ||
|
|
See Notes to Financial Statements.
111
1290 FUNDS
1290 UNCONSTRAINED BOND MANAGERS FUND
STATEMENT OF ASSETS AND LIABILITIES
April 30, 2016 (Unaudited)
ASSETS | ||||
Investments at value (Cost $67,217,533) | $ | 67,592,694 | ||
Cash | 896,245 | |||
Foreign cash (Cost $79,768) | 81,528 | |||
Cash held as collateral at broker | 568,000 | |||
Receivable for forward commitments | 2,703,844 | |||
Receivable for securities sold | 2,181,972 | |||
Dividends, interest and other receivables | 246,816 | |||
Variation Margin on Centrally Cleared Swaps | 132,950 | |||
Due from Custodian | 75,224 | |||
Unrealized appreciation on forward foreign currency contracts | 70,415 | |||
Receivable for Fund shares sold | 30,000 | |||
Due from broker for futures variation margin | 20,708 | |||
Market value on OTC swap contracts (Premiums received $812) | 19,719 | |||
Deferred offering cost | 5,058 | |||
Other assets | 1,923 | |||
|
| |||
Total assets | 74,627,096 | |||
|
| |||
LIABILITIES | ||||
Securities sold short (Proceeds received $2,703,844) | 2,702,516 | |||
Payable for securities purchased | 2,643,589 | |||
Unrealized depreciation on forward foreign currency contracts | 215,651 | |||
Dividends and distributions payable | 176,338 | |||
Options written, at value (Premiums received $92,868) | 94,250 | |||
Payable for return of cash collateral on forward contracts | 60,000 | |||
Market value on OTC swap contracts (Premiums paid $36,870) | 52,755 | |||
Investment management fees payable | 25,875 | |||
Administrative fees payable | 8,414 | |||
Transfer agent fees payable | 498 | |||
Trustees’ fees payable | 416 | |||
Distribution fees payable - Class R | 40 | |||
Distribution fees payable - Class A | 21 | |||
Accrued expenses | 8,707 | |||
|
| |||
Total liabilities | 5,989,070 | |||
|
| |||
NET ASSETS | $ | 68,638,026 | ||
|
| |||
Net assets were comprised of: | ||||
Paid in capital | $ | 70,082,513 | ||
Accumulated undistributed net investment income (loss) | (321,695 | ) | ||
Accumulated undistributed net realized gain (loss) on investments, securities sold short, options written, futures, swaps and foreign currency transactions | (909,045 | ) | ||
Net unrealized appreciation (depreciation) on investments, securities sold short, options written, futures, swaps and foreign currency translations | (213,747 | ) | ||
|
| |||
Net assets | $ | 68,638,026 | ||
|
| |||
Class A | ||||
Net asset value and redemption price per share, $104,425 / 10,670 shares outstanding (unlimited amount authorized: $0.001 par value) | $ | 9.79 | ||
Maximum sales charge (4.50% of offering price) | 0.46 | |||
|
| |||
Maximum offering price per share | $ | 10.25 | ||
|
| |||
Class I | ||||
Net asset value and redemption price per share, $68,435,776 / 6,988,704 shares outstanding (unlimited amount authorized: $0.001 par value) | $ | 9.79 | ||
|
| |||
Class R | ||||
Net asset value and redemption price per share, $97,825 / 10,000 shares outstanding (unlimited amount authorized: $0.001 par value) | $ | 9.78 | ||
|
|
See Notes to Financial Statements.
112
1290 FUNDS
1290 UNCONSTRAINED BOND MANAGERS FUND
STATEMENT OF OPERATIONS
For the Six Months Ended April 30, 2016 (Unaudited)
INVESTMENT INCOME | ||||
Interest | $ | 850,969 | ||
|
| |||
EXPENSES | ||||
Investment management fees | 271,759 | |||
Professional fees | 76,116 | |||
Administrative fees | 50,955 | |||
Printing and mailing expenses | 20,437 | |||
Custodian fees | 15,325 | |||
Offering costs | 13,741 | |||
Registration and filing fees | 13,630 | |||
Transfer agent fees | 10,453 | |||
Trustees’ fees | 4,115 | |||
Distribution fees - Class R | 242 | |||
Distribution fees - Class A | 127 | |||
Miscellaneous | 21,820 | |||
|
| |||
Gross expenses | 498,720 | |||
Less: Waiver from investment adviser | (108,064 | ) | ||
|
| |||
Net expenses | 390,656 | |||
|
| |||
NET INVESTMENT INCOME (LOSS) | 460,313 | |||
|
| |||
REALIZED AND UNREALIZED GAIN (LOSS) | ||||
Realized gain (loss) on: | ||||
Investments | (6,969 | ) | ||
Futures | 70,499 | |||
Foreign currency transactions | (49,436 | ) | ||
Swaps | (525,936 | ) | ||
Options written | 136,293 | |||
Securities sold short | (64,117 | ) | ||
|
| |||
Net realized gain (loss) | (439,666 | ) | ||
|
| |||
Change in unrealized appreciation (depreciation) on: | ||||
Investments | 356,408 | |||
Futures | (3,258 | ) | ||
Foreign currency translations | (95,731 | ) | ||
Swaps | 316,364 | |||
Options written | (22,575 | ) | ||
Securities sold short | (9,922 | ) | ||
|
| |||
Net change in unrealized appreciation (depreciation) | 541,286 | |||
|
| |||
NET REALIZED AND UNREALIZED GAIN (LOSS) | 101,620 | |||
|
| |||
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | $ | 561,933 | ||
|
|
See Notes to Financial Statements.
113
1290 FUNDS
1290 UNCONSTRAINED BOND MANAGERS FUND
STATEMENT OF CHANGES IN NET ASSETS
Six Months Ended April 30, 2016 (Unaudited) | July 6, 2015* to October 31, 2015 | |||||||
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS: |
| |||||||
Net investment income (loss) | $ | 460,313 | $ | 141,092 | ||||
Net realized gain (loss) on investments, securities sold short, options written, futures and foreign currency transactions | (439,666 | ) | (405,468 | ) | ||||
Net change in unrealized appreciation (depreciation) on investments, securities sold short, options written, futures and foreign currency translations | 541,286 | (755,033 | ) | |||||
|
|
|
| |||||
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | 561,933 | (1,019,409 | ) | |||||
|
|
|
| |||||
DIVIDENDS : | ||||||||
Dividends from net investment income | ||||||||
Class A | (1,065 | ) | (256 | ) | ||||
Class I | (773,705 | ) | (219,894 | ) | ||||
Class R | (907 | ) | (199 | ) | ||||
|
|
|
| |||||
TOTAL DIVIDENDS: | (775,677 | ) | (220,349 | ) | ||||
|
|
|
| |||||
CAPITAL SHARES TRANSACTIONS: | ||||||||
Class A | ||||||||
Capital shares sold [ 662 and 10,000 shares, respectively ] | 6,479 | 100,000 | ||||||
Capital shares issued in reinvestment of dividends[ 8 and 0 shares, respectively ] | 74 | — | ||||||
|
|
|
| |||||
Total Class A transactions | 6,553 | 100,000 | ||||||
|
|
|
| |||||
Class I | ||||||||
Capital shares sold [ 7,799 and 6,980,847 shares, respectively ] | 75,993 | 69,808,418 | ||||||
Capital shares issued in reinvestment of dividends[ 57 and 1 shares, respectively ] | 558 | 6 | ||||||
|
|
|
| |||||
Total Class I transactions | 76,551 | 69,808,424 | ||||||
|
|
|
| |||||
Class R | ||||||||
Capital shares sold [ 0 and 10,000 shares, respectively ] | — | 100,000 | ||||||
|
|
|
| |||||
Total Class R transactions | — | 100,000 | ||||||
|
|
|
| |||||
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM CAPITAL SHARE TRANSACTIONS | 83,104 | 70,008,424 | ||||||
|
|
|
| |||||
TOTAL INCREASE (DECREASE) IN NET ASSETS | (130,640 | ) | 68,768,666 | |||||
NET ASSETS: | ||||||||
Beginning of period | 68,768,666 | — | ||||||
|
|
|
| |||||
End of period (a) | $ | 68,638,026 | $ | 68,768,666 | ||||
|
|
|
|
| ||||
(a) Includes accumulated undistributed (overdistributed) net investment income (loss) of | $ | (321,695 | ) | $ | (6,331 | ) | ||
|
|
|
| |||||
* The Fund commenced operations on July 6, 2015. |
See Notes to Financial Statements.
114
1290 FUNDS
1290 UNCONSTRAINED BOND MANAGERS FUND
FINANCIAL HIGHLIGHTS
Class A | Six Months Ended April 30, 2016 (Unaudited) | July 6, 2015* to October 31, 2015 | ||||||
Net asset value, beginning of period | $ | 9.82 | $ | 10.00 | ||||
|
|
|
| |||||
Income (loss) from investment operations: | ||||||||
Net investment income (loss) (e) | 0.05 | 0.01 | ||||||
Net realized and unrealized gain (loss) on investments, securities sold short, options written, futures and foreign currency transactions | 0.02 | (0.16 | ) | |||||
|
|
|
| |||||
Total from investment operations | 0.07 | (0.15 | ) | |||||
|
|
|
| |||||
Less distributions: | ||||||||
Dividends from net investment income | (0.10 | ) | (0.03 | ) | ||||
|
|
|
| |||||
Net asset value, end of period | $ | 9.79 | $ | 9.82 | ||||
|
|
|
| |||||
Total return (b) | 0.73 | % | (1.54 | )% | ||||
|
|
|
| |||||
Ratios/Supplemental Data: | ||||||||
Net assets, end of period (000’s) | $ | 104 | $ | 98 | ||||
Ratio of expenses to average net assets: | ||||||||
After waivers (a) | 1.40 | % | 1.40 | % | ||||
Before waivers (a) | 1.72 | % | 1.62 | % | ||||
Ratio of net investment income (loss) to average net assets: | ||||||||
After waivers (a) | 1.11 | % | 0.37 | %(l) | ||||
Before waivers (a) | 0.79 | % | 0.15 | %(l) | ||||
Portfolio turnover rate (z)^ | 79 | % | 77 | % | ||||
Class I | Six Months Ended April 30, 2016 (Unaudited) | July 6, 2015* to October 31, 2015 | ||||||
Net asset value, beginning of period | $ | 9.82 | $ | 10.00 | ||||
|
|
|
| |||||
Income (loss) from investment operations: | ||||||||
Net investment income (loss) (e) | 0.07 | 0.02 | ||||||
Net realized and unrealized gain (loss) on investments, securities sold short, options written, futures and foreign currency transactions | 0.01 | (0.17 | ) | |||||
|
|
|
| |||||
Total from investment operations | 0.08 | (0.15 | ) | |||||
|
|
|
| |||||
Less distributions: | ||||||||
Dividends from net investment income | (0.11 | ) | (0.03 | ) | ||||
|
|
|
| |||||
Net asset value, end of period | $ | 9.79 | $ | 9.82 | ||||
|
|
|
| |||||
Total return (b) | 0.84 | % | (1.49 | )% | ||||
|
|
|
| |||||
Ratios/Supplemental Data: | ||||||||
Net assets, end of period (000’s) | $ | 68,436 | $ | 68,572 | ||||
Ratio of expenses to average net assets: | ||||||||
After waivers (a) | 1.15 | % | 1.15 | % | ||||
Before waivers (a) | 1.47 | % | 1.36 | % | ||||
Ratio of net investment income (loss) to average net assets: | ||||||||
After waivers (a) | 1.36 | % | 0.68 | %(l) | ||||
Before waivers (a) | 1.04 | % | 0.47 | %(l) | ||||
Portfolio turnover rate (z)^ | 79 | % | 77 | % |
See Notes to Financial Statements.
115
1290 FUNDS
1290 UNCONSTRAINED BOND MANAGERS FUND
FINANCIAL HIGHLIGHTS (Continued)
Class R | Six Months Ended April 30, 2016 (Unaudited) | July 6, 2015* to October 31, 2015 | ||||||
Net asset value, beginning of period | $ | 9.82 | $ | 10.00 | ||||
|
|
|
| |||||
Income (loss) from investment operations: | ||||||||
Net investment income (loss) (e) | 0.04 | — | # | |||||
Net realized and unrealized gain (loss) on investments, securities sold short, options written, futures and foreign currency transactions | 0.01 | (0.16 | ) | |||||
|
|
|
| |||||
Total from investment operations | 0.05 | (0.16 | ) | |||||
|
|
|
| |||||
Less distributions: | ||||||||
Dividends from net investment income | (0.09 | ) | (0.02 | ) | ||||
|
|
|
| |||||
Net asset value, end of period | $ | 9.78 | $ | 9.82 | ||||
|
|
|
| |||||
Total return (b) | 0.53 | % | (1.60 | )% | ||||
|
|
|
| |||||
Ratios/Supplemental Data: | ||||||||
Net assets, end of period (000’s) | $ | 98 | $ | 98 | ||||
Ratio of expenses to average net assets: | ||||||||
After waivers (a) | 1.65 | % | 1.65 | % | ||||
Before waivers (a) | 1.97 | % | 1.88 | % | ||||
Ratio of net investment income (loss) to average net assets: | ||||||||
After waivers (a) | 0.86 | % | 0.12 | %(l) | ||||
Before waivers (a) | 0.54 | % | (0.11 | )%(l) | ||||
Portfolio turnover rate (z)^ | 79 | % | 77 | % |
* | Commencement of Operations. |
# | Per share amount is less than $0.005. |
^ | Portfolio turnover rate excludes derivatives, if any. |
(a) | Ratios for periods less than one year are annualized. |
(b) | Total returns for periods less than one year are not annualized. |
(e) | Net investment income (loss) per share is based on average shares outstanding. |
(l) | The annualized ratio of net investment income to average net assets may not be indicative of operating results for a full year. |
(z) | Portfolio turnover rate for periods less than one year is not annualized. |
See Notes to Financial Statements.
116
1290 FUNDS
April 30, 2016 (Unaudited)
Note 1 | Organization and Significant Accounting Policies |
1290 Funds (the “Trust”) was organized as a Delaware statutory trust on March 1, 2013 and is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company with nine diversified funds in operation (each a “Fund” and collectively, the “Funds”). The investment adviser to each Fund is AXA Equitable Funds Management Group, LLC d/b/a 1290 Asset Managers® (“1290 Asset Managers” or “FMG LLC” or the “Adviser”), a wholly-owned subsidiary of AXA Equitable Life Insurance Company (“AXA Equitable”).
The total amount of seed capital at the Funds’ commencement of operations is listed below:
Funds: | Commencement Date | Class | Seed Capital | |||||
1290 Convertible Securities | 7/6/15 | Class A | $ | 100,000 | ||||
1290 Convertible Securities | 7/6/15 | Class I | 19,800,000 | |||||
1290 Convertible Securities | 7/6/15 | Class R | 100,000 | |||||
1290 DoubleLine Dynamic Allocation | 3/7/16 | Class A | 100,000 | |||||
1290 DoubleLine Dynamic Allocation | 3/7/16 | Class I | 49,800,000 | |||||
1290 DoubleLine Dynamic Allocation | 3/7/16 | Class R | 100,000 | |||||
1290 GAMCO Small/Mid Cap Value | 11/12/14 | Class A | 780,000 | |||||
1290 GAMCO Small/Mid Cap Value | 11/12/14 | Class C | 260,000 | |||||
1290 GAMCO Small/Mid Cap Value | 11/12/14 | Class I | 780,000 | |||||
1290 GAMCO Small/Mid Cap Value | 11/12/14 | Class R | 780,000 | |||||
1290 Global Equity Managers | 7/6/15 | Class A | 100,000 | |||||
1290 Global Equity Managers | 7/6/15 | Class I | 29,800,000 | |||||
1290 Global Equity Managers | 7/6/15 | Class R | 100,000 | |||||
1290 Global Talents | 4/11/16 | Class A | 100,000 | |||||
1290 Global Talents | 4/11/16 | Class I | 19,800,000 | |||||
1290 Global Talents | 4/11/16 | Class R | 100,000 | |||||
1290 High Yield Bond | 11/12/14 | Class A | 9,030,000 | |||||
1290 High Yield Bond | 11/12/14 | Class C | 3,010,000 | |||||
1290 High Yield Bond | 11/12/14 | Class I | 9,030,000 | |||||
1290 High Yield Bond | 11/12/14 | Class R | 9,030,000 | |||||
1290 Multi-Alternative Strategies | 7/6/15 | Class A | 100,000 | |||||
1290 Multi-Alternative Strategies | 7/6/15 | Class I | 9,800,000 | |||||
1290 Multi-Alternative Strategies | 7/6/15 | Class R | 100,000 | |||||
1290 SmartBeta Equity | 11/12/14 | Class A | 3,030,000 | |||||
1290 SmartBeta Equity | 11/12/14 | Class C | 1,010,000 | |||||
1290 SmartBeta Equity | 11/12/14 | Class I | 3,030,000 | |||||
1290 SmartBeta Equity | 11/12/14 | Class R | 3,030,000 | |||||
1290 Unconstrained Bond Managers | 7/6/15 | Class A | 100,000 | |||||
1290 Unconstrained Bond Managers | 7/6/15 | Class I | 35,800,000 | |||||
1290 Unconstrained Bond Managers | 7/6/15 | Class R | 100,000 |
Under the Trust’s organizational documents, its officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the Trust. In addition, in the normal course of business, the Trust enters into contracts with vendors and others that provide for general indemnifications. The Trust’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Trust. However, based on experience, the Trust and management expect the risk of loss to be remote.
Each of the investment sub-advisers (each a “Sub-Adviser”) independently chooses and maintains a portfolio of securities for their respective Fund.
The 1290 Multi-Alternative Strategies Fund is a type of mutual fund often described as a “fund-of-funds”. The 1290 Multi-Alternative Strategies pursues its investment objective by investing exclusively in other unaffiliated investment companies or exchange-traded funds.
117
1290 FUNDS
NOTES TO FINANCIAL STATEMENTS (Continued)
April 30, 2016 (Unaudited)
The Trust issues four classes of shares, Class A, Class C, Class I and Class R on behalf of the following nine Funds: 1290 Convertible Securities Fund, 1290 DoubleLine Dynamic Allocation Fund, 1290 GAMCO Small/Mid Cap Value Fund, 1290 Global Equity Managers Fund, 1290 Global Talents Fund, 1290 High Yield Bond Fund, 1290 Multi-Alternative Strategies Fund, 1290 SmartBeta Equity Fund and 1290 Unconstrained Bond Managers Fund. Class C shares currently are not offered for sale.
The Class A, Class C and Class R shares are subject to distribution fees imposed under distribution plans (“Distribution Plans”) adopted pursuant to Rule 12b-1 under the 1940 Act. Under the Trust’s multiple-class distribution system, all four classes of shares have identical voting, dividend, liquidation and other rights, other than the payment of distribution fees under the applicable Distribution Plan.
Additionally, Class A shares are sold at a maximum front-end sales charge of up to 4.50% for 1290 Convertible Securities Fund, 1290 High Yield Bond Fund and 1290 Unconstrained Bond Managers Fund, and up to 5.50% for 1290 DoubleLine Dynamic Allocation Fund, 1290 GAMCO Small/Mid Cap Value Fund, 1290 Global Equity Managers Fund, 1290 Global Talents Fund, 1290 Multi-Alternative Strategies Fund and 1290 SmartBeta Equity Fund. Class A shares sold without a front-end sales charge are subject to a contingent deferred sales charge (“CDSC”) of 1% of the lesser of net asset value (“NAV”) of the redeemed shares at the time of purchase or the NAV of the redeemed shares at the time of redemption, if redeemed within 12 months of purchase. Class C shares are subject to a CDSC of 1% of the lesser of NAV of the redeemed shares at the time of purchase or the NAV of the redeemed shares at the time of redemption, if redeemed within 12 months of purchase.
1290 High Yield Bond Fund shares that are held for one month or less are subject to a 2.00% redemption fee based on the current NAV on all classes subject to certain exceptions as described in the Fund’s prospectus. No such redemption fees were assessed during the period ended April 30, 2016.
The investment objectives of each Fund are as follows:
1290 Convertible Securities Fund (sub-advised by Palisade Capital Management, L.L.C.) — Seeks a high level of total return.
1290 DoubleLine Dynamic Allocation (sub-advised by DoubleLine Capital LP) — Seeks to achieve total return from long-term capital appreciation and income.
1290 GAMCO Small/Mid Cap Value Fund (sub-advised by GAMCO Asset Management Inc.) — Seeks to maximize capital appreciation.
1290 Global Equity Managers Fund (sub-advised by OppenheimerFunds, Inc. and Templeton Investment Counsel, LLC) — Seeks to achieve long-term growth of capital.
1290 Global Talents (sub-advised by AXA Investment Managers, Inc. (“AXA IM”), an affiliate of 1290 Asset Managers) — Seeks to provide long-term capital growth.
1290 High Yield Bond Fund (sub-advised by AXA IM) — Seeks to maximize current income.
1290 Multi-Alternative Strategies Fund — Seeks long-term growth of capital.
1290 SmartBeta Equity Fund (sub-advised by AXA Rosenberg Investment Management LLC, an affiliate of 1290 Asset Managers) — Seeks to achieve long-term capital appreciation.
1290 Unconstrained Bond Managers Fund (sub-advised by Pacific Investment Management Company LLC and TCW Investment Management Company) — Seeks to achieve maximum current income and total return over a full market cycle through opportunistic sector allocation.
118
1290 FUNDS
NOTES TO FINANCIAL STATEMENTS (Continued)
April 30, 2016 (Unaudited)
The following is a summary of the significant accounting policies of the Trust:
The preparation of financial statements in accordance with United States of America generally accepted accounting principles (“U.S. GAAP”) requires management to make estimates and assumptions that affect the reported amounts and disclosures. Actual results could differ from those estimates. The Funds are investment companies and, accordingly, follow the Investment Company accounting and reporting guidance of the Financial Accounting Standards Board Accounting Standards Codification Topic 946 — Investment Companies, which is part of U.S. GAAP.
Valuation
Equity securities (including securities issued by exchange-traded funds (“ETFs”)) listed on national securities exchanges are valued at the last sale price or official closing price on the date of valuation or, if there is no sale or official closing price, at the latest available bid price. Securities listed on the NASDAQ stock market will be valued using the NASDAQ Official Closing Price (“NOCP”). Generally, the NOCP will be the last sale price unless the reported trade for the security is outside the range of the bid/ask price. In such cases, the NOCP will be normalized to the nearer of the bid or ask price. Other unlisted stocks are valued at their last sale price or official closing price, or if there is no such price, at a bid price estimated by a broker.
Corporate bonds and notes are generally valued on the basis of prices provided by a pricing service. The pricing service may utilize many factors in making evaluations, trading in similar groups of securities and any developments related to specific securities. However, when such prices are not available, such bonds and notes are valued at a bid price estimated by a broker.
Convertible preferred stocks listed on national securities exchanges are valued as of their last sale price or, if there is no sale, at the latest available bid price. Convertible bonds and unlisted convertible preferred stocks are valued using prices obtained from a pricing service for such investments or, if a pricing service price is not available, at bid prices obtained from one or more of the major dealers in such bonds or stocks. Where there is a discrepancy between dealers, values may be adjusted based on recent premium spreads to the underlying common stocks. Convertible bonds may be matrix-priced based upon the conversion value to the underlying common stocks and market premiums.
Mortgage-backed and asset-backed securities are valued at evaluated prices obtained from a pricing service where available, or at a bid price obtained from one or more of the major dealers in such securities. The pricing service may utilize data such as issuer type, coupon, cash flows, collateral performance, mortgage prepayment projection tables and Adjustable Rate Mortgage evaluations that incorporate index data, periodic and life caps, the next coupon reset date and the convertibility of the bond in making evaluations. If a quoted price is unavailable, an equivalent yield or yield spread quotes will be obtained from a broker and converted to a price.
Options that are traded on an exchange are generally valued at their last sale price or official closing price on the date of valuation. Options not traded on an exchange or actively traded are valued according to fair value methods. The market value of a put or call option will usually reflect, among other factors, the market price of the underlying security.
Corporate and Municipal bonds and notes are generally valued on the basis of prices provided by a pricing service. The pricing service may utilize many factors in making evaluations, trading in similar groups of securities and any developments related to specific securities. However, when such prices are not available, such bonds and notes are valued at a bid price estimated by a broker.
U.S. Treasury securities and other obligations issued or guaranteed by the U.S. Government, its agencies or instrumentalities, are valued at prices obtained from a bond pricing service where available. The pricing service may utilize data received from active market makers and broker dealers, yield curves and the spread over comparable U.S. Treasury issues in making evaluations.
119
1290 FUNDS
NOTES TO FINANCIAL STATEMENTS (Continued)
April 30, 2016 (Unaudited)
Foreign securities, including foreign government securities, not traded directly in the U.S., or traded in American Depositary Receipts (“ADR”) or similar form, are valued at representative quoted prices from the primary exchange in the currency of the country of origin. Foreign currency is converted into U.S. dollar equivalent at current exchange rates.
Investments in shares of open-end investment companies (other than ETFs) held by a Fund will be valued at the NAV of the shares of such funds as described in the underlying funds’ prospectuses.
Futures contracts are valued at their last settlement price or, if there is no sale, at the latest available bid price.
Centrally cleared swaps are priced using the value determined by the central counterparty (“CCP”) at the end of the day. If the CCP price is unavailable, a price provided by an approved pricing service will be used.
Forward foreign exchange contracts are valued by interpolating between the forward and spot currency rates as quoted by a pricing service as of a designated hour on the valuation date. The pricing service may utilize data such as actual trading information and foreign currency exchange rates gathered from leading market makers and foreign currency exchange trading centers throughout the world in making evaluations. Forward foreign exchange contracts may be settled with the counterparty in U.S. Dollars without the delivery of foreign currency.
During the six months ended April 30, 2016, 1290 GAMCO Small/Mid Cap Value, 1290 Global Equity Managers, the 1290 Global Talents Fund and the 1290 Unconstrained Bond Managers Fund held forward foreign currency contracts to either gain exposure to certain currencies, or enter into an economic hedge against changes in the values of securities held in the Fund, that do not qualify for hedge accounting under Accounting Standards Codification (“ASC”) 815. The Statement of Operations for each Fund reflects realized gains or losses, if any, in forward currency transactions and unrealized gains or losses in forward currency exchange transactions. Further information on the impact of these positions on the Funds’ financial statements can be found in the Statement of Operations and Portfolio of Investments for each Fund.
If market quotations are not readily available for a security or other financial instruments, such securities and instruments shall be referred to the Trust’s Valuation Committee (“Committee”), who will value the assets in good faith pursuant to procedures (“Pricing Procedures”) adopted by the Board of Trustees of the Trust (the “Board”).
The Board is responsible for ensuring that appropriate valuation methods are used to price securities for the Funds. The Board has delegated the responsibility of calculating the NAVs of the Funds and classes pursuant to these Pricing Procedures to the Trust’s administrator, FMG LLC (in its capacity as administrator, the “Administrator”). The Administrator has entered into a sub-administration agreement with JPMorgan Chase Bank, N.A. (the “Sub-Administrator”) to assist in performing certain of the duties described herein. The Committee, established by the Board, determines the value of the Trust’s securities and assets for which market quotations are not readily available or for which valuation cannot otherwise be provided in accordance with procedures adopted by the Board. The Committee is comprised of senior employees from FMG LLC.
Due to the inherent uncertainty of valuations of such securities, the fair value may differ significantly from the values that would have been used had a ready market for such securities existed.
Various inputs are used in determining the value of the Trust’s assets or liabilities carried at fair value. These inputs are summarized in three broad levels below:
• | Level 1 - quoted prices in active markets for identical assets |
• | Level 2 - other significant observable inputs (including quoted prices of similar securities, interest rates, prepayment speeds, credit risk, etc.) |
• | Level 3 - significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments) |
120
1290 FUNDS
NOTES TO FINANCIAL STATEMENTS (Continued)
April 30, 2016 (Unaudited)
A summary of inputs used to value each Fund’s assets and liabilities carried at fair value as of April 30, 2016 is included in the Portfolios of Investments. Changes in valuation techniques may result in transfers in or out of an investment’s assigned level. The Funds’ policy is to recognize transfers into and transfers out of the valuation levels as of the end of the reporting period.
Transfers between levels are included after the Summary of Level 1, Level 2 and Level 3 inputs, following the Portfolio of Investments for each Fund. Transfers between levels may be due to a decline or an increase in market activity (e.g., frequency of trades), which may result in a lack of, or increase in, available market inputs to determine price.
The inputs or methodology used to value securities are not necessarily an indication of the risk associated with investing in those securities. An investment’s level within the fair value hierarchy is based on the lowest level of any input, both individually and in the aggregate, that is significant to the fair value measurement.
The Committee meets and reviews reports based on the valuation technique used to value each particular Level 3 security. In connection with this review, the Committee obtains, when available, updates from its pricing vendors and Sub-Advisers for each fair valued security. For example, with respect to model driven prices, the Committee receives a report regarding a review and recalculation of pricing models and related discounts. For securities valued based on broker quotes, the Committee evaluates variances between existing broker quotes and any alternative broker quotes provided by a Sub-Adviser or other pricing source.
To substantiate unobservable inputs used in fair valuation, the Secretary of the Committee performs an independent verification and additional research for all fair value notifications received from the pricing agents. Among other factors, particular areas of focus include: description of security, historical pricing, intra-day price movement, last trade information, corporate actions, related securities, any available company news and announcements and any available trade data or other information. The Committee also notes the materiality of holdings and price changes on a Fund’s NAV.
The Committee reviews and considers changes in value for all fair valued securities that have occurred since the last review.
Pursuant to procedures approved by the Board, events or circumstances affecting the values of Fund securities that occur between the closing of their principal markets and the time the NAV is determined may be reflected in the Trust’s calculation of NAV for each applicable Fund when the Adviser deems that the particular event or circumstance would materially affect such Fund’s NAV. None of the Funds applied these procedures on April 30, 2016.
Security Transactions and Investment Income:
Securities transactions are recorded on the trade date net of brokerage fees, commissions, and transfer fees. Dividend income (net of withholding taxes) and distributions to shareholders are recorded on the ex-dividend date, except that certain dividends from foreign securities, if any, are recognized as soon as the Fund is informed of the ex-dividend date. Interest income (including amortization of premium and accretion of discount on long-term securities using the effective yield method) and interest expense are accrued daily. The Trust records paydown gains and losses realized on prepayments received on mortgage-backed securities as an adjustment to interest income.
The Funds record distributions received in excess of income from underlying investments as a reduction of cost of investments and/or realized gain. Such amounts are based on estimates if actual amounts are not available and actual amounts of income, realized gain and return of capital may differ from the estimated amounts. The Funds adjust the estimated amounts of components of distributions (and consequently its net investment income) as necessary once the issuers provide information about the actual composition of the distributions.
121
1290 FUNDS
NOTES TO FINANCIAL STATEMENTS (Continued)
April 30, 2016 (Unaudited)
Realized gains and losses on the sale of investments are computed on the basis of the specific identified cost of the investments sold. Unrealized appreciation (depreciation) on investments and foreign currency denominated assets and liabilities, if any, is presented net of deferred taxes on unrealized appreciation in the Statements of Assets and Liabilities.
Allocation of Expenses and Income:
Expenses attributable to a single Fund or class are charged to that Fund or class. Expenses of the Trust not attributable to a single Fund or class are charged to each Fund or class in proportion to the average net assets of each Fund or other appropriate allocation methods.
The Funds had Offering costs during the year ended October 31, 2015 as follows:
Funds: | Offering Costs | |||
1290 Convertible Securities | $ | 27,366 | ||
1290 GAMCO Small/Mid Cap Value | 24,398 | |||
1290 Global Equity Managers | 27,278 | |||
1290 High Yield Bond | 24,875 | |||
1290 Multi-Alternative Strategies | 27,805 | |||
1290 SmartBeta Equity | 24,439 | |||
1290 Unconstrained Bond Managers | 27,633 |
Additionally, the Funds had Offering costs during the six months ended April 30, 2016 as follows:
Funds: | Offering Costs | |||
1290 Global Talents | $ | 9,250 | ||
1290 DoubleLine Dynamic Allocation | 22,789 |
Offering costs incurred in connection with the offering of shares of the Funds will be amortized and recorded as an expense on a straight line basis over 12 months from the date of the Funds commencement of public offering of shares.
All income earned and expenses incurred by each Fund are borne on a pro-rata basis by each outstanding class of shares, based on the proportionate interest in the Fund represented by the daily net assets of such class, except for distribution fees which are charged on a class-specific basis.
Foreign Currency Valuation:
The books and records of the Trust are kept in U.S. dollars. Foreign currency amounts are translated into U.S. dollars at current exchange rates at the following dates:
(i) market value of investment securities, other assets and liabilities — at the valuation date.
(ii) purchases and sales of investment securities, income and expenses — at the date of such transactions.
The Funds do not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss on investments.
Net currency gains or losses realized and unrealized as a result of differences between interest or dividends, withholding taxes, security payables/receivables, forward foreign currency exchange contracts and foreign cash recorded on a Fund’s books and the U.S. dollar equivalent amount actually received or paid are presented under foreign currency transactions and foreign currency translations in the realized and unrealized gains and losses section, respectively, of the Statements of Operations
122
1290 FUNDS
NOTES TO FINANCIAL STATEMENTS (Continued)
April 30, 2016 (Unaudited)
of the Funds. Net realized gains (losses) on foreign currency transactions represent net foreign exchange gains (losses) from forward foreign currency contracts, disposition of foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions, and the difference between the amount of investment income and foreign withholding taxes recorded on a Fund’s books and the U.S. dollar equivalent of amounts actually received or paid.
Taxes:
The Funds intend to comply with the requirements of the Internal Revenue Code of 1986, as amended, applicable to regulated investment companies (“RICs”) and to distribute substantially all of its net investment income and net realized capital gains to shareholders of each Fund. Therefore, no Federal, State and local income tax provision are required.
The Funds are not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months. However, the Funds’ conclusions may be subject to future review based on changes in, or the interpretation of, the accounting standards or tax laws and regulations. The Funds recognize interest and penalties, if any, related to uncertain tax positions as income tax expense in the Statements of Operations. During the year ended October 31, 2015 the Funds did not incur any interest or penalties. The tax year for the year ended October 31, 2015 remains subject to examination by the Internal Revenue Service, State and local taxing authorities.
Dividends from net investment income, if any, are declared and distributed at least annually for all Funds (1290 Convertible Securities Fund, 1290 High Yield Bond Fund and 1290 Unconstrained Bond Managers Fund declare and distribute monthly). Dividends from net realized short-term and long-term capital gains are declared and distributed at least annually. All distributions are calculated on a tax basis and, as such, the amounts may differ from financial statement investment income and realized gains. Short-term capital gains and foreign currency gains are treated as capital gains for U.S. GAAP purposes but are considered ordinary income for tax purposes. Capital and net specified losses incurred after October 31st and within the taxable year are deemed to arise on the first business day of the Fund’s next taxable year. The tax character of distributions for the year ended October 31, 2015 and the tax composition of undistributed ordinary income and undistributed long term gains for the year ended October 31, 2015 are presented in the following table. For the Funds, the cumulative timing differences related to the tax composition of undistributed ordinary income and long term gains are primarily due to Distributions Payable (1290 High Yield Bond) and Losses Carried Forward (1290 High Yield Bond and 1290 Unconstrained Bond Managers).
Year Ended October 31, 2015 | ||||||||||||
Funds: | Distributed Ordinary Income | Accumulated Undistributed Ordinary Income | Accumulated Undistributed Long-Term Gains | |||||||||
1290 Convertible Securities | $ | 79,871 | $ | 64,906 | $ | — | ||||||
1290 GAMCO Small/Mid Cap Value | 18,854 | 118,272 | 203 | |||||||||
1290 Global Equity Managers | — | 34,029 | — | |||||||||
1290 High Yield Bond | 1,820,139 | 239,013 | — | |||||||||
1290 Multi-Alternative Strategies | — | 2,002 | — | |||||||||
1290 SmartBeta Equity | 30,060 | 127,923 | — | |||||||||
1290 Unconstrained Bond Managers | 220,349 | 28,490 | — |
123
1290 FUNDS
NOTES TO FINANCIAL STATEMENTS (Continued)
April 30, 2016 (Unaudited)
Under the Regulated Investment Company Modernization Act of 2010 (the “RIC Mod Act”), net capital losses recognized by the Funds may get carried forward indefinitely, and retain their character as short-term and/or long-term losses. The following Funds have losses incurred that will be carried forward under the provisions of the RIC Mod Act as follows:
Losses Carried Forward | ||||||||
Funds: | Short-Term | Long-Term | ||||||
1290 Convertible Securities | $ | 51,837 | $ | — | ||||
1290 Global Equity Managers | 95,125 | — | ||||||
1290 High Yield Bond | 492,343 | — | ||||||
1290 SmartBeta Equity | 26,147 | — | ||||||
1290 Unconstrained Bond Managers | 278,307 | 21,356 |
Sale-Buybacks:
A sale-buyback transaction consists of a sale of a security by a Fund to a financial institution, the counterparty, with a simultaneous agreement to repurchase the same or substantially the same security at an agreed-upon price and date. The Fund is not entitled to receive principal and interest payments, if any, made on the security sold to the counterparty during the term of the agreement. The agreed-upon proceeds for securities to be repurchased by the Fund are reflected as a liability on the Fund’s Statement of Assets and Liabilities. The Fund will recognize net income represented by the price differential between the price received for the transferred security and the agreed-upon repurchase price. This is commonly referred to as the “price drop.” A price drop consists of: (i) the foregone interest and inflationary income adjustments, if any, the Fund would have otherwise received had the security not been sold; and (ii) the negotiated financing terms between the Fund and counterparty. Foregone interest and inflationary income adjustments, if any, are recorded as components of interest income on the Fund’s Statement of Operations. Interest payments based upon negotiated financing terms made by the Fund to counterparties are recorded as a component of interest expense on the Fund’s Statement of Operations. In periods of increased demand for the security, the Fund may receive a fee for use of the security by the counterparty, which may result in interest income to the Fund. The Fund will segregate assets determined to be liquid to cover its obligations under sale-buyback transactions. None of the Funds had open sale-buybacks at April 30, 2016.
Accounting for Derivative Instruments:
Following is a description of how and why the Funds use derivative instruments, the type of derivatives utilized by the Funds during the reporting period, as well as the primary underlying risk exposures related to each instrument type. Derivatives accounted for as hedging instruments must be disclosed separately from those that do not qualify for hedge accounting. Even though the Funds may use derivatives in an attempt to achieve an economic hedge, the Fund’s derivatives are not accounted for as hedging instruments because the Funds account for their derivatives at fair value and record any changes in fair value in current period earnings. All open derivative positions at period end are reflected on each respective Fund’s Portfolio of Investments. The volume of derivative activity, based on month-end notional amounts during the period is also noted in each respective Fund’s Portfolio of Investments. Portfolio securities are reserved and/or pledged with the custodian for current or potential derivative holdings as necessary throughout the year.
Options:
Certain Funds write (sell) covered options as a hedge to provide protection against adverse movements in the price of securities in the Fund or to enhance investment performance. Certain Funds purchase and sell exchange traded options on foreign currencies. When a Fund writes an option, an amount equal to the premium received by the Fund is recorded as a liability and is
124
1290 FUNDS
NOTES TO FINANCIAL STATEMENTS (Continued)
April 30, 2016 (Unaudited)
subsequently adjusted on a daily basis to the current market price of the option written. Premiums received from writing options that expire unexercised are recognized as gains on the expiration date. Premiums received from writing options that are exercised or are cancelled in closing purchase transactions are offset against the cost of any securities purchased or added to the proceeds or netted against the amount paid on the transaction to determine the realized gain or loss. In writing options, a Fund must assume that the option may be exercised at any time prior to the expiration of its obligation as a writer, and that in such circumstances the net proceeds of the sale (or cost of) purchase of the underlying securities and currencies pursuant to the call or put option may be substantially below or above the prevailing market price. A Fund also has the additional risk of not being able to enter into a closing purchase transaction if a liquid secondary market does not exist and bears the risk of unfavorable changes in the price of the financial instruments underlying the options.
Certain Funds may purchase put options on securities to increase the Fund’s total investment return or to protect its holdings against a substantial decline in market value. The purchase of put options on securities will enable a Fund to preserve, at least partially, unrealized gains in an appreciated security in its Fund without actually selling the security. In addition, the Funds will continue to receive interest or dividend income on the security. The Funds may also purchase call options on securities to protect against substantial increases in prices of securities that Funds intend to purchase pending their ability to invest in an orderly manner in those securities. The Funds may sell put or call options they have previously purchased, which could result in a net gain or loss depending on whether the amount received on the sale is more or less than the premium and other transaction costs paid on the put or call option which was bought.
Futures Contracts, Options on Futures Contracts, Forward Commitments and Foreign Currency Exchange Contracts:
The futures contracts used by the Funds are agreements to buy or sell a financial instrument for a set price in the future. Options on futures contracts used by the Funds are rights to buy, or sell a futures contract for a set price in the future. Certain Funds buy or sell futures contracts for the purpose of protecting their Fund securities against future changes in interest rates and indices which might adversely affect the value of the Funds’ securities or the price of securities that they intend to purchase at a later date. Initial margin deposits are made upon entering into futures contracts and can be in cash, certain money market instruments, treasury securities or other liquid, high grade debt securities. During the period the futures contracts are open, changes in the market price of the contracts are recognized as unrealized gains or losses by “marking-to-market” at the end of each trading day. Variation margin payments on futures contracts are received or made, depending upon whether unrealized gains or losses are incurred. When the contract is closed, the Fund records a realized gain or loss equal to the difference between the proceeds from or cost of the closing transactions and the Fund’s basis in the contract. Should interest rates or indices move unexpectedly, the Fund may not achieve the anticipated benefits of the futures contracts and may incur a loss. The use of futures contracts transactions involves the risk of imperfect correlation in movements in the price of futures contracts, interest rates and the underlying hedged assets. Use of long futures contracts subjects the Funds to risk of loss in excess of the amounts shown on the Statements of Assets and Liabilities, up to the notional value of the futures contracts. Use of short futures contracts subjects the Funds to unlimited risk of loss. The Funds enter into futures contracts only on exchanges or boards of trade. The exchange or board of trade acts as the counterparty to each futures transaction; therefore, a Fund’s credit risk is limited to failure of the exchange or board of trade.
A Fund may make contracts to purchase or sell securities for a fixed price at a future date beyond customary settlement time (“forward commitments”). Funds may designate the segregation, either on their records or with the Trust’s custodian, of cash or other liquid securities in an amount sufficient to meet the purchase price, or may enter into offsetting contracts for the forward sale of other securities they own. These commitments are reported at market value in the financial statements. Forward commitments may be considered securities in themselves and involve a risk of loss if the value of the security to be purchased declines or if the value of the security to be sold
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April 30, 2016 (Unaudited)
increases prior to the settlement date, which is a risk in addition to the risk of decline in value of the Fund’s other assets. Where such purchases or sales are made through dealers, a Fund relies on the dealer to consummate the sale. The dealer’s failure to do so may result in the loss to a Fund of an advantageous yield or price. Market risk exists on these commitments to the same extent as if the securities were owned on a settled basis and gains and losses are recorded and reported in the same manner. However, during the commitment period, these investments earn no interest or dividends. The use of forward commitments may result in market risk to the Funds that is greater than if the Funds had engaged solely in transactions that settle in the customary time.
The Funds may be exposed to foreign currency risks associated with Fund investments. During the reporting period, the Funds entered into certain forward foreign currency exchange contracts for the purchase or sale of a specific foreign currency at a fixed price on a future date to hedge or otherwise manage these exposures. Unrealized gains or losses on forward foreign currency exchange contracts are recorded by the Funds on a daily basis and realized gains or losses are recorded on the settlement date of a contract.
A Fund may purchase foreign currency on a spot (or cash) basis. In addition, a Fund may enter into contracts to purchase or sell foreign currencies at a future date (“forward contracts”). A forward foreign currency exchange contract is a commitment to purchase or sell a foreign currency at a future date at a negotiated forward rate. Daily fluctuations in the value of such contracts are recognized as unrealized appreciation or depreciation by “marking-to-market”. The gain or loss arising from the difference between the original contracts and the closing of such contracts is included in realized gains or losses from foreign currency transactions in the Statements of Operations of the Funds. The Sub-Advisers may engage in these forward contracts to protect against uncertainty in the level of future exchange rates in connection with the purchase and sale of Fund securities (“transaction hedging”) and to protect the value of specific Fund positions (“position hedging”). The Funds also buy forward foreign currency exchange contracts to gain exposure to currencies. The Funds are subject to off-balance sheet risk to the extent of the value of the contracts for purchase of foreign currency and in an unlimited amount for sales of foreign currency.
Swaps:
Swap agreements are two party contracts entered into primarily by institutional investors for periods ranging from a few weeks to more than one year. Swaps are marked-to-market daily based upon values from third party vendors, which may include a registered exchange, or quotations from market makers to the extent available. In the event that market quotes are not readily available and the swap cannot be valued pursuant to one of the valuation methods, the value of the swap will be determined in good faith by the Committee. Changes in market value, if any, are reflected as a component of net changes in unrealized appreciation (depreciation) on the Statements of Operations. Daily changes in valuation of centrally cleared swaps, if any, are recorded as a receivable or payable for the change in value as appropriate (“variation margin”) on the Statements of Assets and Liabilities. There is potential for swaps to be illiquid. Over-the-counter (“OTC”) swap payments received or made at the beginning of the measurement period are reflected as such on the Statements of Assets and Liabilities and represent premiums paid or received upon entering into the swap agreement to compensate for differences between the stated terms of the swap agreement and prevailing market conditions (credit spreads, currency exchange rates, interest rates, and other relevant factors). These upfront premiums are recorded as realized gains or losses on the Statement of Operations upon termination or maturity of the swap. A liquidation payment received or made at the termination of the swap is recorded as realized gain or loss on the Statement of Operations. Net periodic payments received or paid by a Fund are included as part of realized gains or losses on the Statement of Operations. A realized gain or loss is recorded upon payment or receipt of a periodic payment or payment made upon termination of a swap agreement.
Currency swaps involve the exchange by one party with another party of a series of payments in specified currencies. Currency swaps usually involve the delivery of the entire principal value of one
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April 30, 2016 (Unaudited)
designated currency in exchange for the other designated currency. Therefore, the entire principal value of a currency swap is subject to the risk that the other party to the swap will default on its contractual delivery obligations. In addition, a Fund may enter into currency swaps that involve an agreement to pay interest streams in one currency based on a specified index in exchange for receiving interest streams denominated in another currency. Currency swaps may involve initial and final exchanges that correspond to the agreed upon notional amount.
Interest rate swaps involve the exchange between two parties of payments calculated by reference to specified interest rates (e.g., an exchange of floating rate payments for fixed rate payments). The purchase of an interest rate cap entitles the purchaser, to the extent that a specified index exceeds a predetermined interest rate, to receive payments of interest on a notional principal amount from the party selling such interest rate cap. The purchase of an interest rate floor entitles the purchaser, to the extent that a specified index falls below a predetermined interest rate, to receive payments of interest on a notional principal amount from the party selling such interest rate floor. Caps and floors may be less liquid than swaps. In addition, the value of interest rate transactions will fluctuate based on changes in interest rates.
Credit default swap agreements involve greater risks than if a Fund had invested in the reference obligation directly since, in addition to general market risks, credit default swaps are subject to illiquidity risk, counterparty risk and credit risk. A Fund will enter into credit default swap agreements only with counterparties that meet certain standards of creditworthiness. A buyer generally also will lose its investment and recover nothing should no credit event occur and the swap is held to its termination date. If a credit event were to occur, the value of any deliverable obligation received by the seller, coupled with the upfront or periodic payments previously received, may be less than the full notional value it pays to the buyer, resulting in a loss of value to the seller. A Fund’s obligations under a credit default swap agreement will be accrued daily (offset against any amounts owing to the Fund). In connection with credit default swaps in which a Fund is the buyer, the Fund will segregate or “earmark” cash or assets determined to be liquid, or enter into certain offsetting positions, with a value at least equal to the Fund’s exposure (any accrued but unpaid net amounts owed by the Fund to any counterparty), on a marked-to-market basis. In connection with credit default swaps in which a Fund is the seller, the Fund will segregate or “earmark” cash or assets determined to be liquid, or enter into offsetting positions, with a value at least equal to the full notional amount of the swap (minus any amounts owed to the Fund). Such segregation or “earmarking” is intended to ensure that the Fund has assets available to satisfy its obligations with respect to the transaction and limit any potential leveraging of the Fund. Such segregation or “earmarking” will not limit the Fund’s exposure to loss. To the extent that credit default swaps are entered into for hedging purposes or are covered as described above, the Adviser believes such obligations do not constitute “senior securities” under the 1940 Act and, accordingly, will not treat them as being subject to the Fund’s senior security and borrowing restrictions.
In the case of a credit default swap sold by a Fund (i.e., where the Fund is selling credit default protection), the Fund may value the credit default swap at its notional amount in applying certain of the Fund’s investment policies and restrictions, but may value the credit default swap at market value for purposes of applying certain of the Fund’s other investment policies and restrictions.
An option on a swap agreement, also called a “swaption,” is an option that gives the buyer the right, but not the obligation, to enter into a swap on a future date in exchange for paying a market-based “premium.” A receiver swaption gives the owner the right to receive the total return of a specified asset, reference rate, or index. A payer swaption gives the owner the right to pay the total return of a specified asset, reference rate, or index. A purchaser of a swaption risks losing only the amount of the premium they have paid should they decide to let the option expire, whereas the seller of a swaption is subject to the risk that they will become obligated if the option is exercised. Swaptions also include options that allow an existing swap to be terminated or extended by one of the counterparties.
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April 30, 2016 (Unaudited)
Market and Credit Risk:
A Fund’s investments in financial instruments expose the Fund to various risks such as, but not limited to, interest rate, foreign currency, forward commitments and equity risks.
Interest rate risk is the risk that fixed income securities will decline in value because of changes in interest rates. When nominal interest rates decline the value of certain fixed-income securities held by a Fund generally rises. Conversely, when nominal interest rates rise, the value of certain fixed income securities held by a Fund generally declines. A nominal interest rate can be described as the sum of a real interest rate and an expected inflation rate. Interest rate changes can be sudden and unpredictable, and a Fund may lose money if these changes are not anticipated by Fund management. A Fund may not be able to hedge against changes in interest rates or may choose not to do so for cost or other reasons. In addition, any hedges may not work as intended. Fixed income securities with longer durations tend to be more sensitive to changes in interest rates, usually making them more volatile than securities with shorter durations. Duration is useful primarily as a measure of the sensitivity of a security’s market price to interest rate (i.e. yield) movements.
Foreign (non U.S.) securities in this report are classified by the country of incorporation of a holding. In certain instances, a security’s country of incorporation may be different from its country of economic exposure.
If a Fund invests directly in foreign currencies or in securities that trade in, and receive revenues in, foreign currencies, or in financial derivatives that provide exposure to foreign currencies, it will be subject to the risk that those currencies will decline in value relative to the base currency of the Fund, or, in the case of hedging positions, that the Fund’s base currency 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, intervention (or the failure to intervene) by U.S. or foreign governments, central banks or supranational entities such as the International Monetary Fund, or by the imposition of currency controls or other political developments in the United States or abroad. As a result, a Fund’s investments in foreign currency denominated securities may reduce the Fund’s returns.
Forward commitments and forward foreign currency exchange contracts involve elements of both market and credit risk in excess of the amounts reflected in the Statements of Assets and Liabilities. They are executed directly with the counterparty and not through an exchange and can be terminated only by agreement of both parties to such contracts. With respect to such transactions there is no daily margin settlement. There is also the risk that the security will not be issued or that the other party to the transaction will not meet its obligations. If this occurs, the Fund may lose both the investment opportunity for its assets if set aside to pay for the security and any gain in the security.
The market values of the Fund’s investments may decline due to general market conditions which are not specifically related to a particular company or issuer, such as real or perceived adverse economic conditions, changes in the general outlook for corporate earnings, changes in interest or currency rates or adverse investor sentiment generally. They may also decline due to factors which affect a particular industry or industries, such as labor shortages or increased production costs and competitive conditions within an industry. Equity securities and equity related investments generally have greater market price volatility than fixed income securities, although under certain market conditions fixed income securities may have comparable or greater price volatility. Credit ratings downgrades may also negatively affect securities held by a Fund. Even when markets perform well, there is no assurance that the investments held by a Fund will increase in value along with the broader market. In addition, market risk includes the risk that geopolitical events will disrupt the economy on a national or global level.
A Fund will be exposed to credit risk to parties with whom it trades and will also bear the risk of settlement default. A Fund seeks to minimize concentrations of credit risk by undertaking transactions with a large number of counterparties on recognized and reputable exchanges, where
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April 30, 2016 (Unaudited)
applicable. A Fund could lose money if the issuer or guarantor of a fixed income security, or the counterparty of a financial derivatives contract, repurchase agreement or a loan of portfolio securities or other transactions, is unable or unwilling, or is perceived (whether by market participants, rating agencies, pricing services or otherwise) as unable or unwilling to make timely principal and/or interest payments, or otherwise honor its obligations. Securities are subject to varying degrees of credit risk, which are often reflected in credit ratings.
Certain Funds may invest in below investment grade high-yield securities (“junk bonds”). These securities are considered to be high risk investments. Securities rated below investment grade are speculative in nature, involve greater risk of default by the issuing entity and may be subject to greater market fluctuations than higher rated fixed income securities because such securities are generally unsecured and subordinated to other creditors’ claims. The retail secondary market for these “junk bonds” may be less liquid than that of higher rated securities and adverse economic conditions could make it difficult to sell certain securities or could result in lower prices than those used in calculating the Fund’s NAV.
Offsetting Assets and Liabilities:
The Funds may be subject to various netting arrangements with select counterparties (“Master Agreements”). Master Agreements govern the terms of certain transactions, and are intended to reduce the counterparty risk associated with relevant transactions by specifying credit protection mechanisms and providing standardization that is intended to improve legal certainty. As the Master Agreements are specific to unique operations of different asset types, they allow a Fund to close out and net its total exposure to a counterparty in the event of a default with respect to all the transactions governed under a single Master Agreement with a counterparty. For financial reporting purposes the Statement of Assets and Liabilities generally show derivative assets and liabilities on a gross basis, which reflects the full risks and exposures prior to netting.
Note 2: | Agreements |
The Trust, on behalf of each Fund, has entered into an Investment Advisory Agreement (the “Advisory Agreement”) with the Adviser. Pursuant to the Advisory Agreement, the Adviser supervises the investment program for each Fund in accordance with each Fund’s investment objectives, policies and restrictions. The Adviser is paid a fee for these services. The fee is accrued daily and paid monthly based on the Fund’s average daily net assets, at an annual rate of:
(as a percentage of average daily net assets) | ||||||||||||||||||||
Funds: | First $1 Billion | Next $1 Billion | Next $3 Billion | Next $5 Billion | Thereafter | |||||||||||||||
1290 DoubleLine Dynamic Allocation | 0.750 | % | 0.700 | % | 0.675 | % | 0.650 | % | 0.625 | % | ||||||||||
1290 GAMCO Small/Mid Cap Value | 0.750 | 0.700 | 0.675 | 0.650 | 0.625 | |||||||||||||||
1290 Global Equity Managers | 0.800 | 0.750 | 0.725 | 0.700 | 0.675 | |||||||||||||||
1290 Global Talents | 0.800 | 0.750 | 0.725 | 0.700 | 0.675 | |||||||||||||||
1290 SmartBeta Equity | 0.700 | 0.650 | 0.625 | 0.600 | 0.575 |
(as a percentage of average daily net assets) | ||||||||||||||||
Fund: | First $4 Billion | Next $4 Billion | Next $2 Billion | Thereafter | ||||||||||||
1290 Multi-Alternative Strategies | 0.500 | % | 0.490 | % | 0.480 | % | 0.470 | % |
(as a percentage of average daily net assets) | ||||||||||||
Funds: | First $4 Billion | Next $4 Billion | Thereafter | |||||||||
1290 Convertible Securities | 0.700 | % | 0.680 | % | 0.660 | % | ||||||
1290 High Yield Bond | 0.600 | 0.580 | 0.560 | |||||||||
1290 Unconstrained Bond Managers | 0.800 | 0.780 | 0.760 |
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NOTES TO FINANCIAL STATEMENTS (Continued)
April 30, 2016 (Unaudited)
On behalf of the Trust, the Adviser has entered into an investment sub-advisory agreement (“Sub-Advisory Agreements”) with each of the Sub-Advisers. Each of the Sub-Advisory Agreements obligates the Sub-Advisers for the respective Funds to: (i) continuously furnish investment programs for the Funds; (ii) place all orders for the purchase and sale of investments for the Funds with brokers or dealers selected by the Adviser or the respective Sub-Advisers; and (iii) perform certain limited related administrative functions in connection therewith. The Adviser pays the expenses of providing investment sub-advisory services to the Funds, including the fees of the Sub-Advisers of each Fund.
In addition to the advisory fee, each Fund pays the Administrator its proportionate share of an asset-based administration fee, which is equal to an annual rate of the greater of 0.15% of each Fund’s average daily net assets, or $30,000 per Fund (or $30,000 for each allocated portion (or sleeve) of a Fund, as applicable). The Administrator has contracted with the Sub-Administrator to provide, pursuant to a sub-administration agreement, the Funds with certain administrative services, including monitoring of Fund compliance and Fund accounting services.
The Trust, on behalf of the Funds, has entered into a distribution agreement (the “Distribution Agreement”) with ALPS Distributors, Inc. (“ALPS” or the “Distributor”), under which ALPS serves as Distributor for each Fund’s Class A, Class C, Class I and Class R shares. The Board has approved Distribution Plans pursuant to Rule 12b-1 under the 1940 Act for Class A, Class C, and Class R shares for each Fund. Pursuant to the Distribution Plans, the Funds will pay the Distributor annual fees at the following rates:
Share Class: | Distribution Fee and/or Service Fee (as a % of average daily net assets attributable to the class) | |||
Class A | 0.25 | % | ||
Class C* | 1.00 | |||
Class R | 0.50 |
* | The Distribution Fees for Class C shares are currently being waived. This waiver is voluntary and could be eliminated at any time. |
The Trust, on behalf of the Funds, has entered into a Transfer Agency and Service Agreement (the “Transfer Agency Agreement”) with Boston Financial Data Services (“BFDS”). Pursuant to the Transfer Agency Agreement, BFDS is responsible for, among other things, the issuance, transfer and redemption of shares, the opening and maintenance of shareholder accounts, the handling of certain communications between shareholders and the Trust, and the payment of dividends and distributions payable by the Funds. Under the Transfer Agency Agreement, BFDS receives a monthly fee comprised of a fixed base fee plus a fee computed on the basis of the number of shareholder accounts it maintains for the Trust during the month.
The Trust has entered into a Custody Agreement with JPMorgan Chase Bank, N.A. (in this capacity, the “Custodian”). The Custody Agreement provides for an annual fee based on the amount of assets under custody plus transaction charges. The Custodian serves as custodian of the Trust’s Fund securities and other assets. Under the terms of the Custody Agreement between the Trust and the Custodian, the Custodian maintains and deposits in each Fund’s account, cash, securities and other assets of the Funds. The Custodian is also required, upon the order of the Trust, to deliver securities held by the Custodian, and to make payments for securities purchased by the Trust. The Custodian has also entered into sub-custodian agreements with a number of foreign banks and clearing agencies, pursuant to which Fund securities purchased outside the United States are maintained in the custody of these entities.
The Trust, on behalf of the Funds, has entered into an expense limitation agreement (the “Expense Limitation Agreement”) with 1290 Asset Managers whereby 1290 Asset Managers has contractually agreed to waive fees and/or reduce its fees to the extent that the aggregate expenses incurred by a Fund in any fiscal year, including but not limited to organizational and offering costs
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April 30, 2016 (Unaudited)
and investment advisory fees of the Adviser (but excluding interest, taxes, brokerage commissions, fees and expenses of other investment companies in which a Fund invests, other expenditures that are capitalized in accordance with generally accepted accounting principles (other than offering costs), other extraordinary expenses not incurred in the ordinary course of such Fund’s business and amounts payable pursuant to a plan adopted in accordance with Rule 12b-1 under the 1940 Act) (“Fund Operating Expenses”), exceed the Maximum Annual Operating Expense Limit of:
Total Expense Limited to (% of daily net assets) | ||||||||||||||||
Funds: | Class A | Class C | Class I | Class R | ||||||||||||
1290 Convertible Securities | 1.05 | % | 1.05 | % | 1.05 | % | 1.05 | % | ||||||||
1290 DoubleLine Dynamic Allocation | 1.00 | 1.00 | 1.00 | 1.00 | ||||||||||||
1290 GAMCO Small/Mid Cap Value | 1.10 | 1.10 | 1.10 | 1.10 | ||||||||||||
1290 Global Equity Managers | 1.15 | 1.15 | 1.15 | 1.15 | ||||||||||||
1290 Global Talents | 1.15 | 1.15 | 1.15 | 1.15 | ||||||||||||
1290 High Yield Bond | 0.85 | 0.85 | 0.85 | 0.85 | ||||||||||||
1290 Multi-Alternative Strategies* | 1.40 | 1.40 | 1.40 | 1.40 | ||||||||||||
1290 SmartBeta Equity | 1.10 | 1.10 | 1.10 | 1.10 | ||||||||||||
1290 Unconstrained Bond Managers | 1.15 | 1.15 | 1.15 | 1.15 |
* | Includes fees and expenses of other investment companies in which the Fund invests. |
Prior to March 1, 2016 the following expense limitations were as follows:
Total Expense Limited to (% of daily net assets) | ||||||||||||||||
Fund: | Class A | Class C | Class I | Class R | ||||||||||||
1290 High Yield Bond | 0.80 | % | 0.80 | % | 0.80 | % | 0.80 | % |
1290 Asset Managers first waives its advisory fees, then waives its administration fees, and then reimburses the Fund’s expenses out of its own resources. Each Fund may at a later date reimburse to 1290 Asset Managers the advisory fees waived or other expenses assumed and paid for by 1290 Asset Managers pursuant to the Expense Limitation Agreement within the prior three fiscal years, provided such Fund has reached a sufficient asset size to permit such reimbursement to be made without causing the total annual expense ratio of each Fund to exceed the percentage limits mentioned above for the respective period. Consequently, no reimbursement by a Fund will be made unless: (i) the Fund’s total annual expense ratio is less than the respective percentages stated above for the respective period; and (ii) the payment of such reimbursement has been approved by the Board. Any reimbursement, called recoupment fees on the Statement of Operations of the Fund, will be based on the earliest fees waived or assumed by 1290 Asset Managers. During the period ended April 30, 2016, 1290 Asset Managers did not receive recoupment for any of the Funds within the Trust. At April 30, 2016, under the Expense Limitation Agreement, the amount that would be recoverable from each Fund is as follows:
Amount Eligible Through | Total Eligible for Reimbursement | |||||||||||||||||||
Funds: | 2016 | 2017 | 2018 | 2019 | ||||||||||||||||
1290 Convertible Securities | $ | — | $ | — | $ | 79,383 | $ | 78,801 | $ | 158,184 | ||||||||||
1290 DoubleLine Dynamic Allocation | — | — | — | 27,701 | 27,701 | |||||||||||||||
1290 GAMCO Small/Mid Cap Value | — | — | 256,568 | 69,763 | 326,331 | |||||||||||||||
1290 Global Equity Managers | — | — | 80,380 | 78,556 | 158,936 | |||||||||||||||
1290 Global Talents | — | — | — | 7,127 | 7,127 | |||||||||||||||
1290 High Yield Bond | — | — | 398,213 | 95,854 | 494,067 | |||||||||||||||
1290 Multi-Alternative Strategies | — | — | 67,806 | 68,873 | 136,679 | |||||||||||||||
1290 SmartBeta Equity | — | — | 283,924 | 69,979 | 353,903 | |||||||||||||||
1290 Unconstrained Bond Managers | — | — | 80,587 | 108,064 | 188,651 |
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NOTES TO FINANCIAL STATEMENTS (Continued)
April 30, 2016 (Unaudited)
During the period ended April 30, 2016, the Distributor voluntarily waived distribution fees for the Funds’ Class C shares. These amounts as follows are not eligible for recoupment:
Funds: | Voluntary Waivers | |||
1290 GAMCO Small/Mid Cap Value | $ | 1,087 | ||
1290 High Yield Bond | 10,946 | |||
1290 SmartBeta Equity | 4,196 |
If during a Fund’s fiscal year, Fund Operating Expenses, including all organizational expenses, that at any time during the prior three fiscal years (prior one year after commencement of operations with respect to organizational expenses) received a fee waiver or reduction from 1290 Asset Managers, are less than the percentage limits mentioned above, 1290 Asset Managers is entitled to be reimbursed by such share class up to the lesser of (a) the amount of fees waived or reduced and (b) the amount by which the expense limit for that share class exceeds the Fund Operating Expenses of the share class for the current fiscal year.
Note 3 | Sales Charges |
The Distributor received sales charges on the Fund’s Class A shares and the proceeds of contingent deferred sales charges paid by the investor in connection with certain redemptions of the Fund’s Class A and Class C shares. The Distributor has advised the Funds that for the period ended April 30, 2016, the proceeds retained from sales and redemptions are as follows:
Class A | Class C Contingent Deferred Sales Charge | |||||||||||
Funds: | Front End Sales Charge | Contingent Deferred Sales Charge | ||||||||||
1290 Convertible Securities | $ | 1,780 | $ | — | $ | — | ||||||
1290 DoubleLine Dynamic Allocation | 3,901 | — | — | |||||||||
1290 GAMCO Small/Mid Cap Value | 5,295 | — | — | |||||||||
1290 High Yield Bond | 1,284 | — | — | |||||||||
1290 Multi-Alternative Strategies | 1,831 | — | — | |||||||||
1290 SmartBeta Equity | 1,838 | — | — | |||||||||
1290 Unconstrained Bond Managers | 272 | — | — |
Sales loads and contingent deferred sales charges imposed on purchases and redemptions of Fund shares are retained by the Trust’s Distributors and do not represent expenses or income of the Funds.
Note 4 | Percentage of Ownership by Affiliates |
At April 30, 2016, 1290 Asset Managers held investments in each of the Funds as follows:
Funds: | Percentage of Ownership | |||
1290 Convertible Securities | 96.5 | % | ||
1290 Doubleline Dynamic Allocation | 99.7 | |||
1290 GAMCO Small/Mid Cap Value | 43.2 | |||
1290 Global Equity Managers | 99.9 | |||
1290 Global Talents Fund | 100.0 | |||
1290 High Yield Bond | 98.3 | |||
1290 Multi-Alternative Strategies | 91.4 | |||
1290 SmartBeta Equity | 96.0 | |||
1290 Unconstrained Bond Managers | 99.9 |
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NOTES TO FINANCIAL STATEMENTS (Concluded)
April 30, 2016 (Unaudited)
Note 5 | Subsequent Events |
The Adviser evaluated subsequent events from April 30, 2016, the date of these financial statements, through the date these financial statements were issued and available. The subsequent events include the following:
On June 14-15, 2016, the Trust’s Board of Trustees approved a Plan of Liquidation and Termination under which 1290 Global Equity Managers Fund will liquidate and terminate. It is expected that the liquidation will take place on or about July 18, 2016.
Note 6 | Legal Proceedings |
In July 2011, a lawsuit was filed in the United States District Court of the District of New Jersey, entitled Mary Ann Sivolella v. AXA Equitable Life Insurance Company and AXA Equitable Funds Management Group, LLC (“Sivolella Litigation”). The lawsuit was filed derivatively on behalf of eight Portfolios of EQ Advisors Trust (a separate Trust) advised by the Adviser. The lawsuit seeks recovery under Section 36(b) of the 1940 Act, for alleged excessive fees paid to the Adviser and AXA Equitable (the “Defendants”) for investment management services. The Plaintiff seeks recovery of the alleged overpayments, or alternatively, rescission of the contracts and restitution of all fees paid, interest, costs and fees. In November 2011, the Plaintiff filed an Amended Complaint seeking the same relief and in December 2011, the Defendants filed a motion to dismiss the Amended Complaint. In September 2012, the United States District Court for the District of New Jersey denied the motion to dismiss the Amended Complaint.
In January 2013, a second lawsuit against the Adviser was filed in the United States District Court for the District of New Jersey by a group of Plaintiffs asserting substantially similar claims under Section 36(b) and seeking substantially similar damages as in the Sivolella Litigation. The lawsuit, entitled Glenn D. Sanford, et al. v. AXA Equitable Funds Management Group, LLC (“Sanford Litigation”), was filed derivatively on behalf of certain Portfolios of EQ Advisors Trust advised by the Adviser. The Sanford Litigation does not involve any of the Funds. In light of the similarities of the allegations in the Sivolella and Sanford Litigations, the parties agreed to consolidate the two lawsuits.
In April 2013, the Plaintiffs in the Sivolella and Sanford Litigations amended the complaints to add additional claims under Section 36(b) of the 1940 Act for recovery of alleged excessive fees paid to the Adviser in its capacity as the Administrator of the EQ Advisors Trust (a separate Trust). The Plaintiffs seek recovery of the alleged overpayments, or alternatively, rescission of the contract and restitution of the excessive fees paid, interest, costs, and fees. In January 2015, Defendants filed a motion for summary judgment as well as various motions to strike certain of the Plaintiffs’ experts n the Sivolella and Sanford Litigations. Also in January 2015, two Plaintiffs in the Sanford Litigation filed a motion for partial summary judgment relating to the EQ/Core Bond Index Portfolio, a portfolio of EQ Advisors Trust, as well as motions in limine to bar admission of certain documents and preclude the testimony of one of Defendants’ experts. In August 2015, the Court denied Plaintiffs’ motions in limine and also denied both parties’ motions for summary judgment. The trial commenced in January 2016 and testimony concluded in February 2016. Closing arguments occurred in June 2016 following post-trial briefing.
None of the Funds within the Trust are a party to the Sivolella or Sanford Litigations and any potential damages would be the responsibility of the Defendants. Therefore, no liability for litigation relating to these matters has been accrued in the financial statements of the Funds.
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1290 FUNDS
DISCLOSURE REGARDING ADVISORY CONTRACT APPROVALS
APPROVALS OF INVESTMENT ADVISORY AND INVESTMENT SUB-ADVISORY AGREEMENTS DURING THE SIX-MONTH PERIOD ENDED APRIL 30, 2016 (UNAUDITED)
At a meeting held on December 9-10, 2015, the Board of Trustees (the “Board”) of 1290 Funds (the “Trust”), including those Trustees who are not parties to any Agreement (as defined below) or “interested persons” (as that term is defined in the Investment Company Act of 1940, as amended) of such parties or the Trust (the “Independent Trustees”), considered and unanimously approved an Investment Advisory Agreement (the “Advisory Agreement”) with AXA Equitable Funds Management Group, LLC (d/b/a 1290 Asset Managers) (“1290 Asset Managers” or the “Adviser”) and an Investment Sub-Advisory Agreement (the “Sub-Advisory Agreement” and together with the Advisory Agreement, the “Agreements”) between the Adviser and DoubleLine Capital LP (together with its affiliate DoubleLine Equity LP, “DoubleLine” or the “Sub-Adviser”) with respect to the 1290 DoubleLine Dynamic Allocation Fund, a newly-created fund of the Trust that commenced operations on March 8, 2016.
The Board noted that the Trust is an affiliated investment company of EQ Advisors Trust, which is also managed by the Adviser, and that all of the Board members also currently serve on the Board of Trustees of EQ Advisors Trust. The Board also noted that the proposed Sub-Adviser currently serves as investment sub-adviser for one or more portfolios, or allocated portion(s) of portfolio(s), of EQ Advisors Trust. The Board members also noted that, in their capacities as Trustees of EQ Advisors Trust, they had most recently approved a sub-advisory agreement between the Adviser and DoubleLine with respect to a portfolio of EQ Advisors Trust at a meeting held on March 3-4, 2015.
In reaching its decision to approve each Agreement with respect to the Fund, the Board considered the overall fairness of the Agreement and whether the Agreement was in the best interests of the Fund and its shareholders. The Board further considered all factors it deemed relevant with respect to the Fund and each Agreement, including: (1) the nature, quality and extent of the overall services to be provided to the Fund by the Adviser, the proposed Sub-Adviser and, where applicable, their respective affiliates; (2) information regarding the risk/return profile of the Fund; (3) the level of the Fund’s proposed advisory fee and sub-advisory fee, and the Fund’s expense ratios relative to those of peer funds; (4) the anticipated costs of the services to be provided by, and the estimated profits to be realized by, the Adviser and its affiliates from their relationships with the Fund; (5) the anticipated effect of growth and size on the Fund’s performance and expenses, including any potential economies of scale; and (6) the “fall out” benefits to be realized by the Adviser, the proposed Sub-Adviser, and their respective affiliates. In considering each Agreement, the Board did not identify any single factor or information as all-important or controlling and each Trustee may have attributed different weight to each factor.
In connection with its deliberations, the Board took into account information prepared by the Adviser and the proposed Sub-Adviser, including memoranda and other materials addressing the factors set out above, and provided to the Trustees in connection with the meeting. The Board also took into account information provided to the Trustees at prior Board meetings. The Board also took into account information relating to the Adviser and the proposed Sub-Adviser provided to the Trustees, in their capacities as Trustees of EQ Advisors Trust, at prior meetings of the Board of Trustees of EQ Advisors Trust, and the Trustees noted their experience and familiarity with the Adviser, the proposed Sub-Adviser, and the other funds of the Trust derived from their years of service on the Boards of EQ Advisors Trust and the Trust. The information provided to the Trustees described, among other things, the Fund’s investment strategies and risks, the services to be provided by the Adviser and the proposed Sub-Adviser, as well as the Adviser’s and the proposed Sub-Adviser’s investment personnel, proposed advisory and sub-advisory fees, expense ratios, risk/return profile information, expense limitation arrangements, and other matters. During the meeting, the Trustees met with senior representatives of the Adviser to discuss the Agreements and the information provided. The Independent Trustees met in advance of, and in executive session during, the meeting at which the Board approved the Agreements to review the information provided. At the meeting, the Independent Trustees and management engaged in extensive discussions regarding the Agreements. The Independent Trustees were assisted by independent counsel during the meeting and during their deliberations regarding the Agreements, and also received materials discussing the legal standards applicable to their consideration of the Agreements. In approving the Agreements, the Board, including the Independent Trustees, determined that the proposed advisory and sub-advisory fees were fair and reasonable and that the approval of the Agreements was in the best interests of the Fund and its shareholders. Although the Board gave attention to all information provided, the following discusses some of the primary factors that the Board deemed relevant to its decision to approve the Agreements.
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Nature, Quality and Extent of Services. The Board evaluated the nature, quality and extent of the overall services to be provided to the Fund and its shareholders by the Adviser, the proposed Sub-Adviser and, where applicable, their respective affiliates. The Board also considered the Adviser’s and the proposed Sub-Adviser’s responsibilities with respect to the Fund.
With respect to the Adviser, the Board considered that the Adviser would be responsible for, among other things, developing investment strategies for the Fund; researching, conducting “due diligence” on, selecting and monitoring the proposed Sub-Adviser; overseeing the proposed Sub-Adviser’s selection of investments for the Fund; monitoring and evaluating the performance of the Fund; monitoring the investment operations and composition of the Fund and, in connection therewith, monitoring compliance with the Fund’s investment objectives, policies and restrictions, as well as the Fund’s compliance with applicable law; monitoring brokerage selection, commission and other trading costs, quality of execution, and other brokerage matters; coordinating and managing the flow of information and communications relating to the Fund among the proposed Sub-Adviser and other applicable parties; and implementing Board directives as they relate to the Fund. The Board also considered information regarding the Adviser’s process for selecting and monitoring the proposed Sub-Adviser, as well as information regarding the backgrounds of the personnel who would perform those functions with respect to the Fund. The Board also considered that the Adviser’s responsibilities would include daily monitoring of investment, operational, enterprise, legal, regulatory and compliance risks as they relate to the Fund, and considered information regarding the Adviser’s ongoing risk management activities. The Board also considered that the Adviser has assumed significant entrepreneurial and other risk in launching and sponsoring the Fund. The Board’s conclusion regarding the nature, quality and extent of the overall services to be provided by the Adviser also was based, in part, on (i) the Board’s experience and familiarity with the Adviser serving as the investment adviser for the other funds of the Trust, and on periodic reports provided to the Board regarding the services provided by the Adviser to those other funds, and (ii) the Trustees’ experience and familiarity, in their capacities as Trustees of EQ Advisors Trust, with the Adviser serving as the investment manager for portfolios of EQ Advisors Trust, and on periodic reports provided to the Trustees, in their capacities as Trustees of EQ Advisors Trust, regarding the services provided by the Adviser to those other portfolios.
With respect to the proposed Sub-Adviser, the Board considered that, subject to the oversight of the Adviser, the proposed Sub-Adviser would be responsible for making investment decisions for the Fund; placing with brokers or dealers orders for the purchase and sale of investments for the Fund; and performing certain related administrative functions. The Board also reviewed information regarding the proposed Sub-Adviser’s process for selecting investments for the Fund, as well as information regarding the background of the proposed Sub-Adviser’s portfolio managers who would provide services to the Fund. In addition, the Board received information regarding the proposed Sub-Adviser’s trading experience and how the proposed Sub-Adviser would seek to achieve ”best execution” on behalf of the Fund. The Board’s conclusion regarding the nature, quality and extent of the overall services to be provided by the proposed Sub-Adviser also was based, in part, on the Trustees’ experience and familiarity, in their capacities as Trustees of EQ Advisors Trust, with the Sub-Adviser serving as an investment sub-adviser for one or more portfolios, or allocated portion(s) of portfolio(s), of EQ Advisors Trust, and on periodic reports provided to the Trustees, in their capacities as Trustees of EQ Advisors Trust, regarding the services provided by the Sub-Adviser to those other portfolios.
The Board members also considered the Fund’s Chief Compliance Officer’s evaluation of the Sub-Adviser’s compliance program, policies, and procedures with respect to the Fund and factored into their review their experience and familiarity with the Adviser’s compliance program, policies, and procedures with respect to the Trust and their experience and familiarity, in their capacities as Trustees of EQ Advisors Trust, with the Adviser’s and the proposed Sub-Adviser’s compliance programs, policies, and procedures with respect to EQ Advisors Trust. The Board also considered whether there were any pending lawsuits, enforcement proceedings or regulatory investigations involving the Adviser or the proposed Sub-Adviser and reviewed information regarding the Adviser’s and the proposed Sub-Adviser’s financial condition and history of operations and potential conflicts of interest in managing the Fund.
The Board also considered the benefits that would be provided to shareholders from participation in a Fund advised by the Adviser, including the Adviser’s experience operating a large fund complex that offers a wide range of portfolios, sub-advisers and investment styles. In addition, the Board considered the nature, quality and extent of the administrative, shareholder servicing and distribution services that the Adviser and its affiliates would provide to the Fund and its shareholders.
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The Board noted that the Fund did not have any performance history as it was newly organized and had not commenced operations as of the date of the meeting. With respect to approval of the Advisory Agreement, the Board received and reviewed information regarding the Fund’s investment objectives, policies and anticipated investments. The Board also considered the Adviser’s expertise, resources, proposed methodology and personnel for managing the Fund and its experience managing the other funds of the Trust, as well as portfolios of EQ Advisors Trust.
With respect to approval of the Sub-Advisory Agreement, the Board noted that comparative performance information was not available because the proposed Sub-Adviser did not advise other funds or accounts using a substantially similar investment strategy as the Fund. However, the Board considered the proposed Sub-Adviser’s expertise, resources, proposed investment strategy, and personnel for advising the Fund.
Based on its review, the Board determined that the nature, quality and extent of the overall services to be provided by the Adviser and the proposed Sub-Adviser were appropriate for the Fund in light of its investment objectives and, thus, supported a decision to approve the Agreements.
Expenses. The Board considered the Fund’s proposed advisory fee and sub-advisory fee in light of the nature, quality and extent of the overall services to be provided by the Adviser and the proposed Sub-Adviser. In addition, the Board considered the relative levels of the sub-advisory fee to be paid to the proposed Sub-Adviser and the advisory fee to be retained by the Adviser in light of, among other factors, the services provided to the Fund by the Adviser and the proposed Sub-Adviser. The Board considered that all fees and expenses of the Fund are explicitly disclosed in the Fund’s offering documents.
With respect to the Advisory Agreement, the Board also considered the Fund’s proposed advisory fee schedule relative to the advisory fee schedules of other portfolios managed by the Adviser. The Board also considered information provided by the Adviser comparing the proposed advisory fee rate and expense ratios for the Fund to the advisory fee rates and expense ratios for comparable funds, including information compiled by Lipper, Inc., an independent organization. The Board further considered that the proposed advisory fee schedule for the Fund includes breakpoints that would reduce the advisory fee rate as Fund assets increase above certain levels. The Board noted that any such reduction in the Fund’s advisory fee would result in corresponding reductions in the Fund’s total expense ratios. In addition, the Board further considered that the Adviser had contractually agreed to make payments or waive all or a portion of its advisory, administrative and other fees so that the Fund’s total expense ratios do not exceed certain levels as set forth in its prospectus. The Board also noted that, to the extent that the Adviser waives fees pursuant to the expense limitation arrangement, the Fund’s actual advisory fee may be lower than the Fund’s contractual advisory fee. Based on its review, the Board determined that the Adviser’s proposed fee for the Fund is fair and reasonable.
With respect to the Sub-Advisory Agreement, the Board also considered the proposed sub-advisory fee in light of the fees that the proposed Sub-Adviser charges under other advisory agreements with other clients. The Board noted that the Adviser, and not the Fund, would pay the proposed Sub-Adviser and that the proposed sub-advisory fee was negotiated between the proposed Sub-Adviser and the Adviser. Moreover, the Board noted that the Adviser generally is aware of the fees charged by sub-advisers to other clients and that the Adviser believes that the fees agreed upon with the proposed Sub-Adviser are reasonable in light of the quality of the investment sub-advisory services to be provided. Based on its review, the Board determined that the proposed sub-advisory fee for the proposed Sub-Adviser is fair and reasonable.
Profitability and Costs. The Board also considered the anticipated level of profits to be realized by the Adviser in connection with the operation of the Fund. The Adviser represented that, as a new fund with no prior operations, the Fund was not expected to be profitable to the Adviser initially because of its anticipated small initial asset base. As a result, the Board noted that it periodically would evaluate profitability as the assets of the Fund increase over time. With respect to the Sub-Advisory Agreement, the Board considered the estimated impact of the proposed advisory fee on the profitability of the Adviser. The Adviser advised the Board that it does not regard Sub-Adviser profitability as meaningful to its evaluation of the Sub-Advisory Agreement. The Board acknowledged the Adviser’s view of Sub-Adviser profitability, noting the Board’s findings as to the reasonableness of the sub-advisory fee and that the fee paid to the proposed Sub-Adviser is the product of negotiations with the Adviser and reflects levels of profitability acceptable to the Adviser and the proposed Sub-Adviser based on the particular circumstances in each case for each of them. The Board further noted that the proposed Sub-Adviser’s fee will be paid by the Adviser and not the Fund.
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Economies of Scale. The Board also considered whether economies of scale or efficiencies would be realized as the Fund grows larger and the extent to which this is reflected in the proposed advisory and sub-advisory fee schedules for the Fund. While recognizing that any precise determination is inherently subject to assumptions and subjective assessments, the Board considered that any economies of scale or efficiencies may be shared with funds and their shareholders in a variety of ways, including: (i) breakpoints in the advisory fee or other fees so that a fund’s effective fee rate declines as the fund grows in size, (ii) subsidizing a fund’s expenses by making payments or waiving all or a portion of the advisory fee or other fees so that the fund’s total expense ratio does not exceed certain levels, (iii) setting the advisory fee or other fees so that a fund is priced to scale, which assumes that the fund has sufficient assets from inception to operate at a competitive fee rate without any fee waiver or expense reimbursement from the adviser, and (iv) reinvestment in, and enhancements to, the services that an adviser and its affiliates provide to a fund and its shareholders. The Board noted that the proposed advisory fee schedule for the Fund includes breakpoints that would reduce the advisory fee rate as Fund assets increase above certain levels. In addition, the Board noted that the Adviser had agreed to assume certain expenses of the Fund by making payments or waiving all or a portion of its advisory, administrative and other fees so that the Fund’s total expense ratios do not exceed certain levels as set forth in the prospectus in light of the fact that the Fund is a new fund and initially would not have sufficient assets to maintain its expense ratios at competitive levels. The Board also considered that the Adviser could potentially share economies of scale or efficiencies with the Fund through reinvestment in, and enhancements to, the services that the Adviser and its affiliates provide over time, such as hiring additional personnel and providing additional resources in areas that would be relevant to the management and administration of the Fund. The Board considered these factors, and the relationship they bear to the fee structure charged to the Fund by the Adviser, and concluded that there would be a reasonable sharing of benefits from any economies of scale or efficiencies with the Fund once it commences operations and at reasonably anticipated asset levels. The Board noted, however, that it would monitor future growth in Fund assets to determine whether economies of scale or efficiencies continued to be reflected in the Fund’s fee arrangements.
Fall-Out Benefits. The Board also considered the extent to which the Adviser and its affiliates might derive ancillary benefits from Fund operations, including the following. The Board noted that the Adviser also would serve as the administrator for the Fund and would receive compensation for acting in this capacity. The Board also noted that AXA Distributors, LLC, an affiliate of the Adviser, provides distribution support services for the Trust pursuant to an agreement with the Trust’s distributor, ALPS Distributors, Inc. AXA Distributors, LLC may receive compensation from the Fund (which may include payments pursuant to Rule 12b-1 plans with respect to its Class A, Class C (when offered for sale), and Class R shares) for providing shareholder services and selling activities, which could lead to growth in the Trust’s assets and corresponding benefits from such growth, including economies of scale. The Board also recognized that other broker-dealers that are affiliated with the Adviser may sell, and earn sales commissions and/or other compensation with respect to, shares of the Fund. Further, the Board considered that Sanford C. Bernstein & Co., LLC, a registered broker-dealer, is an affiliate of the Adviser and may, from time to time, receive brokerage commissions from the Fund in connection with the purchase and sale of portfolio securities; provided, however, that those transactions, among other things, must be consistent with seeking best execution. Based on its review, the Board determined that any “fall-out” benefits that may accrue to the Adviser are fair and reasonable.
The Board also noted that the proposed Sub-Adviser may derive ancillary benefits from Fund operations. For example, the Board noted that the proposed Sub-Adviser serves as investment sub-adviser for other funds advised by the Adviser and receives sub-advisory fees with respect to those funds. In addition, the Board noted that the proposed Sub-Adviser may benefit from greater exposure in the marketplace with respect to the proposed Sub-Adviser’s investment process and from expanding its level of assets under management, and may derive benefits from its association with the Adviser. Based on its review, the Board determined that any “fall-out” benefits that may accrue to the proposed Sub-Adviser are fair and reasonable.
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APPROVALS OF INVESTMENT ADVISORY AND INVESTMENT SUB-ADVISORY AGREEMENTS DURING THE SIX-MONTH PERIOD ENDED APRIL 30, 2016 (UNAUDITED)
At a meeting held on March 2-3, 2016, the Board of Trustees (the “Board”) of 1290 Funds (the “Trust”), including those Trustees who are not parties to any Agreement (as defined below) or “interested persons” (as that term is defined in the Investment Company Act of 1940, as amended) of such parties or the Trust (the “Independent Trustees”), considered and unanimously approved an Investment Advisory Agreement (the “Advisory Agreement”) with AXA Equitable Funds Management Group, LLC (d/b/a 1290 Asset Managers) (“1290 Asset Managers” or the “Adviser”) and an Investment Sub-Advisory Agreement (the “Sub-Advisory Agreement” and together with the Advisory Agreement, the “Agreements”) between the Adviser and AXA Investment Managers, Inc. (the “Sub-Adviser”) with respect to the 1290 Global Talents Fund, a newly-created fund of the Trust that commenced operations on April 12, 2016.
The Board noted that the Trust is an affiliated investment company of EQ Advisors Trust, which is also managed by the Adviser, and that all of the Board members also currently serve on the Board of Trustees of EQ Advisors Trust. The Board also noted that the proposed Sub-Adviser currently serves as investment sub-adviser for another fund of the Trust and for an allocated portion of a portfolio of EQ Advisors Trust. The Board noted that the Fund would be added, by amendment, to the existing Sub-Advisory Agreement between the Adviser and the proposed Sub-Adviser. In this regard, the Board noted that it had most recently approved the existing Sub-Advisory Agreement at a meeting held on June 10, 2014.
In reaching its decision to approve each Agreement with respect to the Fund, the Board considered the overall fairness of the Agreement and whether the Agreement was in the best interests of the Fund and its shareholders. The Board further considered all factors it deemed relevant with respect to the Fund and each Agreement, including: (1) the nature, quality and extent of the overall services to be provided to the Fund by the Adviser, the proposed Sub-Adviser and, where applicable, their respective affiliates; (2) comparative performance information; (3) the level of the Fund’s proposed advisory fee and sub-advisory fee, and the Fund’s expense ratios relative to those of peer funds; (4) the anticipated costs of the services to be provided by, and the estimated profits to be realized by, the Adviser and its affiliates from their relationships with the Fund; (5) the anticipated effect of growth and size on the Fund’s performance and expenses, including any potential economies of scale; and (6) the “fall out” benefits to be realized by the Adviser, the proposed Sub-Adviser, and their respective affiliates. In considering each Agreement, the Board did not identify any single factor or information as all-important or controlling and each Trustee may have attributed different weight to each factor.
In connection with its deliberations, the Board took into account information prepared by the Adviser and the proposed Sub-Adviser, including memoranda and other materials addressing the factors set out above, and provided to the Trustees in connection with the meeting. The Board also took into account information provided to the Trustees at prior Board meetings. The Board also took into account information relating to the Adviser and the proposed Sub-Adviser provided to the Trustees, in their capacities as Trustees of EQ Advisors Trust, at prior meetings of the Board of Trustees of EQ Advisors Trust, and the Trustees noted their experience and familiarity with the Adviser, the proposed Sub-Adviser, and the other funds of the Trust derived from their years of service on the Boards of EQ Advisors Trust and the Trust. The information provided to the Trustees described, among other things, the Fund’s investment strategies and risks, the services to be provided by the Adviser and the proposed Sub-Adviser, as well as the Adviser’s and the proposed Sub-Adviser’s investment personnel, proposed advisory and sub-advisory fees, expense ratios, comparative performance information, expense limitation arrangements, and other matters. During the meeting, the Trustees met with senior representatives of the Adviser to discuss the Agreements and the information provided. The Independent Trustees met in advance of, and in executive session during, the meeting at which the Board approved the Agreements to review the information provided. At the meeting, the Independent Trustees and management engaged in extensive discussions regarding the Agreements. The Independent Trustees were assisted by independent counsel during the meeting and during their deliberations regarding the Agreements, and also received materials discussing the legal standards applicable to their consideration of the Agreements. In approving the Agreements, the Board, including the Independent Trustees, determined that the proposed advisory and sub-advisory fees were fair and reasonable and that the approval of the Agreements was in the best interests of the Fund and its shareholders. Although the Board gave attention to all information provided, the following discusses some of the primary factors that the Board deemed relevant to its decision to approve the Agreements.
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Nature, Quality and Extent of Services. The Board evaluated the nature, quality and extent of the overall services to be provided to the Fund and its shareholders by the Adviser, the proposed Sub-Adviser and, where applicable, their respective affiliates. In addition to the comparative performance information discussed below, the Board considered the Adviser’s and the proposed Sub-Adviser’s responsibilities with respect to the Fund.
With respect to the Adviser, the Board considered that the Adviser would be responsible for, among other things, developing investment strategies for the Fund; researching, conducting “due diligence” on, selecting and monitoring the proposed Sub-Adviser; overseeing the proposed Sub-Adviser’s selection of investments for the Fund; monitoring and evaluating the performance of the Fund; monitoring the investment operations and composition of the Fund and, in connection therewith, monitoring compliance with the Fund’s investment objectives, policies and restrictions, as well as the Fund’s compliance with applicable law; monitoring brokerage selection, commission and other trading costs, quality of execution, and other brokerage matters; coordinating and managing the flow of information and communications relating to the Fund among the proposed Sub-Adviser and other applicable parties; and implementing Board directives as they relate to the Fund. The Board also considered information regarding the Adviser’s process for selecting and monitoring the proposed Sub-Adviser, as well as information regarding the backgrounds of the personnel who would perform those functions with respect to the Fund. The Board also considered that the Adviser’s responsibilities would include daily monitoring of investment, operational, enterprise, legal, regulatory and compliance risks as they relate to the Fund, and considered information regarding the Adviser’s ongoing risk management activities. The Board also considered that the Adviser has assumed significant entrepreneurial and other risk in launching and sponsoring the Fund. The Board’s conclusion regarding the nature, quality and extent of the overall services to be provided by the Adviser also was based, in part, on (i) the Board’s experience and familiarity with the Adviser serving as the investment adviser for the other funds of the Trust, and on periodic reports provided to the Board regarding the services provided by the Adviser to those other funds, and (ii) the Trustees’ experience and familiarity, in their capacities as Trustees of EQ Advisors Trust, with the Adviser serving as the investment manager for portfolios of EQ Advisors Trust, and on periodic reports provided to the Trustees, in their capacities as Trustees of EQ Advisors Trust, regarding the services provided by the Adviser to those other portfolios.
With respect to the proposed Sub-Adviser, the Board considered that, subject to the oversight of the Adviser, the proposed Sub-Adviser would be responsible for making investment decisions for the Fund; placing with brokers or dealers orders for the purchase and sale of investments for the Fund; and performing certain related administrative functions. The Board also reviewed information regarding the proposed Sub-Adviser’s process for selecting investments for the Fund, as well as information regarding the background of the proposed Sub-Adviser’s portfolio managers who would provide services to the Fund, including their experience managing similar accounts for the Sub-Adviser and its affiliates. In addition, the Board received information regarding the proposed Sub-Adviser’s trading experience and how the proposed Sub-Adviser would seek to achieve ”best execution” on behalf of the Fund. The Board’s conclusion regarding the nature, quality and extent of the overall services to be provided by the proposed Sub-Adviser also was based, in part, on (i) the Board’s experience and familiarity with the Sub-Adviser serving as an investment sub-adviser for another fund of the Trust, and on periodic reports provided to the Board regarding the services provided by the Sub-Adviser to that other fund, and (ii) the Trustees’ experience and familiarity, in their capacities as Trustees of EQ Advisors Trust, with the Sub-Adviser serving as an investment sub-adviser for an allocated portion of a portfolio of EQ Advisors Trust, and on periodic reports provided to the Trustees, in their capacities as Trustees of EQ Advisors Trust, regarding the services provided by the Sub-Adviser to that other portfolio.
The Board members also considered the Fund’s Chief Compliance Officer’s evaluation of the Sub-Adviser’s compliance program, policies, and procedures with respect to the Fund and factored into their review their experience and familiarity with the Adviser’s and the proposed Sub-Adviser’s compliance programs, policies, and procedures with respect to the Trust and their experience and familiarity, in their capacities as Trustees of EQ Advisors Trust, with the Adviser’s and the proposed Sub-Adviser’s compliance programs, policies, and procedures with respect to EQ Advisors Trust. The Board also considered whether there were any pending lawsuits, enforcement proceedings or regulatory investigations involving the Adviser or the proposed Sub-Adviser and reviewed information regarding the Adviser’s and the proposed Sub-Adviser’s financial condition and history of operations and potential conflicts of interest in managing the Fund.
The Board also considered the benefits that would be provided to shareholders from participation in a Fund advised by the Adviser, including the Adviser’s experience operating a large fund complex that offers a wide range of portfolios, sub-advisers and investment styles. In addition, the Board considered the nature, quality and extent of the administrative, shareholder servicing and distribution services that the Adviser and its affiliates would provide to the Fund and its shareholders.
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The Board noted that the Fund did not have any performance history as it was newly organized and had not commenced operations as of the date of the meeting. With respect to approval of the Advisory Agreement, the Board received and reviewed information regarding the Fund’s investment objectives, policies and anticipated investments. The Board also considered the Adviser’s expertise, resources, proposed methodology and personnel for managing the Fund and its experience managing the other funds of the Trust, as well as portfolios of EQ Advisors Trust.
With respect to approval of the Sub-Advisory Agreement, the Board received and reviewed performance data relating to the proposed Sub-Adviser’s management of other funds and/or accounts with substantially similar investment objectives, policies, and strategies as the Fund, as compared to appropriate benchmarks. The Board generally considered long-term performance to be more important than short-term performance. The Board also considered the proposed Sub-Adviser’s expertise, resources, proposed investment strategy, and personnel for advising the Fund.
Based on its review, the Board determined that the nature, quality and extent of the overall services to be provided by the Adviser and the proposed Sub-Adviser were appropriate for the Fund in light of its investment objectives and, thus, supported a decision to approve the Agreements.
Expenses. The Board considered the Fund’s proposed advisory fee and sub-advisory fee in light of the nature, quality and extent of the overall services to be provided by the Adviser and the proposed Sub-Adviser. In addition, the Board considered the relative levels of the sub-advisory fee to be paid to the proposed Sub-Adviser and the advisory fee to be retained by the Adviser in light of, among other factors, the services provided to the Fund by the Adviser and the proposed Sub-Adviser. The Board considered that all fees and expenses of the Fund are explicitly disclosed in the Fund’s offering documents.
With respect to the Advisory Agreement, the Board also considered the Fund’s proposed advisory fee schedule relative to the advisory fee schedules of other portfolios managed by the Adviser. The Board also considered information provided by the Adviser comparing the proposed advisory fee rate and expense ratios for the Fund to the advisory fee rates and expense ratios for comparable funds, including information compiled by Lipper, Inc., an independent organization. The Board further considered that the proposed advisory fee schedule for the Fund includes breakpoints that would reduce the advisory fee rate as Fund assets increase above certain levels. The Board noted that any such reduction in the Fund’s advisory fee would result in corresponding reductions in the Fund’s total expense ratios. In addition, the Board further considered that the Adviser had contractually agreed to make payments or waive all or a portion of its advisory, administrative and other fees so that the Fund’s total expense ratios do not exceed certain levels as set forth in its prospectus. The Board also noted that, to the extent that the Adviser waives fees pursuant to the expense limitation arrangement, the Fund’s actual advisory fee may be lower than the Fund’s contractual advisory fee. Based on its review, the Board determined that the Adviser’s proposed fee for the Fund is fair and reasonable.
With respect to the Sub-Advisory Agreement, the Board also considered the proposed sub-advisory fee in light of the fees that the proposed Sub-Adviser charges under other advisory agreements with other clients. The Board noted that the Adviser, and not the Fund, would pay the proposed Sub-Adviser and that the proposed sub-advisory fee was negotiated between the proposed Sub-Adviser and the Adviser. Moreover, the Board noted that the Adviser generally is aware of the fees charged by sub-advisers to other clients and that the Adviser believes that the fees agreed upon with the proposed Sub-Adviser are reasonable in light of the quality of the investment sub-advisory services to be provided. Based on its review, the Board determined that the proposed sub-advisory fee for the proposed Sub-Adviser is fair and reasonable.
Profitability and Costs. The Board also considered the anticipated level of profits to be realized by the Adviser in connection with the operation of the Fund. The Adviser represented that, as a new fund with no prior operations, the Fund was not expected to be profitable to the Adviser initially because of its anticipated small initial asset base. As a result, the Board noted that it periodically would evaluate profitability as the assets of the Fund increase over time. With respect to the Sub-Advisory Agreement, the Board considered the estimated impact of the proposed advisory fee on the profitability of the Adviser. The Adviser advised the Board that it does not regard Sub-Adviser profitability as meaningful to its evaluation of the Sub-Advisory Agreement. The Board acknowledged the Adviser’s view of Sub-Adviser profitability, noting the Board’s findings as to the reasonableness of the sub-advisory fee and that the fee paid to the proposed Sub-Adviser is the product of negotiations with the Adviser and reflects levels of profitability acceptable to the Adviser and the proposed Sub-Adviser based on the particular circumstances in each case for each of them. The Board further noted that the proposed Sub-Adviser’s fee will be paid by the Adviser and not the Fund.
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Economies of Scale. The Board also considered whether economies of scale or efficiencies would be realized as the Fund grows larger and the extent to which this is reflected in the proposed advisory and sub-advisory fee schedules for the Fund. While recognizing that any precise determination is inherently subject to assumptions and subjective assessments, the Board considered that any economies of scale or efficiencies may be shared with funds and their shareholders in a variety of ways, including: (i) breakpoints in the advisory fee or other fees so that a fund’s effective fee rate declines as the fund grows in size, (ii) subsidizing a fund’s expenses by making payments or waiving all or a portion of the advisory fee or other fees so that the fund’s total expense ratio does not exceed certain levels, (iii) setting the advisory fee or other fees so that a fund is priced to scale, which assumes that the fund has sufficient assets from inception to operate at a competitive fee rate without any fee waiver or expense reimbursement from the adviser, and (iv) reinvestment in, and enhancements to, the services that an adviser and its affiliates provide to a fund and its shareholders. The Board noted that the proposed advisory fee schedule for the Fund includes breakpoints that would reduce the advisory fee rate as Fund assets increase above certain levels. In addition, the Board noted that the Adviser had agreed to assume certain expenses of the Fund by making payments or waiving all or a portion of its advisory, administrative and other fees so that the Fund’s total expense ratios do not exceed certain levels as set forth in the prospectus in light of the fact that the Fund is a new fund and initially would not have sufficient assets to maintain its expense ratios at competitive levels. The Board also considered that the Adviser could potentially share economies of scale or efficiencies with the Fund through reinvestment in, and enhancements to, the services that the Adviser and its affiliates provide over time, such as hiring additional personnel and providing additional resources in areas that would be relevant to the management and administration of the Fund. In connection with its deliberations regarding the Sub-Advisory Agreement, the Board noted that the proposed sub-advisory fee schedule for the proposed Sub-Adviser includes breakpoints that would reduce the sub-advisory fee rate as Fund assets under the proposed Sub-Adviser’s management increase above certain levels. The Board again noted that the sub-advisory fee is paid by the Adviser out of its assets and not from the Fund’s assets. The Board considered these factors, and the relationship they bear to the fee structure charged to the Fund by the Adviser, and concluded that there would be a reasonable sharing of benefits from any economies of scale or efficiencies with the Fund once it commences operations and at reasonably anticipated asset levels. The Board noted, however, that it would monitor future growth in Fund assets to determine whether economies of scale or efficiencies continued to be reflected in the Fund’s fee arrangements.
Fall-Out Benefits. The Board also considered the extent to which the Adviser and its affiliates might derive ancillary benefits from Fund operations, including the following. The Board noted that the Adviser also would serve as the administrator for the Fund and would receive compensation for acting in this capacity. In addition, the Board recognized that the proposed Sub-Adviser is an affiliate of the Adviser and would serve as the Sub-Adviser to the Fund and receive sub-advisory fees that are paid by the Adviser out of the fees that it earns from the Fund. The Board also noted that AXA Distributors, LLC, which also is an affiliate of the Adviser, provides distribution support services for the Trust pursuant to an agreement with the Trust’s distributor, ALPS Distributors, Inc. AXA Distributors, LLC may receive compensation from the Fund (which may include payments pursuant to Rule 12b-1 plans with respect to its Class A, Class C (when offered for sale), and Class R shares) for providing shareholder services and selling activities, which could lead to growth in the Trust’s assets and corresponding benefits from such growth, including economies of scale. The Board also recognized that other broker-dealers that are affiliated with the Adviser may sell, and earn sales commissions and/or other compensation with respect to, shares of the Fund. Further, the Board considered that Sanford C. Bernstein & Co., LLC, a registered broker-dealer, is an affiliate of the Adviser and may, from time to time, receive brokerage commissions from the Fund in connection with the purchase and sale of portfolio securities; provided, however, that those transactions, among other things, must be consistent with seeking best execution. Based on its review, the Board determined that any “fall-out” benefits that may accrue to the Adviser are fair and reasonable.
The Board also noted that the proposed Sub-Adviser may derive ancillary benefits from Fund operations. For example, the Sub-Adviser, through its position as Sub-Adviser to the Fund, may engage in soft dollar transactions. The Board considered information regarding the proposed Sub-Adviser’s procedures for executing portfolio transactions for the Fund and the proposed Sub-Adviser’s policies and procedures for selecting brokers and dealers and obtaining research from those brokers and dealers. In addition, the Board considered that the Sub-Adviser may be affiliated with registered broker-dealers who may, from time to time, receive brokerage commissions from the Fund in connection with the purchase and sale of portfolio securities; provided, however, that those transactions, among other things, must be consistent with seeking best execution. The Board also considered that the proposed Sub-Adviser is an affiliate of the Adviser and would serve as the Sub-Adviser to the Fund and receive sub-advisory fees that are paid by the Adviser out of the fees that it earns from the Fund. The Board also noted that the proposed
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Sub-Adviser serves as investment sub-adviser for other funds advised by the Adviser and receives sub-advisory fees with respect to those funds. The Board also recognized that the proposed Sub-Adviser and its affiliates may sell, and earn sales commissions and/or other compensation with respect to, the Fund and other investment products issued by the Adviser or its affiliates. In addition, the Board noted that the proposed Sub-Adviser may benefit from greater exposure in the marketplace with respect to the proposed Sub-Adviser’s investment process and from expanding its level of assets under management, and may derive benefits from its association with the Adviser. Based on its review, the Board determined that any “fall-out” benefits that may accrue to the proposed Sub-Adviser are fair and reasonable.
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PROXY VOTING POLICIES AND PROCEDURES (UNAUDITED)
A description of the policies and procedures that the Funds use to determine how to vote proxies relating to portfolio securities is available (i) without charge, upon request, by calling a toll-free number at 1-888-310-0416 and (ii) on the Securities and Exchange Commission’s website at http://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 (i) on the Trust’s website at www.1290Funds.com and (ii) on the Securities and Exchange Commission’s website at http://www.sec.gov.
QUARTERLY PORTFOLIO HOLDINGS INFORMATION (UNAUDITED)
The Funds file their complete schedules of portfolio holdings with the Securities and Exchange Commission for the first and third quarters of each fiscal year on Form N-Q. The Funds’ Forms N-Q are available on the Securities and Exchange Commission’s website at http://www.sec.gov. You may also review and obtain copies at the Securities and Exchange Commission’s Public Reference Room in Washington, D.C. Information about the Public Reference Room may be obtained by calling 1-800-SEC-0330.
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Visit the Funds’ Website: 1290Funds.com
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Must be accompanied or preceded by a Prospectus. 1290 Funds are distributed by ALPS Distributors, Inc. | RRD#166950 |
© 2016 AXA Equitable Life Insurance Company. All rights reserved.
1290 Avenue of the Americas, New York, NY 10104.
AXA Equitable Life Insurance Company
Item 2. | Code of Ethics. |
Not required.
Item 3. | Audit Committee Financial Expert. |
Not required.
Item 4. | Principal Accountant Fees and Services. |
Not required.
Item 5. | Audit Committee of Listed Registrants. |
Not applicable
Item 6. | Schedule of Investments. |
The Schedule of Investments is included as part of the Semi-Annual Report to Shareholders filed under Item 1 of this Form N-CSR.
Item 7. | Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies. |
Not applicable.
Item 8. | Portfolio Managers of Closed-End Management Investment Companies. |
Not applicable.
Item 9. | Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers. |
Not applicable.
Item 10. | Submission of Matters to a Vote of Security Holders. |
There have been no material changes to the procedures by which shareholders may recommend nominees to the registrant’s board of trustees.
Item 11. | Controls and Procedures. |
(a) | The registrant’s principal executive and principal financial officers, or persons performing similar functions, have concluded that the registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended (“1940 Act”)) are effective as of a date within 90 days prior to the filing date of this report that includes the disclosure required by this paragraph, based on the evaluation of these controls and procedures required by Rule 30a-3(b) under the 1940 Act and Rule 15d-15(b) under the Securities Exchange Act of 1934, as amended. |
(b) | The registrant’s certifying officers are not aware of any changes in the registrant’s internal control over financial reporting that occurred during the registrant’s second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting. |
Item 12. | Exhibits. |
(a)(1) | Not applicable for the reporting period. | |
(a)(2) | Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 are filed herewith. | |
(a)(3) | Not applicable. | |
(b) | Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 are filed herewith. |
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.
1290 FUNDS
By: | /s/ Steven M. Joenk | |
Steven M. Joenk | ||
President and Chief Executive Officer | ||
July 6, 2016 |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By: | /s/ Steven M. Joenk | |
Steven M. Joenk | ||
President and Chief Executive Officer | ||
July 6, 2016 | ||
By: | /s/ Brian E. Walsh | |
Brian E. Walsh | ||
Chief Financial Officer | ||
July 6, 2016 |