UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORMN-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act File Number811-22959
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)
WILLIAM T. MACGREGOR ESQ.
Executive Vice President, General Counsel and Secretary
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 C. 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: October 31, 2019
Item 1. | Reports to Stockholders. |
The following is a copy of the report transmitted to shareholders pursuant to Rule30e-1 under the Investment Company Act of 1940 (17 CFR270.30e-1).
Annual Report
October 31, 2019
Beginning on January 1, 2021, as permitted by regulations adopted by the Securities and Exchange Commission, paper copies of the Funds’ annual and semi-annual shareholder reports will no longer be sent by mail, unless you specifically request paper copies of the shareholder reports from the Funds or from your financial intermediary, such as a broker-dealer or bank. Instead, the shareholder reports will be made available on the Funds’ website (www.1290Funds.com/literature.php), and you will be notified by mail each time a shareholder report is posted and provided with a website link to access the shareholder report.
If you already elected to receive shareholder reports electronically, you will not be affected by this change and you need not take any action. You may elect to receive the Funds’ shareholder reports and other communications electronically by contacting your financial intermediary or, if you invest directly with the Funds, by calling 1-888-310-0416 or by sending an e-mail request to 1290Funds@dfinsolutions.com.
Beginning on January 1, 2019, you may elect to receive all future shareholder reports in paper free of charge. If you invest through a financial intermediary, you can contact your financial intermediary to request that you continue to receive paper copies of your shareholder reports. If you invest directly with the Funds, you can call 1-888-310-0416 or send an e-mail request to 1290Funds@dfinsolutions.com to let the Funds know that you wish to continue receiving paper copies of your shareholder reports. Your election to receive reports in paper will apply to all 1290 Funds held in your account if you invest through your financial intermediary or all 1290 Funds held with the fund complex if you invest directly with the Funds.
1290 Funds
Annual Report
October 31, 2019
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Market Overview for the year ended October 31, 2019
Over the past year, early tax and regulatory reform optimism collided with headwinds from trade policy uncertainty, interest rate angst, and emerging market distress, creating a volatile trading environment. Amid signs of slowdown, central banks around the world took steps to stimulate their economies; despite relatively robust U.S. macroeconomic data, the U.S. Federal Reserve cut interest rates in both August and September, the first decreases since the Global Financial Crisis of 2008.
Although the yield curve briefly steepened in response to the Fed’s meeting in the fourth quarter of 2018, driven by a fall in short-end yields, the past year has been characterized by a strong flattening of the Treasury curve. As 2019 began, the U.S. bond market rallied, with U.S. investment-grade corporate credit delivering strong returns, as did U.S. high yield. In the second quarter, the 10-year U.S. Treasury yield fell to 2.01%, its lowest level since late 2016. The amount of negative-yielding debt in the world surged in June to a record of over 13 trillion U.S. dollars. During late summer, central banks around the world eased monetary policy, and yields fell — generating higher government bond returns than most investors expected. The market value of negative-yielding bonds swelled to around 17 trillion U.S. dollars. The 10-year U.S. Treasury yield, returned to historical lows during the third quarter, edging up slightly at the third quarter’s end. Headwinds from the U.S.-China trade conflict, as well as weaker-than-expected economic data, appeared to cause long-duration assets such as investment-grade corporate bonds and Treasuries to outperform shorter-duration sectors such as collateralized loan obligations and asset-backed securities. The most closely watched part of the U.S. yield curve — the gap between two- and 10-year yields — inverted temporarily in August, stoking fear that a recession may be coming.
The U.S. stock market started off the period exhibiting extreme volatility as December of 2018 was the worst month for equity markets since World War II. Economically sensitive industrial stocks, especially on the small- and mid-cap side, took the brunt of the market’s concern. The market recouped all of those December losses in the first quarter as U.S. stocks registered their best first quarter since 1998. This rally was fueled by a shift in Fed policy and renewed hopes of a trade deal with China. The second quarter was once again marked by volatility as investors were forced to weigh weaker economic data against the possibility of an upcoming July rate cut. Despite another volatile quarter, the market ended June sitting right around its all-time high. The U.S. entered the third quarter with the longest expansion on record for the economy, the lowest unemployment since the 1960s, household wealth at a record high, and solid housing growth, all while inflation remained tame. Despite a decelerating economy and rising geopolitical risks, the S&P 500 finished the third quarter only 1.5 percentage points below its all-time high. Stocks have continued to rally into November, setting record highs as a solid October jobs report, improving China trade talks, easy central bank monetary policies, and the December UK election date agreement all fuelled the advance.
Global equity markets rose in value in the year ended October 31, 2019, with the MSCI World Index gaining almost 13% in U.S. dollar terms. Stocks’ continued climb came in spite of increased volatility, with escalating U.S./China trade tensions — and growing concerns about their potential impact on global economic growth — intermittently affecting investor sentiment. In this context, less cyclical stocks and sectors generally led the market, with real estate delivering the strongest returns.
Source: AXA Equitable Funds Management Group, LLC doing business as 1290 Asset Managers®. As of 10/31/19.
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 OP 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.
Fund holdings and sector allocations are subject to change. Please see the Portfolio of Investments for a complete list of fund holdings.
2
NOTES ON PERFORMANCE (Unaudited)
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% Bloomberg 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 Bloomberg Barclays U.S. Aggregate Bond Index at a weighting of 40%.
Bloomberg 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-backed securities.
ICE BofAML U.S. 3-Month Treasury Bill Indexmeasures 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.
ICE BofAML U.S. Convertibles Indexconsists of U.S. dollar denominated investment grade and non-investment grade convertible securities 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.
ICE BofAML U.S. High Yield Indextracks 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) ACWI (Net) Index (“MSCI ACWI (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 24 emerging markets. The index covers approximately 85% of the global investment opportunities.
Morgan Stanley Capital International (MSCI) ACWI Minimum Volatility (Net) Index (“MSCI ACWI Minimum Volatility (Net) Index”) aims to reflect the performance characteristics of a minimum variance strategy applied to large and mid cap equities across 23 developed markets and 23 emerging markets countries. The index is calculated by optimizing the MSCI ACWI Index, its parent index, in USD for the lowest absolute risk (within a given set of constraints). Historically, the index has shown lower beta and volatility characteristics relative to the MSCI ACWI Index.
Morgan Stanley Capital International (MSCI) World (Net) Index (“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 2500™ Value Indexmeasures the performance of those Russell 2500TM Index companies with lower price-to-book ratios and lower forecasted growth values. 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.
The Standard & Poor’s Target Date Index Series (each, an “S&P Target Date Index”) comprises eleven multi-asset class indices, each corresponding to a particular target retirement date. The asset allocation for each index in the series is determined once a year through survey of large fund management companies that offer target date products. Each index is fully investable, with varying levels of exposure to equities, fixed income and commodities.
The CBOE Volatility Index (known as the VIX), is measure of constant, 30-day expected volatility of the U.S. stock market, derived from prices of the S&P 500 Index call and put options.
Glossary
Derivativeis a financial instrument with a price that is dependent upon or derived from one or more underlying assets.
Diversified spreadis the sale of multiple, diversified futures contracts and the purchase of other multiple, diversified offsetting futures contracts. A spread tracks the difference between a long and short position.
Mortgage backed security (MBS)is a type of asset-backed security that is secured by a mortgage or collection of mortgages.
Quantitative easingis the introduction of new money into the money supply by a central bank.
Shiller Barclays Cyclically Adjusted Price-to-Earnings (CAPE) Total Return Index aims to identify undervalued sectors in the large-cap equity market based on a modified CAPE® ratio, which is designed to assess longer term equity valuations by using an inflation adjusted earnings horizon.
Smart betadefines a set of investment strategies that emphasize the use of alternative index construction rules to traditional market capitalization based indices.
Swapis a derivative contract through which two parties exchange financial instruments.
3
1290 CONVERTIBLE SECURITIES FUND (Unaudited)
INVESTMENT ADVISER
Ø | 1290 Asset Managers® |
INVESTMENT SUB-ADVISER
Ø | Palisade Capital Management, L.L.C. |
PERFORMANCE RESULTS
Annualized Total Returns as of 10/31/19 | ||||||||||||
1 Year | Since Incept. | |||||||||||
Fund – Class A Shares* | without Sales Charge | 13.20 | % | 6.02 | % | |||||||
with Sales Charge (a) | 8.07 | 4.90 | ||||||||||
Fund – Class I Shares* | 13.58 | 6.30 | ||||||||||
Fund – Class R Shares* | 13.07 | 5.77 | ||||||||||
ICE BofAML U.S. Convertibles Index | 12.45 | 7.67 | ||||||||||
* Date of inception 7/6/15.
(a) A 4.50% front-end sales charge was deducted.
Returns for periods greater than one year are annualized. |
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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.
The graph illustrates comparative performance for $10,000 invested in the Class I Shares of the 1290 Convertible Securities Fund and the ICE BofAML U.S. Convertibles Index from 7/6/15 to 10/31/19. The performance of the ICE BofAML U.S. Convertibles Index reflects an initial investment at the end of the month closest to the Fund’s inception. The performance of the Fund assumes reinvestment of all dividends and capital gain distributions, if any, and does not include a sales charge. The performance of the ICE BofAML U.S. Convertibles Index does not reflect the deduction of expenses or a sales charge associated with a mutual fund and has been adjusted to reflect reinvestment of all dividends, capital gain distributions, and interest of the securities included in the benchmark.
As of October 1, 2019, the gross expense ratios for Class A, I and R shares were 1.94%, 1.69% and 2.19%, respectively. The net expense ratios for Class A, I and R shares were 1.15%, 0.90% and 1.40%, respectively. The net expense ratios reflect the Adviser’s decision to contractually limit expenses through April 30, 2021. Fund Performance may also 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.
In addition, 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.
PERFORMANCE SUMMARY
The Fund’s Class I shares returned 13.58% for the year ended October 31, 2019. The Fund’s benchmark, the ICE BofAML U.S. Convertibles Index, returned 12.45% over the same year.
Overview — Palisade Capital Management, L.L.C.
The Fund overcame a slow start to post strong performance over the past year. The sharp, sentiment-driven selloff that brought 2018 to a close did not carry into 2019, and as a result, many of the Fund’s early underperforming holdings rebounded and rallied strongly throughout the course of the year. Shrugging off China trade concerns and signs of slowing global growth, major U.S. equity market indexes finished the period near record highs, helping to drive convertible returns. Both credit and volatility were weaker but were offset by an accommodative Federal Reserve stance which pushed rates lower.
As the year progressed, the market did experience a change in sentiment as investors began to shift their focus towards value-oriented names and away from growth-oriented names. This rotation caused Value convertibles to outperform Growth convertibles over the twelve-month period ending October 31, 2019 for the first time in nearly 18 years. Despite the Fund’s general focus on Growth convertibles, the Fund was able to navigate this unusual weakness with strong security selection and still post robust returns for the period. In addition, the Fund’s positioning in outperforming larger capitalization names over underperforming smaller capitalization names was an additional tailwind for performance.
Given strong recent market returns and the prospect of an election year looming, we remain mindful of the risk side of the equation as much as the reward side. While the U.S. remains one of the most attractive markets in which to invest, the macro environment remains unsettled and the potential for heightened volatility remains. We continue to favor larger, more stable, and higher quality credit issuers to better navigate this uncertain environment. While Growth has underperformed Value recently, we believe this is a short-term phenomenon rather than a long-term secular shift that would warrant a change in our strategic bias towards Growth. Convertibles remain, in our view, an ideal asset class to help investors continue to participate in the strong equity market rally while providing downside support if volatility should ratchet higher in the coming year.
Fund Highlights
What helped performance during the year?
• | The Fund benefited from security selection in the technology sector, driven by a triple-digit return from Novellus Systems, Inc. 2.625%. |
• | Outperformance in the financials and health care sectors was attributable to strong returns from LendingTree, Inc. 0.625% and Exact Sciences Corporation 1.000%, respectively. |
4
1290 CONVERTIBLE SECURITIES FUND (Unaudited)
• | Elsewhere, the Fund benefited from good security selection in the consumer discretionary sector where Mercadolibre, Inc. 2.000% posted a strong return, and from an underweight to the weak energy sector. |
What hurt performance during the year?
• | The Fund was held back by unfavorable security selection in the industrials sector. Notably, Greenbrier Companies, Inc. 2.875% was an underperformer for the period. |
• | An underweight exposure to the outperforming utilities sector and an overweight exposure to the underperforming transportation sector were also detractors from results relative to the benchmark. |
• | Elsewhere, an overweight exposure to the health care sector, which did not keep pace with the overall benchmark return, weighed heavily on results. |
Fund Characteristics As of October 31, 2019 | ||||
Weighted Average Life (Years) | N/A | |||
Weighted Average Coupon (%) | N/A | |||
Weighted Average Effective Duration (Years)* | N/A | |||
Weighted Average Rating** | BB | |||
* Effective duration is a measure of the price sensitivity of the Fund to interest rate movements, taking into account specific features of the securities in which it invests.
** Weighted Average Rating has been provided by the Investment Sub-Adviser. A credit rating is an assessment provided by a nationally recognized statistical rating organization (NRSRO) of the creditworthiness of an issuer with respect to debt obligations, including specific securities, money market instruments or other debts. Ratings are measured on a scale that generally ranges from AAA (highest) to D (lowest); ratings are subject to change without notice. |
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Sector Weightings as of October 31, 2019 | % of Net Assets | |||
Information Technology | 37.0 | % | ||
Health Care | 24.2 | |||
Financials | 9.3 | |||
Consumer Discretionary | 8.0 | |||
Industrials | 7.0 | |||
Communication Services | 5.1 | |||
Real Estate | 2.0 | |||
Utilities | 1.5 | |||
Materials | 0.9 | |||
Energy | 0.9 | |||
Consumer Staples | 0.5 | |||
Investment Company | 0.5 | |||
Cash and Other | 3.1 | |||
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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 October 31, 2019 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 5/1/19 | Ending Account Value 10/31/19 | Expenses Paid During Period* 5/1/19 - 10/31/19 | ||||||||||
Class A | ||||||||||||
Actual | $1,000.00 | $1,018.40 | $6.27 | |||||||||
Hypothetical (5% average annual return before expenses) | 1,000.00 | 1,018.99 | 6.28 | |||||||||
Class I | ||||||||||||
Actual | 1,000.00 | 1,020.50 | 5.01 | |||||||||
Hypothetical (5% average annual return before expenses) | 1,000.00 | 1,020.25 | 5.01 | |||||||||
Class R | ||||||||||||
Actual | 1,000.00 | 1,018.40 | 7.54 | |||||||||
Hypothetical (5% average annual return before expenses) | 1,000.00 | 1,017.73 | 7.54 | |||||||||
* Expenses are equal to the Fund’s Class A, I and R shares annualized expense ratios of 1.23%, 0.98% and 1.48%, respectively, multiplied by the average account value over the period, and multiplied by 184/365 (to reflect the one-half year period). |
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5
1290 FUNDS
1290 CONVERTIBLE SECURITIES FUND
PORTFOLIO OF INVESTMENTS
October 31, 2019
Principal Amount | Value (Note 1) | |||||||
LONG-TERM DEBT SECURITIES: | ||||||||
Convertible Bonds (79.0%) | ||||||||
Communication Services (5.1%) | ||||||||
Diversified Telecommunication Services (0.4%) |
| |||||||
Vonage Holdings Corp. | ||||||||
1.750%, 6/1/24§ | $ | 106,000 | $ | 102,506 | ||||
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Entertainment (1.7%) | ||||||||
Live Nation Entertainment, Inc. | ||||||||
2.500%, 3/15/23 | 105,000 | 128,456 | ||||||
Pandora Media LLC | ||||||||
1.750%, 12/1/23 | 177,000 | 213,779 | ||||||
Zynga, Inc. | ||||||||
0.250%, 6/1/24§ | 99,000 | 101,213 | ||||||
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443,448 | ||||||||
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Interactive Media & Services (0.9%) | ||||||||
Momo, Inc. | ||||||||
1.250%, 7/1/25 | 61,000 | 55,999 | ||||||
Twitter, Inc. | ||||||||
0.250%, 6/15/24 | 171,000 | 163,262 | ||||||
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219,261 | ||||||||
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Media (2.1%) | ||||||||
DISH Network Corp. | ||||||||
3.375%, 8/15/26 | 395,000 | 369,349 | ||||||
Liberty Interactive LLC | ||||||||
1.750%, 9/30/46§ | 116,000 | 164,145 | ||||||
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533,494 | ||||||||
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Total Communication Services | 1,298,709 | |||||||
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Consumer Discretionary (8.0%) | ||||||||
Diversified Consumer Services (1.1%) | ||||||||
Chegg, Inc. | ||||||||
0.125%, 3/15/25§ | 299,000 | 279,804 | ||||||
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Hotels, Restaurants & Leisure (1.0%) | ||||||||
Caesars Entertainment Corp. | ||||||||
5.000%, 10/1/24 | 145,000 | 256,686 | ||||||
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Internet & Direct Marketing Retail (4.5%) |
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Booking Holdings, Inc. | ||||||||
0.350%, 6/15/20 | 306,000 | 476,235 | ||||||
Etsy, Inc. | ||||||||
(Zero Coupon), 3/1/23 | 107,000 | 151,271 | ||||||
0.125%, 10/1/26§ | 106,000 | 95,736 | ||||||
IAC Financeco 3, Inc. | ||||||||
2.000%, 1/15/30§ | 300,000 | 333,665 | ||||||
Wayfair, Inc. | ||||||||
0.375%, 9/1/22 | 70,000 | 74,004 | ||||||
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1,130,911 | ||||||||
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Specialty Retail (1.4%) | ||||||||
Guess?, Inc. | ||||||||
2.000%, 4/15/24§ | 100,000 | 95,313 | ||||||
RH | ||||||||
(Zero Coupon), 6/15/23 | 228,000 | 257,357 | ||||||
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352,670 | ||||||||
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Total Consumer Discretionary | 2,020,071 | |||||||
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Consumer Staples (0.5%) | ||||||||
Personal Products (0.5%) | ||||||||
Herbalife Nutrition Ltd. | ||||||||
2.625%, 3/15/24 | 132,000 | 132,968 | ||||||
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Total Consumer Staples | 132,968 | |||||||
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Energy (0.9%) | ||||||||
Energy Equipment & Services (0.5%) |
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SEACOR Holdings, Inc. | ||||||||
3.250%, 5/15/30 | 148,000 | 133,860 | ||||||
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Oil, Gas & Consumable Fuels (0.4%) |
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Cheniere Energy, Inc. |
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4.250%, 3/15/45 | 120,000 | 94,050 | ||||||
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Total Energy | 227,910 | |||||||
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Financials (2.5%) | ||||||||
Capital Markets (0.8%) | ||||||||
New Mountain Finance Corp. | ||||||||
5.750%, 8/15/23 | 199,000 | 208,313 | ||||||
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Consumer Finance (0.7%) | ||||||||
Encore Capital Group, Inc. | ||||||||
3.250%, 10/1/25§ | 72,000 | 74,170 | ||||||
PRA Group, Inc. | ||||||||
3.500%, 6/1/23 | 99,000 | 100,100 | ||||||
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174,270 | ||||||||
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Mortgage Real Estate Investment Trusts (REITs) (0.3%) |
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Western Asset Mortgage Capital Corp. (REIT) |
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6.750%, 10/1/22 | 60,000 | 60,817 | ||||||
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Thrifts & Mortgage Finance (0.7%) |
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LendingTree, Inc. | ||||||||
0.625%, 6/1/22 | 101,000 | 182,020 | ||||||
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Total Financials | 625,420 | |||||||
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Health Care (19.3%) | ||||||||
Biotechnology (8.4%) | ||||||||
BioMarin Pharmaceutical, Inc. | ||||||||
1.500%, 10/15/20 | 211,000 | 221,457 | ||||||
Clovis Oncology, Inc. | ||||||||
2.500%, 9/15/21 | 128,000 | 106,358 | ||||||
Exact Sciences Corp. | ||||||||
1.000%, 1/15/25 | 289,000 | 401,931 | ||||||
Incyte Corp. | ||||||||
1.250%, 11/15/20 | 75,000 | 122,903 | ||||||
Inovio Pharmaceuticals, Inc. | ||||||||
6.500%, 3/1/24§ | 66,000 | 46,035 | ||||||
Insmed, Inc. | ||||||||
1.750%, 1/15/25 | 175,000 | 149,398 | ||||||
Invitae Corp. | ||||||||
2.000%, 9/1/24§ | 22,000 | 19,924 | ||||||
Ionis Pharmaceuticals, Inc. | ||||||||
1.000%, 11/15/21 | 81,000 | 89,179 | ||||||
Ligand Pharmaceuticals, Inc. | ||||||||
0.750%, 5/15/23 | 315,000 | 273,062 | ||||||
Medicines Co. (The) | ||||||||
2.500%, 1/15/22 | 131,000 | 210,255 | ||||||
Neurocrine Biosciences, Inc. | ||||||||
2.250%, 5/15/24 | 150,000 | 218,914 |
See Notes to Financial Statements.
6
1290 FUNDS
1290 CONVERTIBLE SECURITIES FUND
PORTFOLIO OF INVESTMENTS (Continued)
October 31, 2019
Principal Amount | Value (Note 1) | |||||||
Repligen Corp. | ||||||||
0.375%, 7/15/24 | $ | 67,000 | $ | 66,993 | ||||
Retrophin, Inc. | ||||||||
2.500%, 9/15/25 | 58,000 | 43,489 | ||||||
Sarepta Therapeutics, Inc. | ||||||||
1.500%, 11/15/24 | 110,000 | 155,115 | ||||||
|
| |||||||
2,125,013 | ||||||||
|
| |||||||
Health Care Equipment & Supplies (4.7%) |
| |||||||
CONMED Corp. | ||||||||
2.625%, 2/1/24§ | 144,000 | 197,608 | ||||||
DexCom, Inc. | ||||||||
0.750%, 5/15/22 | 117,000 | 190,723 | ||||||
Insulet Corp. | ||||||||
1.375%, 11/15/24 | 124,000 | 205,762 | ||||||
0.375%, 9/1/26§ | 67,000 | 64,027 | ||||||
Nevro Corp. | ||||||||
1.750%, 6/1/21 | 182,000 | 206,334 | ||||||
NuVasive, Inc. | ||||||||
2.250%, 3/15/21 | 71,000 | 89,083 | ||||||
Wright Medical Group NV | ||||||||
2.250%, 11/15/21 | 204,000 | 240,164 | ||||||
|
| |||||||
1,193,701 | ||||||||
|
| |||||||
Health Care Providers & Services (1.7%) |
| |||||||
Anthem, Inc. | ||||||||
2.750%, 10/15/42 | 54,000 | 204,084 | ||||||
Molina Healthcare, Inc. | ||||||||
1.125%, 1/15/20 | 74,000 | 213,932 | ||||||
|
| |||||||
418,016 | ||||||||
|
| |||||||
Health Care Technology (1.3%) | ||||||||
Evolent Health, Inc. | ||||||||
2.000%, 12/1/21 | 124,000 | 108,879 | ||||||
Teladoc Health, Inc. | ||||||||
3.000%, 12/15/22 | 123,000 | 230,265 | ||||||
|
| |||||||
339,144 | ||||||||
|
| |||||||
Life Sciences Tools & Services (1.0%) |
| |||||||
Illumina, Inc. | ||||||||
0.500%, 6/15/21 | 148,000 | 192,407 | ||||||
(Zero Coupon), 8/15/23 | 66,000 | 71,343 | ||||||
|
| |||||||
263,750 | ||||||||
|
| |||||||
Pharmaceuticals (2.2%) | ||||||||
Dermira, Inc. | ||||||||
3.000%, 5/15/22 | 174,000 | 144,420 | ||||||
Horizon Pharma Investment Ltd. | ||||||||
2.500%, 3/15/22 | 91,000 | 109,057 | ||||||
Jazz Investments I Ltd. | ||||||||
1.875%, 8/15/21 | 241,000 | 240,395 | ||||||
Paratek Pharmaceuticals, Inc. | ||||||||
4.750%, 5/1/24 | 91,000 | 55,846 | ||||||
|
| |||||||
549,718 | ||||||||
|
| |||||||
Total Health Care | 4,889,342 | |||||||
|
| |||||||
Industrials (5.8%) | ||||||||
Aerospace & Defense (0.3%) | ||||||||
Aerojet Rocketdyne Holdings, Inc. | ||||||||
2.250%, 12/15/23 | 46,000 | 79,634 | ||||||
|
| |||||||
Air Freight & Logistics (1.2%) | ||||||||
Atlas Air Worldwide Holdings, Inc. | ||||||||
1.875%, 6/1/24 | 131,000 | 102,034 | ||||||
Echo Global Logistics, Inc. | ||||||||
2.500%, 5/1/20 | 200,000 | 198,048 | ||||||
|
| |||||||
300,082 | ||||||||
|
| |||||||
Construction & Engineering (1.4%) |
| |||||||
Dycom Industries, Inc. | ||||||||
0.750%, 9/15/21 | 179,000 | 169,043 | ||||||
Tutor Perini Corp. | ||||||||
2.875%, 6/15/21 | 209,000 | 198,410 | ||||||
|
| |||||||
367,453 | ||||||||
|
| |||||||
Machinery (2.2%) | ||||||||
Chart Industries, Inc. | ||||||||
1.000%, 11/15/24§ | 88,000 | 105,698 | ||||||
Fortive Corp. | ||||||||
0.875%, 2/15/22§ | 331,000 | 326,557 | ||||||
Greenbrier Cos., Inc. (The) | ||||||||
2.875%, 2/1/24 | 124,000 | 118,969 | ||||||
|
| |||||||
551,224 | ||||||||
|
| |||||||
Transportation Infrastructure (0.7%) |
| |||||||
Macquarie Infrastructure Corp. | ||||||||
2.000%, 10/1/23 | 191,000 | 179,603 | ||||||
|
| |||||||
Total Industrials | 1,477,996 | |||||||
|
| |||||||
Information Technology (35.3%) | ||||||||
Communications Equipment (2.5%) |
| |||||||
Infinera Corp. | ||||||||
2.125%, 9/1/24 | 122,000 | 107,284 | ||||||
InterDigital, Inc. | ||||||||
2.000%, 6/1/24§ | 199,000 | 195,976 | ||||||
Lumentum Holdings, Inc. | ||||||||
0.250%, 3/15/24 | 253,000 | 319,258 | ||||||
|
| |||||||
622,518 | ||||||||
|
| |||||||
Electronic Equipment, Instruments & Components (0.8%) |
| |||||||
Insight Enterprises, Inc. | ||||||||
0.750%, 2/15/25§ | 67,000 | 72,928 | ||||||
TTM Technologies, Inc. | ||||||||
1.750%, 12/15/20 | 105,000 | 134,794 | ||||||
|
| |||||||
207,722 | ||||||||
|
| |||||||
IT Services (4.5%) | ||||||||
Akamai Technologies, Inc. | ||||||||
0.125%, 5/1/25 | 215,000 | 240,800 | ||||||
Euronet Worldwide, Inc. | ||||||||
0.750%, 3/15/49§ | 126,000 | 143,292 | ||||||
GDS Holdings Ltd. | ||||||||
2.000%, 6/1/25 | 56,000 | 59,089 | ||||||
KBR, Inc. | ||||||||
2.500%, 11/1/23§ | 62,000 | 77,629 | ||||||
Okta, Inc. | ||||||||
0.250%, 2/15/23 | 23,000 | 53,125 | ||||||
0.125%, 9/1/25§ | 67,000 | 63,486 | ||||||
Square, Inc. | ||||||||
0.500%, 5/15/23 | 347,000 | 382,735 | ||||||
Twilio, Inc. | ||||||||
0.250%, 6/1/23 | 82,000 | 124,617 | ||||||
|
| |||||||
1,144,773 | ||||||||
|
|
See Notes to Financial Statements.
7
1290 FUNDS
1290 CONVERTIBLE SECURITIES FUND
PORTFOLIO OF INVESTMENTS (Continued)
October 31, 2019
Principal Amount | Value (Note 1) | |||||||
Semiconductors & Semiconductor Equipment (12.8%) |
| |||||||
Advanced Micro Devices, Inc. | ||||||||
2.125%, 9/1/26 | $ | 107,000 | $ | 464,476 | ||||
Inphi Corp. | ||||||||
1.125%, 12/1/20 | 70,000 | 126,675 | ||||||
Intel Corp. | ||||||||
3.250%, 8/1/39 | 67,000 | 186,605 | ||||||
Microchip Technology, Inc. | ||||||||
1.625%, 2/15/25 | 259,000 | 499,708 | ||||||
1.625%, 2/15/27 | 485,000 | 634,906 | ||||||
Micron Technology, Inc. | ||||||||
Series F | ||||||||
2.125%, 2/15/33 | 19,000 | 82,402 | ||||||
Novellus Systems, Inc. | ||||||||
2.625%, 5/15/41 | 43,000 | 360,953 | ||||||
ON Semiconductor Corp. | ||||||||
1.000%, 12/1/20 | 199,000 | 240,820 | ||||||
Rambus, Inc. | ||||||||
1.375%, 2/1/23 | 91,000 | 92,444 | ||||||
Silicon Laboratories, Inc. | ||||||||
1.375%, 3/1/22 | 116,000 | 146,585 | ||||||
Synaptics, Inc. | ||||||||
0.500%, 6/15/22 | 174,000 | 164,213 | ||||||
Teradyne, Inc. | ||||||||
1.250%, 12/15/23 | 121,000 | 240,505 | ||||||
|
| |||||||
3,240,292 | ||||||||
|
| |||||||
Software (13.3%) | ||||||||
Blackline, Inc. | ||||||||
0.125%, 8/1/24§ | 93,000 | 88,295 | ||||||
Coupa Software, Inc. | ||||||||
0.125%, 6/15/25§ | 178,000 | 201,267 | ||||||
DocuSign, Inc. | ||||||||
0.500%, 9/15/23 | 122,000 | 143,267 | ||||||
FireEye, Inc. | ||||||||
0.875%, 6/1/24 | 255,000 | 251,569 | ||||||
Guidewire Software, Inc. | ||||||||
1.250%, 3/15/25 | 167,000 | 199,180 | ||||||
HubSpot, Inc. | ||||||||
0.250%, 6/1/22 | 80,000 | 136,734 | ||||||
New Relic, Inc. | ||||||||
0.500%, 5/1/23 | 222,000 | 213,364 | ||||||
Nutanix, Inc. | ||||||||
(Zero Coupon), 1/15/23 | 181,000 | 173,407 | ||||||
Palo Alto Networks, Inc. | ||||||||
0.750%, 7/1/23 | 288,000 | 316,789 | ||||||
Pluralsight, Inc. | ||||||||
0.375%, 3/1/24§ | 116,000 | 101,782 | ||||||
Proofpoint, Inc. | ||||||||
0.250%, 8/15/24§ | 27,000 | 27,945 | ||||||
Q2 Holdings, Inc. | ||||||||
0.750%, 6/1/26§ | 104,000 | 109,800 | ||||||
RealPage, Inc. | ||||||||
1.500%, 11/15/22 | 93,000 | 142,219 | ||||||
ServiceNow, Inc. | ||||||||
(Zero Coupon), 6/1/22 | 119,000 | 222,920 | ||||||
Splunk, Inc. | ||||||||
0.500%, 9/15/23 | 397,000 | 431,032 | ||||||
1.125%, 9/15/25 | 61,000 | 67,527 | ||||||
Verint Systems, Inc. | ||||||||
1.500%, 6/1/21 | 188,000 | 191,525 | ||||||
Workday, Inc. | ||||||||
0.250%, 10/1/22 | 172,000 | 218,749 | ||||||
Zendesk, Inc. | ||||||||
0.250%, 3/15/23 | 90,000 | 116,967 | ||||||
|
| |||||||
3,354,338 | ||||||||
|
| |||||||
Technology Hardware, Storage & Peripherals (1.4%) |
| |||||||
Pure Storage, Inc. | ||||||||
0.125%, 4/15/23 | 247,000 | 259,056 | ||||||
Western Digital Corp. | ||||||||
1.500%, 2/1/24 (e) | 106,000 | 100,523 | ||||||
|
| |||||||
359,579 | ||||||||
|
| |||||||
Total Information Technology | 8,929,222 | |||||||
|
| |||||||
Materials (0.5%) | ||||||||
Metals & Mining (0.5%) | ||||||||
Allegheny Technologies, Inc. | ||||||||
4.750%, 7/1/22 | 42,000 | 67,496 | ||||||
Cleveland-Cliffs, Inc. | ||||||||
1.500%, 1/15/25 | 61,000 | 66,961 | ||||||
|
| |||||||
Total Materials | 134,457 | |||||||
|
| |||||||
Real Estate (1.1%) | ||||||||
Equity Real Estate Investment Trusts (REITs) (0.7%) |
| |||||||
Colony Capital, Inc. (REIT) | ||||||||
5.000%, 4/15/23 | 111,000 | 108,237 | ||||||
IH Merger Sub LLC (REIT) | ||||||||
3.500%, 1/15/22 | 54,000 | 74,181 | ||||||
|
| |||||||
182,418 | ||||||||
|
| |||||||
Real Estate Management & Development (0.4%) |
| |||||||
Redfin Corp. | ||||||||
1.750%, 7/15/23 | 97,000 | 89,846 | ||||||
|
| |||||||
Total Real Estate | 272,264 | |||||||
|
| |||||||
Total Convertible Bonds | 20,008,359 | |||||||
|
| |||||||
Total Long-Term Debt Securities (79.0%) | 20,008,359 | |||||||
|
| |||||||
Number of Shares | Value (Note 1) | |||||||
CONVERTIBLE PREFERRED STOCKS: |
| |||||||
Financials (6.8%) | ||||||||
Banks (5.5%) | ||||||||
Bank of America Corp., | ||||||||
Series L | ||||||||
7.250% | 365 | 553,555 | ||||||
Wells Fargo & Co., | ||||||||
Series L | ||||||||
7.500% | 550 | 830,225 | ||||||
|
| |||||||
1,383,780 | ||||||||
|
| |||||||
Insurance (0.8%) | ||||||||
Assurant, Inc., | ||||||||
Series D | ||||||||
6.500% | 1,583 | 197,828 | ||||||
|
|
See Notes to Financial Statements.
8
1290 FUNDS
1290 CONVERTIBLE SECURITIES FUND
PORTFOLIO OF INVESTMENTS (Continued)
October 31, 2019
Number of Shares | Value (Note 1) | |||||||
Thrifts & Mortgage Finance (0.5%) | ||||||||
New York Community Capital Trust V, |
| |||||||
6.000% | 2,656 | $ | 134,792 | |||||
|
| |||||||
Total Financials | 1,716,400 | |||||||
|
| |||||||
Health Care (4.9%) | ||||||||
Health Care Equipment & Supplies (3.6%) |
| |||||||
Becton Dickinson and Co., | ||||||||
Series A | ||||||||
6.125% | 9,652 | 595,335 | ||||||
Danaher Corp., | ||||||||
Series A | ||||||||
4.750% | 295 | 327,545 | ||||||
|
| |||||||
922,880 | ||||||||
|
| |||||||
Health Care Technology (0.4%) | ||||||||
Change Healthcare, Inc., | ||||||||
6.000% | 1,996 | 100,858 | ||||||
|
| |||||||
Life Sciences Tools & Services (0.9%) | ||||||||
Avantor, Inc., | ||||||||
Series A | ||||||||
6.250% | 4,314 | 224,371 | ||||||
|
| |||||||
Total Health Care | 1,248,109 | |||||||
|
| |||||||
Industrials (1.2%) | ||||||||
Machinery (1.2%) | ||||||||
Fortive Corp., | ||||||||
Series A | ||||||||
5.000% | 326 | 293,579 | ||||||
|
| |||||||
Total Industrials | 293,579 | |||||||
|
| |||||||
Information Technology (1.7%) | ||||||||
Semiconductors & Semiconductor Equipment (1.7%) |
| |||||||
Broadcom, Inc., | ||||||||
Series A | ||||||||
8.000%* | 394 | 426,710 | ||||||
|
| |||||||
Total Information Technology | 426,710 | |||||||
|
| |||||||
Materials (0.4%) |
| |||||||
Chemicals (0.4%) | ||||||||
International Flavors & Fragrances, Inc., |
| |||||||
6.000% | 2,191 | 102,473 | ||||||
|
| |||||||
Total Materials | 102,473 | |||||||
|
| |||||||
Real Estate (0.9%) | ||||||||
Equity Real Estate Investment Trusts (REITs) (0.9%) |
| |||||||
Crown Castle International Corp. (REIT), |
| |||||||
Series A | ||||||||
6.875% | 186 | 231,698 | ||||||
|
| |||||||
Total Real Estate | 231,698 | |||||||
|
| |||||||
Utilities (1.5%) | ||||||||
Electric Utilities (0.4%) | ||||||||
American Electric Power Co., Inc., | ||||||||
6.125% | 1,990 | 109,430 | ||||||
|
| |||||||
Multi-Utilities (1.1%) | ||||||||
Sempra Energy, | ||||||||
Series A | ||||||||
6.000% | 2,313 | 268,378 | ||||||
|
| |||||||
Total Utilities | 377,808 | |||||||
|
| |||||||
Total Convertible Preferred Stocks (17.4%) | 4,396,777 | |||||||
|
| |||||||
SHORT-TERM INVESTMENT: | ||||||||
Investment Company (0.5%) | ||||||||
JPMorgan Prime Money Market Fund, IM Shares | 132,021 | 132,074 | ||||||
|
| |||||||
Total Short-Term Investment (0.5%) | 132,074 | |||||||
|
| |||||||
Total Investments in Securities (96.9%) | 24,537,210 | |||||||
Other Assets Less Liabilities (3.1%) | 782,214 | |||||||
|
| |||||||
Net Assets (100%) | $ | 25,319,424 | ||||||
|
|
* | 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 October 31, 2019, the market value of these securities amounted to $3,088,801 or 12.2% 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. |
(e) | Step Bond - Coupon rate increases or decreases in increments to maturity. Rate disclosed is as of October 31, 2019. Maturity date disclosed is the ultimate maturity date. |
See Notes to Financial Statements.
9
1290 FUNDS
1290 CONVERTIBLE SECURITIES FUND
PORTFOLIO OF INVESTMENTS (Continued)
October 31, 2019
The following is a summary of the inputs used to value the Fund’s assets and liabilities carried at fair value as of October 31, 2019:
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: |
| |||||||||||||||
Convertible Bonds | ||||||||||||||||
Communication Services | $ | — | $ | 1,298,709 | $ | — | $ | 1,298,709 | ||||||||
Consumer Discretionary | — | 2,020,071 | — | 2,020,071 | ||||||||||||
Consumer Staples | — | 132,968 | — | 132,968 | ||||||||||||
Energy | — | 227,910 | — | 227,910 | ||||||||||||
Financials | — | 625,420 | — | 625,420 | ||||||||||||
Health Care | — | 4,889,342 | — | 4,889,342 | ||||||||||||
Industrials | — | 1,477,996 | — | 1,477,996 | ||||||||||||
Information Technology | — | 8,929,222 | — | 8,929,222 | ||||||||||||
Materials | — | 134,457 | — | 134,457 | ||||||||||||
Real Estate | — | 272,264 | — | 272,264 | ||||||||||||
Convertible Preferred Stocks | ||||||||||||||||
Financials | 1,716,400 | — | — | 1,716,400 | ||||||||||||
Health Care | 1,248,109 | — | — | 1,248,109 | ||||||||||||
Industrials | 293,579 | — | — | 293,579 | ||||||||||||
Information Technology | 426,710 | — | — | 426,710 | ||||||||||||
Materials | 102,473 | — | — | 102,473 | ||||||||||||
Real Estate | 231,698 | — | — | 231,698 | ||||||||||||
Utilities | 377,808 | — | — | 377,808 | ||||||||||||
Short-Term Investment | ||||||||||||||||
Investment Company | 132,074 | — | — | 132,074 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Assets | $ | 4,528,851 | $ | 20,008,359 | $ | — | $ | 24,537,210 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total Liabilities | $ | — | $ | — | $ | — | $ | — | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total | $ | 4,528,851 | $ | 20,008,359 | $ | — | $ | 24,537,210 | ||||||||
|
|
|
|
|
|
|
|
The Fund held no derivatives contracts during the year ended October 31, 2019.
Investment security transactions for the year ended October 31, 2019 were as follows:
Cost of Purchases: | ||||
Long-term investments other than U.S. government debt securities | $ | 10,931,921 | ||
Net Proceeds of Sales and Redemptions: | ||||
Long-term investments other than U.S. government debt securities | $ | 11,859,909 |
As of October 31, 2019, the gross unrealized appreciation (depreciation) of investments based on the aggregate cost of investments in securities and derivative instruments, if applicable, for Federal income tax purposes was as follows:
Aggregate gross unrealized appreciation | $ | 2,638,560 | ||
Aggregate gross unrealized depreciation | (1,067,970 | ) | ||
|
| |||
Net unrealized appreciation | $ | 1,570,590 | ||
|
| |||
Federal income tax cost of investments in securities and derivative instruments, if applicable | $ | 22,966,620 | ||
|
|
See Notes to Financial Statements.
10
1290 FUNDS
1290 CONVERTIBLE SECURITIES FUND
STATEMENT OF ASSETS AND LIABILITIES
October 31, 2019
ASSETS | ||||
Investments in Securities, at value (Cost $22,795,482) | $ | 24,537,210 | ||
Cash | 646,000 | |||
Receivable for securities sold | 544,690 | |||
Dividends, interest and other receivables | 86,961 | |||
Receivable for Fund shares sold | 41,649 | |||
Prepaid registration and filing fees | 16,948 | |||
Other assets | 445 | |||
|
| |||
Total assets | 25,873,903 | |||
|
| |||
LIABILITIES | ||||
Payable for securities purchased | 458,415 | |||
Dividends and distributions payable | 27,536 | |||
Transfer agent fees payable | 3,053 | |||
Payable for Fund shares redeemed | 1,077 | |||
Administrative fees payable | 198 | |||
Distribution fees payable – Class A | 115 | |||
Distribution fees payable – Class R | 62 | |||
Accrued expenses | 64,023 | |||
|
| |||
Total liabilities | 554,479 | |||
|
| |||
NET ASSETS | $ | 25,319,424 | ||
|
| |||
Net assets were comprised of: | ||||
Paid in capital | $ | 22,563,478 | ||
Total distributable earnings (loss) | 2,755,946 | |||
|
| |||
Net assets | $ | 25,319,424 | ||
|
| |||
Class A | ||||
Net asset value and redemption price per share, $572,402 / 50,952 shares outstanding (unlimited amount authorized: $0.001 par value) | $ | 11.23 | ||
Maximum sales charge (4.50% of offering price) | 0.53 | |||
|
| |||
Maximum offering price per share | $ | 11.76 | ||
|
| |||
Class I | ||||
Net asset value and redemption price per share, $24,599,752 / 2,189,264 shares outstanding (unlimited amount authorized: $0.001 par value) | $ | 11.24 | ||
|
| |||
Class R | ||||
Net asset value and redemption price per share, $147,270 / 13,117 shares outstanding (unlimited amount authorized: $0.001 par value) | $ | 11.23 | ||
|
|
STATEMENT OF OPERATIONS
For the Year Ended October 31, 2019
INVESTMENT INCOME | ||||
Interest | $ | 310,963 | ||
Dividends | 195,390 | |||
|
| |||
Total income | 506,353 | |||
|
| |||
EXPENSES | ||||
Investment advisory fees | 168,090 | |||
Professional fees | 84,056 | |||
Administrative fees | 36,019 | |||
Registration and filing fees | 33,938 | |||
Transfer agent fees | 30,640 | |||
Printing and mailing expenses | 29,738 | |||
Custodian fees | 16,525 | |||
Trustees’ fees | 2,144 | |||
Distribution fees – Class A | 1,335 | |||
Distribution fees – Class R | 694 | |||
Miscellaneous | 16,268 | |||
|
| |||
Gross expenses | 419,447 | |||
Less: Voluntary waiver from investment adviser | (29,400 | ) | ||
Waiver from investment adviser | (149,972 | ) | ||
|
| |||
Net expenses | 240,075 | |||
|
| |||
NET INVESTMENT INCOME (LOSS) | 266,278 | |||
|
| |||
REALIZED AND UNREALIZED GAIN (LOSS) | ||||
Net realized gain (loss) on investments in securities | 1,172,228 | |||
Net change in unrealized appreciation (depreciation) on investments in securities | 1,554,811 | |||
|
| |||
NET REALIZED AND UNREALIZED GAIN (LOSS) | 2,727,039 | |||
|
| |||
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | $ | 2,993,317 | ||
|
|
See Notes to Financial Statements.
11
1290 FUNDS
1290 CONVERTIBLE SECURITIES FUND
STATEMENT OF CHANGES IN NET ASSETS
Year Ended October 31, | ||||||||
2019 | 2018 | |||||||
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS: |
| |||||||
Net investment income (loss) | $ | 266,278 | $ | 333,842 | ||||
Net realized gain (loss) | 1,172,228 | 1,094,133 | ||||||
Net change in unrealized appreciation (depreciation) | 1,554,811 | (1,515,380 | ) | |||||
|
|
|
| |||||
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | 2,993,317 | (87,405 | ) | |||||
|
|
|
| |||||
Distributions to shareholders: | ||||||||
Class A | (29,152 | ) | (14,254 | ) | ||||
Class I | (1,352,512 | ) | (777,213 | ) | ||||
Class R | (7,315 | ) | (3,914 | ) | ||||
|
|
|
| |||||
Total distributions to shareholders | (1,388,979 | ) | (795,381 | ) | ||||
|
|
|
| |||||
CAPITAL SHARES TRANSACTIONS: | ||||||||
Class A | ||||||||
Capital shares sold [ 10,409 and 10,198 shares, respectively ] | 112,483 | 114,133 | ||||||
Capital shares issued in reinvestment of dividends [ 2,313 and 1,010 shares, respectively ] | 23,148 | 10,820 | ||||||
Capital shares repurchased [ (10,505) and (2,118) shares, respectively ] | (110,871 | ) | (23,402 | ) | ||||
|
|
|
| |||||
Total Class A transactions | 24,760 | 101,551 | ||||||
|
|
|
| |||||
Class I | ||||||||
Capital shares sold [ 60,599 and 82,739 shares, respectively ] | 662,358 | 914,895 | ||||||
Capital shares issued in reinvestment of dividends [ 11,004 and 4,466 shares, respectively ] | 110,649 | 47,979 | ||||||
Capital shares repurchased [ (40,367) and (25,797) shares, respectively ] | (429,627 | ) | (283,983 | ) | ||||
|
|
|
| |||||
Total Class I transactions | 343,380 | 678,891 | ||||||
|
|
|
| |||||
Class R | ||||||||
Capital shares sold [ 396 and 2,514 shares, respectively ] | 4,183 | 27,506 | ||||||
Capital shares issued in reinvestment of dividends [ 154 and 69 shares, respectively ] | 1,537 | 733 | ||||||
Capital shares repurchased [ (9) and (17) shares, respectively ] | (103 | ) | (185 | ) | ||||
|
|
|
| |||||
Total Class R transactions | 5,617 | 28,054 | ||||||
|
|
|
| |||||
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM CAPITAL SHARE TRANSACTIONS | 373,757 | 808,496 | ||||||
|
|
|
| |||||
TOTAL INCREASE (DECREASE) IN NET ASSETS | 1,978,095 | (74,290 | ) | |||||
NET ASSETS: | ||||||||
Beginning of year | 23,341,329 | 23,415,619 | ||||||
|
|
|
| |||||
End of year | $ | 25,319,424 | $ | 23,341,329 | ||||
|
|
|
|
See Notes to Financial Statements.
12
1290 FUNDS
1290 CONVERTIBLE SECURITIES FUND
FINANCIAL HIGHLIGHTS
Year Ended October 31, | July 6, 2015* to October 31, 2015 | |||||||||||||||||||
Class A | 2019 | 2018 | 2017 | 2016 | ||||||||||||||||
Net asset value, beginning of period | $ | 10.52 | $ | 10.91 | $ | 9.56 | $ | 9.56 | $ | 10.00 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss) (e) | 0.09 | 0.13 | 0.16 | 0.14 | 0.03 | |||||||||||||||
Net realized and unrealized gain (loss) | 1.22 | (0.18 | ) | 1.43 | 0.04 | (0.44 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total from investment operations | 1.31 | (0.05 | ) | 1.59 | 0.18 | (0.41 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Less distributions: | ||||||||||||||||||||
Dividends from net investment income | (0.23 | ) | (0.23 | ) | (0.24 | ) | (0.18 | ) | (0.03 | ) | ||||||||||
Distributions from net realized gains | (0.37 | ) | (0.11 | ) | — | — | — | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total dividends and distributions | (0.60 | ) | (0.34 | ) | (0.24 | ) | (0.18 | ) | (0.03 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net asset value, end of period | $ | 11.23 | $ | 10.52 | $ | 10.91 | $ | 9.56 | $ | 9.56 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total return (b) | 13.20 | % | (0.46 | )% | 16.82 | % | 1.97 | % | (4.08 | )% | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Ratios/Supplemental Data: | ||||||||||||||||||||
Net assets, end of period (000’s) | $ | 572 | $ | 512 | $ | 433 | $ | 374 | $ | 206 | ||||||||||
Ratio of expenses to average net assets: | ||||||||||||||||||||
After waivers and reimbursements (a)(f) | 1.24 | % | 1.30 | % | 1.30 | % | 1.30 | % | 1.30 | % | ||||||||||
Before waivers and reimbursements (a)(f) | 1.99 | % | 1.94 | % | 2.07 | % | 2.26 | % | 2.09 | % | ||||||||||
Ratio of net investment income (loss) to average net assets: | ||||||||||||||||||||
After waivers and reimbursements (a)(f) | 0.87 | % | 1.14 | % | 1.54 | % | 1.49 | % | 1.09 | %(l) | ||||||||||
Before waivers and reimbursements (a)(f) | 0.12 | % | 0.49 | % | 0.78 | % | 0.52 | % | 0.30 | %(l) | ||||||||||
Portfolio turnover rate (z)^ | 47 | % | 45 | % | 41 | % | 32 | % | 6 | % | ||||||||||
Year Ended October 31, | July 6, 2015* to October 31, 2015 | |||||||||||||||||||
Class I | 2019 | 2018 | 2017 | 2016 | ||||||||||||||||
Net asset value, beginning of period | $ | 10.52 | $ | 10.91 | $ | 9.56 | $ | 9.56 | $ | 10.00 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss) (e) | 0.12 | 0.15 | 0.18 | 0.17 | 0.04 | |||||||||||||||
Net realized and unrealized gain (loss) | 1.23 | (0.17 | ) | 1.43 | 0.04 | (0.44 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total from investment operations | 1.35 | (0.02 | ) | 1.61 | 0.21 | (0.40 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Less distributions: | ||||||||||||||||||||
Dividends from net investment income | (0.26 | ) | (0.26 | ) | (0.26 | ) | (0.21 | ) | (0.04 | ) | ||||||||||
Distributions from net realized gains | (0.37 | ) | (0.11 | ) | — | — | — | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total dividends and distributions | (0.63 | ) | (0.37 | ) | (0.26 | ) | (0.21 | ) | (0.04 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net asset value, end of period | $ | 11.24 | $ | 10.52 | $ | 10.91 | $ | 9.56 | $ | 9.56 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total return (b) | 13.58 | % | (0.23 | )% | 17.11 | % | 2.23 | % | (4.00 | )% | ||||||||||
|
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|
|
|
|
|
|
| |||||||||||
Ratios/Supplemental Data: | ||||||||||||||||||||
Net assets, end of period (000’s) | $ | 24,600 | $ | 22,697 | $ | 22,874 | $ | 19,584 | $ | 19,073 | ||||||||||
Ratio of expenses to average net assets: | ||||||||||||||||||||
After waivers and reimbursements (a)(f) | 0.99 | % | 1.05 | % | 1.05 | % | 1.05 | % | 1.05 | % | ||||||||||
Before waivers and reimbursements (a)(f) | 1.74 | % | 1.69 | % | 1.82 | % | 1.99 | % | 1.72 | % | ||||||||||
Ratio of net investment income (loss) to average net assets: | ||||||||||||||||||||
After waivers and reimbursements (a)(f) | 1.12 | % | 1.40 | % | 1.80 | % | 1.78 | % | 1.37 | %(l) | ||||||||||
Before waivers and reimbursements (a)(f) | 0.37 | % | 0.75 | % | 1.03 | % | 0.84 | % | 0.70 | %(l) | ||||||||||
Portfolio turnover rate (z)^ | 47 | % | 45 | % | 41 | % | 32 | % | 6 | % |
See Notes to Financial Statements.
13
1290 FUNDS
1290 CONVERTIBLE SECURITIES FUND
FINANCIAL HIGHLIGHTS (Continued)
Year Ended October 31, | July 6, 2015* to October 31, 2015 | |||||||||||||||||||
Class R | 2019 | 2018 | 2017 | 2016 | ||||||||||||||||
Net asset value, beginning of period | $ | 10.51 | $ | 10.91 | $ | 9.56 | $ | 9.56 | $ | 10.00 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss) (e) | 0.07 | 0.10 | 0.13 | 0.12 | 0.03 | |||||||||||||||
Net realized and unrealized gain (loss) | 1.23 | (0.18 | ) | 1.43 | 0.04 | (0.45 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total from investment operations | 1.30 | (0.08 | ) | 1.56 | 0.16 | (0.42 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Less distributions: | ||||||||||||||||||||
Dividends from net investment income | (0.21 | ) | (0.21 | ) | (0.21 | ) | (0.16 | ) | (0.02 | ) | ||||||||||
Distributions from net realized gains | (0.37 | ) | (0.11 | ) | — | — | — | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total dividends and distributions | (0.58 | ) | (0.32 | ) | (0.21 | ) | (0.16 | ) | (0.02 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net asset value, end of period | $ | 11.23 | $ | 10.51 | $ | 10.91 | $ | 9.56 | $ | 9.56 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total return (b) | 13.07 | % | (0.78 | )% | 16.53 | % | 1.72 | % | (4.16 | )% | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Ratios/Supplemental Data: | ||||||||||||||||||||
Net assets, end of period (000’s) | $ | 147 | $ | 132 | $ | 109 | $ | 96 | $ | 96 | ||||||||||
Ratio of expenses to average net assets: | ||||||||||||||||||||
After waivers and reimbursements (a)(f) | 1.49 | % | 1.55 | % | 1.55 | % | 1.55 | % | 1.55 | % | ||||||||||
Before waivers and reimbursements (a)(f) | 2.24 | % | 2.19 | % | 2.32 | % | 2.49 | % | 2.22 | % | ||||||||||
Ratio of net investment income (loss) to average net assets: | ||||||||||||||||||||
After waivers and reimbursements (a)(f) | 0.62 | % | 0.90 | % | 1.30 | % | 1.28 | % | 0.87 | %(l) | ||||||||||
Before waivers and reimbursements (a)(f) | (0.13 | )% | 0.25 | % | 0.53 | % | 0.34 | % | 0.20 | %(l) | ||||||||||
Portfolio turnover rate (z)^ | 47 | % | 45 | % | 41 | % | 32 | % | 6 | % |
* | Commencement of Operations. |
^ | Portfolio turnover rate excludes derivatives, if any. |
(a) | Ratios for periods less than one year are annualized. Certain non-recurring expenses incurred by the Fund are not annualized for periods less than one year. |
(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”), if applicable. |
(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.
14
1290 DIVERSIFIED BOND FUND (Unaudited)
INVESTMENT ADVISER
Ø | 1290 Asset Managers® |
INVESTMENT SUB-ADVISERS
Ø | Brandywine Global Investment Management, LLC (Brandywine Global) |
PERFORMANCE RESULTS
Annualized Total Returns as of 10/31/19 | ||||||||||||
1 Year | Since Incept. | |||||||||||
Fund – Class A Shares* | without Sales Charge | 13.08 | % | 3.96 | % | |||||||
with Sales Charge (a | ) | 7.98 | 2.86 | |||||||||
Fund – Class I Shares* | 13.43 | 4.24 | ||||||||||
Fund – Class R Shares* | 12.84 | 3.71 | ||||||||||
Bloomberg Barclays U.S. Aggregate Bond Index | 11.51 | 3.52 | ||||||||||
* Date of inception 7/6/15.
(a) A 4.50% front-end sales charge was deducted.
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.
The graph illustrates comparative performance for $10,000 invested in the Class I Shares of the 1290 Diversified Bond Fund and the Bloomberg Barclays U.S. Aggregate Bond Index from 7/6/15 to 10/31/19. The performance of the Bloomberg Barclays U.S. Aggregate Bond Index reflects an initial investment at the end of the month closest to the Fund’s inception. The performance of the Fund assumes reinvestment of all dividends and capital gain distributions, if any, and does not include a sales charge. The performance of the Bloomberg Barclays U.S. Aggregate Bond Index does not reflect the deduction of expenses or a sales charge associated with a mutual fund and has been adjusted to reflect reinvestment of all dividends, capital gain distributions, and interest of the securities included in the benchmark.
As of March 1, 2019, the gross expense ratios for Class A, I and R shares were 1.69%, 1.38% and 1.93%, respectively. The net expense ratios for Class A, I and R shares were 0.75%, 0.50% and 1.00%, respectively. The net expense ratios reflect the Adviser’s decision to contractually limit expenses through April 30, 2020. Fund Performance may also 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.
In addition, 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.
PERFORMANCE SUMMARY
The Fund’s Class I shares returned 13.43% for the year ended October 31, 2019. The Fund’s benchmark, the Bloomberg Barclays U.S. Aggregate Bond Index, returned 11.51% over the same year.
Overview — Brandywine Global Investment Management, LLC (Brandywine Global)
Over the last year, we believe any large gains in developed market bond prices have likely run their course. However, we see potential in the emerging world. A major global policy easing cycle is underway, signaling that a potential turnaround in the current economic slump may be imminent. Deflationary pressures have encouraged emerging market monetary policy stimulus as well as developed market central bank intervention. We believe these efforts, along with lower bond yields, mortgage rates, and energy costs, are working to stabilize the global outlook, a view supported by some leading economic indicators. More interest rate cuts and stimulus measures may be in the pipeline. Specifically, we believe the Federal Reserve will cut rates further, Chinese policymakers will continue to offer stimulus, and a trade resolution — driven by political and economic self-preservation — will emerge. We believe these forces will drive the U.S. dollar lower. The main risk is that our optimism on the evolution of these three crucial factors is not realized: the trade war escalates; the Federal Reserve missteps; and/or, the Chinese fail to provide enough support. Under any of these conditions, the current slowdown could extend much longer.
Fund Highlights
The flexibility of the investment guidelines allowed the portfolio managers to nimbly position the Fund to take advantage of tactical opportunities and reallocate when risk on/risk off sentiment presented itself.
Portfolio Positioning:
• | U.S. Government/Investment Grade — At period end, we are slightly underweight U.S. treasury duration relative to the benchmark. We built U.S. Treasury duration to near all-time highs. As Treasury yields collapsed, we continuously took profit. Given the size of the recent move in Treasuries we are dubious of their valuation now, and thus underweight. We are largely neutral on investment grade credit. |
• | Internal Sovereigns Developed Markets — At period end, we were short German Bunds as a relative-value trade versus the remaining U.S. Treasury holdings, and also as an overall duration hedge for the Fund. |
• | Internal Sovereigns Emerging Markets — At period end, we were long select emerging markets that we believe exhibit attractive levels of high real yield and strong fundamental tailwinds. |
15
1290 DIVERSIFIED BOND FUND (Unaudited)
• | Structured Credit — We added meaningfully to this segment of the Fund over the third quarter. Most notably, we built positions in agency pass throughs and high quality non-agency commercial mortgage-backed securities (CMBS). This was based on our view that spreads have widened materially, and on the back of the recent collapse in yields we expect forward looking volatility in Treasury markets to limit prepayments, thus, allowing us to harvest the benefits of a high spread to Treasuries with what we believe will be a narrowing trend. |
• | Currency — We built our U.S. dollar allocation over the recent months in anticipation of volatility we expect related to intensification of the trade war and challenged global growth data. Our view remains bearish U.S. dollar in the intermediate term, but we believe it prudent to be nimble in our non-dollar exposures in an effort to control volatility during periods of market uncertainty. |
What helped performance during the year?
• | The Fund’s ability to invest in non-U.S. dollar currencies added to Fund performance relative to the benchmark. |
• | The majority of the return for the period can be attributed to U.S. Treasury duration and emerging markets exposure. |
• | U.S. Government bonds and bond futures were additive to performance. |
• | Select emerging markets added to performance including Mexico, Brazil and Peru. |
• | Non-U.S. dollar currency positioning in select emerging markets, specifically in the Mexican Peso and South African Rand, added to performance. |
• | Selectively maneuvering the duration of the Fund via U.S. Treasuries was additive. |
• | The Fund was short German Bunds as a relative-value trade versus the remaining U.S. Treasury holdings, and also as an overall duration hedge for the Fund. The short German bond futures coupled with a long position in U.S. Bond futures added to performance. |
• | While the Fund is predominately denominated in U.S. dollars, foreign currency forwards are used to hedge exposure to foreign securities, as well as add alpha. Currency forwards added to performance during the period. |
• | The Fund held relatively modest exposure to select names within the high yield space, both through cash bonds and select credit default swaps (“CDS”), which added slightly to performance. |
What hurt performance during the year?
• | While mortgages added to performance, a selection of non-agency mortgage-backed securities (MBS) underperformed the benchmark’s agency MBS positions, and the Fund’s overall mortgage allocation was underweight relative to the benchmark. |
• | An underweight to the benchmark in corporate investment grade bonds underperformed the benchmark’s allocation. |
• | A position in Argentinian bonds hurt performance. |
• | A position in Norwegian Krone hurt performance. |
Fund Characteristics As of October 31, 2019 | ||||
Weighted Average Life (Years) | 9.08 | |||
Weighted Average Coupon (%) | 4.99 | |||
Weighted Average Effective Duration (Years)* | 4.17 | |||
Weighted Average Rating** | BBB+ | |||
* Effective duration is a measure of the price sensitivity of the Fund to interest rate movements, taking into account specific features of the securities in which it invests.
** Weighted Average Rating has been provided by the Investment Sub-Adviser. A credit rating is an assessment provided by a nationally recognized statistical rating organization (NRSRO) of the creditworthiness of an issuer with respect to debt obligations, including specific securities, money market instruments or other debts. Ratings are measured on a scale that generally ranges from AAA (highest) to D (lowest); ratings are subject to change without notice. |
|
Sector Weightings as of October 31, 2019 | % of Net Assets | |||
Foreign Government Securities | 24.3 | % | ||
Mortgage-Backed Security | 11.8 | |||
Financials | 11.1 | |||
Commercial Mortgage-Backed Securities | 10.5 | |||
Collateralized Mortgage Obligations | 8.2 | |||
Information Technology | 6.1 | |||
Energy | 5.2 | |||
U.S. Treasury Obligations | 5.1 | |||
Asset-Backed Securities | 3.9 | |||
Investment Company | 2.1 | |||
Communication Services | 1.1 | |||
Health Care | 1.0 | |||
Consumer Discretionary | 0.8 | |||
Real Estate | 0.7 | |||
Materials | 0.6 | |||
Industrials | 0.4 | |||
Utilities | 0.3 | |||
Cash and Other | 6.8 | |||
|
| |||
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 October 31, 2019 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.
16
1290 DIVERSIFIED BOND FUND (Unaudited)
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 5/1/19 | Ending Account Value 10/31/19 | Expenses Paid During Period* 5/1/19 - 10/31/19 | ||||||||||
Class A |
| |||||||||||
Actual | $1,000.00 | $1,064.00 | $3.90 | |||||||||
Hypothetical (5% average annual return before expenses) | 1,000.00 | 1,021.42 | 3.82 | |||||||||
Class I | ||||||||||||
Actual | 1,000.00 | 1,065.20 | 2.60 | |||||||||
Hypothetical (5% average annual return before expenses) | 1,000.00 | 1,022.68 | 2.55 | |||||||||
Class R | ||||||||||||
Actual | 1,000.00 | 1,062.80 | 5.20 | |||||||||
Hypothetical (5% average annual return before expenses) | 1,000.00 | 1,020.17 | 5.09 | |||||||||
* Expenses are equal to the Fund’s Class A, I and R shares annualized expense ratios of 0.75%, 0.50% and 1.00%, respectively, multiplied by the average account value over the period, and multiplied by 184/365 (to reflect the one-half year period). |
|
17
1290 FUNDS
1290 DIVERSIFIED BOND FUND
PORTFOLIO OF INVESTMENTS
October 31, 2019
Principal Amount | Value (Note 1) | |||||||
LONG-TERM DEBT SECURITIES: |
| |||||||
Asset-Backed Securities (3.9%) |
| |||||||
Aames Mortgage Investment Trust, |
| |||||||
Series 2006-1 A4 | $ | 1,278,290 | $ | 1,267,577 | ||||
Park Place Securities, Inc. Asset-Backed Pass-Through Certificates, |
| |||||||
Series 2005-WHQ2 M2 | 604,079 | 601,894 | ||||||
Popular ABS Mortgage Pass-Through Trust, |
| |||||||
Series 2005-5 MV1 | 741,315 | 736,038 | ||||||
Towd Point Mortgage Trust, |
| |||||||
Series 2017-6 A1 | 724,457 | 730,022 | ||||||
|
| |||||||
Total Asset-Backed Securities | 3,335,531 | |||||||
|
| |||||||
Collateralized Mortgage Obligations (8.2%) |
| |||||||
Angel Oak Mortgage Trust, |
| |||||||
Series 2019-5 A2 | 3,203,000 | 3,206,814 | ||||||
COLT Mortgage Loan Trust, |
| |||||||
Series 2018-1 A1 | 375,276 | 375,556 | ||||||
Series 2018-1 A3 | 819,788 | 820,477 | ||||||
Connecticut Avenue Securities Trust, |
| |||||||
Series 2018-R07 1M2 | 920,000 | 927,431 | ||||||
FNMA, | ||||||||
Series 2018-C06 1M2 | 860,000 | 861,513 | ||||||
TDA CAM FTA, | ||||||||
Series 9 B | EUR | 800,000 | 749,674 | |||||
|
| |||||||
Total Collateralized Mortgage Obligations | 6,941,465 | |||||||
|
| |||||||
Commercial Mortgage-Backed Securities (10.5%) |
| |||||||
COMM Mortgage Trust, | ||||||||
Series 2014-CR14 AM | $ | 2,716,000 | 2,932,499 | |||||
FHLMC Multifamily Structured Pass-Through Certificates, |
| |||||||
Series K722 X1 | 13,089,704 | 457,162 | ||||||
Series K727 A1 | 772,035 | 782,071 | ||||||
FREMF Mortgage Trust, | ||||||||
Series 2017-K61 C | 1,305,000 | 1,331,197 | ||||||
JPMBB Commercial Mortgage Securities Trust, |
| |||||||
Series 2015-C32 C | 3,240,280 | 3,478,480 | ||||||
|
| |||||||
Total Commercial Mortgage-Backed Securities | 8,981,409 | |||||||
|
| |||||||
Corporate Bonds (27.3%) | ||||||||
Communication Services (1.1%) | ||||||||
Wireless Telecommunication Services (1.1%) |
| |||||||
Sprint Corp. | $ | 870,000 | $ | 928,342 | ||||
|
| |||||||
Total Communication Services | 928,342 | |||||||
|
| |||||||
Consumer Discretionary (0.8%) | ||||||||
Specialty Retail (0.8%) | ||||||||
PetSmart, Inc. | 710,000 | 698,555 | ||||||
|
| |||||||
Total Consumer Discretionary | 698,555 | |||||||
|
| |||||||
Energy (5.2%) | ||||||||
Oil, Gas & Consumable Fuels (5.2%) |
| |||||||
Petroleos Mexicanos | ||||||||
4.250%, 1/15/25 | 1,015,000 | 1,012,056 | ||||||
6.500%, 6/2/41 | 665,000 | 658,350 | ||||||
7.690%, 1/23/50§ | 755,000 | 819,024 | ||||||
Saudi Arabian Oil Co. | 1,785,000 | 1,941,188 | ||||||
|
| |||||||
4,430,618 | ||||||||
|
| |||||||
Total Energy | 4,430,618 | |||||||
|
| |||||||
Financials (11.1%) | ||||||||
Banks (5.8%) | ||||||||
Bank of America Corp. | 705,000 | 711,510 | ||||||
Series L | 610,000 | 610,983 | ||||||
Citigroup, Inc. | ||||||||
3.875%, 10/25/23 | 905,000 | 959,944 | ||||||
(ICE LIBOR USD 3 Month + 1.25%), 3.349%, 7/1/26 (k) | 605,000 | 611,149 | ||||||
JPMorgan Chase & Co. | ||||||||
2.400%, 6/7/21 | 605,000 | 608,805 | ||||||
3.200%, 1/25/23 | 680,000 | 704,017 | ||||||
Wells Fargo & Co. | 695,000 | 704,230 | ||||||
|
| |||||||
4,910,638 | ||||||||
|
| |||||||
Capital Markets (4.4%) | ||||||||
Ares Capital Corp. | 280,000 | 290,483 | ||||||
FS KKR Capital Corp. | ||||||||
4.750%, 5/15/22 | 287,000 | 295,999 | ||||||
4.625%, 7/15/24 | 150,000 | 154,145 | ||||||
Goldman Sachs Group, Inc. (The) | 1,215,000 | 1,218,631 | ||||||
Morgan Stanley | 645,000 | 654,840 | ||||||
Owl Rock Capital Corp. | 645,000 | 685,011 | ||||||
UBS Group AG | 450,000 | 455,007 | ||||||
|
| |||||||
3,754,116 | ||||||||
|
|
See Notes to Financial Statements.
18
1290 FUNDS
1290 DIVERSIFIED BOND FUND
PORTFOLIO OF INVESTMENTS (Continued)
October 31, 2019
Principal Amount | Value (Note 1) | |||||||
Consumer Finance (0.7%) | ||||||||
American Express Co. | $ | 610,000 | $ | 621,498 | ||||
|
| |||||||
Insurance (0.2%) | ||||||||
Markel Corp. | ||||||||
3.350%, 9/17/29 | 165,000 | 167,486 | ||||||
|
| |||||||
Total Financials | 9,453,738 | |||||||
|
| |||||||
Health Care (1.0%) | ||||||||
Pharmaceuticals (1.0%) | ||||||||
Bristol-Myers Squibb Co. | ||||||||
3.400%, 7/26/29§ | 755,000 | 812,131 | ||||||
|
| |||||||
Total Health Care | 812,131 | |||||||
|
| |||||||
Industrials (0.4%) | ||||||||
Aerospace & Defense (0.2%) | ||||||||
Boeing Co. (The) | ||||||||
2.700%, 5/1/22 | 210,000 | 213,399 | ||||||
|
| |||||||
Industrial Conglomerates (0.2%) |
| |||||||
General Electric Co. | ||||||||
3.100%, 1/9/23 | 135,000 | 137,153 | ||||||
|
| |||||||
Total Industrials | 350,552 | |||||||
|
| |||||||
Information Technology (6.1%) | ||||||||
IT Services (1.7%) | ||||||||
International Business Machines Corp. |
| |||||||
4.250%, 5/15/49 | 1,315,000 | 1,497,230 | ||||||
|
| |||||||
Semiconductors & Semiconductor Equipment (1.3%) |
| |||||||
Broadcom, Inc. | ||||||||
3.125%, 10/15/22§ | 360,000 | 366,627 | ||||||
3.625%, 10/15/24§ | 340,000 | 349,336 | ||||||
Qorvo, Inc. | ||||||||
5.500%, 7/15/26 | 400,000 | 425,992 | ||||||
|
| |||||||
1,141,955 | ||||||||
|
| |||||||
Software (0.8%) | ||||||||
Symantec Corp. | ||||||||
5.000%, 4/15/25§ | 635,000 | 650,239 | ||||||
|
| |||||||
Technology Hardware, Storage & Peripherals (2.3%) |
| |||||||
Dell International LLC | ||||||||
7.125%, 6/15/24§ | 485,000 | 512,887 | ||||||
6.020%, 6/15/26§ | 1,245,000 | 1,419,100 | ||||||
|
| |||||||
1,931,987 | ||||||||
|
| |||||||
Total Information Technology | 5,221,411 | |||||||
|
| |||||||
Materials (0.6%) | ||||||||
Metals & Mining (0.6%) | ||||||||
Steel Dynamics, Inc. | ||||||||
5.125%, 10/1/21 | 520,000 | 521,976 | ||||||
|
| |||||||
Total Materials | 521,976 | |||||||
|
| |||||||
Real Estate (0.7%) | ||||||||
Equity Real Estate Investment Trusts (REITs) (0.7%) |
| |||||||
American Tower Corp. (REIT) | ||||||||
2.800%, 6/1/20 | 605,000 | 607,673 | ||||||
|
| |||||||
Total Real Estate | 607,673 | |||||||
|
| |||||||
Utilities (0.3%) | ||||||||
Electric Utilities (0.3%) | ||||||||
DPL, Inc. | ||||||||
7.250%, 10/15/21 | 239,000 | 256,626 | ||||||
|
| |||||||
Total Utilities | 256,626 | |||||||
|
| |||||||
Total Corporate Bonds | 23,281,622 | |||||||
|
| |||||||
Foreign Government Securities (24.3%) |
| |||||||
Federative Republic of Brazil |
| |||||||
10.000%, 1/1/21 | BRL | 28,400,000 | $ | 7,521,430 | ||||
Republic of Argentina | ||||||||
2.500%, 7/22/21 TIPS (r) | ARS | 147,057,537 | 578,928 | |||||
Republic of Colombia | ||||||||
7.000%, 5/4/22 | COP | 4,452,000,000 | 1,379,119 | |||||
Republic of Indonesia | ||||||||
9.000%, 3/15/29 | IDR | 26,500,000,000 | 2,134,235 | |||||
Republic of South Africa | ||||||||
8.750%, 2/28/48 | ZAR | 54,280,000 | 3,144,392 | |||||
United Mexican States | ||||||||
7.500%, 6/3/27 | MXN | 9,700,000 | 526,010 | |||||
8.000%, 11/7/47 | 94,600,000 | 5,377,415 | ||||||
|
| |||||||
Total Foreign Government Securities | 20,661,529 | |||||||
|
| |||||||
Mortgage-Backed Security (11.8%) |
| |||||||
FNMA UMBS | ||||||||
3.000%, 9/1/49 | $ | 9,913,781 | 10,079,030 | |||||
|
| |||||||
Total Mortgage-Backed Security | 10,079,030 | |||||||
|
| |||||||
U.S. Treasury Obligations (5.1%) |
| |||||||
U.S. Treasury Bonds | ||||||||
3.375%, 11/15/48 | 970,000 | 1,222,124 | ||||||
U.S. Treasury Notes | ||||||||
(US Treasury 3 Month Bill Money Market Yield + 0.22%), 1.857%, 7/31/21 (k) | 2,445,000 | 2,444,470 | ||||||
(US Treasury 3 Month Bill Money Market Yield + 0.30%), 1.937%, 10/31/21 (k) | 695,000 | 695,518 | ||||||
|
| |||||||
Total U.S. Treasury Obligations | 4,362,112 | |||||||
|
| |||||||
Total Long-Term Debt Securities (91.1%) | 77,642,698 | |||||||
|
| |||||||
Number of Rights | Value (Note 1) | |||||||
RIGHTS: | ||||||||
Communication Services (0.0%) |
| |||||||
Wireless Telecommunication Services (0.0%) |
| |||||||
T-Mobile US, Inc., CVR* | 22,000 | 22,632 | ||||||
T-Mobile USA, Inc., CVR (r)* | 32,000 | — | ||||||
|
| |||||||
Total Rights (0.0%) | 22,632 | |||||||
|
|
See Notes to Financial Statements.
19
1290 FUNDS
1290 DIVERSIFIED BOND FUND
PORTFOLIO OF INVESTMENTS (Continued)
October 31, 2019
Number of Shares | Value (Note 1) | |||||||
SHORT-TERM INVESTMENT: |
| |||||||
Investment Company (2.1%) | ||||||||
JPMorgan Prime Money Market Fund, IM Shares | 1,798,678 | $ | 1,799,397 | |||||
|
| |||||||
Total Short-Term Investment (2.1%) | 1,799,397 | |||||||
|
| |||||||
Total Investments in Securities (93.2%) | 79,464,727 | |||||||
Other Assets Less Liabilities (6.8%) | 5,777,195 | |||||||
|
| |||||||
Net Assets (100%) | $ | 85,241,922 | ||||||
|
|
* | 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 October 31, 2019, the market value of these securities amounted to $15,415,591 or 18.1% 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. |
(k) | Variable or floating rate security, linked to the referenced benchmark. The interest rate shown was the current rate as of October 31, 2019. |
(l) | Variable or floating rate security, the interest rate of which adjusts periodically based on changes in current interest rates and prepayments on the underlying pool of assets. The interest rate shown was the current rate as of October 31, 2019. |
(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 October 31, 2019, the market value of these securities amounted to $749,674 or 0.9% of net assets. |
(r) | Value determined using significant unobservable inputs. |
Glossary:
ARS | — Argentine Peso |
BRL | — Brazilian Real |
CHF | — Swiss Franc |
CLP | — Chilean Peso |
COP | — Colombian Peso |
CVR | — Contingent Value Rights |
CZK | — Czech Koruna |
EUR | — European Currency Unit |
FHLMC | — Federal Home Loan Mortgage Corp. |
FNMA | — Federal National Mortgage Association |
GBP | — British Pound |
HUF | — Hungarian Forint |
ICE | — Intercontinental Exchange |
IDR | — Indonesian Rupiah |
IO | — Interest Only |
JPY | — Japanese Yen |
LIBOR | — London Interbank Offered Rate |
MXN | — Mexican Peso |
NOK | — Norwegian Krone |
PHP | — Philippine Peso |
RUB | — Russian Ruble |
TIPS | — Treasury Inflation Protected Security |
UMBS | — Uniform Mortgage-Backed Securities |
USD | — United States Dollar |
ZAR | — South African Rand |
Futures contracts outstanding as of October 31, 2019 (Note 1):
Description | Number of Contracts | Expiration Date | Trading Currency | Notional Amount ($) | Value and Unrealized Appreciation (Depreciation) ($) | |||||||||||||
Long Contracts |
| |||||||||||||||||
U.S. Treasury 5 Year Note | 226 | 12/2019 | USD | 26,939,906 | (115,222 | ) | ||||||||||||
U.S. Treasury Ultra Bond | 18 | 12/2019 | USD | 3,415,500 | (81,134 | ) | ||||||||||||
|
| |||||||||||||||||
(196,356 | ) | |||||||||||||||||
|
| |||||||||||||||||
Short Contracts |
| |||||||||||||||||
Euro-Buxl | (12 | ) | 12/2019 | EUR | (2,810,021 | ) | 178,299 | |||||||||||
U.S. Treasury 10 Year Note | (217 | ) | 12/2019 | USD | (28,274,422 | ) | 48,065 | |||||||||||
|
| |||||||||||||||||
226,364 | ||||||||||||||||||
|
| |||||||||||||||||
30,008 | ||||||||||||||||||
|
|
Forward Foreign Currency Contracts outstanding as of October 31, 2019 (Note 1):
Currency Purchased | Currency Sold | Counterparty | Settlement Date | Unrealized Appreciation (Depreciation) ($) | ||||||||||||||||
RUB | 297,000,000 | USD | 4,490,360 | Citibank NA** | 11/8/2019 | 138,916 | ||||||||||||||
MXN | 19,600,000 | USD | 981,283 | Barclays Bank plc | 11/19/2019 | 35,134 | ||||||||||||||
USD | 3,212,063 | ZAR | 47,300,000 | Citibank NA | 12/11/2019 | 97,552 |
See Notes to Financial Statements.
20
1290 FUNDS
1290 DIVERSIFIED BOND FUND
PORTFOLIO OF INVESTMENTS (Continued)
October 31, 2019
Currency Purchased | Currency Sold | Counterparty | Settlement Date | Unrealized Appreciation (Depreciation) ($) | ||||||||||||||||
EUR | 1,300,000 | USD | 1,447,673 | JPMorgan Chase Bank | 12/12/2019 | 6,042 | ||||||||||||||
EUR | 670,000 | USD | 737,432 | National Australia Bank Ltd. | 12/12/2019 | 11,791 | ||||||||||||||
HUF | 711,000,000 | USD | 2,409,441 | HSBC Bank plc | 12/12/2019 | 8,834 | ||||||||||||||
USD | 2,416,169 | EUR | 2,160,000 | JPMorgan Chase Bank | 12/12/2019 | 765 | ||||||||||||||
USD | 1,424,800 | CHF | 1,400,000 | HSBC Bank plc | 12/13/2019 | 1,226 | ||||||||||||||
JPY | 266,000,000 | USD | 2,474,890 | Citibank NA | 1/9/2020 | 90 | ||||||||||||||
JPY | 265,000,000 | USD | 2,447,232 | National Australia Bank Ltd. | 1/9/2020 | 18,444 | ||||||||||||||
USD | 1,439,871 | JPY | 153,000,000 | Citibank NA | 1/9/2020 | 16,293 | ||||||||||||||
CZK | 160,600,000 | USD | 6,923,068 | HSBC Bank plc | 1/10/2020 | 105,962 | ||||||||||||||
|
| |||||||||||||||||||
Total unrealized appreciation | 441,049 | |||||||||||||||||||
|
| |||||||||||||||||||
USD | 4,574,310 | RUB | 297,000,000 | Citibank NA** | 11/8/2019 | (54,967 | ) | |||||||||||||
MXN | 5,300,000 | USD | 276,669 | Goldman Sachs Bank USA | 11/19/2019 | (1,822 | ) | |||||||||||||
USD | 3,675,804 | EUR | 3,320,000 | HSBC Bank plc | 12/12/2019 | (36,761 | ) | |||||||||||||
USD | 3,273,131 | EUR | 2,940,000 | JPMorgan Chase Bank | 12/12/2019 | (14,502 | ) | |||||||||||||
USD | 1,433,627 | CHF | 1,410,000 | Morgan Stanley | 12/13/2019 | (115 | ) | |||||||||||||
JPY | 153,000,000 | USD | 1,429,303 | Morgan Stanley | 1/9/2020 | (5,724 | ) | |||||||||||||
USD | 3,294,991 | BRL | 13,320,000 | HSBC Bank plc** | 1/9/2020 | (13,670 | ) | |||||||||||||
USD | 1,327,140 | COP | 4,600,000,000 | JPMorgan Chase Bank** | 1/10/2020 | (30,136 | ) | |||||||||||||
USD | 2,093,105 | IDR | 29,900,000,000 | JPMorgan Chase Bank** | 1/29/2020 | (17,925 | ) | |||||||||||||
USD | 3,506,721 | PHP | 180,000,000 | HSBC Bank plc** | 1/30/2020 | (28,444 | ) | |||||||||||||
CLP | 1,750,000,000 | USD | 2,423,487 | HSBC Bank plc** | 1/31/2020 | (57,977 | ) | |||||||||||||
NOK | 12,800,000 | USD | 1,400,139 | HSBC Bank plc | 2/19/2020 | (7,649 | ) | |||||||||||||
GBP | 1,190,000 | USD | 1,551,225 | HSBC Bank plc | 2/24/2020 | (4,385 | ) | |||||||||||||
|
| |||||||||||||||||||
Total unrealized depreciation | (274,077 | ) | ||||||||||||||||||
|
| |||||||||||||||||||
Net unrealized appreciation | 166,972 | |||||||||||||||||||
|
|
** | Non-deliverable forward. |
Centrally Cleared Credit default swap contracts outstanding — sell protection as of October 31, 2019 (Note 1):
Reference | Financing Rate (Paid)/ Received by the Fund (%) | Frequency of Payments Made/ Received | Maturity Date | Implied Credit Spread (%) | Notional Amount | Upfront (Payments) Receipts ($) | Unrealized Appreciation (Depreciation) ($) | Value ($) | ||||||||||||||||||||||||
Goodyear Tire & Rubber Co. (The) | 5.00 | Quarterly | 6/20/2022 | 0.81 | USD | 1,010,000 | 101,624 | 13,520 | 115,144 | |||||||||||||||||||||||
Sprint Communications, Inc. | 5.00 | Quarterly | 6/20/2021 | 0.80 | USD | 1,020,000 | 60,337 | 15,130 | 75,467 | |||||||||||||||||||||||
United States Steel Corp. | 5.00 | Quarterly | 6/20/2021 | 1.77 | USD | 520,000 | 33,839 | (3,798 | ) | 30,041 | ||||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||||||||
195,800 | 24,852 | 220,652 | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
See Notes to Financial Statements.
21
1290 FUNDS
1290 DIVERSIFIED BOND FUND
PORTFOLIO OF INVESTMENTS (Continued)
October 31, 2019
The following is a summary of the inputs used to value the Fund’s assets and liabilities carried at fair value as of October 31, 2019:
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 Securities | $ | — | $ | 3,335,531 | $ | — | $ | 3,335,531 | ||||||||
Centrally Cleared Credit Default Swaps | — | 28,650 | — | 28,650 | ||||||||||||
Collateralized Mortgage Obligations | — | 6,941,465 | — | 6,941,465 | ||||||||||||
Commercial Mortgage-Backed Securities | — | 8,981,409 | — | 8,981,409 | ||||||||||||
Corporate Bonds | ||||||||||||||||
Communication Services | — | 928,342 | — | 928,342 | ||||||||||||
Consumer Discretionary | — | 698,555 | — | 698,555 | ||||||||||||
Energy | — | 4,430,618 | — | 4,430,618 | ||||||||||||
Financials | — | 9,453,738 | — | 9,453,738 | ||||||||||||
Health Care | — | 812,131 | — | 812,131 | ||||||||||||
Industrials | — | 350,552 | — | 350,552 | ||||||||||||
Information Technology | — | 5,221,411 | — | 5,221,411 | ||||||||||||
Materials | — | 521,976 | — | 521,976 | ||||||||||||
Real Estate | — | 607,673 | — | 607,673 | ||||||||||||
Utilities | — | 256,626 | — | 256,626 | ||||||||||||
Foreign Government Securities | — | 20,082,601 | 578,928 | 20,661,529 | ||||||||||||
Forward Currency Contracts | — | 441,049 | — | 441,049 | ||||||||||||
Futures | 226,364 | — | — | 226,364 | ||||||||||||
Mortgage-Backed Security | — | 10,079,030 | — | 10,079,030 | ||||||||||||
Rights | ||||||||||||||||
Communication Services | — | 22,632 | — | (a) | 22,632 | |||||||||||
Short-Term Investment | ||||||||||||||||
Investment Company | 1,799,397 | — | — | 1,799,397 | ||||||||||||
U.S. Treasury Obligations | — | 4,362,112 | — | 4,362,112 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Assets | $ | 2,025,761 | $ | 77,556,101 | $ | 578,928 | $ | 80,160,790 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Liabilities: |
| |||||||||||||||
Centrally Cleared Credit Default Swaps | $ | — | $ | (3,798 | ) | $ | — | $ | (3,798 | ) | ||||||
Forward Currency Contracts | — | (274,077 | ) | — | (274,077 | ) | ||||||||||
Futures | (196,356 | ) | — | — | (196,356 | ) | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Liabilities | $ | (196,356 | ) | $ | (277,875 | ) | $ | — | $ | (474,231 | ) | |||||
|
|
|
|
|
|
|
| |||||||||
Total | $ | 1,829,405 | $ | 77,278,226 | $ | 578,928 | $ | 79,686,559 | ||||||||
|
|
|
|
|
|
|
|
(a) | Value is zero. |
See Notes to Financial Statements.
22
1290 FUNDS
1290 DIVERSIFIED BOND FUND
PORTFOLIO OF INVESTMENTS (Continued)
October 31, 2019
Fair Values of Derivative Instruments as of October 31, 2019:
Statement of Assets and Liabilities | ||||||
Derivatives Contracts^ | Asset Derivatives | Fair Value | ||||
Interest rate contracts | Receivables, Net assets – Unrealized appreciation | $ | 226,364 | * | ||
Foreign exchange contracts | Receivables | 441,049 | ||||
Credit contracts | Receivables | 28,650 | ||||
|
| |||||
Total | $ | 696,063 | ||||
|
| |||||
Liability Derivatives | ||||||
Interest rate contracts | Payables, Net assets – Unrealized depreciation | $ | (196,356 | )* | ||
Foreign exchange contracts | Payables | (274,077 | ) | |||
Credit contracts | Payables | (3,798 | ) | |||
|
| |||||
Total | $ | (474,231 | ) | |||
|
|
* | Includes cumulative appreciation/depreciation of futures contracts as reported in the Portfolio of Investments. Only variation margin is reported within the Statement of Assets & Liabilities. |
The Effect of Derivative Instruments on the Statement of Operations for the year ended October 31, 2019:
Amount of Realized Gain or (Loss) on Derivatives Recognized in Income | ||||||||||||||||
Derivatives Contracts^ | Futures | Forward Foreign Currency Contracts | Swaps | Total | ||||||||||||
Interest rate contracts | $ | 1,228,657 | $ | — | $ | — | $ | 1,228,657 | ||||||||
Foreign exchange contracts | — | (221,798 | ) | — | (221,798 | ) | ||||||||||
Credit contracts | — | — | 17,863 | 17,863 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | $ | 1,228,657 | $ | (221,798 | ) | $ | 17,863 | $ | 1,024,722 | |||||||
|
|
|
|
|
|
|
| |||||||||
Amount of Unrealized Appreciation or (Depreciation) on Derivatives Recognized in Income | ||||||||||||||||
Derivatives Contracts^ | Futures | Forward Foreign Currency Contracts | Swaps | Total | ||||||||||||
Interest rate contracts | $ | 232,333 | $ | — | $ | — | $ | 232,333 | ||||||||
Foreign exchange contracts | — | 405,991 | — | 405,991 | ||||||||||||
Credit contracts | — | — | 56,036 | 56,036 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | $ | 232,333 | $ | 405,991 | $ | 56,036 | $ | 694,360 | ||||||||
|
|
|
|
|
|
|
|
^ The Fund held forward foreign currency contracts, futures and swaps contracts as a substitute for investing in conventional securities, hedging and in an attempt to enhance returns.
The Fund held swap contracts with an average notional balance of approximately $7,074,000 for eleven months, forward foreign currency contracts with an average settlement value of approximately $45,092,000 and futures contracts with an average notional balance of approximately $21,258,000 during the year ended October 31, 2019.
See Notes to Financial Statements.
23
1290 FUNDS
1290 DIVERSIFIED BOND FUND
PORTFOLIO OF INVESTMENTS (Continued)
October 31, 2019
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 October 31, 2019:
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 | $ | 35,134 | $ | — | $ | — | $ | 35,134 | ||||||||
Citibank NA | 252,851 | (54,967 | ) | (120,000 | ) | 77,884 | ||||||||||
HSBC Bank plc | 116,022 | (116,022 | ) | — | — | |||||||||||
JPMorgan Chase Bank | 6,807 | (6,807 | ) | — | — | |||||||||||
National Australia Bank Ltd. | 30,235 | — | — | 30,235 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | $ | 441,049 | $ | (177,796 | ) | $ | (120,000 | ) | $ | 143,253 | ||||||
|
|
|
|
|
|
|
| |||||||||
Counterparty | Gross Amount of Derivative Liabilities Presented in the Statement of Assets and Liabilities (a) | Derivatives Available for Offset | Collateral Pledged | Net Amount Due to Counterparty | ||||||||||||
Citibank NA | $ | 54,967 | $ | (54,967 | ) | $ | — | $ | — | |||||||
Goldman Sachs Bank USA | 1,822 | — | — | 1,822 | ||||||||||||
HSBC Bank plc | 148,886 | (116,022 | ) | (32,864 | ) | — | * | |||||||||
JPMorgan Chase Bank | 62,563 | (6,807 | ) | (50,000 | ) | 5,756 | ||||||||||
Morgan Stanley | 5,839 | — | — | 5,839 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | $ | 274,077 | $ | (177,796 | ) | $ | (82,864 | ) | $ | 13,417 | ||||||
|
|
|
|
|
|
|
|
* | The table above does not include the additional collateral pledged to the counterparty. Total additional collateral pledged is $47,136. |
(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 year ended October 31, 2019 were as follows:
Cost of Purchases: | ||||
Long-term investments other than U.S. government debt securities | $ | 78,123,235 | ||
Long-term U.S. government debt securities | 60,326,836 | |||
|
| |||
$ | 138,450,071 | |||
|
| |||
Net Proceeds of Sales and Redemptions: | ||||
Long-term investments other than U.S. government debt securities | $ | 26,650,368 | ||
Long-term U.S. government debt securities | 66,579,375 | |||
|
| |||
$ | 93,229,743 | |||
|
|
As of October 31, 2019, the gross unrealized appreciation (depreciation) of investments based on the aggregate cost of investments in securities and derivative instruments, if applicable, for Federal income tax purposes was as follows:
Aggregate gross unrealized appreciation | $ | 2,387,796 | ||
Aggregate gross unrealized depreciation | (2,527,726 | ) | ||
|
| |||
Net unrealized appreciation | $ | (139,930 | ) | |
|
| |||
Federal income tax cost of investments in securities and derivative instruments, if applicable | $ | 80,022,289 | ||
|
|
See Notes to Financial Statements.
24
1290 FUNDS
1290 DIVERSIFIED BOND FUND
STATEMENT OF ASSETS AND LIABILITIES
October 31, 2019
ASSETS | ||||
Investments in Securities, at value (Cost $79,598,016) | $ | 79,464,727 | ||
Cash | 821,437 | |||
Cash held as collateral for forward foreign currency contracts | 130,000 | |||
Foreign cash (Cost $51) | 51 | |||
Receivable for Fund shares sold | 2,775,807 | |||
Variation Margin on Centrally Cleared Swaps | 1,135,098 | |||
Dividends, interest and other receivables | 866,374 | |||
Unrealized appreciation on forward foreign currency contracts | 441,049 | |||
Due from broker for futures variation margin | 225,100 | |||
Prepaid registration and filing fees | 23,182 | |||
Receivable from investment adviser | 10,458 | |||
Other assets | 829 | |||
|
| |||
Total assets | 85,894,112 | |||
|
| |||
LIABILITIES | ||||
Unrealized depreciation on forward foreign currency contracts | 274,077 | |||
Payable for return of cash collateral on forward foreign currency contracts | 120,000 | |||
Dividends and distributions payable | 107,759 | |||
Payable for Fund shares redeemed | 48,232 | |||
Transfer agent fees payable | 5,909 | |||
Distribution fees payable – Class A | 777 | |||
Distribution fees payable – Class R | 61 | |||
Accrued expenses | 95,375 | |||
|
| |||
Total liabilities | 652,190 | |||
|
| |||
NET ASSETS | $ | 85,241,922 | ||
|
| |||
Net assets were comprised of: | ||||
Paid in capital | $ | 82,197,029 | ||
Total distributable earnings (loss) | 3,044,893 | |||
|
| |||
Net assets | $ | 85,241,922 | ||
|
| |||
Class A | ||||
Net asset value and redemption price per share, $3,848,040 / 372,026 shares outstanding (unlimited amount authorized: $0.001 par value) | $ | 10.34 | ||
Maximum sales charge (4.50% of offering price) | 0.49 | |||
|
| |||
Maximum offering price per share | $ | 10.83 | ||
|
| |||
Class I | ||||
Net asset value and redemption price per share, $81,248,822 / 7,837,471 shares outstanding (unlimited amount authorized: $0.001 par value) | $ | 10.37 | ||
|
| |||
Class R | ||||
Net asset value and redemption price per share, $145,060 / 14,029 shares outstanding (unlimited amount authorized: $0.001 par value) | $ | 10.34 | ||
|
|
STATEMENT OF OPERATIONS
For the Year Ended October 31, 2019
INVESTMENT INCOME | ||||
Interest | $ | 2,381,842 | ||
Dividends | 28,446 | |||
|
| |||
Total income | 2,410,288 | |||
|
| |||
EXPENSES | ||||
Investment advisory fees | 312,602 | |||
Professional fees | 119,522 | |||
Administrative fees | 78,151 | |||
Transfer agent fees | 45,700 | |||
Printing and mailing expenses | 42,538 | |||
Registration and filing fees | 39,534 | |||
Custodian fees | 34,125 | |||
Distribution fees – Class A | 5,064 | |||
Trustees’ fees | 4,203 | |||
Distribution fees – Class R | 554 | |||
Miscellaneous | 20,746 | |||
|
| |||
Gross expenses | 702,739 | |||
Less: Waiver from investment adviser | (390,753 | ) | ||
Reimbursement from investment adviser | (45,810 | ) | ||
|
| |||
Net expenses | 266,176 | |||
|
| |||
NET INVESTMENT INCOME (LOSS) | 2,144,112 | |||
|
| |||
REALIZED AND UNREALIZED GAIN (LOSS) | ||||
Realized gain (loss) on: | ||||
Investments in securities | 1,740,763 | |||
Futures contracts | 1,228,657 | |||
Forward foreign currency contracts | (221,798 | ) | ||
Foreign currency transactions | (25,751 | ) | ||
Swaps | 17,863 | |||
|
| |||
Net realized gain (loss) | 2,739,734 | |||
|
| |||
Change in unrealized appreciation (depreciation) on: | ||||
Investments in securities | 470,699 | |||
Futures contracts | 232,333 | |||
Forward foreign currency contracts | 405,991 | |||
Foreign currency translations | 5,589 | |||
Swaps | 56,036 | |||
|
| |||
Net change in unrealized appreciation (depreciation) | 1,170,648 | |||
|
| |||
NET REALIZED AND UNREALIZED GAIN (LOSS) | 3,910,382 | |||
|
| |||
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | $ | 6,054,494 | ||
|
|
See Notes to Financial Statements.
25
1290 FUNDS
1290 DIVERSIFIED BOND FUND
STATEMENT OF CHANGES IN NET ASSETS
Year Ended October 31, | ||||||||
2019 | 2018 | |||||||
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS: |
| |||||||
Net investment income (loss) | $ | 2,144,112 | $ | 1,486,877 | ||||
Net realized gain (loss) | 2,739,734 | 937,444 | ||||||
Net change in unrealized appreciation (depreciation) | 1,170,648 | (2,697,799 | ) | |||||
|
|
|
| |||||
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | 6,054,494 | (273,478 | ) | |||||
|
|
|
| |||||
Distributions to shareholders: | ||||||||
Class A | (81,362 | ) | (5,071 | ) | ||||
Class I | (2,130,998 | ) | (2,629,214 | ) | ||||
Class R | (4,205 | ) | (4,106 | ) | ||||
|
|
|
| |||||
Total distributions to shareholders | (2,216,565 | ) | (2,638,391 | ) | ||||
|
|
|
| |||||
Tax return of capital: | ||||||||
Class A | — | (336 | ) | |||||
Class I | — | (174,340 | ) | |||||
Class R | — | (272 | ) | |||||
|
|
|
| |||||
Total tax return of capital | — | (174,948 | ) | |||||
|
|
|
| |||||
CAPITAL SHARES TRANSACTIONS: | ||||||||
Class A | ||||||||
Capital shares sold [ 432,884 and 9,592 shares, respectively ] | 4,348,727 | 93,228 | ||||||
Capital shares issued in reinvestment of dividends [ 7,599 and 83 shares, respectively ] | 77,418 | 803 | ||||||
Capital shares repurchased [ (88,427) and (709) shares, respectively ] | (910,471 | ) | (7,010 | ) | ||||
|
|
|
| |||||
Total Class A transactions | 3,515,674 | 87,021 | ||||||
|
|
|
| |||||
Class I | ||||||||
Capital shares sold [ 5,191,046 and 247,326 shares, respectively ] | 52,777,026 | 2,430,045 | ||||||
Capital shares issued in reinvestment of dividends [ 87,879 and 5,368 shares, respectively ] | 899,213 | 52,506 | ||||||
Capital shares repurchased [ (650,622) and (4,058,224) shares, respectively ] | (6,704,718 | ) | (39,872,855 | ) | ||||
|
|
|
| |||||
Total Class I transactions | 46,971,521 | (37,390,304 | ) | |||||
|
|
|
| |||||
Class R | ||||||||
Capital shares sold [ 3,873 and 113 shares, respectively ] | 39,837 | 1,100 | ||||||
Capital shares issued in reinvestment of dividends [ 48 and 2 shares, respectively ] | 490 | 16 | ||||||
Capital shares repurchased [ (17) and 0 shares, respectively ] | (166 | ) | — | |||||
|
|
|
| |||||
Total Class R transactions | 40,161 | 1,116 | ||||||
|
|
|
| |||||
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM CAPITAL SHARE TRANSACTIONS | 50,527,356 | (37,302,167 | ) | |||||
|
|
|
| |||||
TOTAL INCREASE (DECREASE) IN NET ASSETS | 54,365,285 | (40,388,984 | ) | |||||
NET ASSETS: | ||||||||
Beginning of year | 30,876,637 | 71,265,621 | ||||||
|
|
|
| |||||
End of year | $ | 85,241,922 | $ | 30,876,637 | ||||
|
|
|
|
See Notes to Financial Statements.
26
1290 FUNDS
1290 DIVERSIFIED BOND FUND
FINANCIAL HIGHLIGHTS
Year Ended October 31, | July 6, 2015* to October 31, 2015 | |||||||||||||||||||
Class A | 2019 | 2018 | 2017 | 2016 | ||||||||||||||||
Net asset value, beginning of period | $ | 9.52 | $ | 10.12 | $ | 9.89 | $ | 9.82 | $ | 10.00 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss) (e) | 0.41 | ** | 0.26 | 0.19 | 0.16 | 0.01 | ||||||||||||||
Net realized and unrealized gain (loss) | 0.80 | (0.40 | ) | 0.23 | 0.17 | (0.16 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total from investment operations | 1.21 | (0.14 | ) | 0.42 | 0.33 | (0.15 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Less distributions: | ||||||||||||||||||||
Dividends from net investment income | (0.39 | ) | (0.43 | ) | (0.19 | ) | (0.10 | ) | (0.03 | ) | ||||||||||
Return of capital | — | (0.03 | ) | — | (0.16 | ) | — | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total dividends and distributions | (0.39 | ) | (0.46 | ) | (0.19 | ) | (0.26 | ) | (0.03 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net asset value, end of period | $ | 10.34 | $ | 9.52 | $ | 10.12 | $ | 9.89 | $ | 9.82 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total return (b) | 12.97 | % | (1.44 | )% | 4.25 | % | 3.39 | % | (1.54 | )% | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Ratios/Supplemental Data: | ||||||||||||||||||||
Net assets, end of period (000’s) | $ | 3,848 | $ | 190 | $ | 111 | $ | 109 | $ | 98 | ||||||||||
Ratio of expenses to average net assets: | ||||||||||||||||||||
After waivers and reimbursements (a)(f) | 0.75 | % | 1.05 | % | 1.30 | % | 1.40 | % | 1.40 | % | ||||||||||
Before waivers and reimbursements (a)(f) | 1.55 | % | 1.85 | % | 1.76 | % | 1.84 | % | 1.62 | % | ||||||||||
Ratio of net investment income (loss) to average net assets: | ||||||||||||||||||||
After waivers and reimbursements (a)(f) | 4.00 | %** | 2.63 | % | 1.93 | % | 1.68 | % | 0.37 | %(l) | ||||||||||
Before waivers and reimbursements (a)(f) | 3.19 | %** | 1.83 | % | 1.48 | % | 1.24 | % | 0.15 | %(l) | ||||||||||
Portfolio turnover rate (z)^ | 194 | % | 139 | %*** | 117 | % | 152 | % | 77 | % | ||||||||||
Year Ended October 31, | July 6, 2015* to October 31, 2015 | |||||||||||||||||||
Class I | 2019 | 2018 | 2017 | 2016 | ||||||||||||||||
Net asset value, beginning of period | $ | 9.53 | $ | 10.13 | $ | 9.89 | $ | 9.82 | $ | 10.00 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss) (e) | 0.42 | ** | 0.27 | 0.22 | 0.19 | 0.02 | ||||||||||||||
Net realized and unrealized gain (loss) | 0.84 | (0.38 | ) | 0.23 | 0.16 | (0.17 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total from investment operations | 1.26 | (0.11 | ) | 0.45 | 0.35 | (0.15 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Less distributions: | ||||||||||||||||||||
Dividends from net investment income | (0.42 | ) | (0.46 | ) | (0.21 | ) | (0.11 | ) | (0.03 | ) | ||||||||||
Return of capital | — | (0.03 | ) | — | (0.17 | ) | — | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total dividends and distributions | (0.42 | ) | (0.49 | ) | (0.21 | ) | (0.28 | ) | (0.03 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net asset value, end of period | $ | 10.37 | $ | 9.53 | $ | 10.13 | $ | 9.89 | $ | 9.82 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total return (b) | 13.43 | % | (1.19 | )% | 4.58 | % | 3.63 | % | (1.49 | )% | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Ratios/Supplemental Data: | ||||||||||||||||||||
Net assets, end of period (000’s) | $ | 81,249 | $ | 30,590 | $ | 71,053 | $ | 69,321 | $ | 68,572 | ||||||||||
Ratio of expenses to average net assets: | ||||||||||||||||||||
After waivers and reimbursements (a)(f) | 0.50 | % | 0.91 | % | 1.05 | % | 1.15 | % | 1.15 | % | ||||||||||
Before waivers and reimbursements (a)(f) | 1.34 | % | 1.54 | % | 1.51 | % | 1.58 | % | 1.36 | % | ||||||||||
Ratio of net investment income (loss) to average net assets: | ||||||||||||||||||||
After waivers and reimbursements (a)(f) | 4.12 | %** | 2.70 | % | 2.18 | % | 1.92 | % | 0.68 | %(l) | ||||||||||
Before waivers and reimbursements (a)(f) | 3.28 | %** | 2.06 | % | 1.73 | % | 1.49 | % | 0.47 | %(l) | ||||||||||
Portfolio turnover rate (z)^ | 194 | % | 139 | %*** | 117 | % | 152 | % | 77 | % |
See Notes to Financial Statements.
27
1290 FUNDS
1290 DIVERSIFIED BOND FUND
FINANCIAL HIGHLIGHTS (Continued)
Year Ended October 31, | July 6, 2015* to October 31, 2015 | |||||||||||||||||||
Class R | 2019 | 2018 | 2017 | 2016 | ||||||||||||||||
Net asset value, beginning of period | $ | 9.51 | $ | 10.11 | $ | 9.88 | $ | 9.82 | $ | 10.00 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss) (e) | 0.35 | ** | 0.23 | 0.17 | 0.14 | — | # | |||||||||||||
Net realized and unrealized gain (loss) | 0.85 | (0.39 | ) | 0.23 | 0.15 | (0.16 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total from investment operations | 1.20 | (0.16 | ) | 0.40 | 0.29 | (0.16 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Less distributions: | ||||||||||||||||||||
Dividends from net investment income | (0.37 | ) | (0.41 | ) | (0.17 | ) | (0.09 | ) | (0.02 | ) | ||||||||||
Return of capital | — | (0.03 | ) | — | (0.14 | ) | — | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total dividends and distributions | (0.37 | ) | (0.44 | ) | (0.17 | ) | (0.23 | ) | (0.02 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net asset value, end of period | $ | 10.34 | $ | 9.51 | $ | 10.11 | $ | 9.88 | $ | 9.82 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total return (b) | 12.84 | % | (1.69 | )% | 4.04 | % | 3.05 | % | (1.60 | )% | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Ratios/Supplemental Data: | ||||||||||||||||||||
Net assets, end of period (000’s) | $ | 145 | $ | 96 | $ | 101 | $ | 99 | $ | 98 | ||||||||||
Ratio of expenses to average net assets: | ||||||||||||||||||||
After waivers and reimbursements (a)(f) | 1.00 | % | 1.32 | % | 1.55 | % | 1.65 | % | 1.65 | % | ||||||||||
Before waivers and reimbursements (a)(f) | 1.88 | % | 2.09 | % | 2.01 | % | 2.08 | % | 1.88 | % | ||||||||||
Ratio of net investment income (loss) to average net assets: | ||||||||||||||||||||
After waivers and reimbursements (a)(f) | 3.51 | %** | 2.34 | % | 1.68 | % | 1.42 | % | 0.12 | %(l) | ||||||||||
Before waivers and reimbursements (a)(f) | 2.63 | %** | 1.57 | % | 1.23 | % | 0.99 | % | (0.11 | )%(l) | ||||||||||
Portfolio turnover rate (z)^ | 194 | % | 139 | %*** | 117 | % | 152 | % | 77 | % |
* | Commencement of Operations. |
** | Includes accretion, interest and inflation adjustments on Argentine TIPS Bonds. Without this income, the per share income for each class would have been $0.07 lower and the ratios for each class would have been 0.65% lower. |
*** | The portfolio turnover rate calculation includes purchases and sales made as a result of the replacement of the sub-adviser. Excluding such transactions, the portfolio turnover rate would have been 64%. |
# | 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. Certain non-recurring expenses incurred by the Fund are not annualized for periods less than one year. |
(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”), if applicable. |
(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.
28
1290 DOUBLELINE DYNAMIC ALLOCATION FUND (Unaudited)
INVESTMENT ADVISER
Ø | 1290 Asset Managers® |
INVESTMENT SUB-ADVISER
Ø | DoubleLine Capital LP |
PERFORMANCE RESULTS
Annualized Total Returns as of 10/31/19 | ||||||||||||
1 Year | Since Incept. | |||||||||||
Fund – Class A Shares* | without Sales Charge | 10.73 | % | 7.26 | % | |||||||
with Sales Charge (a | ) | 4.62 | 5.61 | |||||||||
Fund – Class I Shares* | 10.90 | 7.52 | ||||||||||
Fund – Class R Shares* | 10.46 | 7.00 | ||||||||||
60% S&P 500® Index/40% Bloomberg Barclays U.S. Aggregate Bond Index | 13.64 | 10.13 | ||||||||||
S&P 500® Index | 14.33 | 14.37 | ||||||||||
Bloomberg Barclays U.S. Aggregate Bond Index | 11.51 | 3.59 | ||||||||||
* Date of inception 3/7/16.
(a) A 5.50% front-end sales charge was deducted.
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.
The graph illustrates comparative performance for $10,000 invested in the Class I Shares of the 1290 DoubleLine Dynamic Allocation Fund and the 60% S&P 500® Index/40% Bloomberg Barclays U.S. Aggregate Bond Index, the S&P 500® Index and the Bloomberg Barclays U.S. Aggregate Bond Index from 3/7/16 to 10/31/19. The performance of each of the 60% S&P 500® Index/40% Bloomberg Barclays U.S. Aggregate Bond Index, the S&P 500® Index and the Bloomberg Barclays U.S. Aggregate Bond Index reflects an initial investment at the end of the month closest to the Fund’s inception. The performance of the Fund assumes reinvestment of all dividends and capital gain distributions, if any, and does not include a sales charge. The performance of the 60% S&P 500® Index/40% Bloomberg Barclays U.S. Aggregate Bond Index, the S&P 500® Index and the Bloomberg Barclays U.S. Aggregate Bond Index does not reflect the deduction of expenses or a sales charge associated with a mutual fund and has been adjusted to reflect reinvestment of all dividends, capital gain distributions, and interest of the securities included in the benchmark.
As of March 1, 2019, the gross expense ratios for Class A, I and R shares were 1.71%, 1.46% and 1.96%, respectively. The net expense ratios for Class A, I and R shares were 1.20%, 0.95% and 1.45%, respectively. The net expense ratios reflect the Adviser’s decision to contractually limit expenses through April 30, 2020. Fund Performance may also 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.
In addition, 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.
PERFORMANCE SUMMARY
The Fund’s Class I shares returned 10.90% for the year ended October 31, 2019. The Fund’s benchmarks, the 60% S&P 500® Index/40% Bloomberg Barclays U.S. Aggregate Bond Index, the S&P 500® Index and the Bloomberg Barclays U.S. Aggregate Bond Index returned 13.64%, 14.33% and 11.51%, respectively over the same year.
Overview — DoubleLine Capital LP
As the period began, the Federal Reserve (Fed) was in the midst of simultaneously shrinking their balance sheet (Quantitative Tightening, or QT) and raising the federal funds rate. This double-barreled restrictive monetary policy combined with the on-going trade war was already impacting risk markets by late October 2018. Implied equity volatility, as measured by the VIX, had spiked from the summer 2018 levels and the S&P 500® Index had already fallen 7.5% from its all-time high in late September. This market action culminated in late December with the S&P 500® Index almost reaching “bear market” territory (down 20% from its high) and the VIX spiking above 36%. Mere days after raising rates, Federal Reserve Chairman Jerome Powell rushed to calm the market by first indicating the Fed might not raise rates further and then indicating QT might be close to an end.
Risk assets started 2019 on a rebound. The remaining ten months of the period under review would see risk assets rally and fall back depending upon expectations of Fed policy and the to-and-fro of the trade war. Late in the period the yield curve inverted, raising the specter of a recession, followed by the first Fed rate cuts in ten years. Through all of this, the S&P 500® Index reached a succession of new highs (ending October 2019 within one day and less than one-half percent of an all-time high) and the VIX settled back to levels in the mid-teens.
The period saw a sharp deterioration in corporate earnings. At the beginning of the period, consensus estimates (according to FactSet) were predicting that in calendar year 2019 the companies of the S&P 500® Index would grow revenues and earnings by 5.4% and 9.4%, respectively, compared to 2018. By the end of October 2019 and
29
1290 DOUBLELINE DYNAMIC ALLOCATION FUND (Unaudited)
with the third quarter earnings season drawing to a close, it looked as though the third quarter would be the third in a row to see earnings fall below 2018 levels. At the end of the period, consensus expectations for 2019 revenue and earnings growth stood at 4.0% and 0.3%, respectively. In retrospect, it appears corporate margins may have peaked, at least for the time being, late in calendar year 2018.
Fund Highlights
The Fund’s allocation to U.S. equities was achieved using two sources of equity market return: First, exposure to the Shiller Barclays CAPE U.S. Sector Index (CAPE Index), which utilizes a systematic sector rotation strategy based upon the relative CAPE ratio; and second, an actively managed U.S. large cap equity portfolio. The Fund achieves exposure to the CAPE Index through the use of swap agreements. The Fund’s fixed income allocation is achieved with an actively managed multi-sector fixed income portfolio.
During the twelve-month period ended October 31, 2019, the CAPE Index was exposed to seven of the eleven sectors of the S&P 500 Index: communication services, consumer staples, energy, health care, industrials, materials and technology. Every sector except for energy contributed positively to returns during the twelve months. The sectors making the most positive contribution to returns were technology, industrials, and communications services. Although the returns from the health care and materials sectors were positive, they were, along with energy, the weakest sectors while constituents of the CAPE Index. The Fund’s exposure to the CAPE Index outperformed the S&P 500® Index during the twelve months. The Fund obtained all of its exposure to the CAPE Index through the use of swap agreements.
The active equity portfolio underperformed the S&P 500® Index during the twelve months. Relative to the S&P 500® Index benchmark, the portfolio benefited from strong security selection in the health care and communications services sectors as well as an overweight allocation to the technology sector. The portfolio’s investments in the energy sector were a drag on relative returns, owing to both security selection and the portfolio’s overweight allocation to that sector. The portfolio’s allocation to cash and security selection in the financial sector also hurt relative returns.
The total return of the fixed income allocation of the Fund trailed that of the Bloomberg Barclays U.S. Aggregate Bond Index. The fixed income allocations with the best returns were investment grade corporates, agency mortgage backed securities, and high yield — all three sectors delivered double digit returns over the twelve months. Bank loans, non-agency mortgage backed securities, and global bonds delivered the weakest returns among the Fund’s allocations during the twelve months. All fixed income sectors delivered positive returns over the twelve months.
Throughout the twelve months ended October 31, 2019, the Fund’s allocation to equities was below the 60% benchmark allocation. This conservative positioning contributed to the Fund’s underperformance relative to the blended benchmark.
Fund Characteristics As of October 31, 2019 | ||||
Weighted Average Life (Years) | 6.34 | |||
Weighted Average Coupon (%) | 3.57 | |||
Weighted Average Effective Duration (Years)* | 4.54 | |||
Weighted Average Rating** | A3 | |||
* Effective duration is a measure of the price sensitivity of the Fund to interest rate movements, taking into account specific features of the securities in which it invests.
** Weighted Average Rating has been provided by the Investment Sub-Adviser. A credit rating is an assessment provided by a nationally recognized statistical rating organization (NRSRO) of the creditworthiness of an issuer with respect to debt obligations, including specific securities, money market instruments or other debts. Ratings are measured on a scale that generally ranges from AAA (highest) to D (lowest); ratings are subject to change without notice. |
|
Sector Weightings as of October 31, 2019 | % of Net Assets | |||
Investment Companies | 19.3 | % | ||
U.S. Treasury Obligations | 14.7 | |||
Collateralized Mortgage Obligations | 10.3 | |||
Financials | 7.0 | |||
Information Technology | 7.0 | |||
Health Care | 5.8 | |||
Consumer Discretionary | 5.3 | |||
Industrials | 4.5 | |||
Communication Services | 4.2 | |||
Mortgage-Backed Securities | 3.7 | |||
Asset-Backed Securities | 3.4 | |||
Energy | 3.0 | |||
Consumer Staples | 2.7 | |||
Real Estate | 1.8 | |||
Utilities | 1.1 | |||
Materials | 0.6 | |||
Cash and Other | 5.6 | |||
|
| |||
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 October 31, 2019 and held for the entire six-month period.
30
1290 DOUBLELINE DYNAMIC ALLOCATION 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 5/1/19 | Ending Account Value 10/31/19 | Expenses Paid During Period* 10/31/19 | ||||||||||
Class A |
| |||||||||||
Actual | $1,000.00 | $1,036.90 | $5.93 | |||||||||
Hypothetical (5% average annual return before expenses) | 1,000.00 | 1,019.39 | 5.88 | |||||||||
Class I | ||||||||||||
Actual | 1,000.00 | 1,037.80 | 4.65 | |||||||||
Hypothetical (5% average annual return before expenses) | 1,000.00 | 1,020.64 | 4.61 | |||||||||
Class R | ||||||||||||
Actual | 1,000.00 | 1,036.00 | 7.21 | |||||||||
Hypothetical (5% average annual return before expenses) | 1,000.00 | 1,018.12 | 7.15 | |||||||||
* Expenses are equal to the Fund’s Class A, I and R shares annualized expense ratios of 1.15%, 0.90% and 1.40%, respectively, multiplied by the average account value over the period, and multiplied by 184/365 (to reflect the one-half year period). |
|
31
1290 FUNDS
1290 DOUBLELINE DYNAMIC ALLOCATION FUND
PORTFOLIO OF INVESTMENTS
October 31, 2019
Principal Amount | Value (Note 1) | |||||||
LONG-TERM DEBT SECURITIES: |
| |||||||
Asset-Backed Securities (3.4%) | ||||||||
CSMC Trust, | ||||||||
Series 2018-RPL8 A1 | ||||||||
4.125%, 7/25/58 (l)§ | $ | 258,740 | $ | 260,856 | ||||
Series 2019-JR1 A1 | ||||||||
4.095%, 9/27/66 (l)§ | 649,810 | 654,141 | ||||||
GSAA Home Equity Trust, | ||||||||
Series 2007-9 A2A | ||||||||
6.500%, 8/25/47 | 426,253 | 316,685 | ||||||
Pretium Mortgage Credit Partners I LLC, |
| |||||||
Series 2019-NPL2 A1 | ||||||||
3.844%, 12/25/58 (e)§ | 421,069 | 423,436 | ||||||
PRPM LLC, | ||||||||
Series 2019-2A A1 | ||||||||
3.967%, 4/25/24 (e)§ | 460,722 | 465,203 | ||||||
|
| |||||||
Total Asset-Backed Securities | 2,120,321 | |||||||
|
| |||||||
Collateralized Mortgage Obligations (10.3%) |
| |||||||
Banc of America Alternative Loan Trust, |
| |||||||
Series 2006-5 CB14 | ||||||||
6.000%, 6/25/46 (l) | 245,867 | 244,701 | ||||||
CHL Mortgage Pass-Through Trust, |
| |||||||
Series 2006-20 1A33 | ||||||||
6.000%, 2/25/37 | 654,037 | 525,076 | ||||||
Series 2006-OA5 2A1 | ||||||||
2.023%, 4/25/46 (l) | 793,030 | 705,417 | ||||||
FHLMC, | ||||||||
Series 3998 AZ | ||||||||
4.000%, 2/15/42 | 1,358,195 | 1,518,435 | ||||||
FNMA, | ||||||||
Series 2013-5 EZ | ||||||||
2.000%, 8/25/42 | 833,602 | 789,061 | ||||||
Series 2017-4 CH | ||||||||
3.000%, 6/25/42 | 153,713 | 155,544 | ||||||
Series 2018-21 | ||||||||
(Zero Coupon), 4/25/48 PO | 430,860 | 368,334 | ||||||
HarborView Mortgage Loan Trust, | ||||||||
Series 2005-8 1A2A | ||||||||
2.506%, 9/19/35 (l) | 614,952 | 554,811 | ||||||
JP Morgan Mortgage Trust, | ||||||||
Series 2018-7FRB A2 | ||||||||
2.768%, 4/25/46 (l)§ | 251,716 | 251,715 | ||||||
New Residential Mortgage Loan Trust, |
| |||||||
Series 2016-1A A1 | ||||||||
3.750%, 3/25/56 (l)§ | 405,984 | 420,678 | ||||||
RALI Trust, | ||||||||
Series 2006-QS4 A10 | ||||||||
6.000%, 4/25/36 | 575,542 | 557,155 | ||||||
Wells Fargo Mortgage-Backed Securities Trust, |
| |||||||
Series 2007-7 A1 | ||||||||
6.000%, 6/25/37 | 323,071 | 325,701 | ||||||
|
| |||||||
Total Collateralized Mortgage Obligations | 6,416,628 | |||||||
|
| |||||||
Corporate Bonds (16.9%) | ||||||||
Communication Services (2.4%) | ||||||||
Diversified Telecommunication Services (0.8%) |
| |||||||
AT&T, Inc. | ||||||||
5.250%, 3/1/37 | 75,000 | 88,057 | ||||||
CCO Holdings LLC | ||||||||
5.750%, 2/15/26§ | 30,000 | 31,642 | ||||||
5.000%, 2/1/28§ | 35,000 | 36,519 | ||||||
Cincinnati Bell, Inc. | ||||||||
7.000%, 7/15/24§ | 15,000 | 13,595 | ||||||
Frontier Communications Corp. | ||||||||
8.000%, 4/1/27§ | 45,000 | 47,137 | ||||||
Level 3 Financing, Inc. | ||||||||
5.375%, 1/15/24 | 50,000 | 50,938 | ||||||
4.625%, 9/15/27§ | 40,000 | 40,700 | ||||||
Sprint Capital Corp. | ||||||||
6.875%, 11/15/28 | 50,000 | 54,297 | ||||||
Telesat Canada | ||||||||
6.500%, 10/15/27§ | 25,000 | 26,039 | ||||||
Verizon Communications, Inc. | ||||||||
4.272%, 1/15/36 | 80,000 | 90,316 | ||||||
|
| |||||||
479,240 | ||||||||
|
| |||||||
Entertainment (0.2%) | ||||||||
Lions Gate Capital Holdings LLC | ||||||||
6.375%, 2/1/24§ | 45,000 | 43,313 | ||||||
Live Nation Entertainment, Inc. | ||||||||
4.750%, 10/15/27§ | 45,000 | 46,917 | ||||||
Netflix, Inc. | ||||||||
4.875%, 6/15/30§ | 50,000 | 50,550 | ||||||
|
| |||||||
140,780 | ||||||||
|
| |||||||
Media (1.1%) | ||||||||
Cengage Learning, Inc. | ||||||||
9.500%, 6/15/24§ | 35,000 | 31,281 | ||||||
Charter Communications Operating LLC |
| |||||||
4.908%, 7/23/25 | 110,000 | 121,187 | ||||||
Clear Channel Worldwide Holdings, Inc. |
| |||||||
5.125%, 8/15/27§ | 35,000 | 36,389 | ||||||
Comcast Corp. | ||||||||
3.700%, 4/15/24 | 85,000 | 91,153 | ||||||
CSC Holdings LLC | ||||||||
5.250%, 6/1/24 | 90,000 | 96,750 | ||||||
Diamond Sports Group LLC | ||||||||
5.375%, 8/15/26§ | 25,000 | 26,063 | ||||||
Gray Television, Inc. | ||||||||
7.000%, 5/15/27§ | 50,000 | 54,625 | ||||||
iHeartCommunications, Inc. | ||||||||
6.375%, 5/1/26 | 10,000 | 10,725 | ||||||
8.375%, 5/1/27 | 5,000 | 5,363 | ||||||
5.250%, 8/15/27§ | 25,000 | 25,761 | ||||||
Interpublic Group of Cos., Inc. (The) | ||||||||
4.650%, 10/1/28 | 50,000 | 55,892 | ||||||
5.400%, 10/1/48 | 55,000 | 66,701 | ||||||
Sirius XM Radio, Inc. | ||||||||
5.375%, 7/15/26§ | 55,000 | 57,881 | ||||||
5.500%, 7/1/29§ | 25,000 | 26,992 | ||||||
|
| |||||||
706,763 | ||||||||
|
| |||||||
Wireless Telecommunication Services (0.3%) |
| |||||||
Gogo Intermediate Holdings LLC | ||||||||
9.875%, 5/1/24§ | 35,000 | 36,748 | ||||||
Sprint Corp. | ||||||||
7.125%, 6/15/24 | 45,000 | 48,713 | ||||||
T-Mobile USA, Inc. | ||||||||
4.500%, 2/1/26 | 70,000 | 72,012 | ||||||
|
| |||||||
157,473 | ||||||||
|
| |||||||
Total Communication Services | 1,484,256 | |||||||
|
|
See Notes to Financial Statements.
32
1290 FUNDS
1290 DOUBLELINE DYNAMIC ALLOCATION FUND
PORTFOLIO OF INVESTMENTS (Continued)
October 31, 2019
Principal Amount | Value (Note 1) | |||||||
Consumer Discretionary (1.5%) | ||||||||
Auto Components (0.2%) | ||||||||
Icahn Enterprises LP | ||||||||
6.375%, 12/15/25 | $ | 25,000 | $ | 26,345 | ||||
6.250%, 5/15/26 | 45,000 | 47,700 | ||||||
Panther BF Aggregator 2 LP | ||||||||
6.250%, 5/15/26§ | 35,000 | 36,958 | ||||||
|
| |||||||
111,003 | ||||||||
|
| |||||||
Automobiles (0.1%) | ||||||||
Ford Motor Co. | ||||||||
7.450%, 7/16/31 | 25,000 | 29,185 | ||||||
General Motors Co. | ||||||||
(ICE LIBOR USD 3 Month + 0.80%), 3.009%, 8/7/20 (k) | 20,000 | 20,018 | ||||||
|
| |||||||
49,203 | ||||||||
|
| |||||||
Distributors (0.0%) | ||||||||
Performance Food Group, Inc. | ||||||||
5.500%, 10/15/27§ | 35,000 | 37,100 | ||||||
|
| |||||||
Hotels, Restaurants & Leisure (0.4%) |
| |||||||
1011778 BC ULC | ||||||||
5.000%, 10/15/25§ | 40,000 | 41,200 | ||||||
Caesars Resort Collection LLC | ||||||||
5.250%, 10/15/25§ | 35,000 | 35,744 | ||||||
Cedar Fair LP | ||||||||
5.250%, 7/15/29§ | 30,000 | 31,999 | ||||||
Eldorado Resorts, Inc. | ||||||||
6.000%, 4/1/25 | 30,000 | 31,537 | ||||||
Golden Nugget, Inc. | ||||||||
6.750%, 10/15/24§ | 60,000 | 61,731 | ||||||
Royal Caribbean Cruises Ltd. | ||||||||
3.700%, 3/15/28 | 50,000 | 51,564 | ||||||
Viking Cruises Ltd. | ||||||||
5.875%, 9/15/27§ | 40,000 | 42,550 | ||||||
|
| |||||||
296,325 | ||||||||
|
| |||||||
Household Durables (0.1%) | ||||||||
Tempur Sealy International, Inc. | ||||||||
5.500%, 6/15/26 | 49,000 | 51,021 | ||||||
|
| |||||||
Internet & Direct Marketing Retail (0.1%) |
| |||||||
Expedia Group, Inc. | ||||||||
3.250%, 2/15/30§ | 60,000 | 59,790 | ||||||
|
| |||||||
Leisure Products (0.1%) | ||||||||
Hasbro, Inc. | ||||||||
3.500%, 9/15/27 | 60,000 | 61,513 | ||||||
|
| |||||||
Multiline Retail (0.2%) | ||||||||
Dollar Tree, Inc. | ||||||||
4.000%, 5/15/25 | 110,000 | 118,337 | ||||||
|
| |||||||
Specialty Retail (0.3%) | ||||||||
Carvana Co. | ||||||||
8.875%, 10/1/23§ | 25,000 | 25,813 | ||||||
Home Depot, Inc. (The) | ||||||||
3.900%, 6/15/47 | 55,000 | 62,989 | ||||||
PetSmart, Inc. | ||||||||
7.125%, 3/15/23§ | 25,000 | 23,187 | ||||||
5.875%, 6/1/25§ | 17,000 | 16,726 | ||||||
Staples, Inc. | ||||||||
7.500%, 4/15/26§ | 45,000 | 46,753 | ||||||
|
| |||||||
175,468 | ||||||||
|
| |||||||
Total Consumer Discretionary | 959,760 | |||||||
|
| |||||||
Consumer Staples (1.3%) | ||||||||
Beverages (0.4%) | ||||||||
Anheuser-Busch Cos. LLC | ||||||||
4.900%, 2/1/46 | 50,000 | 59,810 | ||||||
Constellation Brands, Inc. | ||||||||
3.150%, 8/1/29 | 120,000 | 122,507 | ||||||
Cott Holdings, Inc. | ||||||||
5.500%, 4/1/25§ | 30,000 | 31,238 | ||||||
|
| |||||||
213,555 | ||||||||
|
| |||||||
Food & Staples Retailing (0.1%) | ||||||||
Albertsons Cos., Inc. | ||||||||
5.875%, 2/15/28§ | 50,000 | 53,444 | ||||||
|
| |||||||
Food Products (0.7%) | ||||||||
B&G Foods, Inc. | ||||||||
5.250%, 4/1/25 | 45,000 | 45,956 | ||||||
5.250%, 9/15/27 | 25,000 | 24,938 | ||||||
JBS USA Lux SA | ||||||||
5.875%, 7/15/24§ | 10,000 | 10,350 | ||||||
5.750%, 6/15/25§ | 5,000 | 5,209 | ||||||
6.750%, 2/15/28§ | 78,000 | 86,044 | ||||||
6.500%, 4/15/29§ | 20,000 | 22,325 | ||||||
Pilgrim’s Pride Corp. | ||||||||
5.750%, 3/15/25§ | 60,000 | 62,100 | ||||||
Post Holdings, Inc. | ||||||||
5.500%, 3/1/25§ | 55,000 | 57,549 | ||||||
5.500%, 12/15/29§ | 15,000 | 15,782 | ||||||
Smithfield Foods, Inc. | ||||||||
4.250%, 2/1/27§ | 115,000 | 119,034 | ||||||
|
| |||||||
449,287 | ||||||||
|
| |||||||
Tobacco (0.1%) | ||||||||
Altria Group, Inc. | ||||||||
5.950%, 2/14/49 | 55,000 | 64,750 | ||||||
|
| |||||||
Total Consumer Staples | 781,036 | |||||||
|
| |||||||
Energy (1.6%) | ||||||||
Energy Equipment & Services (0.3%) |
| |||||||
Tervita Corp. | ||||||||
7.625%, 12/1/21§ | 45,000 | 44,887 | ||||||
Transocean Poseidon Ltd. | ||||||||
6.875%, 2/1/27§ | 30,000 | 30,188 | ||||||
Transocean, Inc. | ||||||||
7.250%, 11/1/25§ | 25,000 | 22,063 | ||||||
USA Compression Partners LP | ||||||||
6.875%, 9/1/27§ | 65,000 | 65,325 | ||||||
|
| |||||||
162,463 | ||||||||
|
| |||||||
Oil, Gas & Consumable Fuels (1.3%) |
| |||||||
Antero Midstream Partners LP | ||||||||
5.750%, 3/1/27§ | 16,000 | 11,900 | ||||||
Cenovus Energy, Inc. | ||||||||
5.400%, 6/15/47 | 55,000 | 61,601 | ||||||
Cheniere Energy Partners LP | ||||||||
5.250%, 10/1/25 | 60,000 | 62,025 | ||||||
5.625%, 10/1/26 | 25,000 | 26,406 | ||||||
Energy Transfer Operating LP | ||||||||
4.750%, 1/15/26 | 45,000 | 48,767 | ||||||
4.200%, 4/15/27 | 5,000 | 5,263 | ||||||
Gulfport Energy Corp. | ||||||||
6.375%, 5/15/25 | 40,000 | 24,200 |
See Notes to Financial Statements.
33
1290 FUNDS
1290 DOUBLELINE DYNAMIC ALLOCATION FUND
PORTFOLIO OF INVESTMENTS (Continued)
October 31, 2019
Principal Amount | Value (Note 1) | |||||||
Hess Infrastructure Partners LP | ||||||||
5.625%, 2/15/26§ | $ | 75,000 | $ | 78,187 | ||||
Hilcorp Energy I LP | ||||||||
6.250%, 11/1/28§ | 25,000 | 22,187 | ||||||
Indigo Natural Resources LLC | ||||||||
6.875%, 2/15/26§ | 15,000 | 13,725 | ||||||
Kinder Morgan Energy Partners LP | ||||||||
6.950%, 1/15/38 | 50,000 | 64,404 | ||||||
Marathon Petroleum Corp. | ||||||||
5.125%, 12/15/26 | 55,000 | 62,829 | ||||||
NGL Energy Partners LP | ||||||||
7.500%, 4/15/26§ | 15,000 | 14,272 | ||||||
Oasis Petroleum, Inc. | ||||||||
6.875%, 3/15/22 | 45,000 | 39,375 | ||||||
Occidental Petroleum Corp. | ||||||||
2.900%, 8/15/24 | 55,000 | 55,533 | ||||||
Parkland Fuel Corp. | ||||||||
5.875%, 7/15/27§ | 30,000 | 31,762 | ||||||
Parsley Energy LLC | ||||||||
5.625%, 10/15/27§ | 45,000 | 46,519 | ||||||
Peabody Energy Corp. | ||||||||
6.000%, 3/31/22§ | 30,000 | 27,750 | ||||||
QEP Resources, Inc. | ||||||||
5.625%, 3/1/26 | 35,000 | 31,500 | ||||||
Sabine Pass Liquefaction LLC | ||||||||
5.000%, 3/15/27 | 55,000 | 60,340 | ||||||
Sunoco LP | ||||||||
5.500%, 2/15/26 | 25,000 | 25,815 | ||||||
6.000%, 4/15/27 | 15,000 | 15,844 | ||||||
|
| |||||||
830,204 | ||||||||
|
| |||||||
Total Energy | 992,667 | |||||||
|
| |||||||
Financials (4.0%) | ||||||||
Banks (1.1%) |
| |||||||
Bank of America Corp. | ||||||||
(ICE LIBOR USD 3 Month + 1.21%), 3.974%, 2/7/30 (k) | 55,000 | 59,968 | ||||||
Bank of Montreal | ||||||||
(USD Swap Semi 5 Year + 1.43%), 3.803%, 12/15/32 (k) | 65,000 | 67,697 | ||||||
Bank of Nova Scotia (The) | ||||||||
3.400%, 2/11/24 | 120,000 | 125,662 | ||||||
Citigroup, Inc. | ||||||||
(ICE LIBOR USD 3 Month + 1.10%), 3.224%, 5/17/24 (k) | 115,000 | 116,203 | ||||||
Commonwealth Bank of Australia | ||||||||
3.900%, 7/12/47§ | 60,000 | 67,059 | ||||||
Mitsubishi UFJ Financial Group, Inc. | ||||||||
(ICE LIBOR USD 3 Month + 0.74%), 2.878%, 3/2/23 (k) | 125,000 | 124,832 | ||||||
Santander Holdings USA, Inc. | ||||||||
3.400%, 1/18/23 | 120,000 | 122,835 | ||||||
Wells Fargo & Co. | ||||||||
(ICE LIBOR USD 3 Month + 1.17%), 2.879%, 10/30/30 (k) | 30,000 | 30,061 | ||||||
|
| |||||||
714,317 | ||||||||
|
| |||||||
Capital Markets (0.4%) |
| |||||||
Goldman Sachs Group, Inc. (The) |
| |||||||
3.625%, 2/20/24 | 110,000 | 115,693 | ||||||
Morgan Stanley | ||||||||
(ICE LIBOR USD 3 Month + 0.85%), 3.737%, 4/24/24 (k) | 115,000 | 120,240 | ||||||
|
| |||||||
235,933 | ||||||||
|
| |||||||
Consumer Finance (1.5%) |
| |||||||
American Express Co. | ||||||||
3.400%, 2/22/24 | 125,000 | 130,962 | ||||||
Avolon Holdings Funding Ltd. | ||||||||
5.250%, 5/15/24§ | 30,000 | 32,904 | ||||||
3.950%, 7/1/24§ | 115,000 | 119,592 | ||||||
Capital One Financial Corp. | ||||||||
(ICE LIBOR USD 3 Month + 0.72%), 2.656%, 1/30/23 (k) | 180,000 | 179,839 | ||||||
Discover Financial Services | ||||||||
4.100%, 2/9/27 | 85,000 | 91,093 | ||||||
General Motors Financial Co., Inc. | ||||||||
(ICE LIBOR USD 3 Month + 0.99%), 3.033%, 1/5/23 (k) | 140,000 | 137,858 | ||||||
3.950%, 4/13/24 | 15,000 | 15,527 | ||||||
John Deere Capital Corp. | ||||||||
3.450%, 1/10/24 | 75,000 | 79,312 | ||||||
2.600%, 3/7/24 | 65,000 | 66,557 | ||||||
Springleaf Finance Corp. | ||||||||
6.625%, 1/15/28 | 30,000 | 33,225 | ||||||
Synchrony Financial | ||||||||
3.950%, 12/1/27 | 60,000 | 62,178 | ||||||
|
| |||||||
949,047 | ||||||||
|
| |||||||
Diversified Financial Services (0.3%) |
| |||||||
Allied Universal Holdco LLC | ||||||||
6.625%, 7/15/26§ | 40,000 | 42,600 | ||||||
MPH Acquisition Holdings LLC | ||||||||
7.125%, 6/1/24§ | 45,000 | 41,571 | ||||||
Refinitiv US Holdings, Inc. | ||||||||
6.250%, 5/15/26§ | 65,000 | 70,606 | ||||||
Verscend Escrow Corp. | ||||||||
9.750%, 8/15/26§ | 47,000 | 49,938 | ||||||
|
| |||||||
204,715 | ||||||||
|
| |||||||
Insurance (0.6%) |
| |||||||
Alliant Holdings Intermediate LLC | ||||||||
6.750%, 10/15/27§ | 20,000 | 20,802 | ||||||
Athene Global Funding | ||||||||
3.000%, 7/1/22§ | 120,000 | 121,888 | ||||||
Liberty Mutual Group, Inc. | ||||||||
3.951%, 10/15/50§ | 60,000 | 61,175 | ||||||
NFP Corp. | ||||||||
6.875%, 7/15/25§ | 45,000 | 44,156 | ||||||
Prudential Financial, Inc. | ||||||||
3.905%, 12/7/47 | 55,000 | 59,456 | ||||||
Willis North America, Inc. | ||||||||
4.500%, 9/15/28 | 55,000 | 61,138 | ||||||
|
| |||||||
368,615 | ||||||||
|
| |||||||
Thrifts & Mortgage Finance (0.1%) |
| |||||||
Nationstar Mortgage Holdings, Inc. | ||||||||
8.125%, 7/15/23§ | 35,000 | 37,056 | ||||||
|
| |||||||
Total Financials | 2,509,683 | |||||||
|
|
See Notes to Financial Statements.
34
1290 FUNDS
1290 DOUBLELINE DYNAMIC ALLOCATION FUND
PORTFOLIO OF INVESTMENTS (Continued)
October 31, 2019
Principal Amount | Value (Note 1) | |||||||
Health Care (1.3%) |
| |||||||
Biotechnology (0.1%) |
| |||||||
AbbVie, Inc. | ||||||||
4.700%, 5/14/45 | $ | 60,000 | $ | 64,259 | ||||
|
| |||||||
Health Care Providers & Services (0.9%) |
| |||||||
Anthem, Inc. | ||||||||
2.375%, 1/15/25 | 30,000 | 30,004 | ||||||
Centene Corp. | ||||||||
4.750%, 1/15/25 | 39,000 | 40,297 | ||||||
5.375%, 6/1/26§ | 5,000 | 5,280 | ||||||
Cigna Corp. | ||||||||
(ICE LIBOR USD 3 Month + 0.89%), 2.891%, 7/15/23 (k) | 85,000 | 85,312 | ||||||
4.900%, 12/15/48 | 85,000 | 98,801 | ||||||
CVS Health Corp. | ||||||||
5.050%, 3/25/48 | 80,000 | 92,125 | ||||||
HCA, Inc. | ||||||||
5.375%, 9/1/26 | 35,000 | 38,128 | ||||||
4.125%, 6/15/29 | 60,000 | 63,385 | ||||||
Select Medical Corp. | ||||||||
6.250%, 8/15/26§ | 40,000 | 42,600 | ||||||
Tenet Healthcare Corp. | ||||||||
5.125%, 11/1/27§ | 45,000 | 46,913 | ||||||
WellCare Health Plans, Inc. | ||||||||
5.375%, 8/15/26§ | 40,000 | 42,600 | ||||||
West Street Merger Sub, Inc. | ||||||||
6.375%, 9/1/25§ | 20,000 | 18,950 | ||||||
|
| |||||||
604,395 | ||||||||
|
| |||||||
Life Sciences Tools & Services (0.1%) |
| |||||||
Avantor, Inc. | ||||||||
9.000%, 10/1/25§ | 45,000 | 50,218 | ||||||
|
| |||||||
Pharmaceuticals (0.2%) |
| |||||||
Bausch Health Cos., Inc. | ||||||||
7.000%, 3/15/24§ | 20,000 | 20,898 | ||||||
5.750%, 8/15/27§ | 25,000 | 27,117 | ||||||
7.000%, 1/15/28§ | 30,000 | 32,325 | ||||||
7.250%, 5/30/29§ | 30,000 | 33,000 | ||||||
|
| |||||||
113,340 | ||||||||
|
| |||||||
Total Health Care | 832,212 | |||||||
|
| |||||||
Industrials (2.0%) | ||||||||
Aerospace & Defense (0.4%) |
| |||||||
BBA US Holdings, Inc. | ||||||||
4.000%, 3/1/28§ | 5,000 | 4,963 | ||||||
Bombardier, Inc. | ||||||||
6.000%, 10/15/22§ | 40,000 | 38,950 | ||||||
Lockheed Martin Corp. | ||||||||
4.700%, 5/15/46 | 100,000 | 127,059 | ||||||
TransDigm, Inc. | ||||||||
6.250%, 3/15/26§ | 55,000 | 58,781 | ||||||
6.375%, 6/15/26 | 15,000 | 15,591 | ||||||
5.500%, 11/15/27§ | 30,000 | 29,964 | ||||||
|
| |||||||
275,308 | ||||||||
|
| |||||||
Airlines (0.2%) |
| |||||||
Delta Air Lines, Inc. | ||||||||
3.625%, 3/15/22 | 115,000 | 117,588 | ||||||
|
| |||||||
Building Products (0.2%) |
| |||||||
Builders FirstSource, Inc. | ||||||||
5.625%, 9/1/24§ | 39,000 | 40,560 | ||||||
Owens Corning | ||||||||
4.400%, 1/30/48 | 70,000 | 64,434 | ||||||
|
| |||||||
104,994 | ||||||||
|
| |||||||
Commercial Services & Supplies (0.3%) |
| |||||||
Aramark Services, Inc. | ||||||||
5.000%, 4/1/25§ | 30,000 | 31,162 | ||||||
Clean Harbors, Inc. | ||||||||
4.875%, 7/15/27§ | 30,000 | 31,198 | ||||||
Garda World Security Corp. | ||||||||
8.750%, 5/15/25§ | 35,000 | 35,088 | ||||||
GFL Environmental, Inc. | ||||||||
8.500%, 5/1/27§ | 20,000 | 21,950 | ||||||
Waste Management, Inc. | ||||||||
4.000%, 7/15/39 | 55,000 | 62,235 | ||||||
|
| |||||||
181,633 | ||||||||
|
| |||||||
Construction & Engineering (0.1%) |
| |||||||
AECOM | ||||||||
5.125%, 3/15/27 | 45,000 | 47,405 | ||||||
|
| |||||||
Industrial Conglomerates (0.1%) |
| |||||||
General Electric Co. | ||||||||
5.875%, 1/14/38 | 55,000 | 65,897 | ||||||
|
| |||||||
Machinery (0.0%) |
| |||||||
Colfax Corp. | ||||||||
6.000%, 2/15/24§ | 25,000 | 26,534 | ||||||
6.375%, 2/15/26§ | 10,000 | 10,825 | ||||||
|
| |||||||
37,359 | ||||||||
|
| |||||||
Professional Services (0.1%) |
| |||||||
Dun & Bradstreet Corp. (The) | ||||||||
6.875%, 8/15/26§ | 35,000 | 38,160 | ||||||
|
| |||||||
Road & Rail (0.2%) |
| |||||||
CSX Corp. | ||||||||
3.800%, 11/1/46 | 55,000 | 57,649 | ||||||
Penske Truck Leasing Co. LP | ||||||||
4.200%, 4/1/27§ | 55,000 | 58,666 | ||||||
Uber Technologies, Inc. | ||||||||
7.500%, 9/15/27§ | 25,000 | 24,625 | ||||||
|
| |||||||
140,940 | ||||||||
|
| |||||||
Trading Companies & Distributors (0.4%) |
| |||||||
Air Lease Corp. | ||||||||
3.250%, 3/1/25 | 115,000 | 118,184 | ||||||
Beacon Roofing Supply, Inc. | ||||||||
4.875%, 11/1/25§ | 60,000 | 58,950 | ||||||
United Rentals North America, Inc. | ||||||||
6.500%, 12/15/26 | 40,000 | 43,300 | ||||||
3.875%, 11/15/27 | 20,000 | 20,155 | ||||||
5.250%, 1/15/30 | 25,000 | 26,250 | ||||||
|
| |||||||
266,839 | ||||||||
|
| |||||||
Total Industrials | 1,276,123 | |||||||
|
| |||||||
Information Technology (0.6%) | ||||||||
Communications Equipment (0.1%) |
| |||||||
CommScope, Inc. | ||||||||
5.500%, 3/1/24§ | 5,000 | 5,062 | ||||||
6.000%, 3/1/26§ | 25,000 | 25,633 | ||||||
|
| |||||||
30,695 | ||||||||
|
|
See Notes to Financial Statements.
35
1290 FUNDS
1290 DOUBLELINE DYNAMIC ALLOCATION FUND
PORTFOLIO OF INVESTMENTS (Continued)
October 31, 2019
Principal Amount | Value (Note 1) | |||||||
IT Services (0.1%) |
| |||||||
GTT Communications, Inc. | ||||||||
7.875%, 12/31/24§ | $ | 20,000 | $ | 11,700 | ||||
Tempo Acquisition LLC | ||||||||
6.750%, 6/1/25§ | 55,000 | 56,650 | ||||||
|
| |||||||
68,350 | ||||||||
|
| |||||||
Semiconductors & Semiconductor Equipment (0.1%) |
| |||||||
NXP BV | ||||||||
3.875%, 6/18/26§ | 60,000 | 62,979 | ||||||
|
| |||||||
Software (0.3%) |
| |||||||
CDK Global, Inc. | ||||||||
5.250%, 5/15/29§ | 15,000 | 15,919 | ||||||
Genesys Telecommunications Laboratories, Inc. |
| |||||||
10.000%, 11/30/24§ | 40,000 | 43,200 | ||||||
Informatica LLC | ||||||||
7.125%, 7/15/23§ | 70,000 | 71,225 | ||||||
SS&C Technologies, Inc. | ||||||||
5.500%, 9/30/27§ | 50,000 | 53,235 | ||||||
|
| |||||||
183,579 | ||||||||
|
| |||||||
Total Information Technology | 345,603 | |||||||
|
| |||||||
Materials (0.6%) | ||||||||
Chemicals (0.3%) |
| |||||||
Mosaic Co. (The) | ||||||||
4.050%, 11/15/27 | 120,000 | 126,120 | ||||||
Nutrien Ltd. | ||||||||
4.200%, 4/1/29 | 60,000 | 66,444 | ||||||
|
| |||||||
192,564 | ||||||||
|
| |||||||
Containers & Packaging (0.2%) |
| |||||||
Berry Global, Inc. | ||||||||
5.625%, 7/15/27§ | 45,000 | 47,531 | ||||||
Flex Acquisition Co., Inc. | ||||||||
6.875%, 1/15/25§ | 25,000 | 23,563 | ||||||
WRKCo, Inc. | ||||||||
3.750%, 3/15/25 | 50,000 | 52,673 | ||||||
|
| |||||||
123,767 | ||||||||
|
| |||||||
Metals & Mining (0.1%) |
| |||||||
SunCoke Energy Partners LP | ||||||||
7.500%, 6/15/25§ | 40,000 | 34,000 | ||||||
|
| |||||||
Total Materials | 350,331 | |||||||
|
| |||||||
Real Estate (1.1%) |
| |||||||
Equity Real Estate Investment Trusts (REITs) (1.1%) |
| |||||||
Alexandria Real Estate Equities, Inc. (REIT) |
| |||||||
4.000%, 1/15/24 | 110,000 | 117,485 | ||||||
4.850%, 4/15/49 | 25,000 | 31,001 | ||||||
American Tower Corp. (REIT) | ||||||||
3.950%, 3/15/29 | 55,000 | 59,104 | ||||||
Crown Castle International Corp. (REIT) |
| |||||||
3.650%, 9/1/27 | 55,000 | 58,088 | ||||||
3.800%, 2/15/28 | 50,000 | 53,225 | ||||||
ESH Hospitality, Inc. (REIT) |
| |||||||
5.250%, 5/1/25§ | 50,000 | 51,322 | ||||||
4.625%, 10/1/27§ | 20,000 | 20,027 | ||||||
Iron Mountain, Inc. (REIT) | ||||||||
4.875%, 9/15/29§ | 35,000 | 35,689 | ||||||
MPT Operating Partnership LP (REIT) |
| |||||||
5.250%, 8/1/26 | 45,000 | 47,250 | ||||||
4.625%, 8/1/29 | 25,000 | 26,079 | ||||||
Public Storage (REIT) | ||||||||
3.385%, 5/1/29 | 60,000 | 64,566 | ||||||
Simon Property Group LP (REIT) | ||||||||
2.450%, 9/13/29 | 30,000 | 29,713 | ||||||
Welltower, Inc. (REIT) | ||||||||
3.950%, 9/1/23 | 110,000 | 116,821 | ||||||
|
| |||||||
710,370 | ||||||||
|
| |||||||
Total Real Estate | 710,370 | |||||||
|
| |||||||
Utilities (0.5%) | ||||||||
Electric Utilities (0.3%) | ||||||||
Georgia Power Co. | ||||||||
Series A | 60,000 | 59,992 | ||||||
Monongahela Power Co. | ||||||||
5.400%, 12/15/43§ | 70,000 | 93,022 | ||||||
Southern California Edison Co. | ||||||||
4.000%, 4/1/47 | 30,000 | 30,953 | ||||||
|
| |||||||
183,967 | ||||||||
|
| |||||||
Gas Utilities (0.1%) | ||||||||
Brooklyn Union Gas Co. (The) | ||||||||
4.487%, 3/4/49§ | 60,000 | 72,397 | ||||||
|
| |||||||
Independent Power and Renewable Electricity Producers (0.1%) |
| |||||||
Calpine Corp. | ||||||||
5.250%, 6/1/26§ | 45,000 | 46,800 | ||||||
|
| |||||||
Total Utilities | 303,164 | |||||||
|
| |||||||
Total Corporate Bonds | 10,545,205 | |||||||
|
| |||||||
Mortgage-Backed Securities (3.7%) | ||||||||
FHLMC | ||||||||
3.000%, 3/1/46 | 666,288 | 684,045 | ||||||
3.500%, 5/1/46 | 660,177 | 677,695 | ||||||
4.000%, 10/1/48 | 80,872 | 84,208 | ||||||
FNMA UMBS | ||||||||
3.500%, 7/1/42 | 301,000 | 316,324 | ||||||
3.500%, 6/1/48 | 534,939 | 551,641 | ||||||
|
| |||||||
Total Mortgage-Backed Securities | 2,313,913 | |||||||
|
| |||||||
U.S. Treasury Obligations (11.0%) | ||||||||
U.S. Treasury Bonds | ||||||||
3.125%, 2/15/43 | 220,000 | 259,256 | ||||||
3.625%, 8/15/43 | 180,000 | 229,388 | ||||||
3.750%, 11/15/43 | 180,000 | 234,049 | ||||||
2.750%, 11/15/47 | 230,000 | 257,591 | ||||||
U.S. Treasury Inflation Linked Bonds |
| |||||||
1.000%, 2/15/46 TIPS | 335,662 | 372,105 | ||||||
U.S. Treasury Inflation Linked Notes |
| |||||||
0.875%, 1/15/29 TIPS | 172,730 | 183,675 | ||||||
U.S. Treasury Notes |
| |||||||
2.750%, 8/15/21 | 210,000 | 214,315 | ||||||
2.875%, 10/15/21 | 490,000 | 502,322 | ||||||
1.750%, 11/30/21 | 500,000 | 502,051 | ||||||
2.500%, 1/15/22 | 190,000 | 193,911 | ||||||
2.625%, 2/28/23 | 410,000 | 424,598 | ||||||
2.500%, 3/31/23 | 340,000 | 351,010 |
See Notes to Financial Statements.
36
1290 FUNDS
1290 DOUBLELINE DYNAMIC ALLOCATION FUND
PORTFOLIO OF INVESTMENTS (Continued)
October 31, 2019
Principal Amount | Value (Note 1) | |||||||
2.750%, 4/30/23 | $ | 330,000 | $ | 343,716 | ||||
1.625%, 5/31/23 | 270,000 | 270,944 | ||||||
1.875%, 8/31/24 | 140,000 | 142,190 | ||||||
2.125%, 9/30/24 | 350,000 | 359,618 | ||||||
2.250%, 10/31/24 | 350,000 | 361,833 | ||||||
2.750%, 2/28/25 | 180,000 | 190,958 | ||||||
3.000%, 9/30/25 | 250,000 | 269,893 | ||||||
2.375%, 5/15/27 | 410,000 | 432,286 | ||||||
2.250%, 8/15/27 | 350,000 | 366,078 | ||||||
2.250%, 11/15/27 | 350,000 | 366,269 | ||||||
|
| |||||||
Total U.S. Treasury Obligations | 6,828,056 | |||||||
|
| |||||||
Total Long-Term Debt Securities (45.3%) | 28,224,123 | |||||||
|
| |||||||
Number of Shares | Value (Note 1) | |||||||
COMMON STOCKS: | ||||||||
Communication Services (1.8%) | ||||||||
Interactive Media & Services (1.8%) |
| |||||||
Alphabet, Inc., Class A* | 507 | 638,212 | ||||||
Facebook, Inc., Class A* | 2,740 | 525,121 | ||||||
|
| |||||||
1,163,333 | ||||||||
|
| |||||||
Total Communication Services | 1,163,333 | |||||||
|
| |||||||
Consumer Discretionary (3.8%) | ||||||||
Hotels, Restaurants & Leisure (0.5%) |
| |||||||
Domino’s Pizza, Inc. | 1,061 | 288,189 | ||||||
|
| |||||||
Internet & Direct Marketing Retail (1.7%) |
| |||||||
Amazon.com, Inc.* | 445 | 790,614 | ||||||
Booking Holdings, Inc.* | 139 | 284,779 | ||||||
|
| |||||||
1,075,393 | ||||||||
|
| |||||||
Multiline Retail (1.1%) |
| |||||||
Dollar General Corp. | 2,317 | 371,508 | ||||||
Target Corp. | 2,819 | 301,379 | ||||||
|
| |||||||
672,887 | ||||||||
|
| |||||||
Specialty Retail (0.5%) |
| |||||||
O’Reilly Automotive, Inc.* | 713 | 310,518 | ||||||
|
| |||||||
Total Consumer Discretionary | 2,346,987 | |||||||
|
| |||||||
Consumer Staples (1.4%) | ||||||||
Beverages (0.3%) |
| |||||||
Constellation Brands, Inc., Class A | 782 | 148,838 | ||||||
|
| |||||||
Food & Staples Retailing (0.3%) |
| |||||||
Sysco Corp. | 2,291 | 182,982 | ||||||
|
| |||||||
Tobacco (0.8%) |
| |||||||
Philip Morris International, Inc. | 6,393 | 520,646 | ||||||
|
| |||||||
Total Consumer Staples | 852,466 | |||||||
|
| |||||||
Energy (1.4%) | ||||||||
Energy Equipment & Services (0.4%) |
| |||||||
Halliburton Co. | 7,384 | 142,142 | ||||||
Patterson-UTI Energy, Inc. | 9,301 | 77,385 | ||||||
|
| |||||||
219,527 | ||||||||
|
| |||||||
Oil, Gas & Consumable Fuels (1.0%) |
| |||||||
Continental Resources, Inc.* | 4,938 | 145,523 | ||||||
Devon Energy Corp. | 8,631 | 175,037 | ||||||
Pioneer Natural Resources Co. | 2,633 | 323,911 | ||||||
|
| |||||||
644,471 | ||||||||
|
| |||||||
Total Energy | 863,998 | |||||||
|
| |||||||
Financials (3.0%) | ||||||||
Banks (1.4%) |
| |||||||
Citigroup, Inc. | 6,527 | 469,030 | ||||||
Wells Fargo & Co. | 7,719 | 398,532 | ||||||
|
| |||||||
867,562 | ||||||||
|
| |||||||
Capital Markets (0.9%) |
| |||||||
Charles Schwab Corp. (The) | 6,171 | 251,221 | ||||||
Intercontinental Exchange, Inc. | 3,093 | 291,732 | ||||||
|
| |||||||
542,953 | ||||||||
|
| |||||||
Insurance (0.7%) |
| |||||||
Aflac, Inc. | 5,355 | 284,672 | ||||||
Willis Towers Watson plc | 947 | 176,994 | ||||||
|
| |||||||
461,666 | ||||||||
|
| |||||||
Total Financials | 1,872,181 | |||||||
|
| |||||||
Health Care (4.5%) | ||||||||
Biotechnology (0.2%) |
| |||||||
BioMarin Pharmaceutical, Inc.* | 1,664 | 121,821 | ||||||
|
| |||||||
Health Care Equipment & Supplies (1.4%) |
| |||||||
Abbott Laboratories | 4,089 | 341,881 | ||||||
Alcon, Inc.* | 2,481 | 147,049 | ||||||
Boston Scientific Corp.* | 8,452 | 352,449 | ||||||
|
| |||||||
841,379 | ||||||||
|
| |||||||
Health Care Providers & Services (1.2%) |
| |||||||
Anthem, Inc. | 1,156 | 311,056 | ||||||
UnitedHealth Group, Inc. | 1,845 | 466,232 | ||||||
|
| |||||||
777,288 | ||||||||
|
| |||||||
Pharmaceuticals (1.7%) |
| |||||||
AstraZeneca plc (ADR) | 9,060 | 444,212 | ||||||
Novartis AG (ADR) | 3,663 | 320,293 | ||||||
Zoetis, Inc. | 2,259 | 288,971 | ||||||
|
| |||||||
1,053,476 | ||||||||
|
| |||||||
Total Health Care | 2,793,964 | |||||||
|
| |||||||
Industrials (2.5%) | ||||||||
Aerospace & Defense (1.6%) |
| |||||||
Boeing Co. (The) | 1,277 | 434,065 | ||||||
Lockheed Martin Corp. | 755 | 284,393 | ||||||
Northrop Grumman Corp. | 806 | 284,099 | ||||||
|
| |||||||
1,002,557 | ||||||||
|
| |||||||
Air Freight & Logistics (0.3%) |
| |||||||
FedEx Corp. | 1,303 | 198,916 | ||||||
|
| |||||||
Industrial Conglomerates (0.6%) |
| |||||||
Honeywell International, Inc. | 2,005 | 346,324 | ||||||
|
| |||||||
Total Industrials | 1,547,797 | |||||||
|
|
See Notes to Financial Statements.
37
1290 FUNDS
1290 DOUBLELINE DYNAMIC ALLOCATION FUND
PORTFOLIO OF INVESTMENTS (Continued)
October 31, 2019
Number of Shares | Value (Note 1) | |||||||
Information Technology (6.4%) | ||||||||
Electronic Equipment, Instruments & Components (0.4%) |
| |||||||
Corning, Inc. | 8,431 | $ | 249,811 | |||||
|
| |||||||
IT Services (1.8%) |
| |||||||
Cognizant Technology Solutions Corp., Class A | 4,170 | 254,120 | ||||||
PayPal Holdings, Inc.* | 3,217 | 334,890 | ||||||
Visa, Inc., Class A | 2,869 | 513,149 | ||||||
|
| |||||||
1,102,159 | ||||||||
|
| |||||||
Semiconductors & Semiconductor Equipment (0.9%) |
| |||||||
Analog Devices, Inc. | 2,718 | 289,820 | ||||||
Lam Research Corp. | 1,154 | 312,780 | ||||||
|
| |||||||
602,600 | ||||||||
|
| |||||||
Software (2.7%) |
| |||||||
Adobe, Inc.* | 1,364 | 379,096 | ||||||
Microsoft Corp. | 7,727 | 1,107,819 | ||||||
Splunk, Inc.* | 1,506 | 180,660 | ||||||
|
| |||||||
1,667,575 | ||||||||
|
| |||||||
Technology Hardware, Storage & Peripherals (0.6%) |
| |||||||
Apple, Inc. | 1,582 | 393,538 | ||||||
|
| |||||||
Total Information Technology | 4,015,683 | |||||||
|
| |||||||
Real Estate (0.7%) | ||||||||
Equity Real Estate Investment Trusts (REITs) (0.7%) |
| |||||||
American Tower Corp. (REIT) | 2,031 | 442,921 | ||||||
|
| |||||||
Total Real Estate | 442,921 | |||||||
|
| |||||||
Utilities (0.6%) | ||||||||
Electric Utilities (0.6%) |
| |||||||
NextEra Energy, Inc. | 1,536 | 366,090 | ||||||
|
| |||||||
Total Utilities | 366,090 | |||||||
|
| |||||||
Total Common Stocks (26.1%) | 16,265,420 | |||||||
|
| |||||||
INVESTMENT COMPANIES: | ||||||||
Fixed Income (6.6%) | ||||||||
DoubleLine Floating Rate Fund, Class I‡ | 177,241 | 1,682,018 | ||||||
DoubleLine Global Bond Fund, Class I‡ | 228,313 | 2,383,588 | ||||||
|
| |||||||
Total Investment Companies (6.6%) | 4,065,606 | |||||||
|
| |||||||
SHORT-TERM INVESTMENTS: | ||||||||
Investment Company (12.7%) | ||||||||
JPMorgan Prime Money Market Fund, IM Shares | 7,872,512 | 7,875,661 | ||||||
|
| |||||||
Principal Amount | Value (Note 1) | |||||||
U.S. Treasury Obligations (3.7%) | ||||||||
U.S. Treasury Bills | ||||||||
1.52%, 2/6/20 (p) | $ | 2,000,000 | 1,991,742 | |||||
1.53%, 9/10/20 (p) | 340,000 | 335,523 | ||||||
|
| |||||||
Total U.S. Treasury Obligations | 2,327,265 | |||||||
|
| |||||||
Total Short-Term Investments (16.4%) | 10,202,926 | |||||||
|
| |||||||
Total Investments in Securities (94.4%) | 58,758,075 | |||||||
Other Assets Less Liabilities (5.6%) | 3,488,935 | |||||||
|
| |||||||
Net Assets (100%) | $ | 62,247,010 | ||||||
|
|
* | 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 October 31, 2019, the market value of these securities amounted to $6,749,150 or 10.8% of net assets. Securities denoted with “§” but without “b” have been determined to be liquid under the guidelines established by the Board of Trustees. To the extent any securities might provide a right to demand registration, such rights have not been relied upon when determining liquidity. |
(e) | Step Bond – Coupon rate increases or decreases in increments to maturity. Rate disclosed is as of October 31, 2019. Maturity date disclosed is the ultimate maturity date. |
(k) | Variable or floating rate security, linked to the referenced benchmark. The interest rate shown was the current rate as of October 31, 2019. |
(l) | Variable or floating rate security, the interest rate of which adjusts periodically based on changes in current interest rates and prepayments on the underlying pool of assets. The interest rate shown was the current rate as of October 31, 2019. |
(p) | Yield to maturity. |
Glossary:
ADR | — American Depositary Receipt |
CAPE | — Cyclically Adjusted Price Earnings |
FHLMC | — Federal Home Loan Mortgage Corp. |
FNMA | — Federal National Mortgage Association |
ICE | — Intercontinental Exchange |
LIBOR | — London Interbank Offered Rate |
OTC | — Over-the-counter |
PO | — Principal Only |
TIPS | — Treasury Inflation Protected Security |
UMBS | — Uniform Mortgage-Backed Securities |
USD | — United States Dollar |
See Notes to Financial Statements.
38
1290 FUNDS
1290 DOUBLELINE DYNAMIC ALLOCATION FUND
PORTFOLIO OF INVESTMENTS (Continued)
October 31, 2019
Investments in companies which were affiliates for the year ended October 31, 2019, were as follows:
Security Description | Shares at October 31, 2019 | Market Value October 31, 2018 ($) | Purchases at Cost ($) | Proceeds from Sales ($) | Net Realized Gain (Loss) ($) | Change in Unrealized Appreciation/ (Depreciation) ($) | Market Value October 31, 2019 ($) | Dividend/ Interest Income ($) | Capital Gain Distributions ($) | |||||||||||||||||||||||||||
INVESTMENT COMPANIES: | ||||||||||||||||||||||||||||||||||||
Fixed Income | ||||||||||||||||||||||||||||||||||||
DoubleLine Floating Rate Fund, Class I | 177,241 | 2,769,359 | — | (1,000,000 | ) | (7,254 | ) | (80,087 | ) | 1,682,018 | 140,787 | — | ||||||||||||||||||||||||
DoubleLine Global Bond Fund, Class I | 228,313 | 1,633,717 | 650,000 | — | — | 99,871 | 2,383,588 | 19,875 | — | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
Total | 4,403,076 | 650,000 | (1,000,000 | ) | (7,254 | ) | 19,784 | 4,065,606 | 160,662 | — | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTC Total return swap contracts outstanding as of October 31, 2019 (Note 1):
Reference Entity | Payments Made | Payments Received | Frequency of | Counterparty | Maturity Date | Notional Amount | Value and Unrealized Appreciation (Depreciation) ($) | |||||||||||||
Shiller Barclays CAPE US Sector II ER USD Index | 0.40% and decrease in total return of index | Increase in total return of index | At maturity | Barclays Bank plc | 6/22/2020 | USD | 9,000,000 | 520,756 | ||||||||||||
|
| |||||||||||||||||||
520,756 | ||||||||||||||||||||
|
| |||||||||||||||||||
Shiller Barclays CAPE US Sector ER USD Index | 0.47% and decrease in total return of index | Increase in total return of index | At maturity | Barclays Bank plc | 12/9/2019 | USD | 1,700,000 | (4,361 | ) | |||||||||||
|
| |||||||||||||||||||
(4,361 | ) | |||||||||||||||||||
|
| |||||||||||||||||||
516,395 | ||||||||||||||||||||
|
|
See Notes to Financial Statements.
39
1290 FUNDS
1290 DOUBLELINE DYNAMIC ALLOCATION FUND
PORTFOLIO OF INVESTMENTS (Continued)
October 31, 2019
The following is a summary of the inputs used to value the Fund’s assets and liabilities carried at fair value as of October 31, 2019:
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 Securities | $ | — | $ | 2,120,321 | $ | — | $ | 2,120,321 | ||||||||
Collateralized Mortgage Obligations | — | 6,416,628 | — | 6,416,628 | ||||||||||||
Common Stocks | ||||||||||||||||
Communication Services | 1,163,333 | — | — | 1,163,333 | ||||||||||||
Consumer Discretionary | 2,346,987 | — | — | 2,346,987 | ||||||||||||
Consumer Staples | 852,466 | — | — | 852,466 | ||||||||||||
Energy | 863,998 | — | — | 863,998 | ||||||||||||
Financials | 1,872,181 | — | — | 1,872,181 | ||||||||||||
Health Care | 2,793,964 | — | — | 2,793,964 | ||||||||||||
Industrials | 1,547,797 | — | — | 1,547,797 | ||||||||||||
Information Technology | 4,015,683 | — | — | 4,015,683 | ||||||||||||
Real Estate | 442,921 | — | — | 442,921 | ||||||||||||
Utilities | 366,090 | — | — | 366,090 | ||||||||||||
Corporate Bonds | ||||||||||||||||
Communication Services | — | 1,484,256 | — | 1,484,256 | ||||||||||||
Consumer Discretionary | — | 959,760 | — | 959,760 | ||||||||||||
Consumer Staples | — | 781,036 | — | 781,036 | ||||||||||||
Energy | — | 992,667 | — | 992,667 | ||||||||||||
Financials | — | 2,509,683 | — | 2,509,683 | ||||||||||||
Health Care | — | 832,212 | — | 832,212 | ||||||||||||
Industrials | — | 1,276,123 | — | 1,276,123 | ||||||||||||
Information Technology | — | 345,603 | — | 345,603 | ||||||||||||
Materials | — | 350,331 | — | 350,331 | ||||||||||||
Real Estate | — | 710,370 | — | 710,370 | ||||||||||||
Utilities | — | 303,164 | — | 303,164 | ||||||||||||
Investment Companies | 4,065,606 | — | — | 4,065,606 | ||||||||||||
Mortgage-Backed Securities | — | 2,313,913 | — | 2,313,913 | ||||||||||||
Short-Term Investments | ||||||||||||||||
Investment Company | 7,875,661 | — | — | 7,875,661 | ||||||||||||
U.S. Treasury Obligations | — | 2,327,265 | — | 2,327,265 | ||||||||||||
Total Return Swaps | — | 520,756 | — | 520,756 | ||||||||||||
U.S. Treasury Obligations | — | 6,828,056 | — | 6,828,056 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Assets | $ | 28,206,687 | $ | 31,072,144 | $ | — | $ | 59,278,831 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Liabilities: | ||||||||||||||||
Total Return Swaps | $ | — | $ | (4,361 | ) | $ | — | $ | (4,361 | ) | ||||||
|
|
|
|
|
|
|
| |||||||||
Total Liabilities | $ | — | $ | (4,361 | ) | $ | — | $ | (4,361 | ) | ||||||
|
|
|
|
|
|
|
| |||||||||
Total | $ | 28,206,687 | $ | 31,067,783 | $ | — | $ | 59,274,470 | ||||||||
|
|
|
|
|
|
|
|
See Notes to Financial Statements.
40
1290 FUNDS
1290 DOUBLELINE DYNAMIC ALLOCATION FUND
PORTFOLIO OF INVESTMENTS (Continued)
October 31, 2019
Fair Values of Derivative Instruments as of October 31, 2019:
Statement of Assets and Liabilities | ||||||
Derivatives Contracts^ | Asset Derivatives | Fair Value | ||||
Equity contracts | Receivables, Net assets – Unrealized appreciation | $ | 520,756 | |||
|
| |||||
Total | $ | 520,756 | ||||
|
| |||||
Liability Derivatives | ||||||
Equity contracts | Payables, Net assets – Unrealized depreciation | $ | (4,361 | ) | ||
|
| |||||
Total | $ | (4,361 | ) | |||
|
|
The Effect of Derivative Instruments on the Statement of Operations for the year ended October 31, 2019:
Amount of Realized Gain or (Loss) on Derivatives Recognized in Income | ||||||||
Derivatives Contracts^ | Swaps | Total | ||||||
Equity contracts | $ | 1,350,102 | $ | 1,350,102 | ||||
|
|
|
| |||||
Total | $ | 1,350,102 | $ | 1,350,102 | ||||
|
|
|
| |||||
Amount of Unrealized Appreciation or (Depreciation) on Derivatives Recognized in Income | ||||||||
Derivatives Contracts^ | Swaps | Total | ||||||
Equity contracts | $ | 235,246 | $ | 235,246 | ||||
|
|
|
| |||||
Total | $ | 235,246 | $ | 235,246 | ||||
|
|
|
|
^ The Fund held swaps contracts as a substitute for investing in conventional securities.
The Fund held swap contracts with an average notional value of approximately $11,915,000 during the year ended October 31, 2019.
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 October 31, 2019:
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 | $ | 520,756 | $ | (4,361 | ) | $ | (449,262 | ) | $ | 67,133 | ||||||
|
|
|
|
|
|
|
| |||||||||
Total | $ | 520,756 | $ | (4,361 | ) | $ | (449,262 | ) | $ | 67,133 | ||||||
|
|
|
|
|
|
|
| |||||||||
Counterparty | Gross Amount of Derivative Liabilities Presented in the Statement of Assets and Liabilities (a) | Derivatives Available for Offset | Collateral Pledged | Net Amount Due to Counterparty | ||||||||||||
Barclays Bank plc | $ | 4,361 | $ | (4,361 | ) | $ | — | $ | — | |||||||
|
|
|
|
|
|
|
| |||||||||
Total | $ | 4,361 | $ | (4,361 | ) | $ | — | $ | — | |||||||
|
|
|
|
|
|
|
|
(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. |
See Notes to Financial Statements.
41
1290 FUNDS
1290 DOUBLELINE DYNAMIC ALLOCATION FUND
PORTFOLIO OF INVESTMENTS (Continued)
October 31, 2019
Investment security transactions for the year ended October 31, 2019 were as follows:
Cost of Purchases: | ||||
Long-term investments other than U.S. government debt securities | $ | 21,345,227 | ||
Long-term U.S. government debt securities | 10,471,741 | |||
|
| |||
$ | 31,816,968 | |||
|
| |||
Net Proceeds of Sales and Redemptions: | ||||
Long-term investments other than U.S. government debt securities | $ | 19,255,759 | ||
Long-term U.S. government debt securities | 9,054,431 | |||
|
| |||
$ | 28,310,190 | |||
|
|
As of October 31, 2019, the gross unrealized appreciation (depreciation) of investments based on the aggregate cost of investments in securities and derivative instruments, if applicable, for Federal income tax purposes was as follows:
Aggregate gross unrealized appreciation | $ | 4,333,855 | ||
Aggregate gross unrealized depreciation | (1,031,004 | ) | ||
|
| |||
Net unrealized appreciation | $ | 3,302,851 | ||
|
| |||
Federal income tax cost of investments in securities and derivative instruments, if applicable | $ | 55,971,619 | ||
|
|
See Notes to Financial Statements.
42
1290 FUNDS
1290 DOUBLELINE DYNAMIC ALLOCATION FUND
STATEMENT OF ASSETS AND LIABILITIES
October 31, 2019
ASSETS | ||||
Investments in Securities, at value: | ||||
Affiliated Issuers (Cost $4,067,746) | $ | 4,065,606 | ||
Unaffiliated Issuers (Cost $51,846,289) | 54,692,469 | |||
Cash | 2,815,199 | |||
Market value on OTC swap contracts | 520,756 | |||
Dividends, interest and other receivables | 205,191 | |||
Receivable for securities sold | 94,601 | |||
Prepaid registration and filing fees | 11,534 | |||
Receivable for Fund shares sold | 9,511 | |||
Other assets | 728 | |||
|
| |||
Total assets | 62,415,595 | |||
|
| |||
LIABILITIES | ||||
Payable for securities purchased | 55,000 | |||
Investment advisory fees payable | 18,626 | |||
Administrative fees payable | 7,835 | |||
Market value on OTC swap contracts | 4,361 | |||
Transfer agent fees payable | 3,384 | |||
Distribution fees payable – Class A | 431 | |||
Distribution fees payable – Class R | 71 | |||
Accrued expenses | 78,877 | |||
|
| |||
Total liabilities | 168,585 | |||
|
| |||
NET ASSETS | $ | 62,247,010 | ||
|
| |||
Net assets were comprised of: | ||||
Paid in capital | $ | 55,727,999 | ||
Total distributable earnings (loss) | 6,519,011 | |||
|
| |||
Net assets | $ | 62,247,010 | ||
|
| |||
Class A | ||||
Net asset value and redemption price per share, $2,081,224 / 185,357 shares outstanding (unlimited amount authorized: $0.001 par value) | $ | 11.23 | ||
Maximum sales charge (5.50% of offering price) | 0.65 | |||
|
| |||
Maximum offering price per share | $ | 11.88 | ||
|
| |||
Class I | ||||
Net asset value and redemption price per share, $59,997,379 / 5,331,700 shares outstanding (unlimited amount authorized: $0.001 par value) | $ | 11.25 | ||
|
| |||
Class R | ||||
Net asset value and redemption price per share, $168,407 / 15,026 shares outstanding (unlimited amount authorized: $0.001 par value) | $ | 11.21 | ||
|
|
STATEMENT OF OPERATIONS
For the Year Ended October 31, 2019
INVESTMENT INCOME | ||||
Interest | $ | 1,304,217 | ||
Dividends ($160,662 of dividend income received from affiliates) | 384,714 | |||
|
| |||
Total income | 1,688,931 | |||
|
| |||
EXPENSES | ||||
Investment advisory fees | 444,349 | |||
Professional fees | 123,272 | |||
Administrative fees | 88,870 | |||
Printing and mailing expenses | 46,747 | |||
Registration and filing fees | 42,291 | |||
Transfer agent fees | 38,420 | |||
Custodian fees | 19,325 | |||
Trustees’ fees | 5,305 | |||
Distribution fees – Class A | 5,045 | |||
Distribution fees – Class R | 799 | |||
Miscellaneous | 30,194 | |||
|
| |||
Gross expenses | 844,617 | |||
Less: Voluntary waiver from investment adviser | (72,912 | ) | ||
Waiver from investment adviser | (229,925 | ) | ||
|
| |||
Net expenses | 541,780 | |||
|
| |||
NET INVESTMENT INCOME (LOSS) | 1,147,151 | |||
|
| |||
REALIZED AND UNREALIZED GAIN (LOSS) | ||||
Realized gain (loss) on: | ||||
Investments in securities ($(7,254) of realized gain (loss) from affiliates) | 884,508 | |||
Swaps | 1,350,102 | |||
|
| |||
Net realized gain (loss) | 2,234,610 | |||
|
| |||
Change in unrealized appreciation (depreciation) on: | ||||
Investments in securities ($19,784 of change in unrealized appreciation (depreciation) from affiliates) | 2,505,890 | |||
Swaps | 235,246 | |||
|
| |||
Net change in unrealized appreciation (depreciation) | 2,741,136 | |||
|
| |||
NET REALIZED AND UNREALIZED GAIN (LOSS) | 4,975,746 | |||
|
| |||
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | $ | 6,122,897 | ||
|
|
See Notes to Financial Statements.
43
1290 FUNDS
1290 DOUBLELINE DYNAMIC ALLOCATION FUND
STATEMENT OF CHANGES IN NET ASSETS
Year Ended October 31, | ||||||||
2019 | 2018 | |||||||
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS: |
| |||||||
Net investment income (loss) | $ | 1,147,151 | $ | 964,904 | ||||
Net realized gain (loss) | 2,234,610 | 1,692,724 | ||||||
Net change in unrealized appreciation (depreciation) | 2,741,136 | (1,814,177 | ) | |||||
|
|
|
| |||||
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | 6,122,897 | 843,451 | ||||||
|
|
|
| |||||
Distributions to shareholders: | ||||||||
Class A | (83,828 | ) | (83,272 | ) | ||||
Class I | (2,637,668 | ) | (4,227,949 | ) | ||||
Class R | (6,450 | ) | (7,506 | ) | ||||
|
|
|
| |||||
Total distributions to shareholders | (2,727,946 | ) | (4,318,727 | ) | ||||
|
|
|
| |||||
CAPITAL SHARES TRANSACTIONS: | ||||||||
Class A | ||||||||
Capital shares sold [ 55,587 and 157,314 shares, respectively ] | 596,061 | 1,679,813 | ||||||
Capital shares issued in reinvestment of dividends [ 7,863 and 7,082 shares, respectively ] | 79,177 | 75,498 | ||||||
Capital shares repurchased [ (108,047) and (47,392) shares, respectively ] | (1,145,133 | ) | (515,495 | ) | ||||
|
|
|
| |||||
Total Class A transactions | (469,895 | ) | 1,239,816 | |||||
|
|
|
| |||||
Class I | ||||||||
Capital shares sold [ 54,826 and 161,547 shares, respectively ] | 587,053 | 1,758,509 | ||||||
Capital shares issued in reinvestment of dividends [ 18,482 and 20,595 shares, respectively ] | 186,113 | 219,547 | ||||||
Capital shares repurchased [ (113,792) and (51,690) shares, respectively ] | (1,175,255 | ) | (554,783 | ) | ||||
|
|
|
| |||||
Total Class I transactions | (402,089 | ) | 1,423,273 | |||||
|
|
|
| |||||
Class R | ||||||||
Capital shares sold [ 145 and 4,880 shares, respectively ] | 1,462 | 51,331 | ||||||
Capital shares issued in reinvestment of dividends [ 205 and 1 shares, respectively ] | 2,068 | 7 | ||||||
Capital shares repurchased [ (17) and (197) shares, respectively ] | (181 | ) | (2,083 | ) | ||||
|
|
|
| |||||
Total Class R transactions | 3,349 | 49,255 | ||||||
|
|
|
| |||||
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM CAPITAL SHARE TRANSACTIONS | (868,635 | ) | 2,712,344 | |||||
|
|
|
| |||||
TOTAL INCREASE (DECREASE) IN NET ASSETS | 2,526,316 | (762,932 | ) | |||||
NET ASSETS: | ||||||||
Beginning of year | 59,720,694 | 60,483,626 | ||||||
|
|
|
| |||||
End of year | $ | 62,247,010 | $ | 59,720,694 | ||||
|
|
|
|
See Notes to Financial Statements.
44
1290 FUNDS
1290 DOUBLELINE DYNAMIC ALLOCATION FUND
FINANCIAL HIGHLIGHTS
Year Ended October 31, | March 7, 2016* to October 31, 2016 | |||||||||||||||
Class A | 2019 | 2018 | 2017 | |||||||||||||
Net asset value, beginning of period | $ | 10.61 | $ | 11.25 | $ | 10.53 | $ | 10.00 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Income (loss) from investment operations: | ||||||||||||||||
Net investment income (loss) (e)(x) | 0.18 | 0.15 | 0.11 | 0.06 | ||||||||||||
Net realized and unrealized gain (loss) | 0.91 | (0.01 | ) | 0.87 | 0.47 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
Total from investment operations | 1.09 | 0.14 | 0.98 | 0.53 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Less distributions: |
| |||||||||||||||
Dividends from net investment income | (0.17 | ) | (0.13 | ) | (0.09 | ) | — | |||||||||
Distributions from net realized gains | (0.30 | ) | (0.65 | ) | (0.17 | ) | — | |||||||||
|
|
|
|
|
|
|
| |||||||||
Total dividends and distributions | (0.47 | ) | (0.78 | ) | (0.26 | ) | — | |||||||||
|
|
|
|
|
|
|
| |||||||||
Net asset value, end of period | $ | 11.23 | $ | 10.61 | $ | 11.25 | $ | 10.53 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total return (b) | 10.73 | % | 1.19 | % | 9.46 | % | 5.30 | % | ||||||||
|
|
|
|
|
|
|
| |||||||||
Ratios/Supplemental Data: |
| |||||||||||||||
Net assets, end of period (000’s) | $ | 2,081 | $ | 2,440 | $ | 1,271 | $ | 356 | ||||||||
Ratio of expenses to average net assets: | ||||||||||||||||
After waivers (a)(f) | 1.15 | %(j) | 1.20 | %(k) | 1.21 | % | 1.22 | % | ||||||||
Before waivers (a)(f) | 1.67 | % | 1.66 | % | 1.75 | % | 1.85 | % | ||||||||
Ratio of net investment income (loss) to average net assets: | ||||||||||||||||
After waivers (a)(f)(x) | 1.70 | % | 1.39 | % | 1.02 | % | 0.89 | %(l) | ||||||||
Before waivers (a)(f)(x) | 1.19 | % | 0.93 | % | 0.48 | % | 0.26 | %(l) | ||||||||
Portfolio turnover rate (z)^ | 63 | % | 79 | % | 86 | % | 56 | % | ||||||||
Year Ended October 31, | March 7, 2016* to October 31, 2016 | |||||||||||||||
Class I | 2019 | 2018 | 2017 | |||||||||||||
Net asset value, beginning of period | $ | 10.63 | $ | 11.27 | $ | 10.55 | $ | 10.00 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Income (loss) from investment operations: | ||||||||||||||||
Net investment income (loss) (e)(x) | 0.21 | 0.18 | 0.14 | 0.08 | ||||||||||||
Net realized and unrealized gain (loss) | 0.91 | (0.01 | ) | 0.86 | 0.47 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
Total from investment operations | 1.12 | 0.17 | 1.00 | 0.55 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Less distributions: |
| |||||||||||||||
Dividends from net investment income | (0.20 | ) | (0.16 | ) | (0.11 | ) | — | |||||||||
Distributions from net realized gains | (0.30 | ) | (0.65 | ) | (0.17 | ) | — | |||||||||
|
|
|
|
|
|
|
| |||||||||
Total dividends and distributions | (0.50 | ) | (0.81 | ) | (0.28 | ) | — | |||||||||
|
|
|
|
|
|
|
| |||||||||
Net asset value, end of period | $ | 11.25 | $ | 10.63 | $ | 11.27 | $ | 10.55 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total return (b) | 11.00 | % | 1.44 | % | 9.68 | % | 5.50 | % | ||||||||
|
|
|
|
|
|
|
| |||||||||
Ratios/Supplemental Data: |
| |||||||||||||||
Net assets, end of period (000’s) | $ | 59,997 | $ | 57,126 | $ | 59,101 | $ | 53,478 | ||||||||
Ratio of expenses to average net assets: | ||||||||||||||||
After waivers (a)(f) | 0.90 | %(j) | 0.95 | %(k) | 0.96 | % | 0.97 | % | ||||||||
Before waivers (a)(f) | 1.42 | % | 1.41 | % | 1.50 | % | 1.55 | % | ||||||||
Ratio of net investment income (loss) to average net assets: | ||||||||||||||||
After waivers (a)(f)(x) | 1.95 | % | 1.62 | % | 1.27 | % | 1.12 | %(l) | ||||||||
Before waivers (a)(f)(x) | 1.43 | % | 1.16 | % | 0.72 | % | 0.55 | %(l) | ||||||||
Portfolio turnover rate (z)^ | 63 | % | 79 | % | 86 | % | 56 | % |
See Notes to Financial Statements.
45
1290 FUNDS
1290 DOUBLELINE DYNAMIC ALLOCATION FUND
FINANCIAL HIGHLIGHTS (Continued)
Year Ended October 31, | March 7, 2016* to October 31, 2016 | |||||||||||||||
Class R | 2019 | 2018 | 2017 | |||||||||||||
Net asset value, beginning of period | $ | 10.59 | $ | 11.23 | $ | 10.52 | $ | 10.00 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Income (loss) from investment operations: | ||||||||||||||||
Net investment income (loss) (e)(x) | 0.15 | 0.12 | 0.08 | 0.04 | ||||||||||||
Net realized and unrealized gain (loss) | 0.91 | (0.01 | ) | 0.87 | 0.48 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
Total from investment operations | 1.06 | 0.11 | 0.95 | 0.52 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Less distributions: |
| |||||||||||||||
Dividends from net investment income | (0.14 | ) | (0.10 | ) | (0.07 | ) | — | |||||||||
Distributions from net realized gains | (0.30 | ) | (0.65 | ) | (0.17 | ) | — | |||||||||
|
|
|
|
|
|
|
| |||||||||
Total dividends and distributions | (0.44 | ) | (0.75 | ) | (0.24 | ) | — | |||||||||
|
|
|
|
|
|
|
| |||||||||
Net asset value, end of period | $ | 11.21 | $ | 10.59 | $ | 11.23 | $ | 10.52 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total return (b) | 10.46 | % | 0.93 | % | 9.15 | % | 5.20 | % | ||||||||
|
|
|
|
|
|
|
| |||||||||
Ratios/Supplemental Data: |
| |||||||||||||||
Net assets, end of period (000’s) | $ | 168 | $ | 156 | $ | 112 | $ | 105 | ||||||||
Ratio of expenses to average net assets: | ||||||||||||||||
After waivers (a)(f) | 1.40 | %(j) | 1.45 | %(k) | 1.46 | % | 1.47 | % | ||||||||
Before waivers (a)(f) | 1.92 | % | 1.91 | % | 2.01 | % | 2.05 | % | ||||||||
Ratio of net investment income (loss) to average net assets: | ||||||||||||||||
After waivers (a)(f)(x) | 1.44 | % | 1.13 | % | 0.77 | % | 0.62 | %(l) | ||||||||
Before waivers (a)(f)(x) | 0.93 | % | 0.67 | % | 0.22 | % | 0.05 | %(l) | ||||||||
Portfolio turnover rate (z)^ | 63 | % | 79 | % | 86 | % | 56 | % |
* | Commencement of Operations. |
^ | Portfolio turnover rate excludes derivatives, if any. |
(a) | Ratios for periods less than one year are annualized. Certain non-recurring expenses incurred by the Fund are not annualized for periods less than one year. |
(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”), if applicable. |
(j) | Including direct and indirect expenses, the net expense ratio after waivers and reimbursements would be 1.20% for Class A, 0.95% for Class I and 1.45% for Class R. |
(k) | Including direct and indirect expenses, the net expense ratio after waivers and reimbursements would be 1.25% for Class A, 1.00% for Class I and 1.50% 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.
46
1290 GAMCO SMALL/MID CAP VALUE FUND (Unaudited)
INVESTMENT ADVISER
Ø | 1290 Asset Managers® |
INVESTMENT SUB-ADVISER
Ø | GAMCO Asset Management, Inc. |
PERFORMANCE RESULTS
Annualized Total Returns as of 10/31/19 | ||||||||||||
1 Year | Since Incept. | |||||||||||
Fund – Class A Shares* | without Sales Charge | 2.29 | % | 6.28 | % | |||||||
with Sales Charge (a | ) | (3.36 | ) | 5.08 | ||||||||
Fund – Class I Shares* | 2.57 | 6.56 | ||||||||||
Fund – Class R Shares* | 2.02 | 6.02 | ||||||||||
Fund – Class T Shares*† | without Sales Charge | 2.57 | 6.56 | |||||||||
with Sales Charge (b | ) | (0.02 | ) | 6.01 | ||||||||
Russell 2500TMValue Index | 6.10 | 6.21 | ||||||||||
* Date of inception 11/12/14.
† Class T Shares currently are not offered for sale.
(a) A 5.50% front-end sales charge was deducted.
(b) A 2.50% front-end sales charge was deducted.
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.
The graph illustrates comparative performance for $10,000 invested in the Class I Shares of the 1290 GAMCO Small/Mid Cap Value Fund and the Russell 2500TM Value Index from 11/12/14 to 10/31/19. The performance of the Russell 2500TM Value Index reflects an initial investment at the end of the month closest to the Fund’s inception. The performance of the Fund assumes reinvestment of all dividends and capital gain distributions, if any, and does not include a sales charge. The performance of the Russell 2500TM Value Index does not reflect the deduction of expenses or a sales charge associated with a mutual fund and has been adjusted to reflect reinvestment of all dividends, capital gain distributions, and interest of the securities included in the benchmark.
As of March 1, 2019, the gross expense ratios for Class A, I, R and T shares were 1.80%, 1.52%, 2.06% and 1.81%, respectively. The net expense ratios for Class A, I, R and T shares were 1.25%, 1.00%, 1.50% and 1.25%, respectively. The net expense ratios reflect the Adviser’s decision to contractually limit expenses through April 30, 2020. Fund Performance may also 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.
In addition, 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.
PERFORMANCE SUMMARY
The Fund’s Class I shares returned 2.57% for the year ended October 31, 2019. The Fund’s benchmark, the Russell 2500TM Value Index, returned 6.10% over the same year.
Overview — GAMCO Asset Management, Inc.
The market started off the period exhibiting extreme volatility, with December of 2018 the worst month for equity markets since World War II. Economically sensitive industrial stocks, especially on the small and mid-cap side, took the brunt of the market’s concern. The market recouped all of those December losses in the first quarter as U.S. stocks registered their best first quarter since 1998. This rally was fueled by a shift in Federal Reserve (Fed) policy and renewed hopes of a trade deal with China. The second quarter was once again marked by volatility as investors were forced to weigh weaker economic data against the possibility of an upcoming July rate cut. Despite another volatile quarter, the market ended June sitting right around its all-time high. The third quarter began with the longest expansion on record for the U.S. economy, the lowest unemployment since the 1960s, household wealth at a record high, and solid housing growth, all while inflation remained tame. Despite a decelerating economy and rising geopolitical risks, the S&P 500® Index finished the third quarter only 1.5% below its all-time high.
Fund Highlights
We buy businesses we believe are selling at a discount to their Private Market Value (the price an informed industrialist would pay for the entire company), with a catalyst in place that could potentially surface values. Industry consolidation, financial engineering (e.g., spin-offs), changes in management and changes in regulation are just a few catalysts in which the Fund is rich. Our philosophy and process focus on fundamental company research and individual stock selection.
We believe we are generally well-positioned for almost any economic environment. Our holdings have tended to be domestically focused with strong franchises and often pricing power. We have never been top-down allocators, trying to chase every trend. Rather, we rely on fundamental bottom-up research informed by our view of the shifting political and economic tides.
The Fund trailed the Russell 2500TM Value Index during this period. As you know, the Fund looks quite different from the index and occasionally we have seen periods where returns differ significantly. The Fund’s higher weighting in communication services and lower weighting in technology were relative detractors to performance for this period.
47
1290 GAMCO SMALL/MID CAP VALUE FUND (Unaudited)
What helped performance during the year?
• | We saw several takeover announcements in the last twelve months that positively impacted performance. Avon Products, Tribune Media and El Paso Electric all were up over 16% for the period. We expect to see continued industry consolidation as a positive catalyst for the Fund moving forward as interest rates remain very low after being cut three times during the period. |
• | The Fund’s overweight to industrials over the period had the largest positive impact on performance. Several names, such as Griffon Corp., Herc Holdings, Inc. and CIRCOR International, Inc., surged despite volatility caused by uncertainty over trade negotiations and supply chains. |
• | Federated Investors, Inc. and Legg Mason, Inc. rose on strong fundamentals despite a challenging industry backdrop. |
What hurt performance during the year?
• | A larger position in communication services companies, an area in which our firm has built deep knowledge over many years, was one of the largest detractors to performance for the period. The Viacom-CBS deal unites the companies for the first time since they split in 2005. Many Viacom shareholders were unhappy with the terms of the transaction. The companies have addressed initial concerns and their combined more than 20% share of viewing will be far more powerful than each as a standalone, putting the combined company in a better position to negotiate some of the digital changes the industry is going through. |
• | The Fund’s underweighting in real estate and technology also detracted from performance on a relative basis as the benchmark’s allocation to technology was more than three times that of the Fund. |
• | RPC, Inc., which provides a broad range of specialized oilfield services and equipment for oil and gas companies, pulled back sharply over the last twelve months as the U.S. land rig count continued to decline and overcapacity persisted in the pressure pumping industry. |
Sector Weightings as of October 31, 2019 | % of Net Assets | |||
Industrials | 37.5 | % | ||
Communication Services | 14.4 | |||
Consumer Staples | 10.9 | |||
Materials | 8.8 | |||
Consumer Discretionary | 8.7 | |||
Investment Company | 4.1 | |||
Health Care | 4.0 | |||
Financials | 3.7 | |||
Information Technology | 2.6 | |||
Real Estate | 2.0 | |||
Utilities | 2.0 | |||
Energy | 1.0 | |||
Cash and Other | 0.3 | |||
|
| |||
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 R and Class T 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 October 31, 2019 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.
48
1290 GAMCO SMALL/MID CAP VALUE FUND (Unaudited)
EXAMPLE
Beginning Account Value 5/1/19 | Ending Account Value 10/31/19 | Expenses Paid During Period* 5/1/19 - 10/31/19 | ||||||||||
Class A |
| |||||||||||
Actual | $1,000.00 | $949.00 | $6.11 | |||||||||
Hypothetical (5% average annual return before expenses) | 1,000.00 | 1,018.94 | 6.33 | |||||||||
Class I |
| |||||||||||
Actual | 1,000.00 | 950.50 | 4.89 | |||||||||
Hypothetical (5% average annual return before expenses) | 1,000.00 | 1,020.20 | 5.06 | |||||||||
Class R |
| |||||||||||
Actual | 1,000.00 | 947.20 | 7.33 | |||||||||
Hypothetical (5% average annual return before expenses) | 1,000.00 | 1,017.67 | 7.60 | |||||||||
Class T** |
| |||||||||||
Actual | 1,000.00 | 949.80 | 4.89 | |||||||||
Hypothetical (5% average annual return before expenses) | 1,000.00 | 1,020.19 | 5.06 | |||||||||
* Expenses are equal to the Fund’s Class A, I, R and T shares annualized expense ratios of 1.24%, 0.99%, 1.49% and 0.99%, respectively, multiplied by the average account value over the period, and multiplied by 184/365 (to reflect the one-half year period).
** Class T shares currently are not offered for sale. |
|
49
1290 FUNDS
1290 GAMCO SMALL/MID CAP VALUE FUND
PORTFOLIO OF INVESTMENTS
October 31, 2019
Number of Shares | Value (Note 1) | |||||||
COMMON STOCKS: | ||||||||
Communication Services (14.4%) | ||||||||
Diversified Telecommunication Services (0.8%) |
| |||||||
Intelsat SA* | 30,000 | $ | 761,700 | |||||
|
| |||||||
Entertainment (4.2%) | ||||||||
AMC Entertainment Holdings, Inc., Class A | 40,000 | 374,800 | ||||||
Entertainment One Ltd. | 90,000 | 648,776 | ||||||
Liberty Media Corp.-Liberty Braves, Class A* | 3,500 | 103,320 | ||||||
Liberty Media Corp.-Liberty Braves, Class C* | 20,000 | 588,200 | ||||||
Lions Gate Entertainment Corp., Class B* | 1,000 | 7,490 | ||||||
Madison Square Garden Co. (The), Class A* | 2,501 | 667,567 | ||||||
Viacom, Inc., Class B | 87,000 | 1,875,720 | ||||||
|
| |||||||
4,265,873 | ||||||||
|
| |||||||
Media (7.6%) | ||||||||
AMC Networks, Inc., Class A* | 9,500 | 413,725 | ||||||
Clear Channel Outdoor Holdings, Inc.* | 370,963 | 864,344 | ||||||
comScore, Inc.* | 49,000 | 113,190 | ||||||
Corus Entertainment, Inc., Class B | 190,000 | 729,937 | ||||||
DISH Network Corp., Class A* | 376 | 12,927 | ||||||
EW Scripps Co. (The), Class A | 45,000 | 604,575 | ||||||
Grupo Televisa SAB (ADR) | 65,000 | 718,250 | ||||||
JCDecaux SA | 21,000 | 573,822 | ||||||
Loral Space & Communications, Inc.* | 9,400 | 375,906 | ||||||
Meredith Corp. | 43,000 | 1,621,100 | ||||||
MSG Networks, Inc., Class A* | 45,000 | 729,450 | ||||||
Sirius XM Holdings, Inc. | 34,560 | 232,243 | ||||||
TEGNA, Inc. | 30,000 | 450,900 | ||||||
WideOpenWest, Inc.* | 38,000 | 241,300 | ||||||
|
| |||||||
7,681,669 | ||||||||
|
| |||||||
Wireless Telecommunication Services (1.8%) |
| |||||||
Gogo, Inc.* | 35,000 | 215,250 | ||||||
Millicom International Cellular SA | 9,000 | 406,530 | ||||||
Millicom International Cellular SA (SDR) | 9,000 | 410,120 | ||||||
United States Cellular Corp.* | 20,000 | 744,400 | ||||||
|
| |||||||
1,776,300 | ||||||||
|
| |||||||
Total Communication Services | 14,485,542 | |||||||
|
| |||||||
Consumer Discretionary (8.7%) | ||||||||
Auto Components (0.7%) | ||||||||
Dana, Inc. | 36,000 | 584,280 | ||||||
Lear Corp. | 600 | 70,662 | ||||||
|
| |||||||
654,942 | ||||||||
|
| |||||||
Diversified Consumer Services (0.6%) |
| |||||||
H&R Block, Inc. | 12,000 | 299,880 | ||||||
ServiceMaster Global Holdings, Inc.* | 6,000 | 242,280 | ||||||
Universal Technical Institute, Inc.* | 12,000 | 71,040 | ||||||
|
| |||||||
613,200 | ||||||||
|
| |||||||
Hotels, Restaurants & Leisure (2.7%) |
| |||||||
Cheesecake Factory, Inc. (The) | 11,000 | 459,690 | ||||||
Churchill Downs, Inc. | 2,900 | 376,971 | ||||||
Dover Motorsports, Inc. | 15,000 | 28,950 | ||||||
Eldorado Resorts, Inc.* | 6,000 | 268,620 | ||||||
Golden Entertainment, Inc.* | 37,000 | 535,760 | ||||||
Nathan’s Famous, Inc. | 7,500 | 570,750 | ||||||
Wynn Resorts Ltd. | 4,000 | 485,360 | ||||||
|
| |||||||
2,726,101 | ||||||||
|
| |||||||
Household Durables (1.2%) | ||||||||
Bassett Furniture Industries, Inc. | 42,500 | 648,125 | ||||||
Hunter Douglas NV | 3,000 | 192,054 | ||||||
Lennar Corp., Class B | 8,000 | 376,160 | ||||||
|
| |||||||
1,216,339 | ||||||||
|
| |||||||
Internet & Direct Marketing Retail (0.3%) |
| |||||||
Lands’ End, Inc.* | 14,000 | 168,980 | ||||||
Stamps.com, Inc.* | 2,000 | 168,860 | ||||||
|
| |||||||
337,840 | ||||||||
|
| |||||||
Leisure Products (3.0%) | ||||||||
Brunswick Corp. | 37,000 | 2,154,880 | ||||||
Mattel, Inc.* | 27,000 | 322,380 | ||||||
Polaris, Inc. | 5,200 | 512,980 | ||||||
|
| |||||||
2,990,240 | ||||||||
|
| |||||||
Specialty Retail (0.2%) | ||||||||
Carvana Co.* | 1,500 | 121,620 | ||||||
Tractor Supply Co. | 1,000 | 95,020 | ||||||
|
| |||||||
216,640 | ||||||||
|
| |||||||
Total Consumer Discretionary | 8,755,302 | |||||||
|
| |||||||
Consumer Staples (10.9%) | ||||||||
Beverages (2.4%) | ||||||||
Cott Corp. | 12,000 | 154,200 | ||||||
Davide Campari-Milano SpA | 33,000 | 302,352 | ||||||
National Beverage Corp. | 11,300 | 496,748 | ||||||
Remy Cointreau SA | 11,000 | 1,470,969 | ||||||
|
| |||||||
2,424,269 | ||||||||
|
| |||||||
Food & Staples Retailing (0.8%) | ||||||||
Casey’s General Stores, Inc. | 2,500 | 427,025 | ||||||
Ingles Markets, Inc., Class A | 9,500 | 374,585 | ||||||
|
| |||||||
801,610 | ||||||||
|
| |||||||
Food Products (5.3%) | ||||||||
Bunge Ltd. | 25,000 | 1,350,000 | ||||||
Farmer Brothers Co.* | 32,200 | 413,126 | ||||||
Hain Celestial Group, Inc. (The)* | 84,000 | 1,985,760 | ||||||
JM Smucker Co. (The) | 10,000 | 1,056,800 | ||||||
Maple Leaf Foods, Inc. | 12,000 | 209,278 | ||||||
McCormick & Co., Inc. | 1,800 | 289,152 | ||||||
|
| |||||||
5,304,116 | ||||||||
|
| |||||||
Household Products (1.6%) | ||||||||
Energizer Holdings, Inc. | 32,000 | 1,359,680 | ||||||
Oil-Dri Corp. of America | 7,000 | 245,070 | ||||||
|
| |||||||
1,604,750 | ||||||||
|
| |||||||
Personal Products (0.8%) | ||||||||
Edgewell Personal Care Co.* | 23,000 | 805,000 | ||||||
|
| |||||||
Total Consumer Staples | 10,939,745 | |||||||
|
|
See Notes to Financial Statements.
50
1290 FUNDS
1290 GAMCO SMALL/MID CAP VALUE FUND
PORTFOLIO OF INVESTMENTS (Continued)
October 31, 2019
Number of Shares | Value (Note 1) | |||||||
Energy (1.0%) | ||||||||
Energy Equipment & Services (1.0%) |
| |||||||
Dril-Quip, Inc.* | 12,000 | $ | 492,240 | |||||
RPC, Inc. | 130,000 | 538,200 | ||||||
Weatherford International plc* | 145,000 | 3,915 | ||||||
|
| |||||||
Total Energy | 1,034,355 | |||||||
|
| |||||||
Financials (3.7%) | ||||||||
Banks (1.5%) | ||||||||
Atlantic Capital Bancshares, Inc.* | 14,000 | 261,100 | ||||||
Cadence Bancorp | 10,997 | 169,134 | ||||||
Flushing Financial Corp. | 16,154 | 349,573 | ||||||
Synovus Financial Corp. | 22,005 | 745,309 | ||||||
|
| |||||||
1,525,116 | ||||||||
|
| |||||||
Capital Markets (2.2%) | ||||||||
Federated Investors, Inc., Class B | 35,000 | 1,117,900 | ||||||
Legg Mason, Inc. | 25,000 | 931,500 | ||||||
Waddell & Reed Financial, Inc., Class A | 7,000 | 115,920 | ||||||
|
| |||||||
2,165,320 | ||||||||
|
| |||||||
Total Financials | 3,690,436 | |||||||
|
| |||||||
Health Care (4.0%) |
| |||||||
Biotechnology (0.4%) | ||||||||
Clovis Oncology, Inc.* | 14,000 | 44,380 | ||||||
Spark Therapeutics, Inc.* | 3,000 | 327,510 | ||||||
|
| |||||||
371,890 | ||||||||
|
| |||||||
Health Care Equipment & Supplies (0.5%) |
| |||||||
Cutera, Inc.* | 16,000 | 504,000 | ||||||
|
| |||||||
Health Care Providers & Services (1.1%) |
| |||||||
Option Care Health, Inc.* | 90,009 | 318,632 | ||||||
Patterson Cos., Inc. | 46,000 | 787,980 | ||||||
|
| |||||||
1,106,612 | ||||||||
|
| |||||||
Health Care Technology (1.9%) | ||||||||
Evolent Health, Inc., Class A* | 50,000 | 381,000 | ||||||
Teladoc Health, Inc.* | 20,000 | 1,532,000 | ||||||
|
| |||||||
1,913,000 | ||||||||
|
| |||||||
Life Sciences Tools & Services (0.1%) |
| |||||||
Bio-Rad Laboratories, Inc., Class A* | 300 | 99,486 | ||||||
|
| |||||||
Total Health Care | 3,994,988 | |||||||
|
| |||||||
Industrials (37.5%) | ||||||||
Aerospace & Defense (3.8%) | ||||||||
AAR Corp. | 16,000 | 668,000 | ||||||
Aerojet Rocketdyne Holdings, Inc.* | 25,500 | 1,102,365 | ||||||
Moog, Inc., Class A | 10,500 | 878,955 | ||||||
Moog, Inc., Class B | 700 | 58,205 | ||||||
Textron, Inc. | 25,000 | 1,152,250 | ||||||
|
| |||||||
3,859,775 | ||||||||
|
| |||||||
Building Products (2.9%) | ||||||||
Armstrong Flooring, Inc.* | 50,000 | 307,000 | ||||||
Griffon Corp. | 120,000 | 2,557,200 | ||||||
|
| |||||||
2,864,200 | ||||||||
|
| |||||||
Commercial Services & Supplies (2.7%) |
| |||||||
IAA, Inc.* | 8,688 | 331,447 | ||||||
KAR Auction Services, Inc. | 8,688 | 215,984 | ||||||
Matthews International Corp., Class A | 43,000 | 1,590,140 | ||||||
Team, Inc.* | 30,000 | 544,800 | ||||||
|
| |||||||
2,682,371 | ||||||||
|
| |||||||
Construction & Engineering (0.5%) |
| |||||||
Arcosa, Inc. | 14,000 | 537,740 | ||||||
|
| |||||||
Electrical Equipment (0.6%) | ||||||||
AZZ, Inc. | 14,600 | 566,334 | ||||||
|
| |||||||
Machinery (21.4%) | ||||||||
Astec Industries, Inc. | 63,500 | 2,228,215 | ||||||
CIRCOR International, Inc.* | 78,500 | 3,005,765 | ||||||
CNH Industrial NV | 30,000 | 327,300 | ||||||
Donaldson Co., Inc. | 300 | 15,822 | ||||||
Eastern Co. (The) | 15,000 | 413,850 | ||||||
EnPro Industries, Inc. | 41,000 | 2,851,550 | ||||||
Evoqua Water Technologies Corp.* | 58,000 | 1,007,460 | ||||||
Flowserve Corp. | 34,000 | 1,660,560 | ||||||
Gardner Denver Holdings, Inc.* | 40,000 | 1,273,200 | ||||||
Graco, Inc. | 4,500 | 203,400 | ||||||
ITT, Inc. | 3,500 | 208,075 | ||||||
Kennametal, Inc. | 37,000 | 1,145,150 | ||||||
Mueller Industries, Inc. | 40,000 | 1,230,800 | ||||||
Mueller Water Products, Inc., Class A | 34,000 | 397,800 | ||||||
Navistar International Corp.* | 22,070 | 690,350 | ||||||
Park-Ohio Holdings Corp. | 21,000 | 645,960 | ||||||
Toro Co. (The) | 6,000 | 462,780 | ||||||
Trinity Industries, Inc. | 86,000 | 1,701,080 | ||||||
Twin Disc, Inc.* | 65,074 | 700,196 | ||||||
Watts Water Technologies, Inc., Class A | 12,000 | 1,119,000 | ||||||
Welbilt, Inc.* | 12,500 | 237,000 | ||||||
|
| |||||||
21,525,313 | ||||||||
|
| |||||||
Road & Rail (0.7%) | ||||||||
Hertz Global Holdings, Inc.* | 50,648 | 684,254 | ||||||
|
| |||||||
Trading Companies & Distributors (3.8%) |
| |||||||
Ashtead Group plc | 2,000 | 60,830 | ||||||
GATX Corp. | 8,000 | 636,400 | ||||||
Herc Holdings, Inc.* | 50,000 | 2,213,000 | ||||||
Kaman Corp. | 15,000 | 880,050 | ||||||
|
| |||||||
3,790,280 | ||||||||
|
| |||||||
Transportation Infrastructure (1.1%) |
| |||||||
Macquarie Infrastructure Corp. | 26,500 | 1,143,210 | ||||||
|
| |||||||
Total Industrials | 37,653,477 | |||||||
|
| |||||||
Information Technology (2.6%) | ||||||||
Communications Equipment (0.2%) |
| |||||||
Communications Systems, Inc. | 20,000 | 119,000 | ||||||
EchoStar Corp., Class A* | 1,600 | 62,400 | ||||||
|
| |||||||
181,400 | ||||||||
|
| |||||||
Electronic Equipment, Instruments & Components (0.8%) |
| |||||||
KEMET Corp. | 11,000 | 239,140 | ||||||
Landis+Gyr Group AG* | 6,000 | 556,209 | ||||||
|
| |||||||
795,349 | ||||||||
|
|
See Notes to Financial Statements.
51
1290 FUNDS
1290 GAMCO SMALL/MID CAP VALUE FUND
PORTFOLIO OF INVESTMENTS (Continued)
October 31, 2019
Number of Shares | Value (Note 1) | |||||||
IT Services (0.3%) | ||||||||
Internap Corp.* | 70,000 | $ | 166,600 | |||||
MoneyGram International, Inc.* | 30,000 | 118,800 | ||||||
|
| |||||||
285,400 | ||||||||
|
| |||||||
Software (0.3%) | ||||||||
Cloudflare, Inc., Class A* | 500 | 8,420 | ||||||
FireEye, Inc.* | 10,000 | 158,400 | ||||||
Zuora, Inc., Class A* | 15,000 | 213,750 | ||||||
|
| |||||||
380,570 | ||||||||
|
| |||||||
Technology Hardware, Storage & Peripherals (1.0%) |
| |||||||
Diebold Nixdorf, Inc.* | 141,000 | 987,000 | ||||||
|
| |||||||
Total Information Technology | 2,629,719 | |||||||
|
| |||||||
Materials (8.8%) | ||||||||
Chemicals (6.7%) | ||||||||
Axalta Coating Systems Ltd.* | 7,000 | 206,430 | ||||||
Chr Hansen Holding A/S | 1,200 | 92,112 | ||||||
Core Molding Technologies, Inc.* | 60,000 | 342,600 | ||||||
Element Solutions, Inc.* | 130,000 | 1,411,800 | ||||||
Ferro Corp.* | 90,000 | 1,001,700 | ||||||
GCP Applied Technologies, Inc.* | 88,000 | 1,818,080 | ||||||
HB Fuller Co. | 7,000 | 341,600 | ||||||
Scotts Miracle-Gro Co. (The) | 7,000 | 702,730 | ||||||
Tredegar Corp. | 15,000 | 298,200 | ||||||
Valvoline, Inc. | 26,000 | 554,840 | ||||||
|
| |||||||
6,770,092 | ||||||||
|
| |||||||
Containers & Packaging (1.6%) | ||||||||
Greif, Inc., Class A | 30,000 | 1,175,100 | ||||||
Myers Industries, Inc. | 25,000 | 423,250 | ||||||
|
| |||||||
1,598,350 | ||||||||
|
| |||||||
Metals & Mining (0.5%) | ||||||||
Ampco-Pittsburgh Corp.* | 27,000 | 104,760 | ||||||
Freeport-McMoRan, Inc. | 10,000 | 98,200 | ||||||
TimkenSteel Corp.* | 52,000 | 292,240 | ||||||
|
| |||||||
495,200 | ||||||||
|
| |||||||
Total Materials | 8,863,642 | |||||||
|
| |||||||
Real Estate (2.0%) |
| |||||||
Equity Real Estate Investment Trusts (REITs) (1.5%) |
| |||||||
Ryman Hospitality Properties, Inc. (REIT) | 6,000 | 505,020 | ||||||
Seritage Growth Properties (REIT), Class A | 23,000 | 1,000,270 | ||||||
|
| |||||||
1,505,290 | ||||||||
|
| |||||||
Real Estate Management & Development (0.5%) |
| |||||||
St Joe Co. (The)* | 28,000 | 519,400 | ||||||
|
| |||||||
Total Real Estate | 2,024,690 | |||||||
|
| |||||||
Utilities (2.0%) | ||||||||
Gas Utilities (1.0%) | ||||||||
National Fuel Gas Co. | 22,000 | 996,820 | ||||||
|
| |||||||
Independent Power and Renewable Electricity Producers (1.0%) |
| |||||||
AES Corp. | 60,000 | 1,023,000 | ||||||
|
| |||||||
Total Utilities | 2,019,820 | |||||||
|
| |||||||
Total Common Stocks (95.6%) | 96,091,716 | |||||||
|
| |||||||
Number of Warrants | Value (Note 1) | |||||||
WARRANTS: | ||||||||
Health Care (0.0%) | ||||||||
Health Care Providers & Services (0.0%) |
| |||||||
Option Care Health, Inc., expiring 6/30/25 (r)* | 22 | 8 | ||||||
|
| |||||||
Total Health Care | 8 | |||||||
|
| |||||||
Total Warrants (0.0%) | 8 | |||||||
|
| |||||||
Number of Shares | Value (Note 1) | |||||||
SHORT-TERM INVESTMENT: | ||||||||
Investment Company (4.1%) | ||||||||
JPMorgan Prime Money Market Fund, IM Shares | 4,166,882 | 4,168,549 | ||||||
|
| |||||||
Total Short-Term Investment (4.1%) | 4,168,549 | |||||||
|
| |||||||
Total Investments in Securities (99.7%) | 100,260,273 | |||||||
Other Assets Less Liabilities (0.3%) | 275,796 | |||||||
|
| |||||||
Net Assets (100%) | $ | 100,536,069 | ||||||
|
|
* | Non-income producing. |
(r) | Value determined using significant unobservable inputs. |
Glossary:
ADR | — American Depositary Receipt |
SDR | — Swedish Depositary Receipt |
See Notes to Financial Statements.
52
1290 FUNDS
1290 GAMCO SMALL/MID CAP VALUE FUND
PORTFOLIO OF INVESTMENTS (Continued)
October 31, 2019
The following is a summary of the inputs used to value the Fund’s assets and liabilities carried at fair value as of October 31, 2019:
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: |
| |||||||||||||||
Common Stocks | ||||||||||||||||
Communication Services | $ | 12,852,824 | $ | 1,632,718 | $ | — | $ | 14,485,542 | ||||||||
Consumer Discretionary | 7,892,508 | 862,794 | — | 8,755,302 | ||||||||||||
Consumer Staples | 8,632,202 | 2,307,543 | — | 10,939,745 | ||||||||||||
Energy | 1,034,355 | — | — | 1,034,355 | ||||||||||||
Financials | 3,690,436 | — | — | 3,690,436 | ||||||||||||
Health Care | 3,994,988 | — | — | 3,994,988 | ||||||||||||
Industrials | 37,534,442 | 119,035 | — | 37,653,477 | ||||||||||||
Information Technology | 2,073,510 | 556,209 | — | 2,629,719 | ||||||||||||
Materials | 8,428,930 | 434,712 | — | 8,863,642 | ||||||||||||
Real Estate | 2,024,690 | — | — | 2,024,690 | ||||||||||||
Utilities | 2,019,820 | — | — | 2,019,820 | ||||||||||||
Short-Term Investment | ||||||||||||||||
Investment Company | 4,168,549 | — | — | 4,168,549 | ||||||||||||
Warrants | ||||||||||||||||
Health Care | — | — | 8 | 8 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Assets | $ | 94,347,254 | $ | 5,913,011 | $ | 8 | $ | 100,260,273 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total Liabilities | $ | — | $ | — | $ | — | $ | — | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total | $ | 94,347,254 | $ | 5,913,011 | $ | 8 | $ | 100,260,273 | ||||||||
|
|
|
|
|
|
|
|
The Fund held no derivatives contracts during the year ended October 31, 2019.
Investment security transactions for the year ended October 31, 2019 were as follows:
Cost of Purchases: | ||||
Long-term investments other than U.S. government debt securities | $ | 41,216,178 | ||
Net Proceeds of Sales and Redemptions: | ||||
Long-term investments other than U.S. government debt securities | $ | 34,818,314 |
As of October 31, 2019, the gross unrealized appreciation (depreciation) of investments based on the aggregate cost of investments in securities and derivative instruments, if applicable, for Federal income tax purposes was as follows:
Aggregate gross unrealized appreciation | $ | 7,771,267 | ||
Aggregate gross unrealized depreciation | (11,860,214 | ) | ||
|
| |||
Net unrealized depreciation | $ | (4,088,947 | ) | |
|
| |||
Federal income tax cost of investments in securities and derivative instruments, if applicable | $ | 104,349,220 | ||
|
|
For the year ended October 31, 2019, the Fund incurred approximately $14,428 as brokerage commissions with G. Research, an affiliated broker/dealer.
See Notes to Financial Statements.
53
1290 FUNDS
1290 GAMCO SMALL/MID CAP VALUE FUND
STATEMENT OF ASSETS AND LIABILITIES
October 31, 2019
ASSETS |
| |||
Investments in Securities, at value (Cost $103,336,085) | $ | 100,260,273 | ||
Cash | 331,000 | |||
Foreign cash (Cost $7,264) | 7,302 | |||
Receivable for Fund shares sold | 196,938 | |||
Receivable for securities sold | 35,348 | |||
Prepaid registration and filing fees | 25,804 | |||
Dividends, interest and other receivables | 25,108 | |||
Other assets | 1,163 | |||
|
| |||
Total assets | 100,882,936 | |||
|
| |||
LIABILITIES |
| |||
Payable for Fund shares redeemed | 138,818 | |||
Payable for securities purchased | 69,905 | |||
Investment advisory fees payable | 22,554 | |||
Transfer agent fees payable | 16,423 | |||
Administrative fees payable | 12,521 | |||
Distribution fees payable – Class A | 813 | |||
Distribution fees payable – Class R | 378 | |||
Accrued expenses | 85,455 | |||
|
| |||
Total liabilities | 346,867 | |||
|
| |||
NET ASSETS | $ | 100,536,069 | ||
|
| |||
Net assets were comprised of: |
| |||
Paid in capital | $ | 102,989,288 | ||
Total distributable earnings (loss) | (2,453,219 | ) | ||
|
| |||
Net assets | $ | 100,536,069 | ||
|
| |||
Class A | ||||
Net asset value and redemption price per share, $3,895,970 / 312,633 shares outstanding (unlimited amount authorized: $0.001 par value) | $ | 12.46 | ||
Maximum sales charge (5.50% of offering price) | 0.73 | |||
|
| |||
Maximum offering price per share | $ | 13.19 | ||
|
| |||
Class I | ||||
Net asset value and redemption price per share, $95,600,713 / 7,655,897 shares outstanding (unlimited amount authorized: $0.001 par value) | $ | 12.49 | ||
|
| |||
Class R | ||||
Net asset value and redemption price per share, $912,258 / 73,666 shares outstanding (unlimited amount authorized: $0.001 par value) | $ | 12.38 | ||
|
| |||
Class T** | ||||
Net asset value and redemption price per share, $127,128 / 10,179 shares outstanding (unlimited amount authorized: $0.001 par value) | $ | 12.49 | ||
Maximum sales charge (2.50% of offering price) | 0.32 | |||
|
| |||
Maximum offering price per share | $ | 12.81 | ||
|
|
** | Class T shares currently are not offered for sale. |
STATEMENT OF OPERATIONS
For the Year Ended October 31, 2019
INVESTMENT INCOME |
| |||
Dividends (net of $20,536 foreign withholding tax) | $ | 1,585,702 | ||
Interest | 7,073 | |||
|
| |||
Total income | 1,592,775 | |||
|
| |||
EXPENSES |
| |||
Investment advisory fees | 731,267 | |||
Professional fees | 153,149 | |||
Administrative fees | 146,254 | |||
Transfer agent fees | 134,850 | |||
Printing and mailing expenses | 71,540 | |||
Registration and filing fees | 53,910 | |||
Custodian fees | 22,075 | |||
Distribution fees – Class A | 9,506 | |||
Trustees’ fees | 8,720 | |||
Distribution fees – Class R | 4,393 | |||
Distribution fees – Class T** | 316 | |||
Miscellaneous | 54,280 | |||
|
| |||
Gross expenses | 1,390,260 | |||
Less: Waiver from investment adviser | (407,167 | ) | ||
Waiver from distributor | (316 | ) | ||
|
| |||
Net expenses | 982,777 | |||
|
| |||
NET INVESTMENT INCOME (LOSS) | 609,998 | |||
|
| |||
REALIZED AND UNREALIZED GAIN (LOSS) |
| |||
Realized gain (loss) on: | ||||
Investments in securities | 342,149 | |||
Foreign currency transactions | (1,490 | ) | ||
|
| |||
Net realized gain (loss) | 340,659 | |||
|
| |||
Change in unrealized appreciation (depreciation) on: |
| |||
Investments in securities | 1,060,291 | |||
Foreign currency translations | 118 | |||
|
| |||
Net change in unrealized appreciation (depreciation) | 1,060,409 | |||
|
| |||
NET REALIZED AND UNREALIZED GAIN (LOSS) | 1,401,068 | |||
|
| |||
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | $ | 2,011,066 | ||
|
|
** | Class T shares currently are not offered for sale. |
See Notes to Financial Statements.
54
1290 FUNDS
1290 GAMCO SMALL/MID CAP VALUE FUND
STATEMENT OF CHANGES IN NET ASSETS
Year Ended October 31, | ||||||||
2019 | 2018 | |||||||
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS: | ||||||||
Net investment income (loss) | $ | 609,998 | $ | 293,327 | ||||
Net realized gain (loss) | 340,659 | 803,616 | ||||||
Net change in unrealized appreciation (depreciation) | 1,060,409 | (6,520,592 | ) | |||||
|
|
|
| |||||
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | 2,011,066 | (5,423,649 | ) | |||||
|
|
|
| |||||
Distributions to shareholders: | ||||||||
Class A | (42,434 | ) | (45,934 | ) | ||||
Class I | (1,255,738 | ) | (549,863 | ) | ||||
Class R | (7,956 | ) | (12,578 | ) | ||||
Class T** | (1,787 | ) | (3,105 | ) | ||||
|
|
|
| |||||
Total distributions to shareholders | (1,307,915 | ) | (611,480 | ) | ||||
|
|
|
| |||||
CAPITAL SHARES TRANSACTIONS: | ||||||||
Class A | ||||||||
Capital shares sold [ 70,453 and 166,645 shares, respectively ] | 886,229 | 2,189,545 | ||||||
Capital shares issued in reinvestment of dividends [ 3,493 and 3,358 shares, respectively ] | 40,904 | 43,044 | ||||||
Capital shares repurchased [ (53,218) and (38,937) shares, respectively ] | (654,905 | ) | (513,240 | ) | ||||
|
|
|
| |||||
Total Class A transactions | 272,228 | 1,719,349 | ||||||
|
|
|
| |||||
Class I | ||||||||
Capital shares sold [ 1,868,998 and 5,718,892 shares, respectively ] | 23,316,263 | 75,982,055 | ||||||
Capital shares issued in reinvestment of dividends [ 59,543 and 37,602 shares, respectively ] | 697,247 | 482,439 | ||||||
Capital shares repurchased [ (1,297,404) and (389,765) shares, respectively ] | (15,901,713 | ) | (5,160,624 | ) | ||||
|
|
|
| |||||
Total Class I transactions | 8,111,797 | 71,303,870 | ||||||
|
|
|
| |||||
Class R | ||||||||
Capital shares sold [ 21,731 and 71,062 shares, respectively ] | 268,538 | 928,020 | ||||||
Capital shares issued in reinvestment of dividends [ 575 and 782 shares, respectively ] | 6,698 | 9,998 | ||||||
Capital shares repurchased [ (13,939) and (32,549) shares, respectively ] | (167,220 | ) | (428,019 | ) | ||||
|
|
|
| |||||
Total Class R transactions | 108,016 | 509,999 | ||||||
|
|
|
| |||||
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM CAPITAL SHARE TRANSACTIONS | 8,492,041 | 73,533,218 | ||||||
|
|
|
| |||||
TOTAL INCREASE (DECREASE) IN NET ASSETS | 9,195,192 | 67,498,089 | ||||||
NET ASSETS: | ||||||||
Beginning of year | 91,340,877 | 23,842,788 | ||||||
|
|
|
| |||||
End of year | $ | 100,536,069 | $ | 91,340,877 | ||||
|
|
|
|
| ||||
** Class T shares currently are not offered for sale. Class T shares were formerly known as Class C shares. |
See Notes to Financial Statements.
55
1290 FUNDS
1290 GAMCO SMALL/MID CAP VALUE FUND
FINANCIAL HIGHLIGHTS
Year Ended October 31, | November 12, 2014* to October 31, 2015 | |||||||||||||||||||
Class A | 2019 | 2018 | 2017 | 2016 | ||||||||||||||||
Net asset value, beginning of period | $ | 12.33 | $ | 12.83 | $ | 10.28 | $ | 10.25 | $ | 10.00 | ||||||||||
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|
|
|
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|
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|
| |||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss) (e) | 0.05 | 0.03 | 0.06 | ## | 0.05 | (0.01 | ) | |||||||||||||
Net realized and unrealized gain (loss) | 0.22 | (0.25 | ) | 2.67 | 0.25 | 0.33 | ||||||||||||||
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|
|
|
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| |||||||||||
Total from investment operations | 0.27 | (0.22 | ) | 2.73 | 0.30 | 0.32 | ||||||||||||||
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| |||||||||||
Less distributions: | ||||||||||||||||||||
Dividends from net investment income | (0.02 | ) | (0.03 | ) | (0.02 | ) | — | # | (0.07 | ) | ||||||||||
Distributions from net realized gains | (0.12 | ) | (0.25 | ) | (0.16 | ) | (0.27 | ) | — | |||||||||||
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|
|
|
|
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| |||||||||||
Total dividends and distributions | (0.14 | ) | (0.28 | ) | (0.18 | ) | (0.27 | ) | (0.07 | ) | ||||||||||
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| |||||||||||
Net asset value, end of period | $ | 12.46 | $ | 12.33 | $ | 12.83 | $ | 10.28 | $ | 10.25 | ||||||||||
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| |||||||||||
Total return (b) | 2.29 | % | (1.84 | )% | 26.72 | % | 3.08 | % | 3.20 | % | ||||||||||
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| |||||||||||
Ratios/Supplemental Data: | ||||||||||||||||||||
Net assets, end of period (000’s) | $ | 3,896 | $ | 3,599 | $ | 2,063 | $ | 591 | $ | 997 | ||||||||||
Ratio of expenses to average net assets: | ||||||||||||||||||||
After waivers and reimbursements (a)(f) | 1.24 | %(j) | 1.24 | %(j) | 1.27 | % | 1.35 | % | 1.35 | % | ||||||||||
Before waivers and reimbursements (a)(f) | 1.66 | % | 1.79 | % | 2.72 | % | 4.38 | % | 9.28 | % | ||||||||||
Ratio of net investment income (loss) to average net assets: | ||||||||||||||||||||
After waivers and reimbursements (a)(f) | 0.39 | % | 0.26 | % | 0.48 | %(aa) | 0.49 | % | (0.10 | )%(l) | ||||||||||
Before waivers and reimbursements (a)(f) | (0.03 | )% | (0.28 | )% | (0.97 | )%(aa) | (2.53 | )% | (8.03 | )%(l) | ||||||||||
Portfolio turnover rate (z)^ | 37 | % | 49 | % | 88 | % | 76 | % | 95 | % | ||||||||||
Year Ended October 31, | November 12, 2014* to October 31, 2015 | |||||||||||||||||||
Class I | 2019 | 2018 | 2017 | 2016 | ||||||||||||||||
Net asset value, beginning of period | $ | 12.36 | $ | 12.86 | $ | 10.30 | $ | 10.27 | $ | 10.00 | ||||||||||
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|
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|
|
|
|
| |||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss) (e) | 0.08 | 0.07 | 0.08 | ## | 0.05 | 0.02 | ||||||||||||||
Net realized and unrealized gain (loss) | 0.23 | (0.26 | ) | 2.68 | 0.28 | 0.32 | ||||||||||||||
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| |||||||||||
Total from investment operations | 0.31 | (0.19 | ) | 2.76 | 0.33 | 0.34 | ||||||||||||||
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| |||||||||||
Less distributions: | ||||||||||||||||||||
Dividends from net investment income | (0.06 | ) | (0.06 | ) | (0.04 | ) | (0.03 | ) | (0.07 | ) | ||||||||||
Distributions from net realized gains | (0.12 | ) | (0.25 | ) | (0.16 | ) | (0.27 | ) | — | |||||||||||
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|
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|
|
| |||||||||||
Total dividends and distributions | (0.18 | ) | (0.31 | ) | (0.20 | ) | (0.30 | ) | (0.07 | ) | ||||||||||
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|
| |||||||||||
Net asset value, end of period | $ | 12.49 | $ | 12.36 | $ | 12.86 | $ | 10.30 | $ | 10.27 | ||||||||||
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|
|
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| |||||||||||
Total return (b) | 2.57 | % | (1.60 | )% | 27.09 | % | 3.34 | % | 3.43 | % | ||||||||||
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| |||||||||||
Ratios/Supplemental Data: | ||||||||||||||||||||
Net assets, end of period (000’s) | $ | 95,601 | $ | 86,815 | $ | 21,317 | $ | 6,041 | $ | 2,416 | ||||||||||
Ratio of expenses to average net assets: | ||||||||||||||||||||
After waivers and reimbursements (a)(f) | 0.99 | %(j) | 0.99 | %(j) | 1.02 | % | 1.10 | % | 1.10 | % | ||||||||||
Before waivers and reimbursements (a)(f) | 1.41 | % | 1.51 | % | 2.47 | % | 4.09 | % | 8.56 | % | ||||||||||
Ratio of net investment income (loss) to average net assets: | ||||||||||||||||||||
After waivers and reimbursements (a)(f) | 0.64 | % | 0.54 | % | 0.69 | %(aa) | 0.49 | % | 0.16 | %(l) | ||||||||||
Before waivers and reimbursements (a)(f) | 0.22 | % | 0.03 | % | (0.76 | )%(aa) | (2.51 | )% | (7.30 | )%(l) | ||||||||||
Portfolio turnover rate (z)^ | 37 | % | 49 | % | 88 | % | 76 | % | 95 | % |
See Notes to Financial Statements.
56
1290 FUNDS
1290 GAMCO SMALL/MID CAP VALUE FUND
FINANCIAL HIGHLIGHTS (Continued)
Year Ended October 31, | November 12, 2014* to October 31, 2015 | |||||||||||||||||||
Class R | 2019 | 2018 | 2017 | 2016 | ||||||||||||||||
Net asset value, beginning of period | $ | 12.26 | $ | 12.76 | $ | 10.23 | $ | 10.23 | $ | 10.00 | ||||||||||
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| |||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss) (e) | 0.02 | — | # | 0.03 | ## | 0.04 | (0.04 | ) | ||||||||||||
Net realized and unrealized gain (loss) | 0.22 | (0.25 | ) | 2.66 | 0.23 | 0.34 | ||||||||||||||
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| |||||||||||
Total from investment operations | 0.24 | (0.25 | ) | 2.69 | 0.27 | 0.30 | ||||||||||||||
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| |||||||||||
Less distributions: | ||||||||||||||||||||
Dividends from net investment income | — | — | — | — | (0.07 | ) | ||||||||||||||
Distributions from net realized gains | (0.12 | ) | (0.25 | ) | (0.16 | ) | (0.27 | ) | — | |||||||||||
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|
|
|
|
|
|
| |||||||||||
Total dividends and distributions | (0.12 | ) | (0.25 | ) | (0.16 | ) | (0.27 | ) | (0.07 | ) | ||||||||||
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|
|
|
|
| |||||||||||
Net asset value, end of period | $ | 12.38 | $ | 12.26 | $ | 12.76 | $ | 10.23 | $ | 10.23 | ||||||||||
|
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|
|
|
|
|
|
| |||||||||||
Total return (b) | 2.02 | % | (2.07 | )% | 26.49 | % | 2.77 | % | 2.96 | % | ||||||||||
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|
|
|
| |||||||||||
Ratios/Supplemental Data: | ||||||||||||||||||||
Net assets, end of period (000’s) | $ | 912 | $ | 801 | $ | 332 | $ | 168 | $ | 777 | ||||||||||
Ratio of expenses to average net assets: | ||||||||||||||||||||
After waivers and reimbursements (a)(f) | 1.49 | %(j) | 1.49 | %(j) | 1.53 | % | 1.60 | % | 1.60 | % | ||||||||||
Before waivers and reimbursements (a)(f) | 1.91 | % | 2.05 | % | 3.00 | % | 4.65 | % | 9.73 | % | ||||||||||
Ratio of net investment income (loss) to average net assets: | ||||||||||||||||||||
After waivers and reimbursements (a)(f) | 0.14 | % | 0.02 | % | 0.27 | %(aa) | 0.42 | % | (0.35 | )%(l) | ||||||||||
Before waivers and reimbursements (a)(f) | (0.28 | )% | (0.54 | )% | (1.21 | )%(aa) | (2.64 | )% | (8.49 | )%(l) | ||||||||||
Portfolio turnover rate (z)^ | 37 | % | 49 | % | 88 | % | 76 | % | 95 | % | ||||||||||
Year Ended October 31, | November 12, 2014* to October 31, 2015 | |||||||||||||||||||
Class T** | 2019 | 2018 | 2017 | 2016 | ||||||||||||||||
Net asset value, beginning of period | $ | 12.36 | $ | 12.86 | $ | 10.30 | $ | 10.27 | $ | 10.00 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss) (e) | 0.08 | 0.07 | 0.11 | ## | 0.08 | 0.01 | ||||||||||||||
Net realized and unrealized gain (loss) | 0.23 | (0.26 | ) | 2.65 | 0.25 | 0.33 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total from investment operations | 0.31 | (0.19 | ) | 2.76 | 0.33 | 0.34 | ||||||||||||||
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|
|
|
|
|
|
|
| |||||||||||
Less distributions: | ||||||||||||||||||||
Dividends from net investment income | (0.06 | ) | (0.06 | ) | (0.04 | ) | (0.03 | ) | (0.07 | ) | ||||||||||
Distributions from net realized gains | (0.12 | ) | (0.25 | ) | (0.16 | ) | (0.27 | ) | — | |||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total dividends and distributions | (0.18 | ) | (0.31 | ) | (0.20 | ) | (0.30 | ) | (0.07 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net asset value, end of period | $ | 12.49 | $ | 12.36 | $ | 12.86 | $ | 10.30 | $ | 10.27 | ||||||||||
|
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|
|
|
|
|
|
|
| |||||||||||
Total return (b) | 2.57 | % | (1.60 | )% | 27.09 | % | 3.34 | % | 3.43 | % | ||||||||||
|
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|
|
|
|
|
|
| |||||||||||
Ratios/Supplemental Data: | ||||||||||||||||||||
Net assets, end of period (000’s) | $ | 127 | $ | 126 | $ | 131 | $ | 105 | $ | 259 | ||||||||||
Ratio of expenses to average net assets: | ||||||||||||||||||||
After waivers and reimbursements (a)(f) | 0.99 | %(j) | 0.99 | %(j) | 1.03 | % | 1.10 | % | 1.10 | % | ||||||||||
Before waivers and reimbursements (a)(f) | 1.66 | % | 1.80 | % | 3.02 | % | 5.11 | % | 10.23 | % | ||||||||||
Ratio of net investment income (loss) to average net assets: | ||||||||||||||||||||
After waivers and reimbursements (a)(f) | 0.64 | % | 0.50 | % | 0.89 | %(aa) | 0.77 | % | 0.15 | %(l) | ||||||||||
Before waivers and reimbursements (a)(f) | (0.02 | )% | (0.31 | )% | (1.10 | )%(aa) | (3.23 | )% | (8.98 | )%(l) | ||||||||||
Portfolio turnover rate (z)^ | 37 | % | 49 | % | 88 | % | 76 | % | 95 | % |
See Notes to Financial Statements.
57
1290 FUNDS
1290 GAMCO SMALL/MID CAP VALUE FUND
FINANCIAL HIGHLIGHTS (Continued)
* | Commencement of Operations. |
** | Class T shares currently are not offered for sale. Class T shares were formerly known as Class C shares. |
# | 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, $0.04, $(0.01) and $0.07 for Class A, Class I, Class R and Class T, respectively. |
^ | Portfolio turnover rate excludes derivatives, if any. |
(a) | Ratios for periods less than one year are annualized. Certain non-recurring expenses incurred by the Fund are not annualized for periods less than one year. |
(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”), if applicable. |
(j) | Including direct and indirect expenses, the net expense ratio after waivers and reimbursements would be 1.25% for Class A, 1.00% for Class I, 1.50% for Class R and 1.00% for Class T. |
(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 each class would have been 0.34% lower. |
See Notes to Financial Statements.
58
1290 GLOBAL TALENTS FUND (Unaudited)
INVESTMENT ADVISER
Ø | 1290 Asset Managers® |
INVESTMENT SUB-ADVISER
Ø | AXA Investment Managers, Inc. |
PERFORMANCE RESULTS
Annualized Total Returns as of 10/31/19 | ||||||||||||
1 Year | Since Incept. | |||||||||||
Fund – Class A Shares* | without Sales Charge | 6.49 | % | 7.65 | % | |||||||
with Sales Charge (a) | 0.61 | 5.96 | ||||||||||
Fund – Class I Shares* | 6.72 | 7.92 | ||||||||||
Fund – Class R Shares* | 6.18 | 7.39 | ||||||||||
MSCI ACWI (Net) Index | 12.59 | 11.15 | ||||||||||
* Date of inception 4/11/16.
(a) A 5.50% front-end sales charge was deducted.
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.
The graph illustrates comparative performance for $10,000 invested in the Class I Shares of the 1290 Global Talents Fund and the MSCI ACWI (Net) Index from 4/11/16 to 10/31/19. The performance of the MSCI ACWI (Net) Index reflects an initial investment at the end of the month closest to the Fund’s inception. The performance of the Fund assumes reinvestment of all dividends and capital gain distributions, if any, and does not include a sales charge. The performance of the MSCI ACWI (Net) Index does not reflect the deduction of expenses or a sales charge associated with a mutual fund and has been adjusted to reflect reinvestment of all dividends, capital gain distributions, and interest of the securities included in the benchmark.
As of March 1, 2019, the gross expense ratios for Class A, I and R shares were 1.94%, 1.69% and 2.19%, respectively. The net expense ratios for Class A, I and R shares were 1.25%, 1.00% and 1.50%, respectively. The net expense ratios reflect the Adviser’s decision to contractually limit expenses through April 30, 2020. Fund Performance may also 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.
In addition, 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.
PERFORMANCE SUMMARY
The Fund’s Class I shares returned 6.72% for the year ended October 31, 2019. The Fund’s benchmark, the MSCI ACWI (Net) Index, returned 12.59% over the same year.
Overview — AXA Investment Managers, Inc.
Over the last twelve months, global equity markets have risen double-digits but seen tremendous volatility in a context of macro-economic uncertainty. The U.S.-China conflict further escalated, which surprised most investors which had pinned their hopes on a partial resolution. The U.S. Federal Reserve (Fed) backtracked by not only halting quantitative tightening but delivering three consecutive interest rates cuts. This led a number of other central banks to follow suit. Manufacturing weakness spread across regions from China to Germany and the United States. Conflicts and mass protests erupted, notably in Hong Kong, but also in the Middle East and in South America, with in some cases stark economic impact. The UK postponed several times its exit from the European Union, maintaining the uncertainty.
Global equity markets experienced a sharp sell-off at the end of 2018, which was immediately followed by an equally sharp rebound at the start of 2019. Market volatility continued but markets rose as deep pessimism left the floor to cautious optimism. September witnessed a market rotation into value names and away from momentum growth names. In addition, we have also seen a rebound lately in cyclical names. From a sector perspective, interest rate sensitive sectors such as real estate and utilities were clear winners. Information technology continued on its secular growth path. Cyclical sectors such as consumer discretionary (in a context of resilient consumer demand) and industrials (on the premise that manufacturing weakness may be bottoming out) did relatively well. The big laggard was energy, which was down over the period, pressured by both cyclical and structural factors.
Any resolution of the geopolitical tensions, trade conflicts and political uncertainty would be positive for equities markets. If the world continues on its path of modest economic growth, as is our base case scenario, rather than enter a deep recession, as many market participants fear, we would expect equities to continue to move higher.
Fund Highlights
Entrepreneurial and family owned businesses share some common attributes: their leaders have ‘skin in the game’, they remain in control of their destiny (not dependent on banks for example), they take a long-term perspective when managing their businesses, and they tend to focus on areas where they have developed an expertise. As a result, they tend to focus less on meeting short term targets and/or near-term market expectations (which means more volatile
59
1290 GLOBAL TALENTS FUND (Unaudited)
earnings versus companies which manage their earnings). They tend to see difficult times as transitory; as such, they continue to invest for the long term. This means that their performance can be more volatile than the rest of the market.
The Fund is undergoing a period of underperformance versus its benchmark which can be partly explained by the reasons mentioned above. We believe that we continue to retain in the Fund good quality companies, with solid management teams and leaders, exposed to the long-term structural trends that are reshaping the global economy. However, a number of these companies are being caught in the trade wars, current political uncertainty and general macro-economic slowdown. We have made some adjustments to the Fund over the last twelve months: exiting some underperforming names, reducing the exposure to the most volatile names, adding new more defensive family/entrepreneurial names to the Fund and increasing our cash levels.
What helped performance during the year?
• | Prologis, Inc., which was added during the period, was a stellar performer, with its growing exposure to e-commerce continuing to pay off. |
• | In the health care space, long-held holdings Stryker Corp. and Roche Holding AG delivered, in the first case solid and accelerating growth trajectory, and in the second case reassuring and solid outlook (despite persistent biosimilar threat). |
• | Ecolab, Inc. continued to deliver steady growth on the back of recurring revenue stream, consistent execution and a diversified portfolio. |
• | Booz Allen Hamilton Holding Corp., which was added during the period, continued to benefit from solid U.S. government spending, solid execution and an effective hiring strategy. |
• | Facebook, Inc.’s share price appreciated in view of its continued stronghold in global advertising and despite heavy ongoing regulatory scrutiny |
• | In technology, Dassault Systemes SE and Proofpoint, Inc. delivered strong revenue growth while QUALCOMM, Inc. proved resilient by reaching resolution in a context of various disputes and appears well positioned for the 5G opportunity. |
What hurt performance during the year?
• | We have seen weakness in our energy holdings, which are concentrated in the Permian basin: Concho Resources, Inc. and EOG Resources, Inc. The macro-economic slowdown has hurt oil prices, with the outlook further muddled by structure pressure (renewables, electric vehicles, etc.) and the issues have been compounded for these U.S. shale oil players by pipeline capacity constraints and drilling problems. |
• | FedEx Corp. share price has fallen on the back of the macro-economic slow-down and the U.S.-China trade war; it has also decided to pull out from servicing Amazon, focusing instead on longer term contracts with other retail players, which will be a near-term headwind. |
• | SoftBank Group Corp. share price was hurt by the declining value of its investments in the Vision Fund, primarily the fall in Uber Technologies shares and the aborted initial public offering (IPO) and ensuing lower valuation in WeWork. |
• | The Charles Schwab Corp. share price fell as the tailwind of higher interest rates faded while price competition in the industry continued to intensify. |
• | Jazz Pharmaceuticals plc came under pressure as political rhetoric over U.S. health care reform and drug pricing continues unabated and it is facing increased competitive pressure. |
• | In some cases, we decided to exit underperforming holdings: ZOZO, Inc. after launching a big innovation which failed and dented profitability considerably, a recently announced new innovation failed to convince us; Henkel decided to reinvest aggressively in its digital and marketing capabilities but we believe its larger and more digital-savvy competitors will stay ahead for a sustainable period; Fresenius SE & Co. lowered its outlook for the next couple of years as it faces sluggish growth in its domestic hospital division as well as rising labor and legal costs. |
Sector Weightings as of October 31, 2019 | Market Value | % of Net Assets | ||||||
Information Technology | $6,116,454 | 22.3 | % | |||||
Financials | 3,853,397 | 14.1 | ||||||
Health Care | 3,615,682 | 13.2 | ||||||
Communication Services | 3,414,893 | 12.5 | ||||||
Consumer Staples | 2,751,092 | 10.1 | ||||||
Consumer Discretionary | 2,100,760 | 7.7 | ||||||
Industrials | 2,002,205 | 7.3 | ||||||
Materials | 1,177,197 | 4.3 | ||||||
Real Estate | 718,403 | 2.6 | ||||||
Energy | 578,881 | 2.1 | ||||||
Investment Company | 378,032 | 1.4 | ||||||
Cash and Other | 662,497 | 2.4 | ||||||
|
| |||||||
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 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 October 31, 2019 and held for the entire six-month period.
60
1290 GLOBAL TALENTS 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 | Ending Account Value 10/31/19 | Expenses Paid During Period* 10/31/19 | ||||||||||
Class A |
| |||||||||||
Actual | $1,000.00 | $970.80 | $6.21 | |||||||||
Hypothetical (5% average annual return before expenses) | 1,000.00 | 1,018.90 | 6.36 | |||||||||
Class I | ||||||||||||
Actual | 1,000.00 | 971.80 | 4.97 | |||||||||
Hypothetical (5% average annual return before expenses) | 1,000.00 | 1,020.16 | 5.09 | |||||||||
Class R | ||||||||||||
Actual | 1,000.00 | 969.80 | 7.45 | |||||||||
Hypothetical (5% average annual return before expenses) | 1,000.00 | 1,017.64 | 7.63 | |||||||||
* Expenses are equal to the Fund’s Class A, I and R shares annualized expense ratios of 1.25%, 1.00% and 1.50%, respectively, multiplied by the average account value over the period, and multiplied by 184/365 (to reflect the one-half year period). |
|
61
1290 FUNDS
1290 GLOBAL TALENTS FUND
PORTFOLIO OF INVESTMENTS
October 31, 2019
Number of Shares | Value (Note 1) | |||||||
COMMON STOCKS: | ||||||||
Belgium (3.1%) | ||||||||
Anheuser-Busch InBev SA/NV | 10,626 | $ | 853,759 | |||||
|
| |||||||
China (4.9%) | ||||||||
Alibaba Group Holding Ltd. (ADR)* | 3,990 | 704,913 | ||||||
Tencent Holdings Ltd. | 15,700 | 642,751 | ||||||
|
| |||||||
1,347,664 | ||||||||
|
| |||||||
Finland (1.6%) | ||||||||
Sampo OYJ, Class A | 10,420 | 426,971 | ||||||
|
| |||||||
France (4.8%) | ||||||||
Dassault Systemes SE | 5,742 | 871,271 | ||||||
Financiere de L’Odet SA | 506 | 446,959 | ||||||
|
| |||||||
1,318,230 | ||||||||
|
| |||||||
Israel (2.4%) | ||||||||
Check Point Software Technologies Ltd.* | 5,878 | 660,746 | ||||||
|
| |||||||
Japan (7.9%) | ||||||||
Kose Corp. | 3,800 | 679,137 | ||||||
SoftBank Group Corp. | 19,200 | 744,958 | ||||||
Unicharm Corp. | 22,000 | 751,532 | ||||||
|
| |||||||
2,175,627 | ||||||||
|
| |||||||
Mexico (1.7%) | ||||||||
Fomento Economico Mexicano SAB de CV | 52,500 | 466,664 | ||||||
|
| |||||||
Peru (2.4%) | ||||||||
Credicorp Ltd. | 3,007 | 643,618 | ||||||
|
| |||||||
Spain (1.7%) | ||||||||
Industria de Diseno Textil SA | 14,742 | 459,547 | ||||||
|
| |||||||
Sweden (2.3%) | ||||||||
Assa Abloy AB, Class B | 26,870 | 637,264 | ||||||
|
| |||||||
Switzerland (3.6%) | ||||||||
Roche Holding AG | 3,251 | 978,101 | ||||||
|
| |||||||
United States (59.8%) | ||||||||
Alphabet, Inc., Class A* | 858 | 1,080,050 | ||||||
Amazon.com, Inc.* | 527 | 936,300 | ||||||
Apple, Inc. | 5,145 | 1,279,870 | ||||||
Bank OZK | 18,113 | 508,251 | ||||||
Berkshire Hathaway, Inc., Class B* | 5,566 | 1,183,220 | ||||||
BlackRock, Inc. | 1,262 | 582,665 | ||||||
Booz Allen Hamilton Holding Corp. | 8,607 | 605,675 | ||||||
Charles Schwab Corp. (The) | 12,495 | 508,672 | ||||||
Cognex Corp. | 7,880 | 405,741 | ||||||
Concho Resources, Inc. | 3,638 | 245,638 | ||||||
DexCom, Inc.* | 4,456 | 687,293 | ||||||
Ecolab, Inc. | 6,129 | 1,177,197 | ||||||
EOG Resources, Inc. | 4,808 | 333,243 | ||||||
Facebook, Inc., Class A* | 4,942 | 947,134 | ||||||
FedEx Corp. | 4,147 | 633,081 | ||||||
Fidelity National Information Services, Inc. | 5,680 | 748,397 | ||||||
Fortive Corp. | 4,129 | 284,901 | ||||||
IPG Photonics Corp.* | 3,335 | 447,824 | ||||||
Jazz Pharmaceuticals plc* | 4,198 | 527,395 | ||||||
Prologis, Inc. (REIT) | 8,186 | 718,403 | ||||||
Proofpoint, Inc.* | 5,229 | 603,270 | ||||||
QUALCOMM, Inc. | 6,137 | 493,660 | ||||||
Stryker Corp. | 3,137 | 678,439 | ||||||
UnitedHealth Group, Inc. | 2,946 | 744,454 | ||||||
|
| |||||||
16,360,773 | ||||||||
|
| |||||||
Total Common Stocks (96.2%) | 26,328,964 | |||||||
|
| |||||||
SHORT-TERM INVESTMENT: |
| |||||||
Investment Company (1.4%) |
| |||||||
JPMorgan Prime Money Market Fund, IM Shares | 377,881 | 378,032 | ||||||
|
| |||||||
Total Short-Term Investment (1.4%) | 378,032 | |||||||
|
| |||||||
Total Investments in Securities (97.6%) | 26,706,996 | |||||||
Other Assets Less Liabilities (2.4%) | 662,497 | |||||||
|
| |||||||
Net Assets (100%) | $ | 27,369,493 | ||||||
|
|
* | Non-income producing. |
Glossary:
ADR | — American Depositary Receipt |
REIT | — Real Estate Investment Trust |
See Notes to Financial Statements.
62
1290 FUNDS
1290 GLOBAL TALENTS FUND
PORTFOLIO OF INVESTMENTS (Continued)
October 31, 2019
The following is a summary of the inputs used to value the Fund’s assets and liabilities carried at fair value as of October 31, 2019:
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 value of investments) | Total | ||||||||||||
Assets: |
| |||||||||||||||
Common Stocks | ||||||||||||||||
Belgium | $ | — | $ | 853,759 | $ | — | $ | 853,759 | ||||||||
China | 704,913 | 642,751 | — | 1,347,664 | ||||||||||||
Finland | — | 426,971 | — | 426,971 | ||||||||||||
France | — | 1,318,230 | — | 1,318,230 | ||||||||||||
Israel | 660,746 | — | — | 660,746 | ||||||||||||
Japan | — | 2,175,627 | — | 2,175,627 | ||||||||||||
Mexico | 466,664 | — | — | 466,664 | ||||||||||||
Peru | 643,618 | — | — | 643,618 | ||||||||||||
Spain | — | 459,547 | — | 459,547 | ||||||||||||
Sweden | — | 637,264 | — | 637,264 | ||||||||||||
Switzerland | — | 978,101 | — | 978,101 | ||||||||||||
United States | 16,360,773 | — | — | 16,360,773 | ||||||||||||
Short-Term Investment | ||||||||||||||||
Investment Company | 378,032 | — | — | 378,032 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Assets | $ | 19,214,746 | $ | 7,492,250 | $ | — | $ | 26,706,996 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total Liabilities | $ | — | $ | — | $ | — | $ | — | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total | $ | 19,214,746 | $ | 7,492,250 | $ | — | $ | 26,706,996 | ||||||||
|
|
|
|
|
|
|
|
The Effect of Derivative Instruments on the Statement of Operations for the year ended October 31, 2019:
Amount of Realized Gain or (Loss) on Derivatives Recognized in Income | ||||||||
Derivatives Contracts^ | Forward Foreign Currency Contracts | Total | ||||||
Foreign exchange contracts | $ | (332 | ) | $ | (332 | ) | ||
|
|
|
| |||||
Total | $ | (332 | ) | $ | (332 | ) | ||
|
|
|
|
^ The Fund held forward foreign currency contracts for hedging.
The Fund held forward foreign currency contracts with an average settlement value of approximately $73,000 for three days during the year ended October 31, 2019.
Investment security transactions for the year ended October 31, 2019 were as follows:
Cost of Purchases: | ||||
Long-term investments other than U.S. government debt securities | $ | 5,041,716 | ||
Net Proceeds of Sales and Redemptions: | ||||
Long-term investments other than U.S. government debt securities | $ | 5,995,365 |
See Notes to Financial Statements.
63
1290 FUNDS
1290 GLOBAL TALENTS FUND
PORTFOLIO OF INVESTMENTS (Continued)
October 31, 2019
As of October 31, 2019, the gross unrealized appreciation (depreciation) of investments based on the aggregate cost of investments in securities and derivative instruments, if applicable, for Federal income tax purposes was as follows:
Aggregate gross unrealized appreciation | $ | 5,702,023 | ||
Aggregate gross unrealized depreciation | (1,118,556 | ) | ||
|
| |||
Net unrealized appreciation | $ | 4,583,467 | ||
|
| |||
Federal income tax cost of investments in securities and derivative instruments, if applicable | $ | 22,123,529 | ||
|
|
See Notes to Financial Statements.
64
1290 FUNDS
1290 GLOBAL TALENTS FUND
STATEMENT OF ASSETS AND LIABILITIES
October 31, 2019
ASSETS | ||||
Investments in Securities, at value (Cost $22,116,505) | $ | 26,706,996 | ||
Cash | 666,000 | |||
Dividends, interest and other receivables | 51,196 | |||
Prepaid registration and filing fees | 11,440 | |||
Receivable for Fund shares sold | 80 | |||
Other assets | 486 | |||
|
| |||
Total assets | 27,436,198 | |||
|
| |||
LIABILITIES | ||||
Administrative fees payable | 3,438 | |||
Transfer agent fees payable | 2,396 | |||
Investment advisory fees payable | 1,541 | |||
Distribution fees payable – Class A | 310 | |||
Distribution fees payable – Class R | 55 | |||
Accrued expenses | 58,965 | |||
|
| |||
Total liabilities | 66,705 | |||
|
| |||
NET ASSETS | $ | 27,369,493 | ||
|
| |||
Net assets were comprised of: | ||||
Paid in capital | $ | 22,621,553 | ||
Total distributable earnings (loss) | 4,747,940 | |||
|
| |||
Net assets | $ | 27,369,493 | ||
|
| |||
Class A | ||||
Net asset value and redemption price per share, $1,448,039 / 117,537 shares outstanding (unlimited amount authorized: $0.001 par value) | $ | 12.32 | ||
Maximum sales charge (5.50% of offering price) | 0.72 | |||
|
| |||
Maximum offering price per share | $ | 13.04 | ||
|
| |||
Class I | ||||
Net asset value and redemption price per share, $25,798,915 / 2,080,040 shares outstanding (unlimited amount authorized: $0.001 par value) | $ | 12.40 | ||
|
| |||
Class R | ||||
Net asset value and redemption price per share, $122,539 / 10,035 shares outstanding (unlimited amount authorized: $0.001 par value) | $ | 12.21 | ||
|
|
STATEMENT OF OPERATIONS
For the Year Ended October 31, 2019
INVESTMENT INCOME | ||||
Dividends (net of $20,107 foreign withholding tax) | $ | 312,286 | ||
Interest | 12,442 | |||
|
| |||
Total income | 324,728 | |||
|
| |||
EXPENSES | ||||
Investment advisory fees | 214,037 | |||
Professional fees | 78,393 | |||
Administrative fees | 40,132 | |||
Registration and filing fees | 39,601 | |||
Printing and mailing expenses | 30,833 | |||
Transfer agent fees | 30,250 | |||
Custodian fees | 19,325 | |||
Distribution fees – Class A | 3,502 | |||
Trustees’ fees | 2,412 | |||
Distribution fees – Class R | 625 | |||
Miscellaneous | 23,369 | |||
|
| |||
Gross expenses | 482,479 | |||
Less: Waiver from investment adviser | (210,795 | ) | ||
|
| |||
Net expenses | 271,684 | |||
|
| |||
NET INVESTMENT INCOME (LOSS) | 53,044 | |||
|
| |||
REALIZED AND UNREALIZED GAIN (LOSS) | ||||
Realized gain (loss) on: | ||||
Investments in securities | 97,748 | |||
Forward foreign currency contracts | (332 | ) | ||
Foreign currency transactions | (229 | ) | ||
|
| |||
Net realized gain (loss) | 97,187 | |||
|
| |||
Change in unrealized appreciation (depreciation) on: | ||||
Investments in securities | 1,534,381 | |||
Foreign currency translations | 166 | |||
|
| |||
Net change in unrealized appreciation (depreciation) | 1,534,547 | |||
|
| |||
NET REALIZED AND UNREALIZED GAIN (LOSS) | 1,631,734 | |||
|
| |||
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | $ | 1,684,778 | ||
|
|
See Notes to Financial Statements.
65
1290 FUNDS
1290 GLOBAL TALENTS FUND
STATEMENT OF CHANGES IN NET ASSETS
Year Ended October 31, | ||||||||
2019 | 2018 | |||||||
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS: | ||||||||
Net investment income (loss) | $ | 53,044 | $ | 32,506 | ||||
Net realized gain (loss) | 97,187 | 1,334,825 | ||||||
Net change in unrealized appreciation (depreciation) | 1,534,547 | (2,041,685 | ) | |||||
|
|
|
| |||||
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | 1,684,778 | (674,354 | ) | |||||
|
|
|
| |||||
Distributions to shareholders: | ||||||||
Class A | (59,488 | ) | — | |||||
Class I | (1,215,312 | ) | (33,488 | ) | ||||
Class R | (5,857 | ) | — | |||||
|
|
|
| |||||
Total distributions to shareholders | (1,280,657 | ) | (33,488 | ) | ||||
|
|
|
| |||||
CAPITAL SHARES TRANSACTIONS: | ||||||||
Class A | ||||||||
Capital shares sold [ 28,983 and 49,492 shares, respectively ] | 348,443 | 660,562 | ||||||
Capital shares issued in reinvestment of dividends [ 4,796 and 0 shares, respectively ] | 53,769 | — | ||||||
Capital shares repurchased [ (20,615) and (9,676) shares, respectively ] | (249,226 | ) | (130,124 | ) | ||||
|
|
|
| |||||
Total Class A transactions | 152,986 | 530,438 | ||||||
|
|
|
| |||||
Class I | ||||||||
Capital shares sold [ 20,818 and 86,207 shares, respectively ] | 242,976 | 1,178,073 | ||||||
Capital shares issued in reinvestment of dividends [ 5,591 and 33 shares, respectively ] | 62,951 | 422 | ||||||
Capital shares repurchased [ (33,603) and (2,640) shares, respectively ] | (394,874 | ) | (35,891 | ) | ||||
|
|
|
| |||||
Total Class I transactions | (88,947 | ) | 1,142,604 | |||||
|
|
|
| |||||
Class R | ||||||||
Capital shares sold [ 628 and 120 shares, respectively ] | 7,467 | 1,599 | ||||||
Capital shares issued in reinvestment of dividends [ 12 and 0 shares, respectively ] | 137 | — | ||||||
Capital shares repurchased [ (734) and 0# shares, respectively ] | (8,933 | ) | (2 | ) | ||||
|
|
|
| |||||
Total Class R transactions | (1,329 | ) | 1,597 | |||||
|
|
|
| |||||
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM CAPITAL SHARE TRANSACTIONS | 62,710 | 1,674,639 | ||||||
|
|
|
| |||||
TOTAL INCREASE (DECREASE) IN NET ASSETS | 466,831 | 966,797 | ||||||
NET ASSETS: | ||||||||
Beginning of year | 26,902,662 | 25,935,865 | ||||||
|
|
|
| |||||
End of year | $ | 27,369,493 | $ | 26,902,662 | ||||
|
|
|
|
| ||||
# Number of shares is less than 0.5. |
See Notes to Financial Statements.
66
1290 FUNDS
1290 GLOBAL TALENTS FUND
FINANCIAL HIGHLIGHTS
Year Ended October 31, | April 11, 2016* to October 31, 2016 | |||||||||||||||
Class A | 2019 | 2018 | 2017 | |||||||||||||
Net asset value, beginning of period | $ | 12.16 | $ | 12.44 | $ | 10.33 | $ | 10.00 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Income (loss) from investment operations: | ||||||||||||||||
Net investment income (loss) (e) | — | # | (0.02 | ) | (0.03 | ) | (0.01 | ) | ||||||||
Net realized and unrealized gain (loss) | 0.73 | (0.26 | ) | 2.18 | 0.34 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
Total from investment operations | 0.73 | (0.28 | ) | 2.15 | 0.33 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
Less distributions: | ||||||||||||||||
Distributions from net realized gains | (0.57 | ) | — | (0.04 | ) | — | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Net asset value, end of period | $ | 12.32 | $ | 12.16 | $ | 12.44 | $ | 10.33 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total return (b) | 6.49 | % | (2.25 | )% | 20.89 | % | 3.30 | % | ||||||||
|
|
|
|
|
|
|
| |||||||||
Ratios/Supplemental Data: | ||||||||||||||||
Net assets, end of period (000’s) | $ | 1,448 | $ | 1,270 | $ | 803 | $ | 103 | ||||||||
Ratio of expenses to average net assets: | ||||||||||||||||
After waivers and reimbursements (a)(f) | 1.25 | % | 1.25 | % | 1.27 | % | 1.40 | % | ||||||||
Before waivers and reimbursements (a)(f) | 2.04 | % | 1.94 | % | 2.13 | % | 2.31 | % | ||||||||
Ratio of net investment income (loss) to average net assets: | ||||||||||||||||
After waivers and reimbursements (a)(f) | (0.02 | )% | (0.13 | )% | (0.25 | )% | (0.19 | )%(l) | ||||||||
Before waivers and reimbursements (a)(f) | (0.81 | )% | (0.82 | )% | (1.11 | )% | (1.10 | )%(l) | ||||||||
Portfolio turnover rate (z)^ | 20 | % | 26 | % | 18 | % | 11 | % | ||||||||
Year Ended October 31, | April 11, 2016* to October 31, 2016 | |||||||||||||||
Class I | 2019 | 2018 | 2017 | |||||||||||||
Net asset value, beginning of period | $ | 12.22 | $ | 12.48 | $ | 10.34 | $ | 10.00 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Income (loss) from investment operations: | ||||||||||||||||
Net investment income (loss) (e) | 0.03 | 0.02 | 0.01 | — | # | |||||||||||
Net realized and unrealized gain (loss) | 0.73 | (0.26 | ) | 2.18 | 0.34 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
Total from investment operations | 0.76 | (0.24 | ) | 2.19 | 0.34 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
Less distributions: | ||||||||||||||||
Dividends from net investment income | (0.01 | ) | (0.02 | ) | (0.01 | ) | — | |||||||||
Distributions from net realized gains | (0.57 | ) | — | (0.04 | ) | — | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Total dividends and distributions | (0.58 | ) | (0.02 | ) | (0.05 | ) | — | |||||||||
|
|
|
|
|
|
|
| |||||||||
Net asset value, end of period | $ | 12.40 | $ | 12.22 | $ | 12.48 | $ | 10.34 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total return (b) | 6.72 | % | (1.95 | )% | 21.23 | % | 3.40 | % | ||||||||
|
|
|
|
|
|
|
| |||||||||
Ratios/Supplemental Data: | ||||||||||||||||
Net assets, end of period (000’s) | $ | 25,799 | $ | 25,511 | $ | 25,009 | $ | 20,479 | ||||||||
Ratio of expenses to average net assets: | ||||||||||||||||
After waivers and reimbursements (a)(f) | 1.00 | % | 1.00 | % | 1.05 | % | 1.15 | % | ||||||||
Before waivers and reimbursements (a)(f) | 1.79 | % | 1.69 | % | 1.92 | % | 2.06 | % | ||||||||
Ratio of net investment income (loss) to average net assets: | ||||||||||||||||
After waivers and reimbursements (a)(f) | 0.21 | % | 0.13 | % | 0.09 | % | 0.06 | %(l) | ||||||||
Before waivers and reimbursements (a)(f) | (0.57 | )% | (0.56 | )% | (0.79 | )% | (0.85 | )%(l) | ||||||||
Portfolio turnover rate (z)^ | 20 | % | 26 | % | 18 | % | 11 | % |
See Notes to Financial Statements.
67
1290 FUNDS
1290 GLOBAL TALENTS FUND
FINANCIAL HIGHLIGHTS (Continued)
Year Ended October 31, | April 11, 2016* to October 31, 2016 | |||||||||||||||
Class R | 2019 | 2018 | 2017 | |||||||||||||
Net asset value, beginning of period | $ | 12.09 | $ | 12.39 | $ | 10.31 | $ | 10.00 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Income (loss) from investment operations: | ||||||||||||||||
Net investment income (loss) (e) | (0.03 | ) | (0.05 | ) | (0.05 | ) | (0.03 | ) | ||||||||
Net realized and unrealized gain (loss) | 0.72 | (0.25 | ) | 2.17 | 0.34 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
Total from investment operations | 0.69 | (0.30 | ) | 2.12 | 0.31 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
Less distributions: | ||||||||||||||||
Distributions from net realized gains | (0.57 | ) | — | (0.04 | ) | — | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Net asset value, end of period | $ | 12.21 | $ | 12.09 | $ | 12.39 | $ | 10.31 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total return (b) | 6.18 | % | (2.42 | )% | 20.64 | % | 3.10 | % | ||||||||
|
|
|
|
|
|
|
| |||||||||
Ratios/Supplemental Data: | ||||||||||||||||
Net assets, end of period (000’s) | $ | 123 | $ | 122 | $ | 124 | $ | 103 | ||||||||
Ratio of expenses to average net assets: | ||||||||||||||||
After waivers and reimbursements (a)(f) | 1.50 | % | 1.50 | % | 1.55 | % | 1.65 | % | ||||||||
Before waivers and reimbursements (a)(f) | 2.29 | % | 2.19 | % | 2.42 | % | 2.56 | % | ||||||||
Ratio of net investment income (loss) to average net assets: | ||||||||||||||||
After waivers and reimbursements (a)(f) | (0.29 | )% | (0.37 | )% | (0.41 | )% | (0.44 | )%(l) | ||||||||
Before waivers and reimbursements (a)(f) | (1.08 | )% | (1.06 | )% | (1.29 | )% | (1.35 | )%(l) | ||||||||
Portfolio turnover rate (z)^ | 20 | % | 26 | % | 18 | % | 11 | % |
* | 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. Certain non-recurring expenses incurred by the Fund are not annualized for periods less than one year. |
(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”), if applicable. |
(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.
68
1290 HIGH YIELD BOND FUND (Unaudited)
INVESTMENT ADVISER
Ø | 1290 Asset Managers® |
INVESTMENT SUB-ADVISER
Ø | AXA Investment Managers, Inc. |
PERFORMANCE RESULTS
Annualized Total Returns as of 10/31/19 | ||||||||||||
1 Year | Since Incept. | |||||||||||
Fund – Class A Shares* | without Sales Charge | 6.97 | % | 4.05 | % | |||||||
with Sales Charge (a | ) | 2.16 | 3.09 | |||||||||
Fund – Class I Shares* | 7.12 | 4.30 | ||||||||||
Fund – Class R Shares* | 6.59 | 3.78 | ||||||||||
Fund – Class T Shares*† | without Sales Charge | 7.24 | 4.31 | |||||||||
with Sales Charge (b | ) | 4.55 | 3.77 | |||||||||
ICE BofAML U.S. High Yield Index | 8.32 | 5.23 | ||||||||||
* Date of inception 11/12/14.
† Class T Shares currently are not offered for sale.
(a) A 4.50% front-end sales charge was deducted.
(b) A 2.50% front-end sales charge was deducted.
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.
The graph illustrates comparative performance for $10,000 invested in the Class I Shares of the 1290 High Yield Bond Fund and the ICE BofAML U.S. High Yield Index from 11/12/14 to 10/31/19. The performance of the ICE BofAML U.S. High Yield Index reflects an initial investment at the end of the month closest to the Fund’s inception. The performance of the Fund assumes reinvestment of all dividends and capital gain distributions, if any, and does not include a sales charge. The performance of the ICE BofAML U.S. High Yield Index does not reflect the deduction of expenses or a sales charge associated with a mutual fund and has been adjusted to reflect reinvestment of all dividends, capital gain distributions, and interest of the securities included in the benchmark.
As of March 1, 2019, the gross expense ratios for Class A, I, R and T shares were 1.77%, 1.52%, 2.02% and 1.77%, respectively. The net expense ratios for Class A, I, R and T shares were 1.00%, 0.75%, 1.25% and 1.00%, respectively. The net expense ratios reflect the Adviser’s decision to contractually limit expenses through April 30, 2020. Fund Performance may also 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.
In addition, 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.
PERFORMANCE SUMMARY
The Fund’s Class I shares returned 7.12% for the year ended October 31, 2019. The Fund’s benchmark, the ICE BofAML U.S. High Yield Index, returned 8.32% over the same year.
Overview — AXA Investment Managers, Inc.
The high yield market posted a positive return in the twelve-month period ending October 31, 2019. Returns in the period were driven by continued economic growth in the U.S., stable credit fundamentals and softer-than-usual new issue volume which supported secondary trading levels, partially offset by volatility in the stock market, ongoing global growth uncertainty and recessionary expectations. Flows in the high yield market were modestly positive for the period, with $5.7 billion of inflows. The high yield new issue market priced $236.2 billion of new issues during the twelve-month period ending October 31, 2019, which is modestly higher than the $228 billion priced during the prior twelve-month period. The period saw $30.7 billion of high yield default volume, modestly higher than the $26.2 billion of high yield default volume in the prior twelve-month period. The par weighted high yield default rate ended the period at 2.54%, up from 2.04% in October 2018.
Fund Highlights
What helped performance during the year?
• | Positive security selection benefited the Fund, particularly within the higher yielding segment of the market. |
• | The top contributors to return during the period were debt positions in Staples, Inc., JBS USA Lux SA and Charter Communications Operating LLC. Staples (Arch Merger) is a business-to-business distributor serving mainly the United States and Canada. The Staples 8.5% due 2025 bond was a top contributor due to this bond being called at the make whole premium price as part of a larger refinancing transaction. JBS USA is a processor of proteins. The JBS USA 6.75% due 2028 bond was a top performer as the company benefited from rising meat prices due to African Swine Flu in addition to a credit rating upgrade by S&P. Charter Communications (CCO Holdings) is the second largest cable television and internet provider in the U.S. The Charter Communications 5.875% due 2027 bond was a top contributor due to the company’s positive operating performance and resilient cash flow dynamics. |
69
1290 HIGH YIELD BOND FUND (Unaudited)
• | From a sector perspective, the Fund benefited from significantly from positive security selection within the energy sector. |
• | Fund performance benefited from participation in multiple new issues during the period which performed well post pricing. |
What hurt performance during the year?
• | The Fund experienced negative security selection within the telecommunications and retail sectors. The Fund’s underweight within the banking sector had a negative impact on relative performance during the period. |
• | The bottom contributors to return during the period were debt positions in Exela Technologies, GTT Communications, Inc. and Envision Healthcare Corp. Exela Technologies is a provider of business process outsourcing and automation. The Exela Technologies bonds performed poorly during the period due to the company reporting weaker than expected earnings and reducing guidance for fiscal year 2019. The Exela bond was also downgraded by both Moody’s and S&P. GTT Communications is a global alternative fiber operator, with most of its operations in North America and Europe. The GTT Communications bond was a bottom contributor during the period as the company experienced significant headwinds integrating a large acquisition, resulting in deteriorating top-line performance and increasing leverage metrics. Envision Healthcare (Enterprise Merger Sub) provides outsourced physician staffing and operates ambulatory surgery centers. The bond was a bottom performer due to legislation moving through Congress that could potentially reduce Envision’s reimbursement for emergency room physician services. |
• | The Fund’s macro risk positioning had a negative impact on relative performance driven by the Fund’s underweight within the higher quality, longer duration portion of the market. |
Fund Characteristics As of October 31, 2019 | ||||
Weighted Average Life (Years) | 4.98 | |||
Weighted Average Coupon (%) | 6.81 | |||
Weighted Average Effective Duration (Years)* | 2.38 | |||
Weighted Average Rating** | B2 | |||
* Effective duration is a measure of the price sensitivity of the Fund to interest rate movements, taking into account specific features of the securities in which it invests.
** Weighted Average Rating has been provided by the Investment Sub-Adviser. A credit rating is an assessment provided by a nationally recognized statistical rating organization (NRSRO) of the creditworthiness of an issuer with respect to debt obligations, including specific securities, money market instruments or other debts. Ratings are measured on a scale that generally ranges from AAA (highest) to D (lowest); ratings are subject to change without notice. |
|
Sector Weightings as of October 31, 2019 | % of Net Assets | |||
Communication Services | 14.8 | % | ||
Industrials | 13.0 | |||
Energy | 11.9 | |||
Information Technology | 11.7 | |||
Materials | 11.5 | |||
Health Care | 9.8 | |||
Consumer Discretionary | 8.6 | |||
Consumer Staples | 5.4 | |||
Financials | 5.0 | |||
Real Estate | 2.5 | |||
Investment Company | 2.5 | |||
Utilities | 0.2 | |||
Cash and Other | 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, Class R and Class T 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 October 31, 2019 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.
70
1290 HIGH YIELD BOND 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 5/1/19 | Ending Account Value 10/31/19 | Expenses Paid During Period* 5/1/19 - 10/31/19 | ||||||||||
Class A |
| |||||||||||
Actual | $1,000.00 | $1,018.50 | $5.09 | |||||||||
Hypothetical (5% average annual return before expenses) | 1,000.00 | 1,020.16 | 5.09 | |||||||||
Class I | ||||||||||||
Actual | 1,000.00 | 1,018.70 | 3.82 | |||||||||
Hypothetical (5% average annual return before expenses) | 1,000.00 | 1,021.42 | 3.82 | |||||||||
Class R | ||||||||||||
Actual | 1,000.00 | 1,016.10 | 6.35 | |||||||||
Hypothetical (5% average annual return before expenses) | 1,000.00 | 1,018.90 | �� | 6.36 | ||||||||
Class T** | ||||||||||||
Actual | 1,000.00 | 1,018.70 | 3.82 | |||||||||
Hypothetical (5% average annual return before expenses) | 1,000.00 | 1,021.42 | 3.82 | |||||||||
* Expenses are equal to the Fund’s Class A, I, R and T shares annualized expense ratios of 1.00%, 0.75%, 1.25% and 0.75%, respectively, multiplied by the average account value over the period, and multiplied by 184/365 (to reflect the one-half year period).
** Class T shares currently are not offered for sale. |
|
71
1290 FUNDS
1290 HIGH YIELD BOND FUND
PORTFOLIO OF INVESTMENTS
October 31, 2019
Principal Amount | Value (Note 1) | |||||||
LONG-TERM DEBT SECURITIES: |
| |||||||
Corporate Bonds (94.4%) | ||||||||
Communication Services (14.8%) | ||||||||
Diversified Telecommunication Services (5.1%) |
| |||||||
CCO Holdings LLC | ||||||||
5.250%, 9/30/22 | $ | 245,000 | $ | 247,144 | ||||
5.125%, 5/1/23§ | 136,000 | 139,060 | ||||||
5.750%, 1/15/24 | 29,000 | 29,716 | ||||||
5.750%, 2/15/26§ | 132,000 | 139,227 | ||||||
5.875%, 5/1/27§ | 140,000 | 148,575 | ||||||
4.750%, 3/1/30§ | 110,000 | 112,167 | ||||||
CenturyLink, Inc. | ||||||||
Series G | ||||||||
6.875%, 1/15/28 | 128,000 | 134,720 | ||||||
Series W | ||||||||
6.750%, 12/1/23 | 150,000 | 166,687 | ||||||
Cincinnati Bell, Inc. | ||||||||
7.000%, 7/15/24§ | 249,000 | 225,684 | ||||||
Level 3 Financing, Inc. | ||||||||
5.375%, 8/15/22 | 237,000 | 237,593 | ||||||
Level 3 Parent LLC | ||||||||
5.750%, 12/1/22 | 68,000 | 68,085 | ||||||
Sprint Capital Corp. | ||||||||
8.750%, 3/15/32 | 204,000 | 248,625 | ||||||
|
| |||||||
1,897,283 | ||||||||
|
| |||||||
Entertainment (1.1%) | ||||||||
Live Nation Entertainment, Inc. | ||||||||
4.875%, 11/1/24§ | 306,000 | 316,710 | ||||||
Netflix, Inc. | ||||||||
4.875%, 6/15/30§ | 83,000 | 83,913 | ||||||
|
| |||||||
400,623 | ||||||||
|
| |||||||
Interactive Media & Services (1.0%) |
| |||||||
Match Group, Inc. | ||||||||
6.375%, 6/1/24 | 149,000 | 156,822 | ||||||
Rackspace Hosting, Inc. | ||||||||
8.625%, 11/15/24§ | 231,000 | 210,210 | ||||||
|
| |||||||
367,032 | ||||||||
|
| |||||||
Media (6.1%) | ||||||||
Diamond Sports Group LLC | ||||||||
5.375%, 8/15/26§ | 198,000 | 206,415 | ||||||
6.625%, 8/15/27§ | 198,000 | 203,445 | ||||||
DISH DBS Corp. | ||||||||
5.875%, 7/15/22 | 112,000 | 116,711 | ||||||
Getty Images, Inc. | ||||||||
9.750%, 3/1/27§ | 96,000 | 96,840 | ||||||
Lamar Media Corp. | ||||||||
5.375%, 1/15/24 | 74,000 | 75,743 | ||||||
McGraw-Hill Global Education Holdings LLC |
| |||||||
7.875%, 5/15/24§ | 184,000 | 154,100 | ||||||
Meredith Corp. | ||||||||
6.875%, 2/1/26 | 180,000 | 186,196 | ||||||
National CineMedia LLC | ||||||||
6.000%, 4/15/22 | 260,000 | 262,600 | ||||||
5.875%, 4/15/28§ | 61,000 | 64,117 | ||||||
Nexstar Broadcasting, Inc. | ||||||||
5.625%, 8/1/24§ | 46,000 | 47,840 | ||||||
Quebecor Media, Inc. | ||||||||
5.750%, 1/15/23 | 59,000 | 63,850 | ||||||
Sinclair Television Group, Inc. | ||||||||
6.125%, 10/1/22 | 70,000 | 70,875 | ||||||
Sirius XM Radio, Inc. | ||||||||
4.625%, 7/15/24§ | 130,000 | 135,889 | ||||||
5.500%, 7/1/29§ | 52,000 | 56,144 | ||||||
TEGNA, Inc. | ||||||||
5.500%, 9/15/24§ | 150,000 | 154,687 | ||||||
Univision Communications, Inc. |
| |||||||
6.750%, 9/15/22§ | 186,000 | 188,558 | ||||||
Ziggo BV | ||||||||
5.500%, 1/15/27§ | 200,000 | 210,250 | ||||||
|
| |||||||
2,294,260 | ||||||||
|
| |||||||
Wireless Telecommunication Services (1.5%) |
| |||||||
Sprint Communications, Inc. | ||||||||
7.000%, 8/15/20 | 50,000 | 51,508 | ||||||
Sprint Corp. | ||||||||
7.875%, 9/15/23 | 140,000 | 154,252 | ||||||
7.125%, 6/15/24 | 66,000 | 71,445 | ||||||
7.625%, 3/1/26 | 114,000 | 126,113 | ||||||
T-Mobile USA, Inc. | ||||||||
6.000%, 3/1/23 | 101,000 | 102,894 | ||||||
6.000%, 4/15/24 | 64,000 | 66,240 | ||||||
|
| |||||||
572,452 | ||||||||
|
| |||||||
Total Communication Services | 5,531,650 | |||||||
|
| |||||||
Consumer Discretionary (8.6%) |
| |||||||
Auto Components (0.4%) | ||||||||
Panther BF Aggregator 2 LP | ||||||||
8.500%, 5/15/27§ | 134,000 | 134,670 | ||||||
|
| |||||||
Distributors (0.9%) | ||||||||
Performance Food Group, Inc. | ||||||||
5.500%, 10/15/27§ | 50,000 | 53,000 | ||||||
Univar USA, Inc. | ||||||||
6.750%, 7/15/23§ | 265,000 | 268,313 | ||||||
|
| |||||||
321,313 | ||||||||
|
| |||||||
Diversified Consumer Services (0.7%) |
| |||||||
GEMS MENASA Cayman Ltd. | ||||||||
7.125%, 7/31/26§ | 200,000 | 207,875 | ||||||
Service Corp. International | ||||||||
5.375%, 5/15/24 | 36,000 | 37,102 | ||||||
|
| |||||||
244,977 | ||||||||
|
| |||||||
Hotels, Restaurants & Leisure (4.8%) |
| |||||||
1011778 BC ULC | ||||||||
4.250%, 5/15/24§ | 36,000 | 36,945 | ||||||
5.000%, 10/15/25§ | 174,000 | 179,220 | ||||||
Churchill Downs, Inc. | ||||||||
5.500%, 4/1/27§ | 170,000 | 179,988 | ||||||
Eldorado Resorts, Inc. | ||||||||
7.000%, 8/1/23 | 200,000 | 208,750 | ||||||
6.000%, 9/15/26 | 100,000 | 109,625 | ||||||
Golden Entertainment, Inc. | ||||||||
7.625%, 4/15/26§ | 138,000 | 144,900 | ||||||
LTF Merger Sub, Inc. | ||||||||
8.500%, 6/15/23§ | 212,000 | 217,300 | ||||||
MGM Resorts International | ||||||||
6.625%, 12/15/21 | 25,000 | 27,031 | ||||||
Scientific Games International, Inc. | ||||||||
10.000%, 12/1/22 | 239,000 | 245,871 | ||||||
Silversea Cruise Finance Ltd. | ||||||||
7.250%, 2/1/25§ | 247,000 | 261,820 | ||||||
Stars Group Holdings BV | ||||||||
7.000%, 7/15/26§ | 102,000 | 109,553 |
See Notes to Financial Statements.
72
1290 FUNDS
1290 HIGH YIELD BOND FUND
PORTFOLIO OF INVESTMENTS (Continued)
October 31, 2019
Principal Amount | Value (Note 1) | |||||||
Yum! Brands, Inc. | ||||||||
4.750%, 1/15/30§ | $ | 74,000 | $ | 77,608 | ||||
|
| |||||||
1,798,611 | ||||||||
|
| |||||||
Internet & Direct Marketing Retail (0.4%) |
| |||||||
Photo Holdings Merger Sub, Inc. | ||||||||
8.500%, 10/1/26§ | 192,000 | 168,985 | ||||||
|
| |||||||
Multiline Retail (0.1%) | ||||||||
Cumberland Farms, Inc. | ||||||||
6.750%, 5/1/25§ | 53,000 | 56,837 | ||||||
|
| |||||||
Specialty Retail (1.3%) | ||||||||
eG Global Finance plc | ||||||||
8.500%, 10/30/25§ | 200,000 | 209,500 | ||||||
KGA Escrow LLC | ||||||||
7.500%, 8/15/23§ | 144,000 | 153,000 | ||||||
Penske Automotive Group, Inc. | ||||||||
5.750%, 10/1/22 | 78,000 | 78,877 | ||||||
Staples, Inc. | ||||||||
10.750%, 4/15/27§ | 60,000 | 62,250 | ||||||
|
| |||||||
503,627 | ||||||||
|
| |||||||
Total Consumer Discretionary | 3,229,020 | |||||||
|
| |||||||
Consumer Staples (5.4%) | ||||||||
Food Products (3.1%) | ||||||||
B&G Foods, Inc. | ||||||||
5.250%, 4/1/25 | 101,000 | 103,146 | ||||||
5.250%, 9/15/27 | 74,000 | 73,815 | ||||||
Clearwater Seafoods, Inc. | ||||||||
6.875%, 5/1/25§ | 83,000 | 85,490 | ||||||
JBS USA Lux SA | ||||||||
6.750%, 2/15/28§ | 200,000 | 220,625 | ||||||
Lamb Weston Holdings, Inc. | ||||||||
4.625%, 11/1/24§ | 22,000 | 23,127 | ||||||
4.875%, 11/1/26§ | 137,000 | 144,193 | ||||||
Pilgrim’s Pride Corp. | ||||||||
5.875%, 9/30/27§ | 136,000 | 145,452 | ||||||
Post Holdings, Inc. | ||||||||
5.750%, 3/1/27§ | 156,000 | 165,498 | ||||||
Sigma Holdco BV | ||||||||
7.875%, 5/15/26§ | 200,000 | 193,000 | ||||||
|
| |||||||
1,154,346 | ||||||||
|
| |||||||
Household Products (1.3%) | ||||||||
Central Garden & Pet Co. | ||||||||
6.125%, 11/15/23 | 121,000 | 125,083 | ||||||
Energizer Holdings, Inc. | ||||||||
5.500%, 6/15/25§ | 36,000 | 37,260 | ||||||
7.750%, 1/15/27§ | 99,000 | 109,395 | ||||||
Kronos Acquisition Holdings, Inc. | ||||||||
9.000%, 8/15/23§ | 189,000 | 164,194 | ||||||
Spectrum Brands, Inc. | ||||||||
6.625%, 11/15/22 | 68,000 | 68,751 | ||||||
|
| |||||||
504,683 | ||||||||
|
| |||||||
Personal Products (1.0%) | ||||||||
Prestige Brands, Inc. | ||||||||
5.375%, 12/15/21§ | 138,000 | 138,276 | ||||||
6.375%, 3/1/24§ | 221,000 | 230,669 | ||||||
|
| |||||||
368,945 | ||||||||
|
| |||||||
Total Consumer Staples | 2,027,974 | |||||||
|
| |||||||
Energy (11.9%) | ||||||||
Energy Equipment & Services (0.5%) |
| |||||||
Precision Drilling Corp. | ||||||||
7.750%, 12/15/23 | 106,000 | 99,110 | ||||||
7.125%, 1/15/26§ | 105,000 | 90,825 | ||||||
|
| |||||||
189,935 | ||||||||
|
| |||||||
Oil, Gas & Consumable Fuels (11.4%) |
| |||||||
American Midstream Partners LP | ||||||||
9.500%, 12/15/21 (e)§ | 270,000 | 251,944 | ||||||
Antero Resources Corp. | ||||||||
5.375%, 11/1/21 | 68,000 | 60,690 | ||||||
5.625%, 6/1/23 | 117,000 | 82,046 | ||||||
Ascent Resources Utica Holdings LLC | ||||||||
10.000%, 4/1/22§ | 142,000 | 134,020 | ||||||
7.000%, 11/1/26§ | 144,000 | 110,160 | ||||||
Berry Petroleum Co. LLC | ||||||||
7.000%, 2/15/26§ | 75,000 | 70,120 | ||||||
Blue Racer Midstream LLC | ||||||||
6.125%, 11/15/22§ | 246,000 | 242,437 | ||||||
6.625%, 7/15/26§ | 150,000 | 140,737 | ||||||
Calumet Specialty Products Partners LP |
| |||||||
11.000%, 4/15/25§ | 122,000 | 122,915 | ||||||
Chesapeake Energy Corp. | ||||||||
7.000%, 10/1/24 | 114,000 | 77,520 | ||||||
Crestwood Midstream Partners LP |
| |||||||
6.250%, 4/1/23 (e) | 164,000 | 166,616 | ||||||
CrownRock LP | ||||||||
5.625%, 10/15/25§ | 228,000 | 222,590 | ||||||
Delek Logistics Partners LP | ||||||||
6.750%, 5/15/25 | 195,000 | 195,975 | ||||||
Genesis Energy LP | ||||||||
5.625%, 6/15/24 | 186,000 | 175,305 | ||||||
6.500%, 10/1/25 | 124,000 | 117,800 | ||||||
Gulfport Energy Corp. | ||||||||
6.375%, 1/15/26 | 146,000 | 87,600 | ||||||
Hilcorp Energy I LP | ||||||||
6.250%, 11/1/28§ | 178,000 | 157,975 | ||||||
Holly Energy Partners LP | ||||||||
6.000%, 8/1/24§ | 74,000 | 77,145 | ||||||
Indigo Natural Resources LLC | ||||||||
6.875%, 2/15/26§ | 58,000 | 53,070 | ||||||
Parsley Energy LLC | ||||||||
6.250%, 6/1/24§ | 196,000 | 203,595 | ||||||
PBF Holding Co. LLC | ||||||||
7.000%, 11/15/23 | 94,000 | 97,407 | ||||||
PBF Logistics LP | ||||||||
6.875%, 5/15/23 | 220,000 | 225,771 | ||||||
SemGroup Corp. | ||||||||
5.625%, 7/15/22 | 154,000 | 155,578 | ||||||
5.625%, 11/15/23 | 100,000 | 101,875 | ||||||
SM Energy Co. | ||||||||
6.750%, 9/15/26 | 98,000 | 84,035 | ||||||
Southern Star Central Corp. | ||||||||
5.125%, 7/15/22§ | 330,000 | 332,775 | ||||||
Southwestern Energy Co. | ||||||||
7.750%, 10/1/27 | 97,000 | 83,420 | ||||||
Summit Midstream Holdings LLC | ||||||||
5.500%, 8/15/22 | 202,000 | 180,790 | ||||||
Targa Resources Partners LP | ||||||||
6.750%, 3/15/24 | 207,000 | 214,425 |
See Notes to Financial Statements.
73
1290 FUNDS
1290 HIGH YIELD BOND FUND
PORTFOLIO OF INVESTMENTS (Continued)
October 31, 2019
Principal Amount | Value (Note 1) | |||||||
Whiting Petroleum Corp. | ||||||||
6.625%, 1/15/26 | $ | 64,000 | $ | 39,680 | ||||
|
| |||||||
4,266,016 | ||||||||
|
| |||||||
Total Energy | 4,455,951 | |||||||
|
| |||||||
Financials (5.0%) | ||||||||
Capital Markets (0.7%) | ||||||||
MSCI, Inc. | ||||||||
5.250%, 11/15/24§ | 258,000 | 265,095 | ||||||
|
| |||||||
Consumer Finance (1.1%) | ||||||||
Avolon Holdings Funding Ltd. | ||||||||
5.250%, 5/15/24§ | 67,000 | 73,486 | ||||||
Curo Group Holdings Corp. | ||||||||
8.250%, 9/1/25§ | 144,000 | 126,886 | ||||||
Enova International, Inc. | ||||||||
8.500%, 9/1/24§ | 154,000 | 145,530 | ||||||
Park Aerospace Holdings Ltd. | ||||||||
5.500%, 2/15/24§ | 62,000 | 68,363 | ||||||
|
| |||||||
414,265 | ||||||||
|
| |||||||
Diversified Financial Services (1.5%) |
| |||||||
Allied Universal Holdco LLC | ||||||||
9.750%, 7/15/27§ | 74,000 | 77,687 | ||||||
Refinitiv US Holdings, Inc. | ||||||||
6.250%, 5/15/26§ | 238,000 | 258,527 | ||||||
8.250%, 11/15/26§ | 74,000 | 82,880 | ||||||
Verscend Escrow Corp. | ||||||||
9.750%, 8/15/26§ | 120,000 | 127,500 | ||||||
|
| |||||||
546,594 | ||||||||
|
| |||||||
Insurance (1.0%) | ||||||||
Acrisure LLC | ||||||||
8.125%, 2/15/24§ | 350,000 | 371,333 | ||||||
|
| |||||||
Thrifts & Mortgage Finance (0.7%) | ||||||||
Freedom Mortgage Corp. | ||||||||
8.250%, 4/15/25§ | 276,000 | 259,440 | ||||||
|
| |||||||
Total Financials | 1,856,727 | |||||||
|
| |||||||
Health Care (9.8%) | ||||||||
Health Care Equipment & Supplies (0.5%) |
| |||||||
Sotera Health Holdings LLC | ||||||||
6.500%, 5/15/23§ | 194,000 | 196,425 | ||||||
|
| |||||||
Health Care Providers & Services (6.9%) |
| |||||||
Centene Corp. | ||||||||
6.125%, 2/15/24 | 258,000 | 267,755 | ||||||
Eagle Holding Co. II LLC | ||||||||
7.625%, 5/15/22 PIK§ | 164,000 | 166,050 | ||||||
7.750%, 5/15/22 PIK§ | 210,000 | 213,150 | ||||||
Envision Healthcare Corp. | ||||||||
8.750%, 10/15/26§ | 142,000 | 81,650 | ||||||
Hadrian Merger Sub, Inc. | ||||||||
8.500%, 5/1/26§ | 67,000 | 65,827 | ||||||
HCA, Inc. | ||||||||
7.500%, 2/15/22 | 247,000 | 274,046 | ||||||
7.690%, 6/15/25 | 91,000 | 109,655 | ||||||
NVA Holdings, Inc. | ||||||||
6.875%, 4/1/26§ | 258,000 | 275,738 | ||||||
Polaris Intermediate Corp. | ||||||||
8.500%, 12/1/22 PIK§ | 234,000 | 195,975 | ||||||
Surgery Center Holdings, Inc. | ||||||||
6.750%, 7/1/25§ | 147,000 | 135,975 | ||||||
10.000%, 4/15/27§ | 177,000 | 178,770 | ||||||
Tenet Healthcare Corp. | ||||||||
5.125%, 5/1/25 | 97,000 | 99,061 | ||||||
4.875%, 1/1/26§ | 260,000 | 268,775 | ||||||
Vizient, Inc. | ||||||||
6.250%, 5/15/27§ | 33,000 | 35,516 | ||||||
WellCare Health Plans, Inc. | ||||||||
5.375%, 8/15/26§ | 118,000 | 125,670 | ||||||
West Street Merger Sub, Inc. | ||||||||
6.375%, 9/1/25§ | 98,000 | 92,855 | ||||||
|
| |||||||
2,586,468 | ||||||||
|
| |||||||
Life Sciences Tools & Services (0.2%) |
| |||||||
Charles River Laboratories International, Inc. |
| |||||||
5.500%, 4/1/26§ | 76,000 | 81,320 | ||||||
|
| |||||||
Pharmaceuticals (2.2%) | ||||||||
Bausch Health Americas, Inc. | ||||||||
9.250%, 4/1/26§ | 172,000 | 194,441 | ||||||
Bausch Health Cos., Inc. | ||||||||
7.000%, 3/15/24§ | 340,000 | 355,274 | ||||||
5.500%, 11/1/25§ | 126,000 | 131,160 | ||||||
5.750%, 8/15/27§ | 54,000 | 58,573 | ||||||
Catalent Pharma Solutions, Inc. | ||||||||
4.875%, 1/15/26§ | 39,000 | 40,268 | ||||||
5.000%, 7/15/27§ | 47,000 | 49,056 | ||||||
|
| |||||||
828,772 | ||||||||
|
| |||||||
Total Health Care | 3,692,985 | |||||||
|
| |||||||
Industrials (13.0%) | ||||||||
Aerospace & Defense (1.1%) |
| |||||||
Bombardier, Inc. | ||||||||
8.750%, 12/1/21§ | 185,000 | 195,637 | ||||||
7.875%, 4/15/27§ | 180,000 | 169,650 | ||||||
Triumph Group, Inc. | ||||||||
6.250%, 9/15/24§ | 41,000 | 43,050 | ||||||
|
| |||||||
408,337 | ||||||||
|
| |||||||
Building Products (1.8%) | ||||||||
Standard Industries, Inc. | ||||||||
5.500%, 2/15/23§ | 236,000 | 241,239 | ||||||
6.000%, 10/15/25§ | 132,000 | 138,497 | ||||||
Summit Materials LLC | ||||||||
6.125%, 7/15/23 | 272,000 | 277,440 | ||||||
|
| |||||||
657,176 | ||||||||
|
| |||||||
Commercial Services & Supplies (3.7%) |
| |||||||
ACCO Brands Corp. | ||||||||
5.250%, 12/15/24§ | 138,000 | 142,830 | ||||||
ADT Security Corp. (The) | ||||||||
4.125%, 6/15/23 | 74,000 | 75,202 | ||||||
Aramark Services, Inc. | ||||||||
5.000%, 4/1/25§ | 88,000 | 91,410 | ||||||
GFL Environmental, Inc. | ||||||||
7.000%, 6/1/26§ | 114,000 | 121,410 | ||||||
GW B-CR Security Corp. | ||||||||
9.500%, 11/1/27§ | 52,000 | 53,430 | ||||||
Matthews International Corp. | ||||||||
5.250%, 12/1/25§ | 85,000 | 79,687 |
See Notes to Financial Statements.
74
1290 FUNDS
1290 HIGH YIELD BOND FUND
PORTFOLIO OF INVESTMENTS (Continued)
October 31, 2019
Principal Amount | Value (Note 1) | |||||||
Nielsen Co. Luxembourg Sarl (The) |
| |||||||
5.500%, 10/1/21§ | $ | 58,000 | $ | 58,000 | ||||
Nielsen Finance LLC | ||||||||
5.000%, 4/15/22§ | 170,000 | 170,641 | ||||||
Prime Security Services Borrower LLC |
| |||||||
9.250%, 5/15/23§ | 253,000 | 265,524 | ||||||
Sotera Health Topco, Inc. | ||||||||
8.125%, 11/1/21 PIK§ | 327,000 | 324,548 | ||||||
|
| |||||||
1,382,682 | ||||||||
|
| |||||||
Construction & Engineering (0.7%) |
| |||||||
AECOM Global II LLC | ||||||||
5.000%, 4/1/22 (e) | 95,000 | 97,375 | ||||||
New Enterprise Stone & Lime Co., Inc. |
| |||||||
6.250%, 3/15/26§ | 173,000 | 180,353 | ||||||
|
| |||||||
277,728 | ||||||||
|
| |||||||
Machinery (0.9%) | ||||||||
Mueller Water Products, Inc. | ||||||||
5.500%, 6/15/26§ | 52,000 | 54,600 | ||||||
Welbilt, Inc. | ||||||||
9.500%, 2/15/24 | 272,000 | 290,496 | ||||||
|
| |||||||
345,096 | ||||||||
|
| |||||||
Professional Services (1.9%) | ||||||||
Dun & Bradstreet Corp. (The) | ||||||||
6.875%, 8/15/26§ | 116,000 | 126,475 | ||||||
10.250%, 2/15/27§ | 168,000 | 183,963 | ||||||
IHS Markit Ltd. | ||||||||
5.000%, 11/1/22§ | 41,000 | 43,743 | ||||||
Jaguar Holding Co. II | ||||||||
6.375%, 8/1/23§ | 356,000 | 368,460 | ||||||
|
| |||||||
722,641 | ||||||||
|
| |||||||
Road & Rail (2.9%) | ||||||||
Capitol Investment Merger Sub 2 LLC |
| |||||||
10.000%, 8/1/24§ | 101,000 | 104,030 | ||||||
DAE Funding LLC | ||||||||
5.250%, 11/15/21§ | 100,000 | 104,167 | ||||||
5.000%, 8/1/24§ | 102,000 | 106,620 | ||||||
Kenan Advantage Group, Inc. (The) | ||||||||
7.875%, 7/31/23§ | 395,000 | 358,956 | ||||||
Watco Cos. LLC | ||||||||
6.375%, 4/1/23§ | 406,000 | 413,105 | ||||||
|
| |||||||
1,086,878 | ||||||||
|
| |||||||
Total Industrials | 4,880,538 | |||||||
|
| |||||||
Information Technology (11.7%) | ||||||||
Communications Equipment (1.2%) | ||||||||
CommScope, Inc. | ||||||||
5.000%, 6/15/21§ | 13,000 | 13,000 | ||||||
5.500%, 3/1/24§ | 128,000 | 129,568 | ||||||
6.000%, 3/1/26§ | 214,000 | 219,421 | ||||||
8.250%, 3/1/27§ | 74,000 | 70,095 | ||||||
|
| |||||||
432,084 | ||||||||
|
| |||||||
Electronic Equipment, Instruments & Components (0.2%) |
| |||||||
Itron, Inc. | ||||||||
5.000%, 1/15/26§ | 88,000 | 91,080 | ||||||
|
| |||||||
IT Services (2.2%) | ||||||||
Exela Intermediate LLC | ||||||||
10.000%, 7/15/23§ | 283,000 | 134,956 | ||||||
Gartner, Inc. | ||||||||
5.125%, 4/1/25§ | 152,000 | 159,022 | ||||||
GTT Communications, Inc. | ||||||||
7.875%, 12/31/24§ | 176,000 | 102,960 | ||||||
Unisys Corp. | ||||||||
10.750%, 4/15/22§ | 83,000 | 89,640 | ||||||
Zayo Group LLC | ||||||||
6.000%, 4/1/23 | 145,000 | 149,134 | ||||||
5.750%, 1/15/27§ | 184,000 | 186,668 | ||||||
|
| |||||||
822,380 | ||||||||
|
| |||||||
Software (6.4%) | ||||||||
ACI Worldwide, Inc. | ||||||||
5.750%, 8/15/26§ | 135,000 | 143,100 | ||||||
Ascend Learning LLC | ||||||||
6.875%, 8/1/25§ | 170,000 | 177,650 | ||||||
6.875%, 8/1/25§ | 114,000 | 118,987 | ||||||
Camelot Finance SA | ||||||||
4.500%, 11/1/26§ | 216,000 | 218,246 | ||||||
CDK Global, Inc. | ||||||||
5.875%, 6/15/26 | 66,000 | 70,455 | ||||||
Change Healthcare Holdings LLC | ||||||||
5.750%, 3/1/25§ | 324,000 | 331,517 | ||||||
Granite Merger Sub 2, Inc. | ||||||||
11.000%, 7/15/27§ | 149,000 | 146,765 | ||||||
HNA Ecotech Panorama Cayman Co. Ltd. |
| |||||||
8.000%, 4/15/21§ | 120,000 | 107,023 | ||||||
Informatica LLC | ||||||||
7.125%, 7/15/23§ | 116,000 | 118,030 | ||||||
Solera LLC | ||||||||
10.500%, 3/1/24§ | 400,000 | 416,940 | ||||||
Sophia LP | ||||||||
9.000%, 9/30/23§ | 373,000 | 383,258 | ||||||
SS&C Technologies, Inc. | ||||||||
5.500%, 9/30/27§ | 169,000 | 179,934 | ||||||
|
| |||||||
2,411,905 | ||||||||
|
| |||||||
Technology Hardware, Storage & Peripherals (1.7%) |
| |||||||
Dell International LLC | ||||||||
5.875%, 6/15/21§ | 211,000 | 214,429 | ||||||
7.125%, 6/15/24§ | 171,000 | 180,832 | ||||||
Everi Payments, Inc. | ||||||||
7.500%, 12/15/25§ | 120,000 | 126,114 | ||||||
NCR Corp. | ||||||||
5.875%, 12/15/21 | 107,000 | 107,401 | ||||||
|
| |||||||
628,776 | ||||||||
|
| |||||||
Total Information Technology | 4,386,225 | |||||||
|
| |||||||
Materials (11.5%) | ||||||||
Chemicals (4.6%) | ||||||||
Axalta Coating Systems LLC | ||||||||
4.875%, 8/15/24§ | 150,000 | 155,250 | ||||||
Blue Cube Spinco LLC | ||||||||
10.000%, 10/15/25 | 226,000 | 252,837 | ||||||
INEOS Group Holdings SA | ||||||||
5.625%, 8/1/24§ | 200,000 | 204,750 | ||||||
Koppers, Inc. | ||||||||
6.000%, 2/15/25§ | 78,000 | 77,763 |
See Notes to Financial Statements.
75
1290 FUNDS
1290 HIGH YIELD BOND FUND
PORTFOLIO OF INVESTMENTS (Continued)
October 31, 2019
Principal Amount | Value (Note 1) | |||||||
NOVA Chemicals Corp. | ||||||||
4.875%, 6/1/24§ | $ | 104,000 | $ | 105,820 | ||||
Nufarm Australia Ltd. | ||||||||
5.750%, 4/30/26§ | 159,000 | 160,292 | ||||||
PQ Corp. | ||||||||
6.750%, 11/15/22§ | 191,000 | 196,969 | ||||||
5.750%, 12/15/25§ | 136,000 | 140,080 | ||||||
Rayonier AM Products, Inc. | ||||||||
5.500%, 6/1/24§ | 214,000 | 148,195 | ||||||
Starfruit Finco BV | ||||||||
8.000%, 10/1/26§ | 150,000 | 150,000 | ||||||
WR Grace & Co.-Conn | ||||||||
5.125%, 10/1/21§ | 110,000 | 113,740 | ||||||
|
| |||||||
1,705,696 | ||||||||
|
| |||||||
Containers & Packaging (6.8%) | ||||||||
Berry Global, Inc. | ||||||||
5.500%, 5/15/22 | 136,000 | 137,870 | ||||||
5.125%, 7/15/23 | 174,000 | 178,350 | ||||||
Flex Acquisition Co., Inc. | ||||||||
7.875%, 7/15/26§ | 197,000 | 185,919 | ||||||
LABL Escrow Issuer LLC | ||||||||
6.750%, 7/15/26§ | 225,000 | 234,562 | ||||||
10.500%, 7/15/27§ | 126,000 | 127,260 | ||||||
Mauser Packaging Solutions Holding Co. |
| |||||||
5.500%, 4/15/24§ | 186,000 | 191,115 | ||||||
7.250%, 4/15/25§ | 362,000 | 345,710 | ||||||
OI European Group BV | ||||||||
4.000%, 3/15/23§ | 150,000 | 149,062 | ||||||
Owens-Brockway Glass Container, Inc. |
| |||||||
5.000%, 1/15/22§ | 110,000 | 113,597 | ||||||
5.875%, 8/15/23§ | 100,000 | 105,375 | ||||||
Reynolds Group Issuer, Inc. | ||||||||
5.750%, 10/15/20 | 147,305 | 147,261 | ||||||
(ICE LIBOR USD 3 Month + 3.50%), 5.501%, 7/15/21 (k)§ | 326,000 | 326,815 | ||||||
Sealed Air Corp. | ||||||||
4.875%, 12/1/22§ | 102,000 | 107,483 | ||||||
Trivium Packaging Finance BV | ||||||||
5.500%, 8/15/26 (e)§ | 200,000 | 209,500 | ||||||
|
| |||||||
2,559,879 | ||||||||
|
| |||||||
Metals & Mining (0.1%) | ||||||||
Novelis Corp. | ||||||||
6.250%, 8/15/24§ | 29,000 | 30,341 | ||||||
|
| |||||||
Total Materials | 4,295,916 | |||||||
|
| |||||||
Real Estate (2.5%) | ||||||||
Equity Real Estate Investment Trusts (REITs) (1.1%) |
| |||||||
Equinix, Inc. (REIT) | ||||||||
5.375%, 4/1/23 | 82,000 | 83,419 | ||||||
5.875%, 1/15/26 | 90,000 | 95,512 | ||||||
Iron Mountain, Inc. (REIT) | ||||||||
6.000%, 8/15/23 | 106,000 | 108,385 | ||||||
SBA Communications Corp. (REIT) |
| |||||||
4.875%, 9/1/24 | 120,000 | 124,650 | ||||||
|
| |||||||
411,966 | ||||||||
|
| |||||||
Real Estate Management & Development (1.4%) |
| |||||||
Greystar Real Estate Partners LLC |
| |||||||
5.750%, 12/1/25§ | 223,000 | 231,920 | ||||||
Howard Hughes Corp. (The) | ||||||||
5.375%, 3/15/25§ | 166,000 | 171,395 | ||||||
Realogy Group LLC | ||||||||
9.375%, 4/1/27§ | 140,000 | 137,550 | ||||||
|
| |||||||
540,865 | ||||||||
|
| |||||||
Total Real Estate | 952,831 | |||||||
|
| |||||||
Utilities (0.2%) | ||||||||
Independent Power and Renewable Electricity Producers (0.2%) |
| |||||||
AES Corp. | ||||||||
4.875%, 5/15/23 | 86,000 | 87,398 | ||||||
|
| |||||||
Total Utilities | 87,398 | |||||||
|
| |||||||
Total Corporate Bonds | 35,397,215 | |||||||
|
| |||||||
Total Long-Term Debt Securities (94.4%) | 35,397,215 | |||||||
|
| |||||||
Number of Rights | Value (Note 1) | |||||||
RIGHTS: | ||||||||
Communication Services (0.0%) | ||||||||
Wireless Telecommunication Services (0.0%) |
| |||||||
T-Mobile USA, Inc., CVR (r)* | 329,000 | — | ||||||
|
| |||||||
Number of Shares | Value (Note 1) | |||||||
SHORT-TERM INVESTMENT: | ||||||||
Investment Company (2.5%) | ||||||||
JPMorgan Prime Money Market Fund, IM Shares | 933,320 | 933,693 | ||||||
|
| |||||||
Total Short-Term Investment (2.5%) | 933,693 | |||||||
|
| |||||||
Total Investments in Securities (96.9%) | 36,330,908 | |||||||
Other Assets Less Liabilities (3.1%) | 1,180,646 | |||||||
|
| |||||||
Net Assets (100%) | $ | 37,511,554 | ||||||
|
|
* | 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 October 31, 2019, the market value of these securities amounted to $26,402,000 or 70.4% 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. |
(e) | Step Bond – Coupon rate increases or decreases in increments to maturity. Rate disclosed is as of October 31, 2019. Maturity date disclosed is the ultimate maturity date. |
(k) | Variable or floating rate security, linked to the referenced benchmark. The interest rate shown was the current rate as of October 31, 2019. |
(r) | Value determined using significant unobservable inputs. |
See Notes to Financial Statements.
76
1290 FUNDS
1290 HIGH YIELD BOND FUND
PORTFOLIO OF INVESTMENTS (Continued)
October 31, 2019
Glossary:
CVR | — Contingent Value Rights |
ICE | — Intercontinental Exchange |
LIBOR | — London Interbank Offered Rate |
PIK | — Payment-in Kind Security |
USD | — United States Dollar |
The following is a summary of the inputs used to value the Fund’s assets and liabilities carried at fair value as of October 31, 2019:
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 | ||||||||||||||||
Communication Services | $ | — | $ | 5,531,650 | $ | — | $ | 5,531,650 | ||||||||
Consumer Discretionary | — | 3,229,020 | — | 3,229,020 | ||||||||||||
Consumer Staples | — | 2,027,974 | — | 2,027,974 | ||||||||||||
Energy | — | 4,455,951 | — | 4,455,951 | ||||||||||||
Financials | — | 1,856,727 | — | 1,856,727 | ||||||||||||
Health Care | — | 3,692,985 | — | 3,692,985 | ||||||||||||
Industrials | — | 4,880,538 | — | 4,880,538 | ||||||||||||
Information Technology | — | 4,386,225 | — | 4,386,225 | ||||||||||||
Materials | — | 4,295,916 | — | 4,295,916 | ||||||||||||
Real Estate | — | 952,831 | — | 952,831 | ||||||||||||
Utilities | — | 87,398 | — | 87,398 | ||||||||||||
Rights | ||||||||||||||||
Communication Services | — | — | — | (a) | — | (a) | ||||||||||
Short-Term Investment | ||||||||||||||||
Investment Company | 933,693 | — | — | 933,693 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Assets | $ | 933,693 | $ | 35,397,215 | $ | — | $ | 36,330,908 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total Liabilities | $ | — | $ | — | $ | — | $ | — | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total | $ | 933,693 | $ | 35,397,215 | $ | — | $ | 36,330,908 | ||||||||
|
|
|
|
|
|
|
|
(a) Value is zero.
The Fund held no derivatives contracts during the year ended October 31, 2019.
Investment security transactions for the year ended October 31, 2019 were as follows:
Cost of Purchases: | ||||
Long-term investments other than U.S. government debt securities | $ | 20,755,479 | ||
Net Proceeds of Sales and Redemptions: | ||||
Long-term investments other than U.S. government debt securities | $ | 17,737,199 |
As of October 31, 2019, the gross unrealized appreciation (depreciation) of investments based on the aggregate cost of investments in securities and derivative instruments, if applicable, for Federal income tax purposes was as follows:
Aggregate gross unrealized appreciation | $ | 753,016 | ||
Aggregate gross unrealized depreciation | (990,065 | ) | ||
|
| |||
Net unrealized depreciation | $ | (237,049 | ) | |
|
| |||
Federal income tax cost of investments in securities and derivative instruments, if applicable | $ | 36,567,957 | ||
|
|
See Notes to Financial Statements.
77
1290 FUNDS
1290 HIGH YIELD BOND FUND
STATEMENT OF ASSETS AND LIABILITIES
October 31, 2019
ASSETS |
| |||
Investments in Securities, at value (Cost $36,566,625) | $ | 36,330,908 | ||
Cash | 895,000 | |||
Dividends, interest and other receivables | 599,570 | |||
Receivable for Fund shares sold | 123,482 | |||
Receivable for securities sold | 45,870 | |||
Prepaid registration and filing fees | 23,258 | |||
Other assets | 378 | |||
|
| |||
Total assets | 38,018,466 | |||
|
| |||
LIABILITIES | ||||
Payable for securities purchased | 282,105 | |||
Dividends and distributions payable | 128,786 | |||
Payable for Fund shares redeemed | 18,238 | |||
Transfer agent fees payable | 4,110 | |||
Distribution fees payable – Class A | 345 | |||
Distribution fees payable – Class R | 134 | |||
Administrative fees payable | 82 | |||
Accrued expenses | 73,112 | |||
|
| |||
Total liabilities | 506,912 | |||
|
| |||
NET ASSETS | $ | 37,511,554 | ||
|
| |||
Net assets were comprised of: | ||||
Paid in capital | $ | 40,307,640 | ||
Total distributable earnings (loss) | (2,796,086 | ) | ||
|
| |||
Net assets | $ | 37,511,554 | ||
|
| |||
Class A | ||||
Net asset value and redemption price per share, $1,622,501 / 179,170 shares outstanding (unlimited amount authorized: $0.001 par value) | $ | 9.06 | ||
Maximum sales charge (4.50% of offering price) | 0.43 | |||
|
| |||
Maximum offering price per share | $ | 9.49 | ||
|
| |||
Class I | ||||
Net asset value and redemption price per share, $35,453,390 / 3,912,978 shares outstanding (unlimited amount authorized: $0.001 par value) | $ | 9.06 | ||
|
| |||
Class R | ||||
Net asset value and redemption price per share, $307,102 / 33,928 shares outstanding (unlimited amount authorized: $0.001 par value) | $ | 9.05 | ||
|
| |||
Class T** | ||||
Net asset value and redemption price per share, $128,561 / 14,192 shares outstanding (unlimited amount authorized: $0.001 par value) | $ | 9.06 | ||
Maximum sales charge (2.50% of offering price) | 0.23 | |||
|
| |||
Maximum offering price per share | $ | 9.29 | ||
|
|
** | Class T shares currently are not offered for sale. |
STATEMENT OF OPERATIONS
For the Year Ended October 31, 2019
INVESTMENT INCOME | ||||
Interest | $ | 2,156,666 | ||
Dividends | 15,570 | |||
|
| |||
Total income | 2,172,236 | |||
|
| |||
EXPENSES | ||||
Investment advisory fees | 208,582 | |||
Professional fees | 101,443 | |||
Administrative fees | 52,145 | |||
Registration and filing fees | 46,453 | |||
Transfer agent fees | 44,300 | |||
Printing and mailing expenses | 36,622 | |||
Custodian fees | 16,775 | |||
Distribution fees – Class A | 5,287 | |||
Trustees’ fees | 3,088 | |||
Distribution fees – Class R | 1,515 | |||
Distribution fees – Class T** | 320 | |||
Miscellaneous | 23,915 | |||
|
| |||
Gross expenses | 540,445 | |||
Less: Voluntary waiver from investment adviser | (44,745 | ) | ||
Waiver from investment adviser | (215,982 | ) | ||
Waiver from distributor | (320 | ) | ||
Reimbursement from investment adviser | (11,855 | ) | ||
|
| |||
Net expenses | 267,543 | |||
|
| |||
NET INVESTMENT INCOME (LOSS) | 1,904,693 | |||
|
| |||
REALIZED AND UNREALIZED GAIN (LOSS) |
| |||
Net realized gain (loss) on investments in securities | (25,701 | ) | ||
Net change in unrealized appreciation (depreciation) on investments in securities | 503,655 | |||
|
| |||
NET REALIZED AND UNREALIZED GAIN (LOSS) | 477,954 | |||
|
| |||
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | $ | 2,382,647 | ||
|
|
** | Class T shares currently are not offered for sale. |
See Notes to Financial Statements.
78
1290 FUNDS
1290 HIGH YIELD BOND FUND
STATEMENT OF CHANGES IN NET ASSETS
Year Ended October 31, | ||||||||
2019 | 2018 | |||||||
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS: |
| |||||||
Net investment income (loss) | $ | 1,904,693 | $ | 1,812,872 | ||||
Net realized gain (loss) | (25,701 | ) | (192,330 | ) | ||||
Net change in unrealized appreciation (depreciation) | 503,655 | (1,266,344 | ) | |||||
|
|
|
| |||||
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | 2,382,647 | 354,198 | ||||||
|
|
|
| |||||
Distributions to shareholders: | ||||||||
Class A | (108,202 | ) | (112,357 | ) | ||||
Class I | (1,764,776 | ) | (1,686,328 | ) | ||||
Class R | (15,017 | ) | (12,914 | ) | ||||
Class T** | (6,981 | ) | (7,105 | ) | ||||
|
|
|
| |||||
Total distributions to shareholders | (1,894,976 | ) | (1,818,704 | ) | ||||
|
|
|
| |||||
Return of capital: | ||||||||
Class A | (2,254 | ) | — | |||||
Class I | (34,332 | ) | — | |||||
Class R | (323 | ) | — | |||||
Class T** | (136 | ) | — | |||||
|
|
|
| |||||
Total tax return of capital | (37,045 | ) | — | |||||
|
|
|
| |||||
CAPITAL SHARES TRANSACTIONS: | ||||||||
Class A | ||||||||
Capital shares sold [ 31,260 and 211,921 shares, respectively ] | 285,024 | 1,960,500 | ||||||
Capital shares issued in reinvestment of dividends [ 11,087 and 11,169 shares, respectively ] | 99,880 | 101,781 | ||||||
Capital shares repurchased [ (143,061) and (19,204) shares, respectively ] | (1,297,523 | ) | (176,438 | ) | ||||
|
|
|
| |||||
Total Class A transactions | (912,619 | ) | 1,885,843 | |||||
|
|
|
| |||||
Class I | ||||||||
Capital shares sold [ 569,065 and 230,876 shares, respectively ] | 5,164,420 | 2,137,440 | ||||||
Capital shares issued in reinvestment of dividends [ 33,563 and 21,171 shares, respectively ] | 303,346 | 193,221 | ||||||
Capital shares repurchased [ (90,055) and (84,844) shares, respectively ] | (809,784 | ) | (777,869 | ) | ||||
|
|
|
| |||||
Total Class I transactions | 4,657,982 | 1,552,792 | ||||||
|
|
|
| |||||
Class R | ||||||||
Capital shares sold [ 2,702 and 9,078 shares, respectively ] | 24,313 | 82,888 | ||||||
Capital shares issued in reinvestment of dividends [ 609 and 333 shares, respectively ] | 5,496 | 3,029 | ||||||
Capital shares repurchased [ (1,517) and (641) shares, respectively ] | (13,763 | ) | (5,830 | ) | ||||
|
|
|
| |||||
Total Class R transactions | 16,046 | 80,087 | ||||||
|
|
|
| |||||
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM CAPITAL SHARE TRANSACTIONS | 3,761,409 | 3,518,722 | ||||||
|
|
|
| |||||
TOTAL INCREASE (DECREASE) IN NET ASSETS | 4,212,035 | 2,054,216 | ||||||
NET ASSETS: | ||||||||
Beginning of year | 33,299,519 | 31,245,303 | ||||||
|
|
|
| |||||
End of year | $ | 37,511,554 | $ | 33,299,519 | ||||
|
|
|
|
| ||||
** Class T shares currently are not offered for sale. Class T shares were formerly known as Class C shares. |
|
See Notes to Financial Statements.
79
1290 FUNDS
1290 HIGH YIELD BOND FUND
FINANCIAL HIGHLIGHTS
Year Ended October 31, | November 12, 2014* to October 31, 2015 | |||||||||||||||||||
Class A | 2019 | 2018 | 2017 | 2016 | ||||||||||||||||
Net asset value, beginning of period | $ | 8.93 | $ | 9.33 | $ | 9.01 | $ | 9.15 | $ | 10.00 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss) (e) | 0.47 | 0.48 | 0.49 | 0.61 | 0.59 | |||||||||||||||
Net realized and unrealized gain (loss) | 0.14 | (0.40 | ) | 0.32 | (0.09 | ) | (0.84 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total from investment operations | 0.61 | 0.08 | 0.81 | 0.52 | (0.25 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Less distributions: | ||||||||||||||||||||
Dividends from net investment income | (0.47 | ) | (0.48 | ) | (0.48 | ) | (0.65 | ) | (0.60 | ) | ||||||||||
Return of capital | (0.01 | ) | — | (0.01 | ) | (0.01 | ) | — | ||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total dividends and distributions | (0.48 | ) | (0.48 | ) | (0.49 | ) | (0.66 | ) | (0.60 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net asset value, end of period | $ | 9.06 | $ | 8.93 | $ | 9.33 | $ | 9.01 | $ | 9.15 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total return (b) | 6.97 | % | 0.86 | % | 9.20 | % | 6.17 | % | (2.62 | )% | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Ratios/Supplemental Data: | ||||||||||||||||||||
Net assets, end of period (000’s) | $ | 1,623 | $ | 2,500 | $ | 709 | $ | 355 | $ | 8,372 | ||||||||||
Ratio of expenses to average net assets: | ||||||||||||||||||||
After waivers and reimbursements (a)(f) | 1.00 | % | 1.04 | % | 1.06 | % | 1.06 | % | 1.05 | % | ||||||||||
Before waivers and reimbursements (a)(f) | 1.79 | % | 1.77 | % | 1.84 | % | 1.81 | % | 2.45 | % | ||||||||||
Ratio of net investment income (loss) to average net assets: | ||||||||||||||||||||
After waivers and reimbursements (a)(f) | 5.27 | % | 5.20 | % | 5.26 | % | 7.06 | % | 6.39 | %(l) | ||||||||||
Before waivers and reimbursements (a)(f) | 4.48 | % | 4.47 | % | 4.48 | % | 6.31 | % | 4.99 | %(l) | ||||||||||
Portfolio turnover rate (z)^ | 54 | % | 45 | % | 54 | % | 79 | % | 57 | % | ||||||||||
Year Ended October 31, | November 12, 2014* to October 31, 2015 | |||||||||||||||||||
Class I | 2019 | 2018 | 2017 | 2016 | ||||||||||||||||
Net asset value, beginning of period | $ | 8.94 | $ | 9.34 | $ | 9.01 | $ | 9.15 | $ | 10.00 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss) (e) | 0.50 | 0.50 | 0.52 | 0.58 | 0.62 | |||||||||||||||
Net realized and unrealized gain (loss) | 0.12 | (0.40 | ) | 0.33 | (0.04 | ) | (0.85 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total from investment operations | 0.62 | 0.10 | 0.85 | 0.54 | (0.23 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Less distributions: | ||||||||||||||||||||
Dividends from net investment income | (0.49 | ) | (0.50 | ) | (0.51 | ) | (0.67 | ) | (0.62 | ) | ||||||||||
Return of capital | (0.01 | ) | — | (0.01 | ) | (0.01 | ) | — | ||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total dividends and distributions | (0.50 | ) | (0.50 | ) | (0.52 | ) | (0.68 | ) | (0.62 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net asset value, end of period | $ | 9.06 | $ | 8.94 | $ | 9.34 | $ | 9.01 | $ | 9.15 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total return (b) | 7.12 | % | 1.09 | % | 9.58 | % | 6.44 | % | (2.39 | )% | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Ratios/Supplemental Data: | ||||||||||||||||||||
Net assets, end of period (000’s) | $ | 35,453 | $ | 30,386 | $ | 30,185 | $ | 27,710 | $ | 8,395 | ||||||||||
Ratio of expenses to average net assets: | ||||||||||||||||||||
After waivers and reimbursements (a)(f) | 0.75 | % | 0.80 | % | 0.82 | % | 0.84 | % | 0.80 | % | ||||||||||
Before waivers and reimbursements (a)(f) | 1.53 | % | 1.52 | % | 1.58 | % | 1.53 | % | 2.20 | % | ||||||||||
Ratio of net investment income (loss) to average net assets: | ||||||||||||||||||||
After waivers and reimbursements (a)(f) | 5.50 | % | 5.47 | % | 5.55 | % | 6.62 | % | 6.64 | %(l) | ||||||||||
Before waivers and reimbursements (a)(f) | 4.71 | % | 4.74 | % | 4.79 | % | 5.94 | % | 5.24 | %(l) | ||||||||||
Portfolio turnover rate (z)^ | 54 | % | 45 | % | 54 | % | 79 | % | 57 | % |
See Notes to Financial Statements.
80
1290 FUNDS
1290 HIGH YIELD BOND FUND
FINANCIAL HIGHLIGHTS (Continued)
Year Ended October 31, | November 12, 2014* to October 31, 2015 | |||||||||||||||||||
Class R | 2019 | 2018 | 2017 | 2016 | ||||||||||||||||
Net asset value, beginning of period | $ | 8.93 | $ | 9.33 | $ | 9.01 | $ | 9.15 | $ | 10.00 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss) (e) | 0.45 | 0.45 | 0.47 | 0.59 | 0.57 | |||||||||||||||
Net realized and unrealized gain (loss) | 0.13 | (0.39 | ) | 0.32 | (0.10 | ) | (0.85 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total from investment operations | 0.58 | 0.06 | 0.79 | 0.49 | (0.28 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Less distributions: | ||||||||||||||||||||
Dividends from net investment income | (0.45 | ) | (0.46 | ) | (0.46 | ) | (0.62 | ) | (0.57 | ) | ||||||||||
Return of capital | (0.01 | ) | — | (0.01 | ) | (0.01 | ) | — | ||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total dividends and distributions | (0.46 | ) | (0.46 | ) | (0.47 | ) | (0.63 | ) | (0.57 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net asset value, end of period | $ | 9.05 | $ | 8.93 | $ | 9.33 | $ | 9.01 | $ | 9.15 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total return (b) | 6.59 | % | 0.63 | % | 8.95 | % | 5.91 | % | (2.86 | )% | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Ratios/Supplemental Data: | ||||||||||||||||||||
Net assets, end of period (000’s) | $ | 307 | $ | 287 | $ | 218 | $ | 195 | $ | 8,339 | ||||||||||
Ratio of expenses to average net assets: | ||||||||||||||||||||
After waivers and reimbursements (a)(f) | 1.25 | % | 1.30 | % | 1.32 | % | 1.31 | % | 1.30 | % | ||||||||||
Before waivers and reimbursements (a)(f) | 2.03 | % | 2.02 | % | 2.08 | % | 2.06 | % | 2.70 | % | ||||||||||
Ratio of net investment income (loss) to average net assets: | ||||||||||||||||||||
After waivers and reimbursements (a)(f) | 5.00 | % | 4.96 | % | 5.05 | % | 6.83 | % | 6.14 | %(l) | ||||||||||
Before waivers and reimbursements (a)(f) | 4.22 | % | 4.23 | % | 4.28 | % | 6.08 | % | 4.74 | %(l) | ||||||||||
Portfolio turnover rate (z)^ | 54 | % | 45 | % | 54 | % | 79 | % | 57 | % | ||||||||||
Year Ended October 31, | November 12, 2014* to October 31, 2015 | |||||||||||||||||||
Class T** | 2019 | 2018 | 2017 | 2016 | ||||||||||||||||
Net asset value, beginning of period | $ | 8.93 | $ | 9.33 | $ | 9.01 | $ | 9.15 | $ | 10.00 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss) (e) | 0.50 | 0.50 | 0.52 | 0.63 | 0.62 | |||||||||||||||
Net realized and unrealized gain (loss) | 0.13 | (0.40 | ) | 0.32 | (0.09 | ) | (0.85 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total from investment operations | 0.63 | 0.10 | 0.84 | 0.54 | (0.23 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Less distributions: | ||||||||||||||||||||
Dividends from net investment income | (0.49 | ) | (0.50 | ) | (0.51 | ) | (0.67 | ) | (0.62 | ) | ||||||||||
Return of capital | (0.01 | ) | — | (0.01 | ) | (0.01 | ) | — | ||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total dividends and distributions | (0.50 | ) | (0.50 | ) | (0.52 | ) | (0.68 | ) | (0.62 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net asset value, end of period | $ | 9.06 | $ | 8.93 | $ | 9.33 | $ | 9.01 | $ | 9.15 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total return (b) | 7.24 | % | 1.09 | % | 9.46 | % | 6.44 | % | (2.39 | )% | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Ratios/Supplemental Data: | ||||||||||||||||||||
Net assets, end of period (000’s) | $ | 129 | $ | 127 | $ | 132 | $ | 128 | $ | 2,783 | ||||||||||
Ratio of expenses to average net assets: | ||||||||||||||||||||
After waivers and reimbursements (a)(f) | 0.75 | % | 0.80 | % | 0.82 | % | 0.81 | % | 0.80 | % | ||||||||||
Before waivers and reimbursements (a)(f) | 1.78 | % | 1.77 | % | 2.08 | % | 2.56 | % | 3.20 | % | ||||||||||
Ratio of net investment income (loss) to average net assets: | ||||||||||||||||||||
After waivers and reimbursements (a)(f) | 5.50 | % | 5.46 | % | 5.56 | % | 7.30 | % | 6.64 | %(l) | ||||||||||
Before waivers and reimbursements (a)(f) | 4.47 | % | 4.49 | % | 4.30 | % | 5.55 | % | 4.24 | %(l) | ||||||||||
Portfolio turnover rate (z)^ | 54 | % | 45 | % | 54 | % | 79 | % | 57 | % |
See Notes to Financial Statements.
81
1290 FUNDS
1290 HIGH YIELD BOND FUND
FINANCIAL HIGHLIGHTS (Continued)
* | Commencement of Operations. |
** | Class T shares currently are not offered for sale. Class T shares were formerly known as Class C shares. |
^ | Portfolio turnover rate excludes derivatives, if any. |
(a) | Ratios for periods less than one year are annualized. Certain non-recurring expenses incurred by the Fund are not annualized for periods less than one year. |
(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”), if applicable. |
(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.
82
1290 LOW VOLATILITY GLOBAL EQUITY FUND (Unaudited)
INVESTMENT ADVISER
Ø | 1290 Asset Managers® |
PERFORMANCE RESULTS
Annualized Total Returns as of 10/31/19 | ||||||||
1 Year | Since Incept. | |||||||
Fund – Class I Shares* | 14.74 | % | 9.23 | % | ||||
MSCI ACWI Minimum Volatility (Net) Index | 16.39 | 10.67 | ||||||
MSCI ACWI (Net) Index | 12.59 | 9.25 | ||||||
* Date of inception 2/27/17.
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.
The graph illustrates comparative performance for $10,000 invested in the Class I Shares of the 1290 Low Volatility Global Equity Fund and the MSCI ACWI Minimum Volatility (Net) Index and MSCI ACWI (Net) Index from 2/27/17 to 10/31/19. The performance of each of the MSCI ACWI Minimum Volatility (Net) Index and MSCI ACWI (Net) Index reflects an initial investment at the end of the month closest to the Fund’s inception. The performance of the Fund assumes reinvestment of all dividends and capital gain distributions, if any, and does not include a sales charge. The performance of the MSCI ACWI Minimum Volatility (Net) Index and MSCI ACWI (Net) Index does not reflect the deduction of expenses or a sales charge associated with a mutual fund and has been adjusted to reflect reinvestment of all dividends, capital gain distributions, and interest of the securities included in the benchmark.
As of March 1, 2019, the gross expense ratio for Class I shares was 5.28%. The net expense ratio for Class I shares was 0.65%. The net expense ratio reflects the Adviser’s decision to contractually limit expenses through April 30, 2020. Fund Performance may also 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.
In addition, 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.
PERFORMANCE SUMMARY
The Fund’s Class I shares returned 14.74% for the year ended October 31, 2019. The Fund’s benchmarks, the MSCI ACWI Minimum Volatility (Net) Index and the MSCI ACWI (Net) Index, returned 16.39% and 12.59%, respectively over the same year.
Fund Highlights
What helped performance during the year?
• | Low volatility outperformed the market cap weighted benchmark for both U.S. and developed equities for the period. |
• | Relative to the MSCI ACWI (Net) Index, stock selection within domestic and developed equities contributed to positive performance. On a sector basis, an overweight to the real estate and utilities sectors and an underweight to the energy sector benefited relative performance. Stock selection within materials also added to relative performance. |
• | On a sector basis relative to the MSCI ACWI Minimum Volatility (Net) Index, both an underweight position and stock selection within health care contributed to performance. An overweight to real estate also added to relative to performance. |
What hurt performance during the year?
• | Stock selection within emerging markets was the largest detractor to performance relative to both the MSCI ACWI Minimum Volatility (Net) and MSCI ACWI (Net) Indices. |
• | Relative to the MSCI ACWI Minimum Volatility (Net) Index, stock selection in materials, consumer staples and real estate were the top detractors from performance. |
• | Relative to the MSCI ACWI (Net) Index, an underweight position and stock selection within information technology hurt performance. |
Table by Asset Class(as a percentage of Total Investments in Securities) As of October 31, 2019 | ||||
Equity | 100.0 | % |
Top 10 Holdings(as a percentage of Total Investments in Securities) | ||||
As of October 31, 2019 | ||||
iShares Edge MSCI Min Vol Global ETF | 27.5 | % | ||
iShares Edge MSCI Min Vol EAFE ETF | 13.2 | |||
Invesco S&P International Developed Low Volatility ETF | 12.8 | |||
Invesco S&P MidCap Low Volatility ETF | 6.7 | |||
Invesco S&P Emerging Markets Low Volatility ETF | 6.0 | |||
iShares Edge MSCI Min Vol Emerging Markets ETF | 6.0 | |||
Invesco S&P 500 Low Volatility ETF | 5.7 | |||
Invesco S&P 500 High Dividend Low Volatility ETF | 5.7 | |||
iShares Edge MSCI Min Vol USA ETF | 5.7 | |||
SPDR SSGA US Large Cap Low Volatility Index ETF | 4.0 | |||
Holdings are subject to change without notice. |
83
1290 LOW VOLATILITY GLOBAL 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 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 October 31, 2019 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 5/1/19 | Ending Account Value 10/31/19 | Expenses Paid During Period* | ||||||||||
Class I |
| |||||||||||
Actual | $ | 1,000.00 | $ | 1,052.50 | $ | 2.23 | ||||||
Hypothetical (5% average annual return before expenses) | 1,000.00 | 1,023.04 | 2.19 | |||||||||
* Expenses are equal to the Fund’s Class I shares annualized expense ratio of 0.43%, multiplied by the average account value over the period, and multiplied by 184/365 (to reflect the one-half year period). |
|
84
1290 FUNDS
1290 LOW VOLATILITY GLOBAL EQUITY FUND
PORTFOLIO OF INVESTMENTS
October 31, 2019
Number of Shares | Value (Note 1) | |||||||
EXCHANGE TRADED FUNDS (ETF): |
| |||||||
Equity (100.2%) | ||||||||
Invesco S&P 500 High Dividend Low Volatility ETF | 4,830 | $ | 204,695 | |||||
Invesco S&P 500 Low Volatility ETF | 3,560 | 204,949 | ||||||
Invesco S&P Emerging Markets Low Volatility ETF | 9,360 | 216,497 | ||||||
Invesco S&P International Developed Low Volatility ETF | 13,370 | 462,201 | ||||||
Invesco S&P MidCap Low Volatility ETF | 4,500 | 240,075 | ||||||
Invesco S&P SmallCap Low Volatility ETF | 2,420 | 121,484 | ||||||
iShares Edge MSCI Min Vol EAFE ETF | 6,310 | 473,566 | ||||||
iShares Edge MSCI Min Vol Emerging Markets ETF | 3,690 | 215,348 | ||||||
iShares Edge MSCI Min Vol Global ETF | 10,330 | 988,168 | ||||||
iShares Edge MSCI Min Vol USA ETF | 3,190 | 204,001 | ||||||
SPDR SSGA US Large Cap Low Volatility Index ETF | 1,300 | 144,651 | ||||||
SPDR SSGA US Small Cap Low Volatility Index ETF | 1,210 | 117,987 | ||||||
|
| |||||||
Total Investments in Securities (100.2%) | 3,593,622 | |||||||
Other Assets Less Liabilities (-0.2%) | (8,257 | ) | ||||||
|
| |||||||
Net Assets (100%) | $ | 3,585,365 | ||||||
|
|
The following is a summary of the inputs used to value the Fund’s assets and liabilities carried at fair value as of October 31, 2019:
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: | ||||||||||||||||
Exchange Traded Funds | ||||||||||||||||
Exchange Traded Funds | $ | 3,593,622 | $ | — | $ | — | $ | 3,593,622 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total Assets | $ | 3,593,622 | $ | — | $ | — | $ | 3,593,622 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total Liabilities | $ | — | $ | — | $ | — | $ | — | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total | $ | 3,593,622 | $ | — | $ | — | $ | 3,593,622 | ||||||||
|
|
|
|
|
|
|
|
The Fund held no derivatives contracts during the year ended October 31, 2019.
Investment security transactions for the year ended October 31, 2019 were as follows:
Cost of Purchases: | ||||
Long-term investments other than U.S. government debt securities | $ | 442,402 | ||
Net Proceeds of Sales and Redemptions: | ||||
Long-term investments other than U.S. government debt securities | $ | 118,595 |
As of October 31, 2019, the gross unrealized appreciation (depreciation) of investments based on the aggregate cost of investments in securities and derivative instruments, if applicable, for Federal income tax purposes was as follows:
Aggregate gross unrealized appreciation | $ | 492,356 | ||
Aggregate gross unrealized depreciation | — | |||
|
| |||
Net unrealized appreciation | $ | 492,356 | ||
|
| |||
Federal income tax cost of investments in securities and derivative instruments, if applicable | $ | 3,101,266 | ||
|
|
See Notes to Financial Statements.
85
1290 FUNDS
1290 LOW VOLATILITY GLOBAL EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES
October 31, 2019
ASSETS | ||||
Investments in Securities, at value (Cost $3,101,266) | $ | 3,593,622 | ||
Cash | 17,199 | |||
Receivable from investment adviser | 7,123 | |||
Prepaid registration and filing fees | 4,527 | |||
Receivable for Fund shares sold | 3,400 | |||
Other assets | 37 | |||
|
| |||
Total assets | 3,625,908 | |||
|
| |||
LIABILITIES | ||||
Accrued professional fees | 31,148 | |||
Transfer agent fees payable | 1,035 | |||
Accrued expenses | 8,360 | |||
|
| |||
Total liabilities | 40,543 | |||
|
| |||
NET ASSETS | $ | 3,585,365 | ||
|
| |||
Net assets were comprised of: | ||||
Paid in capital | $ | 3,035,314 | ||
Total distributable earnings (loss) | 550,051 | |||
|
| |||
Net assets | $ | 3,585,365 | ||
|
| |||
Class I | ||||
Net asset value and redemption price per share, $3,585,365 / 298,038 shares outstanding (unlimited amount authorized: $0.001 par value) | $ | 12.03 | ||
|
|
STATEMENT OF OPERATIONS
For the Year Ended October 31, 2019
INVESTMENT INCOME | ||||
Dividends | $ | 89,032 | ||
Interest | 427 | |||
|
| |||
Total income | 89,459 | |||
|
| |||
EXPENSES | ||||
Professional fees | 40,911 | |||
Administrative fees | 30,003 | |||
Registration and filing fees | 20,835 | |||
Printing and mailing expenses | 20,570 | |||
Investment advisory fees | 16,026 | |||
Transfer agent fees | 9,545 | |||
Custodian fees | 3,000 | |||
Trustees’ fees | 281 | |||
Miscellaneous | 5,624 | |||
|
| |||
Gross expenses | 146,795 | |||
Less: Waiver from investment adviser | (46,029 | ) | ||
Reimbursement from investment adviser | (87,010 | ) | ||
|
| |||
Net expenses | 13,756 | |||
|
| |||
NET INVESTMENT INCOME (LOSS) | 75,703 | |||
|
| |||
REALIZED AND UNREALIZED GAIN (LOSS) | ||||
Net realized gain (loss) on investments in securities | 16,504 | |||
Net change in unrealized appreciation (depreciation) on investments in securities | 342,520 | |||
|
| |||
NET REALIZED AND UNREALIZED GAIN (LOSS) | 359,024 | |||
|
| |||
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | $ | 434,727 | ||
|
|
STATEMENT OF CHANGES IN NET ASSETS | Year Ended October 31, | |||||||
2019 | 2018 | |||||||
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS: |
| |||||||
Net investment income (loss) | $ | 75,703 | $ | 65,544 | ||||
Net realized gain (loss) | 16,504 | 16,354 | ||||||
Net change in unrealized appreciation (depreciation) | 342,520 | (56,925 | ) | |||||
|
|
|
| |||||
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | 434,727 | 24,973 | ||||||
|
|
|
| |||||
Distributions to shareholders: | ||||||||
Class I | (88,452 | ) | (59,429 | ) | ||||
|
|
|
| |||||
CAPITAL SHARES TRANSACTIONS: | ||||||||
Class I | ||||||||
Capital shares sold [ 30,470 and 13,323 shares, respectively ] | 346,770 | 146,974 | ||||||
Capital shares issued in reinvestment of dividends [ 560 and 223 shares, respectively ] | 5,952 | 2,429 | ||||||
Capital shares repurchased [ (975) and (4,888) shares, respectively ] | (11,138 | ) | (53,199 | ) | ||||
|
|
|
| |||||
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM CAPITAL SHARE TRANSACTIONS | 341,584 | 96,204 | ||||||
|
|
|
| |||||
TOTAL INCREASE (DECREASE) IN NET ASSETS | 687,859 | 61,748 | ||||||
NET ASSETS: | ||||||||
Beginning of year | 2,897,506 | 2,835,758 | ||||||
|
|
|
| |||||
End of year | $ | 3,585,365 | $ | 2,897,506 | ||||
|
|
|
|
See Notes to Financial Statements.
86
1290 FUNDS
1290 LOW VOLATILITY GLOBAL EQUITY FUND
FINANCIAL HIGHLIGHTS
Year Ended October 31, | February 27, 2017* to October 31, 2017 | |||||||||||
Class I | 2019 | 2018 | ||||||||||
Net asset value, beginning of period | $ | 10.81 | $ | 10.94 | $ | 10.00 | ||||||
|
|
|
|
|
| |||||||
Income (loss) from investment operations: | ||||||||||||
Net investment income (loss) (e)(x) | 0.27 | 0.25 | 0.12 | |||||||||
Net realized and unrealized gain (loss) | 1.28 | (0.16 | ) | 0.82 | ||||||||
|
|
|
|
|
| |||||||
Total from investment operations | 1.55 | 0.09 | 0.94 | |||||||||
|
|
|
|
|
| |||||||
Less distributions: | ||||||||||||
Dividends from net investment income | (0.27 | ) | (0.22 | ) | — | |||||||
Distributions from net realized gains | (0.06 | ) | — | # | — | |||||||
|
|
|
|
|
| |||||||
Total dividends and distributions | (0.33 | ) | (0.22 | ) | — | |||||||
|
|
|
|
|
| |||||||
Net asset value, end of period | $ | 12.03 | $ | 10.81 | $ | 10.94 | ||||||
|
|
|
|
|
| |||||||
Total return (b) | 14.74 | % | 0.88 | % | 9.40 | % | ||||||
|
|
|
|
|
| |||||||
Ratios/Supplemental Data: | ||||||||||||
Net assets, end of period (000’s) | $ | 3,585 | $ | 2,898 | $ | 2,836 | ||||||
Ratio of expenses to average net assets: | ||||||||||||
After waivers and reimbursements (a)(f) | 0.43 | %(j) | 0.43 | %(j) | 0.43 | %(j) | ||||||
Before waivers and reimbursements (a)(f) | 4.58 | % | 5.15 | % | 4.87 | % | ||||||
Ratio of net investment income (loss) to average net assets: | ||||||||||||
After waivers and reimbursements (a)(f)(x) | 2.36 | % | 2.24 | % | 1.66 | %(l) | ||||||
Before waivers and reimbursements (a)(f)(x) | (1.79 | )% | (2.49 | )% | (2.78 | )%(l) | ||||||
Portfolio turnover rate (z)^ | 4 | % | 4 | % | 0 | %‡ |
* | Commencement of Operations. |
‡ | Less than 0.5%. |
# | 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. Certain non-recurring expenses incurred by the Fund are not annualized for periods less than one year. |
(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”), if applicable. |
(j) | Including direct and indirect expenses, the net expense ratio after waivers and reimbursements would be 0.65%. |
(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.
87
1290 MULTI-ALTERNATIVE STRATEGIES FUND (Unaudited)
INVESTMENT ADVISER
Ø | 1290 Asset Managers® |
PERFORMANCE RESULTS
Annualized Total Returns as of 10/31/19 | ||||||||||||
1 Year | Since Incept. | |||||||||||
Fund – Class A Shares* | without Sales Charge | 3.98 | % | 1.30 | % | |||||||
with Sales Charge (a | ) | (1.71 | ) | (0.02 | ) | |||||||
Fund – Class I Shares* | 4.25 | 1.55 | ||||||||||
Fund – Class R Shares* | 3.74 | 1.04 | ||||||||||
ICE BofAML U.S. 3-Month Treasury Bill Index | 2.40 | 1.18 | ||||||||||
* Date of inception 7/6/15.
(a) A 5.50% front-end sales charge was deducted.
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.
The graph illustrates comparative performance for $10,000 invested in the Class I Shares of the 1290 Multi-Alternative Strategies Fund and the ICE BofAML U.S.3-Month Treasury Bill Index from 7/6/15 to 10/31/19. The performance of the ICE BofAML U.S. 3-Month Treasury Bill Index reflects an initial investment at the end of the month closest to the Fund’s inception. The performance of the Fund assumes reinvestment of all dividends and capital gain distributions, if any, and does not include a sales charge. The performance of the ICE BofAML U.S. 3-Month Treasury Bill Index does not reflect the deduction of expenses or a sales charge associated with a mutual fund and has been adjusted to reflect reinvestment of all dividends, capital gain distributions, and interest of the securities included in the benchmark.
As of March 1, 2019, the gross expense ratios for Class A, I and R shares were 2.41%, 2.16% and 2.64%, respectively. The net expense ratios for Class A, I and R shares were 1.65%, 1.40% and 1.90%, respectively. The net expense ratios reflect the Adviser’s decision to contractually limit expenses through April 30, 2020. Fund Performance may also 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.
In addition, 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.
PERFORMANCE SUMMARY
The Fund’s Class I shares returned 4.25% for the year ended October 31, 2019. The Fund’s benchmark, the ICE BofAML U.S.3-Month Treasury Bill Index, returned 2.40% over the same year.
Fund Highlights
What helped performance during the year*?
• | Real estate was the top contributor to performance as yields appeared more attractive in the low to negative interest rate environment. Domestic and global real estate investment trusts (REITs) were up about 24% and 20%, respectively, on an absolute basis for the period. |
• | Precious metals had strong performance for the period, with silver and gold up about 27% and 25%, respectively. |
• | While convertible securities lagged the equity markets for the period, the strategy still had strong performance. |
What hurt performance during the year*?
• | Commodities were the top detractor to performance, largely driven by poor performance in energy prices. |
• | Positioning within corn and energy were the main drivers of underperformance for the managed futures strategy. |
• | The value tilt within the long/short equity strategy negatively impacted performance as growth continued to outperform value. |
* | The Fund does not hold a position in any single security directly but has exposure through ETFs. |
Table by Asset Class(as a percentage of Total Investments in Securities) | ||||
As of October 31, 2019 | ||||
Alternatives | 45.8 | % | ||
Fixed Income | 18.0 | |||
Commodity | 16.4 | |||
Equity | 10.5 | |||
Specialty | 9.3 |
Top 10 Holdings (as a percentage of Total Investments in Securities) | ||||
As of October 31, 2019 | ||||
JPMorgan Diversified Alternatives ETF | 9.6 | % | ||
ProShares Hedge Replication ETF | 9.4 | |||
IQ Merger Arbitrage ETF | 9.4 | |||
Invesco DB G10 Currency Harvest Fund | 9.3 | |||
SPDR Bloomberg Barclays Convertible Securities ETF | 9.1 | |||
WisdomTree Managed Futures Strategy Fund | 8.9 | |||
Invesco DB Gold Fund | 6.5 | |||
iShares Core US REIT ETF | 4.5 | |||
Vanguard Global ex-U.S. Real Estate ETF | 4.5 | |||
iShares TIPS Bond ETF | 4.5 | |||
Holdings are subject to change without notice. |
88
1290 MULTI-ALTERNATIVE STRATEGIES 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 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 October 31, 2019 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 5/1/19 | Ending Account Value 10/31/19 | Expenses Paid During Period* 5/1/19 - 10/31/19 | ||||||||||
Class A |
| |||||||||||
Actual | $1,000.00 | $1,011.80 | $5.20 | |||||||||
Hypothetical (5% average annual return before expenses) | 1,000.00 | 1,020.04 | 5.22 | |||||||||
Class I | ||||||||||||
Actual | 1,000.00 | 1,013.70 | 3.93 | |||||||||
Hypothetical (5% average annual return before expenses) | 1,000.00 | 1,021.30 | 3.95 | |||||||||
Class R | ||||||||||||
Actual | 1,000.00 | 1,010.80 | 6.46 | |||||||||
Hypothetical (5% average annual return before expenses) | 1,000.00 | 1,018.78 | 6.48 | |||||||||
* Expenses are equal to the Fund’s Class A, I and R shares annualized expense ratios of 1.02%, 0.77% and 1.27%, respectively, multiplied by the average account value over the period, and multiplied by 184/365 (to reflect the one-half year period). |
|
89
1290 FUNDS
1290 MULTI-ALTERNATIVE STRATEGIES FUND
PORTFOLIO OF INVESTMENTS
October 31, 2019
Number of Shares | Value (Note 1) | |||||||
EXCHANGE TRADED FUNDS (ETF): |
| |||||||
Alternatives (45.6%) | ||||||||
IQ Merger Arbitrage ETF* | 53,360 | $ | 1,739,003 | |||||
JPMorgan Diversified Alternatives ETF* | 70,820 | 1,766,959 | ||||||
JPMorgan Long/Short ETF* | 34,700 | 764,375 | ||||||
ProShares Hedge Replication ETF | 37,960 | 1,740,105 | ||||||
ProShares RAFI Long/Short‡ | 23,000 | 798,675 | ||||||
WisdomTree Managed Futures Strategy Fund | 43,630 | 1,640,488 | ||||||
|
| |||||||
Total Alternatives | 8,449,605 | |||||||
|
| |||||||
Commodity (16.3%) | ||||||||
Invesco DB Base Metals Fund | 17,600 | 268,752 | ||||||
Invesco DB Commodity Index Tracking Fund | 50,780 | 778,457 | ||||||
Invesco DB Gold Fund | 26,070 | 1,200,784 | ||||||
Invesco DB Precious Metals Fund | 2,860 | 120,692 | ||||||
Invesco DB Silver Fund | 4,020 | 106,180 | ||||||
iShares Commodities Select Strategy ETF | 17,470 | 555,197 | ||||||
|
| |||||||
Total Commodity | 3,030,062 | |||||||
|
| |||||||
Equity (10.5%) | ||||||||
iShares Core US REIT ETF | 14,940 | 841,869 | ||||||
iShares MSCI Global Agriculture Producers ETF | 9,870 | 273,158 | ||||||
Vanguard Global ex-U.S. Real Estate ETF | 13,660 | 831,894 | ||||||
|
| |||||||
Total Equity | 1,946,921 | |||||||
|
| |||||||
Fixed Income (17.9%) | ||||||||
iShares TIPS Bond ETF | 7,090 | 822,865 | ||||||
SPDR Bloomberg Barclays Convertible Securities ETF | 31,470 | 1,675,778 | ||||||
Vanguard Short-Term Inflation-Protected Securities ETF | 16,550 | 813,929 | ||||||
|
| |||||||
Total Fixed Income | 3,312,572 | |||||||
|
| |||||||
Specialty (9.3%) | ||||||||
Invesco DB G10 Currency Harvest Fund‡ | 70,890 | 1,714,829 | ||||||
|
| |||||||
Total Investments in Securities (99.6%) | 18,453,989 | |||||||
Other Assets Less Liabilities (0.4%) | 72,173 | |||||||
|
| |||||||
Net Assets (100%) | $ | 18,526,162 | ||||||
|
|
* | Non-income producing. |
‡ | All, or a portion, of the security is an affiliated company as defined under the Investment Company Act of 1940. |
Glossary:
TIPS | — Treasury Inflation Protected Security |
Investments in companies which were affiliates for the year ended October 31, 2019, were as follows:
Security Description | Shares at October 31, 2019 | Market Value October 31, 2018 ($) | Purchases at Cost ($) | Proceeds from Sales ($) | Net Realized Gain (Loss) ($) | Change in Unrealized Appreciation/ (Depreciation) ($) | Market Value October 31, 2019 ($) | Dividend/ Interest Income ($) | Capital Gain Distributions ($) | |||||||||||||||||||||||||||
EXCHANGE TRADED FUNDS (ETF): |
| |||||||||||||||||||||||||||||||||||
Specialty | ||||||||||||||||||||||||||||||||||||
Invesco DB G10 Currency Harvest Fund | 70,890 | 1,772,352 | — | (36,591 | ) | 1,449 | (22,381 | ) | 1,714,829 | 19,549 | — | |||||||||||||||||||||||||
Alternatives | ||||||||||||||||||||||||||||||||||||
ProShares RAFI Long/Short | 23,000 | 1,713,241 | — | (834,425 | ) | (135,408 | ) | 55,267 | 798,675 | 28,951 | — | |||||||||||||||||||||||||
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|
|
|
|
|
|
|
|
| |||||||||||||||||||||
Total | 3,485,593 | — | (871,016 | ) | (133,959 | ) | 32,886 | 2,513,504 | 48,500 | — | ||||||||||||||||||||||||||
|
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|
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|
|
|
|
|
|
|
See Notes to Financial Statements.
90
1290 FUNDS
1290 MULTI-ALTERNATIVE STRATEGIES FUND
PORTFOLIO OF INVESTMENTS (Continued)
October 31, 2019
The following is a summary of the inputs used to value the Fund’s assets and liabilities carried at fair value as of October 31, 2019:
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: |
| |||||||||||||||
Exchange Traded Funds | ||||||||||||||||
Exchange Traded Funds | $ | 18,453,989 | $ | — | $ | — | $ | 18,453,989 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total Assets | $ | 18,453,989 | $ | — | $ | — | $ | 18,453,989 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total Liabilities | $ | — | $ | — | $ | — | $ | — | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total | $ | 18,453,989 | $ | — | $ | — | $ | 18,453,989 | ||||||||
|
|
|
|
|
|
|
|
The Fund held no derivatives contracts during the year ended October 31, 2019.
Investment security transactions for the year ended October 31, 2019 were as follows:
Cost of Purchases: | ||||
Long-term investments other than U.S. government debt securities | $ | 1,462,833 | ||
Net Proceeds of Sales and Redemptions: | ||||
Long-term investments other than U.S. government debt securities | $ | 2,584,068 |
As of October 31, 2019, the gross unrealized appreciation (depreciation) of investments based on the aggregate cost of investments in securities and derivative instruments, if applicable, for Federal income tax purposes was as follows:
Aggregate gross unrealized appreciation | $ | 1,021,002 | ||
Aggregate gross unrealized depreciation | (335,854 | ) | ||
|
| |||
Net unrealized appreciation | $ | 685,148 | ||
|
| |||
Federal income tax cost of investments in securities and derivative instruments, if applicable | $ | 17,768,841 | ||
|
|
See Notes to Financial Statements.
91
1290 FUNDS
1290 MULTI-ALTERNATIVE STRATEGIES FUND
STATEMENT OF ASSETS AND LIABILITIES
October 31, 2019
ASSETS | ||||
Investments in Securities, at value: | ||||
Affiliated Issuers (Cost $2,573,144) | $ | 2,513,504 | ||
Unaffiliated Issuers (Cost $15,254,266) | 15,940,485 | |||
Cash | 111,407 | |||
Prepaid registration and filing fees | 15,166 | |||
Receivable for Fund shares sold | 50 | |||
Other assets | 300 | |||
|
| |||
Total assets | 18,580,912 | |||
|
| |||
LIABILITIES | ||||
Payable for Fund shares redeemed | 4,825 | |||
Transfer agent fees payable | 4,021 | |||
Administrative fees payable | 1,005 | |||
Distribution fees payable – Class A | 133 | |||
Distribution fees payable – Class R | 48 | |||
Accrued expenses | 44,718 | |||
|
| |||
Total liabilities | 54,750 | |||
|
| |||
NET ASSETS | $ | 18,526,162 | ||
|
| |||
Net assets were comprised of: | ||||
Paid in capital | $ | 17,878,370 | ||
Total distributable earnings (loss) | 647,792 | |||
|
| |||
Net assets | $ | 18,526,162 | ||
|
| |||
Class A | ||||
Net asset value and redemption price per share, $627,178 / 60,757 shares outstanding (unlimited amount authorized: $0.001 par value) | $ | 10.32 | ||
Maximum sales charge (5.50% of offering price) | 0.60 | |||
|
| |||
Maximum offering price per share | $ | 10.92 | ||
|
| |||
Class I | ||||
Net asset value and redemption price per share, $17,783,453 / 1,719,769 shares outstanding (unlimited amount authorized: $0.001 par value) | $ | 10.34 | ||
|
| |||
Class R | ||||
Net asset value and redemption price per share, $115,531 / 11,248 shares outstanding (unlimited amount authorized: $0.001 par value) | $ | 10.27 | ||
|
|
STATEMENT OF OPERATIONS
For the Year Ended October 31, 2019
INVESTMENT INCOME | ||||
Dividends ($48,500 of dividend income received from affiliates) | $ | 396,859 | ||
Interest | 1,693 | |||
|
| |||
Total income | 398,552 | |||
|
| |||
EXPENSES | ||||
Investment advisory fees | 93,151 | |||
Professional fees | 57,549 | |||
Transfer agent fees | 36,900 | |||
Registration and filing fees | 34,287 | |||
Administrative fees | 30,004 | |||
Printing and mailing expenses | 28,401 | |||
Custodian fees | 2,600 | |||
Distribution fees – Class A | 1,812 | |||
Trustees’ fees | 1,687 | |||
Distribution fees – Class R | 544 | |||
Miscellaneous | 19,706 | |||
|
| |||
Gross expenses | 306,641 | |||
Less: Waiver from investment adviser | (123,155 | ) | ||
Reimbursement from investment adviser | (28,971 | ) | ||
|
| |||
Net expenses | 154,515 | |||
|
| |||
NET INVESTMENT INCOME (LOSS) | 244,037 | |||
|
| |||
REALIZED AND UNREALIZED GAIN (LOSS) |
| |||
Net realized gain (loss) on investments in securities ($(133,959) of realized gain (loss) from affiliates) | (50,597 | ) | ||
Net change in unrealized appreciation (depreciation) on investments in securities ($32,886 of change in unrealized appreciation (depreciation) from affiliates) | 583,673 | |||
|
| |||
NET REALIZED AND UNREALIZED GAIN (LOSS) | 533,076 | |||
|
| |||
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | $ | 777,113 | ||
|
|
See Notes to Financial Statements.
92
1290 FUNDS
1290 MULTI-ALTERNATIVE STRATEGIES FUND
STATEMENT OF CHANGES IN NET ASSETS
Year Ended October 31, | ||||||||
2019 | 2018 | |||||||
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS: | ||||||||
Net investment income (loss) | $ | 244,037 | $ | 118,683 | ||||
Net realized gain (loss) | (50,597 | ) | (452 | ) | ||||
Net change in unrealized appreciation (depreciation) | 583,673 | (379,307 | ) | |||||
|
|
|
| |||||
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | 777,113 | (261,076 | ) | |||||
|
|
|
| |||||
Distributions to shareholders: | ||||||||
Class A | (7,113 | ) | (2,431 | ) | ||||
Class I | (217,148 | ) | (102,929 | ) | ||||
Class R | (740 | ) | (2,024 | ) | ||||
|
|
|
| |||||
Total distributions to shareholders | (225,001 | ) | (107,384 | ) | ||||
|
|
|
| |||||
CAPITAL SHARES TRANSACTIONS: | ||||||||
Class A | ||||||||
Capital shares sold [ 5,825 and 24,928 shares, respectively ] | 59,103 | 254,309 | ||||||
Capital shares issued in reinvestment of dividends [ 623 and 201 shares, respectively ] | 6,163 | 2,048 | ||||||
Capital shares repurchased [ (28,247) and (7,078) shares, respectively ] | (286,221 | ) | (72,391 | ) | ||||
|
|
|
| |||||
Total Class A transactions | (220,955 | ) | 183,966 | |||||
|
|
|
| |||||
Class I | ||||||||
Capital shares sold [ 178,038 and 320,848 shares, respectively ] | 1,799,614 | 3,286,660 | ||||||
Capital shares issued in reinvestment of dividends [ 9,966 and 4,035 shares, respectively ] | 98,568 | 40,993 | ||||||
Capital shares repurchased [ (276,662) and (115,451) shares, respectively ] | (2,793,490 | ) | (1,179,390 | ) | ||||
|
|
|
| |||||
Total Class I transactions | (895,308 | ) | 2,148,263 | |||||
|
|
|
| |||||
Class R | ||||||||
Capital shares sold [ 703 and 44,922 shares, respectively ] | 7,121 | 456,502 | ||||||
Capital shares issued in reinvestment of dividends [ 4 and 162 shares, respectively ] | 40 | 1,641 | ||||||
Capital shares repurchased [ (22) and (44,791) shares, respectively ] | (223 | ) | (460,156 | ) | ||||
|
|
|
| |||||
Total Class R transactions | 6,938 | (2,013 | ) | |||||
|
|
|
| |||||
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM CAPITAL SHARE TRANSACTIONS | (1,109,325 | ) | 2,330,216 | |||||
|
|
|
| |||||
TOTAL INCREASE (DECREASE) IN NET ASSETS | (557,213 | ) | 1,961,756 | |||||
NET ASSETS: | ||||||||
Beginning of year | 19,083,375 | 17,121,619 | ||||||
|
|
|
| |||||
End of year | $ | 18,526,162 | $ | 19,083,375 | ||||
|
|
|
|
See Notes to Financial Statements.
93
1290 FUNDS
1290 MULTI-ALTERNATIVE STRATEGIES FUND
FINANCIAL HIGHLIGHTS
Year Ended October 31, | July 6, 2015* to October 31, 2015 | |||||||||||||||||||
Class A | 2019 | 2018 | 2017 | 2016 | ||||||||||||||||
Net asset value, beginning of period | $ | 10.02 | $ | 10.21 | $ | 9.97 | $ | 9.70 | $ | 10.00 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss) (e)(x) | 0.11 | 0.04 | 0.02 | 0.01 | (0.01 | ) | ||||||||||||||
Net realized and unrealized gain (loss) | 0.28 | (0.19 | ) | 0.26 | 0.33 | (0.29 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total from investment operations | 0.39 | (0.15 | ) | 0.28 | 0.34 | (0.30 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Less distributions: | ||||||||||||||||||||
Dividends from net investment income | (0.04 | ) | — | (0.01 | ) | (0.05 | ) | — | ||||||||||||
Distributions from net realized gains | (0.05 | ) | (0.04 | ) | (0.03 | ) | — | — | ||||||||||||
Return of capital | — | — | — | (0.02 | ) | — | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total dividends and distributions | (0.09 | ) | (0.04 | ) | (0.04 | ) | (0.07 | ) | — | |||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net asset value, end of period | $ | 10.32 | $ | 10.02 | $ | 10.21 | $ | 9.97 | $ | 9.70 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total return (b) | 3.98 | % | (1.49 | )% | 2.78 | % | 3.53 | % | (3.00 | )% | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Ratios/Supplemental Data: | ||||||||||||||||||||
Net assets, end of period (000’s) | $ | 627 | $ | 827 | $ | 659 | $ | 410 | $ | 112 | ||||||||||
Ratio of expenses to average net assets: | ||||||||||||||||||||
After waivers and reimbursements (a)(f) | 1.07 | %**(j) | 1.03 | %(k) | 1.00 | %(k) | 0.98 | %(k) | 0.96 | %(k) | ||||||||||
Before waivers and reimbursements (a)(f) | 1.89 | % | 1.79 | % | 2.08 | % | 2.62 | % | 2.26 | % | ||||||||||
Ratio of net investment income (loss) to average net assets: | ||||||||||||||||||||
After waivers and reimbursements (a)(f)(x) | 1.12 | % | 0.39 | % | 0.20 | % | 0.10 | % | (0.25 | )%(l) | ||||||||||
Before waivers and reimbursements (a)(f)(x) | 0.30 | % | (0.37 | )% | (0.88 | )% | (1.55 | )% | (1.55 | )%(l) | ||||||||||
Portfolio turnover rate (z)^ | 8 | % | 5 | % | 13 | % | 2 | % | 0 | % | ||||||||||
Year Ended October 31, | July 6, 2015* to October 31, 2015 | |||||||||||||||||||
Class I | 2019 | 2018 | 2017 | 2016 | ||||||||||||||||
Net asset value, beginning of period | $ | 10.04 | $ | 10.23 | $ | 9.99 | $ | 9.71 | $ | 10.00 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss) (e)(x) | 0.13 | 0.07 | 0.05 | 0.05 | — | # | ||||||||||||||
Net realized and unrealized gain (loss) | 0.29 | (0.20 | ) | 0.25 | 0.31 | (0.29 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total from investment operations | 0.42 | (0.13 | ) | 0.30 | 0.36 | (0.29 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Less distributions: | ||||||||||||||||||||
Dividends from net investment income | (0.07 | ) | (0.02 | ) | (0.03 | ) | (0.05 | ) | — | |||||||||||
Distributions from net realized gains | (0.05 | ) | (0.04 | ) | (0.03 | ) | — | — | ||||||||||||
Return of capital | — | — | — | (0.03 | ) | — | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total dividends and distributions | (0.12 | ) | (0.06 | ) | (0.06 | ) | (0.08 | ) | — | |||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net asset value, end of period | $ | 10.34 | $ | 10.04 | $ | 10.23 | $ | 9.99 | $ | 9.71 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total return (b) | 4.25 | % | (1.25 | )% | 3.04 | % | 3.76 | % | (2.90 | )% | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Ratios/Supplemental Data: | ||||||||||||||||||||
Net assets, end of period (000’s) | $ | 17,783 | $ | 18,151 | $ | 16,358 | $ | 12,233 | $ | 9,591 | ||||||||||
Ratio of expenses to average net assets: | ||||||||||||||||||||
After waivers and reimbursements (a)(f) | 0.82 | %**(j) | 0.78 | %(k) | 0.75 | %(k) | 0.73 | %(k) | 0.72 | %(k) | ||||||||||
Before waivers and reimbursements (a)(f) | 1.63 | % | 1.54 | % | 1.82 | % | 2.24 | % | 1.97 | % | ||||||||||
Ratio of net investment income (loss) to average net assets: | ||||||||||||||||||||
After waivers and reimbursements (a)(f)(x) | 1.32 | % | 0.66 | % | 0.45 | % | 0.50 | % | (0.03 | )%(l) | ||||||||||
Before waivers and reimbursements (a)(f)(x) | 0.50 | % | (0.11 | )% | (0.62 | )% | (1.02 | )% | (1.29 | )%(l) | ||||||||||
Portfolio turnover rate (z)^ | 8 | % | 5 | % | 13 | % | 2 | % | 0 | % |
See Notes to Financial Statements.
94
1290 FUNDS
1290 MULTI-ALTERNATIVE STRATEGIES FUND
FINANCIAL HIGHLIGHTS (Continued)
Year Ended October 31, | July 6, 2015* to October 31, 2015 | |||||||||||||||||||
Class R | 2019 | 2018 | 2017 | 2016 | ||||||||||||||||
Net asset value, beginning of period | $ | 9.97 | $ | 10.19 | $ | 9.95 | $ | 9.69 | $ | 10.00 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss) (e)(x) | 0.08 | 0.03 | — | # | — | # | (0.02 | ) | ||||||||||||
Net realized and unrealized gain (loss) | 0.29 | (0.21 | ) | 0.27 | 0.32 | (0.29 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total from investment operations | 0.37 | (0.18 | ) | 0.27 | 0.32 | (0.31 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Less distributions: | ||||||||||||||||||||
Dividends from net investment income | (0.02 | ) | — | — | (0.04 | ) | — | |||||||||||||
Distributions from net realized gains | (0.05 | ) | (0.04 | ) | (0.03 | ) | — | — | ||||||||||||
Return of capital | — | — | — | (0.02 | ) | — | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total dividends and distributions | (0.07 | ) | (0.04 | ) | (0.03 | ) | (0.06 | ) | — | |||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net asset value, end of period | $ | 10.27 | $ | 9.97 | $ | 10.19 | $ | 9.95 | $ | 9.69 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total return (b) | 3.74 | % | (1.79 | )% | 2.53 | % | 3.30 | % | (3.10 | )% | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Ratios/Supplemental Data: | ||||||||||||||||||||
Net assets, end of period (000’s) | $ | 116 | $ | 105 | $ | 105 | $ | 101 | $ | 97 | ||||||||||
Ratio of expenses to average net assets: | ||||||||||||||||||||
After waivers and reimbursements (a)(f) | 1.32 | %**(j) | 1.26 | %(k) | 1.25 | %(k) | 1.22 | %(k) | 1.21 | %(k) | ||||||||||
Before waivers and reimbursements (a)(f) | 2.13 | % | 2.02 | % | 2.32 | % | 2.73 | % | 2.47 | % | ||||||||||
Ratio of net investment income (loss) to average net assets: | ||||||||||||||||||||
After waivers and reimbursements (a)(f)(x) | 0.78 | % | 0.27 | % | (0.02 | )% | 0.02 | % | (0.53 | )%(l) | ||||||||||
Before waivers and reimbursements (a)(f)(x) | (0.04 | )% | (0.49 | )% | (1.08 | )% | (1.50 | )% | (1.78 | )%(l) | ||||||||||
Portfolio turnover rate (z)^ | 8 | % | 5 | % | 13 | % | 2 | % | 0 | % |
* | Commencement of Operations. |
** | Includes excise tax expense of 0.04%. |
# | 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. Certain non-recurring expenses incurred by the Fund are not annualized for periods less than one year. |
(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”), if applicable. |
(j) | Including direct and indirect expenses, the net expense ratio after waivers and reimbursements would be 1.69% for Class A, 1.44% for Class I and 1.94% for Class R. |
(k) | Including direct and indirect expenses, the net expense ratio after waivers and reimbursements 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.
95
1290 RETIREMENT 2020 FUND (Unaudited)
INVESTMENT ADVISER
Ø | 1290 Asset Managers® |
PERFORMANCE RESULTS
Annualized Total Returns as of 10/31/19 | ||||||||
1 Year | Since Incept. | |||||||
Fund – Class I Shares* | 12.37 | % | 7.08 | % | ||||
S&P Target Date 2020 Index | 10.57 | 6.54 | ||||||
* Date of inception 2/27/17.
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.
The graph illustrates comparative performance for $10,000 invested in the Class I Shares of the 1290 Retirement 2020 Fund and the S&P Target Date 2020 Index from 2/27/17 to 10/31/19. The performance of the S&P Target Date 2020 Index reflects an initial investment at the end of the month closest to the Fund’s inception. The performance of the Fund assumes reinvestment of all dividends and capital gain distributions, if any, and does not include a sales charge. The performance of the S&P Target Date 2020 Index does not reflect the deduction of expenses or a sales charge associated with a mutual fund and has been adjusted to reflect reinvestment of all dividends, capital gain distributions, and interest of the securities included in the benchmark.
As of March 1, 2019, the gross expense ratio for Class I shares was 3.98%. The net expense ratio for Class I shares was 0.65%. The net expense ratio reflects the Adviser’s decision to contractually limit expenses through April 30, 2020. Fund Performance may also 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.
In addition, 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.
PERFORMANCE SUMMARY
The Fund’s Class I shares returned 12.37% for the year ended October 31, 2019. The Fund’s benchmark, the S&P Target Date 2020 Index, returned 10.57% over the same year.
Overview
Each 1290 Retirement Fund’s (as defined in the Notes to the Financial Statements) performance will reflect the performance of the underlying asset classes and depends upon their percentage weighting within the Fund. Here’s why: The 1290 Retirement Funds are managed to target a specific year of planned retirement. The asset mix will become more conservative each year, until about 10 years after the target retirement year, when it will become relatively stable. The 1290 Retirement Funds balance the need for appreciation with the need for income as retirement approaches and focus on supporting an income stream over a long-term retirement withdrawal horizon. To achieve its asset class exposure, each 1290 Retirement Fund invests in exchange-traded funds (ETFs) representing various equity and bond asset classes. Because of this, each of the 1290 Retirement Fund’s performance will be a function of the asset class performance and the percentage weighting of each asset class in the 1290 Retirement Fund. Current target and actual allocations, as well as performance, are available in a separate quarterly Fund Fact Sheet.
Fund Highlights
What helped performance during the year?
• | The primary driver of outperformance was the fact that the low volatility tilt of the Fund outperformed the market cap weighted benchmark within both domestic and developed markets equities. |
• | Within fixed income, an overweight to intermediate bonds and an underweight to short duration bonds relative to the benchmark added to performance. |
What hurt performance during the year?
• | While low volatility benefited domestic and developed markets equities, it was not beneficial within the emerging markets equities as market cap outperformed in that segment of the benchmark. |
• | Within domestic equities, a higher allocation to small cap equities relative to the benchmark detracted from performance as large cap equities were the best performer for the period. |
Table by Asset Class(as a percentage of Total Investments in Securities) As of October 31, 2019 | ||||
Equity | 53.5 | % | ||
Fixed Income | 46.5 |
96
1290 RETIREMENT 2020 FUND (Unaudited)
Top 10 Holdings(as a percentage of Total Investments in Securities) As of October 31, 2019 | ||||
iShares Core U.S. Aggregate Bond ETF | 29.0 | % | ||
iShares Core S&P Total US Stock Market ETF | 18.4 | |||
iShares TIPS Bond ETF | 6.8 | |||
iShares Core MSCI EAFE ETF | 6.4 | |||
Invesco S&P 500 Low Volatility ETF | 6.1 | |||
iShares Edge MSCI Min Vol USA ETF | 6.0 | |||
Vanguard Short-Term Bond ETF | 4.1 | |||
iShares Edge MSCI Min Vol EAFE ETF | 3.4 | |||
Invesco S&P MidCap Low Volatility ETF | 3.3 | |||
SPDR Bloomberg Barclays High Yield Bond ETF | 3.3 | |||
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 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 October 31, 2019 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 5/1/19 | Ending Account Value 10/31/19 | Expenses Paid During Period* 5/1/19 - 10/31/19 | ||||||||||
Class I |
| |||||||||||
Actual | $ | 1,000.00 | $ | 1,045.20 | $ | 2.76 | ||||||
Hypothetical (5% average annual return before expenses) | 1,000.00 | 1,022.51 | 2.73 | |||||||||
* Expenses are equal to the Fund’s Class I shares annualized expense ratio of 0.54%, multiplied by the average account value over the period, and multiplied by 184/365 (to reflect the one-half year period). |
|
97
1290 FUNDS
1290 RETIREMENT 2020 FUND
PORTFOLIO OF INVESTMENTS
October 31, 2019
Number of Shares | Value (Note 1) | |||||||
EXCHANGE TRADED FUNDS (ETF): |
| |||||||
Equity (53.4%) | ||||||||
Invesco S&P 500 Low Volatility ETF | 11,460 | $ | 659,752 | |||||
Invesco S&P Emerging Markets Low Volatility ETF | 3,540 | 81,880 | ||||||
Invesco S&P International Developed Low Volatility ETF | 9,880 | 341,552 | ||||||
Invesco S&P MidCap Low Volatility ETF | 6,760 | 360,646 | ||||||
Invesco S&P SmallCap Low Volatility ETF | 3,580 | 179,716 | ||||||
iShares Core MSCI EAFE ETF | 10,890 | 688,575 | ||||||
iShares Core MSCI Emerging Markets ETF | 3,760 | 192,399 | ||||||
iShares Core S&P Total US Stock Market ETF | 28,990 | 1,986,975 | ||||||
iShares Edge MSCI Min Vol EAFE ETF | 4,840 | 363,242 | ||||||
iShares Edge MSCI Min Vol Emerging Markets ETF | 1,420 | 82,871 | ||||||
iShares Edge MSCI Min Vol USA ETF | 10,190 | 651,650 | ||||||
SPDR SSGA US Small Cap Low Volatility Index ETF | 1,780 | 173,568 | ||||||
|
| |||||||
Total Equity | 5,762,826 | |||||||
|
| |||||||
Fixed Income (46.5%) | ||||||||
iShares Core U.S. Aggregate Bond ETF | 27,590 | 3,121,808 | ||||||
iShares TIPS Bond ETF | 6,350 | 736,981 | ||||||
SPDR Bloomberg Barclays High Yield Bond ETF | 3,326 | 359,840 | ||||||
Vanguard Short-Term Bond ETF | 5,450 | 441,287 | ||||||
Vanguard Total International Bond ETF | 6,130 | 358,544 | ||||||
|
| |||||||
Total Fixed Income | 5,018,460 | |||||||
|
| |||||||
Total Investments in Securities (99.9%) | 10,781,286 | |||||||
Other Assets Less Liabilities (0.1%) | 9,314 | |||||||
|
| |||||||
Net Assets (100%) | $ | 10,790,600 | ||||||
|
|
Glossary:
TIPS | — Treasury Inflation Protected Security |
The following is a summary of the inputs used to value the Fund’s assets and liabilities carried at fair value as of October 31, 2019:
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: |
| |||||||||||||||
Exchange Traded Funds |
| |||||||||||||||
Exchange Traded Funds | $ | 10,781,286 | $ | — | $ | — | $ | 10,781,286 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total Assets | $ | 10,781,286 | $ | — | $ | — | $ | 10,781,286 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total Liabilities | $ | — | $ | — | $ | — | $ | — | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total | $ | 10,781,286 | $ | — | $ | — | $ | 10,781,286 | ||||||||
|
|
|
|
|
|
|
|
The Fund held no derivatives contracts during the year ended October 31, 2019.
Investment security transactions for the year ended October 31, 2019 were as follows:
Cost of Purchases: | ||||
Long-term investments other than U.S. government debt securities | $ | 3,930,342 | ||
Net Proceeds of Sales and Redemptions: | ||||
Long-term investments other than U.S. government debt securities | $ | 1,675,005 |
See Notes to Financial Statements.
98
1290 FUNDS
1290 RETIREMENT 2020 FUND
PORTFOLIO OF INVESTMENTS (Continued)
October 31, 2019
As of October 31, 2019, the gross unrealized appreciation (depreciation) of investments based on the aggregate cost of investments in securities and derivative instruments, if applicable, for Federal income tax purposes was as follows:
Aggregate gross unrealized appreciation | $ | 699,905 | ||
Aggregate gross unrealized depreciation | (3,299 | ) | ||
|
| |||
Net unrealized appreciation | $ | 696,606 | ||
|
| |||
Federal income tax cost of investments in securities and derivative instruments, if applicable | $ | 10,084,680 | ||
|
|
See Notes to Financial Statements.
99
1290 FUNDS
1290 RETIREMENT 2020 FUND
STATEMENT OF ASSETS AND LIABILITIES
October 31, 2019
ASSETS |
| |||
Investments in Securities, at value (Cost $10,076,812) | $ | 10,781,286 | ||
Cash | 35,873 | |||
Receivable from investment adviser | 10,766 | |||
Prepaid registration and filing fees | 4,966 | |||
Receivable for Fund shares sold | 571 | |||
Other assets | 192 | |||
|
| |||
Total assets | 10,833,654 | |||
|
| |||
LIABILITIES |
| |||
Transfer agent fees payable | 873 | |||
Accrued expenses | 42,181 | |||
|
| |||
Total liabilities | 43,054 | |||
|
| |||
NET ASSETS | $ | 10,790,600 | ||
|
| |||
Net assets were comprised of: |
| |||
Paid in capital | $ | 9,793,548 | ||
Total distributable earnings (loss) | 997,052 | |||
|
| |||
Net assets | $ | 10,790,600 | ||
|
| |||
Class I | ||||
Net asset value and redemption price per share, $10,790,600 / 933,014 shares outstanding (unlimited amount authorized: $0.001 par value) | $ | 11.57 | ||
|
|
STATEMENT OF OPERATIONS
For the Year Ended October 31, 2019
INVESTMENT INCOME |
| |||
Dividends | $ | 250,424 | ||
Interest | 1,051 | |||
|
| |||
Total income | 251,475 | |||
|
| |||
EXPENSES |
| |||
Investment advisory fees | 47,602 | |||
Professional fees | 47,436 | |||
Administrative fees | 30,005 | |||
Printing and mailing expenses | 28,947 | |||
Registration and filing fees | 21,440 | |||
Transfer agent fees | 9,300 | |||
Custodian fees | 4,800 | |||
Trustees’ fees | 814 | |||
Miscellaneous | 8,985 | |||
|
| |||
Gross expenses | 199,329 | |||
Less: Waiver from investment adviser | (77,607 | ) | ||
Reimbursement from investment adviser | (70,515 | ) | ||
|
| |||
Net expenses | 51,207 | |||
|
| |||
NET INVESTMENT INCOME (LOSS) | 200,268 | |||
|
| |||
REALIZED AND UNREALIZED GAIN (LOSS) |
| |||
Net realized gain (loss) on investments in securities | 144,290 | |||
Net distributions of realized gain received from underlying funds | 71 | |||
|
| |||
Net realized gain (loss) | 144,361 | |||
|
| |||
Net change in unrealized appreciation (depreciation) on investments in securities | 762,470 | |||
|
| |||
NET REALIZED AND UNREALIZED GAIN (LOSS) | 906,831 | |||
|
| |||
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | $ | 1,107,099 | ||
|
|
See Notes to Financial Statements.
100
1290 FUNDS
1290 RETIREMENT 2020 FUND
STATEMENT OF CHANGES IN NET ASSETS
Year Ended October 31, | ||||||||
2019 | 2018 | |||||||
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS: |
| |||||||
Net investment income (loss) | $ | 200,268 | $ | 76,935 | ||||
Net realized gain (loss) | 144,361 | 29,108 | ||||||
Net change in unrealized appreciation (depreciation) | 762,470 | (190,498 | ) | |||||
|
|
|
| |||||
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | 1,107,099 | (84,455 | ) | |||||
|
|
|
| |||||
Distributions to shareholders: | ||||||||
Class I | (142,418 | ) | (49,502 | ) | ||||
|
|
|
| |||||
CAPITAL SHARES TRANSACTIONS: | ||||||||
Class I | ||||||||
Capital shares sold [ 364,955 and 511,333 shares, respectively ] | 3,974,381 | 5,469,555 | ||||||
Capital shares issued in reinvestment of dividends [ 9,100 and 0# shares, respectively ] | 93,918 | 2 | ||||||
Capital shares repurchased [ (170,980) and (31,404) shares, respectively ] | (1,901,097 | ) | (342,217 | ) | ||||
|
|
|
| |||||
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM CAPITAL SHARE TRANSACTIONS | 2,167,202 | 5,127,340 | ||||||
|
|
|
| |||||
TOTAL INCREASE (DECREASE) IN NET ASSETS | 3,131,883 | 4,993,383 | ||||||
NET ASSETS: |
| |||||||
Beginning of year | 7,658,717 | 2,665,334 | ||||||
|
|
|
| |||||
End of year | $ | 10,790,600 | $ | 7,658,717 | ||||
|
|
|
|
| ||||
# Number of shares is less than 0.5. |
See Notes to Financial Statements.
101
1290 FUNDS
1290 RETIREMENT 2020 FUND
FINANCIAL HIGHLIGHTS
Year Ended October 31, | February 27, 2017* to October 31, 2017 | |||||||||||
Class I | 2019 | 2018 | ||||||||||
Net asset value, beginning of period | $ | 10.49 | $ | 10.66 | $ | 10.00 | ||||||
|
|
|
|
|
| |||||||
Income (loss) from investment operations: | ||||||||||||
Net investment income (loss) (e)(x) | 0.23 | 0.20 | 0.12 | |||||||||
Net realized and unrealized gain (loss) | 1.05 | (0.17 | ) | 0.54 | ||||||||
|
|
|
|
|
| |||||||
Total from investment operations | 1.28 | 0.03 | 0.66 | |||||||||
|
|
|
|
|
| |||||||
Less distributions: | ||||||||||||
Dividends from net investment income | (0.15 | ) | (0.18 | ) | — | |||||||
Distributions from net realized gains | (0.05 | ) | (0.02 | ) | — | |||||||
|
|
|
|
|
| |||||||
Total dividends and distributions | (0.20 | ) | (0.20 | ) | — | |||||||
|
|
|
|
|
| |||||||
Net asset value, end of period | $ | 11.57 | $ | 10.49 | $ | 10.66 | ||||||
|
|
|
|
|
| |||||||
Total return (b) | 12.37 | % | 0.24 | % | 6.60 | % | ||||||
|
|
|
|
|
| |||||||
Ratios/Supplemental Data: | ||||||||||||
Net assets, end of period (000’s) | $ | 10,791 | $ | 7,659 | $ | 2,665 | ||||||
Ratio of expenses to average net assets: | ||||||||||||
After waivers and reimbursements (a)(f) | 0.54 | %(j) | 0.53 | %(j) | 0.53 | %(j) | ||||||
Before waivers and reimbursements (a)(f) | 2.09 | % | 3.93 | % | 5.32 | % | ||||||
Ratio of net investment income (loss) to average net assets: | ||||||||||||
After waivers and reimbursements (a)(f)(x) | 2.10 | % | 1.88 | % | 1.66 | %(l) | ||||||
Before waivers and reimbursements (a)(f)(x) | 0.55 | % | (1.52 | )% | (3.13 | )%(l) | ||||||
Portfolio turnover rate (z)^ | 18 | % | 8 | % | 2 | % |
* | Commencement of Operations. |
^ | Portfolio turnover rate excludes derivatives, if any. |
(a) | Ratios for periods less than one year are annualized. Certain non-recurring expenses incurred by the Fund are not annualized for periods less than one year. |
(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”), if applicable. |
(j) | Including direct and indirect expenses, the net expense ratio after waivers and reimbursements would be 0.65%. |
(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.
102
1290 RETIREMENT 2025 FUND (Unaudited)
INVESTMENT ADVISER
Ø | 1290 Asset Managers® |
PERFORMANCE RESULTS
Annualized Total Returns as of 10/31/19 | ||||||||
1 Year | Since Incept. | |||||||
Fund – Class I Shares* | 12.99 | % | 7.78 | % | ||||
S&P Target Date 2025 Index | 10.95 | 7.07 | ||||||
* Date of inception 2/27/17.
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.
The graph illustrates comparative performance for $10,000 invested in the Class I Shares of the 1290 Retirement 2025 Fund and the S&P Target Date 2025 Index from 2/27/17 to 10/31/19. The performance of the S&P Target Date 2025 Index reflects an initial investment at the end of the month closest to the Fund’s inception. The performance of the Fund assumes reinvestment of all dividends and capital gain distributions, if any, and does not include a sales charge. The performance of the S&P Target Date 2025 Index does not reflect the deduction of expenses or a sales charge associated with a mutual fund and has been adjusted to reflect reinvestment of all dividends, capital gain distributions, and interest of the securities included in the benchmark.
As of March 1, 2019, the gross expense ratio for Class I shares was 3.30%. The net expense ratio for Class I shares was 0.65%. The net expense ratio reflects the Adviser’s decision to contractually limit expenses through April 30, 2020. Fund Performance may also 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.
In addition, 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.
PERFORMANCE SUMMARY
The Fund’s Class I shares returned 12.99% for the year ended October 31, 2019. The Fund’s benchmark, the S&P Target Date 2025 Index, returned 10.95% over the same year.
Overview
Each 1290 Retirement Fund’s (as defined in the Notes to the Financial Statements) performance will reflect the performance of the underlying asset classes and depends upon their percentage weighting within the Fund. Here’s why: The 1290 Retirement Funds are managed to target a specific year of planned retirement. The asset mix will become more conservative each year, until about 10 years after the target retirement year, when it will become relatively stable. The 1290 Retirement Funds balance the need for appreciation with the need for income as retirement approaches and focus on supporting an income stream over a long-term retirement withdrawal horizon. To achieve its asset class exposure, each 1290 Retirement Fund invests in exchange-traded funds (ETFs) representing various equity and bond asset classes. Because of this, each of the 1290 Retirement Fund’s performance will be a function of the asset class performance and the percentage weighting of each asset class in the 1290 Retirement Fund. Current target and actual allocations, as well as performance, are available in a separate quarterly Fund Fact Sheet.
Fund Highlights
What helped performance during the year?
• | The primary driver of outperformance was the fact that the low volatility tilt of the Fund outperformed the market cap weighted benchmark within both domestic and developed markets equities. |
• | Within fixed income, an overweight to intermediate bonds and an underweight to short duration bonds relative to the Fund benchmark added to performance. |
What hurt performance during the year?
• | While low volatility benefited domestic and developed markets equities, it was not beneficial within the emerging markets equities as market cap outperformed in that segment of the benchmark. |
• | Within domestic equities, a higher allocation to small cap equities relative to the benchmark detracted from performance as large cap equities were the best performer for the period. |
• | Having no dedicated position in real estate hurt performance, as the sector was up over 24% for the period. |
Table by Asset Class(as a percentage of Total Investments in Securities) As of October 31, 2019 | ||||
Equity | 62.8 | % | ||
Fixed Income | 37.2 |
103
1290 RETIREMENT 2025 FUND (Unaudited)
Top 10 Holdings(as a percentage of Total Investments in Securities) As of October 31, 2019 | ||||
iShares Core U.S. Aggregate Bond ETF | 26.8 | % | ||
iShares Core S&P Total US Stock Market ETF | 21.6 | |||
iShares Core MSCI EAFE ETF | 8.0 | |||
iShares Edge MSCI Min Vol USA ETF | 7.0 | |||
Invesco S&P 500 Low Volatility ETF | 7.0 | |||
iShares TIPS Bond ETF | 5.6 | |||
Invesco S&P MidCap Low Volatility ETF | 4.0 | |||
iShares Edge MSCI Min Vol EAFE ETF | 3.9 | |||
Invesco S&P International Developed Low Volatility ETF | 3.8 | |||
Invesco S&P SmallCap Low Volatility ETF | 1.9 | |||
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 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 October 31, 2019 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 5/1/19 | Ending Account Value 10/31/19 | Expenses Paid During Period* 5/1/19 - 10/31/19 | ||||||||||
Class I |
| |||||||||||
Actual | $ | 1,000.00 | $ | 1,046.10 | $ | 2.77 | ||||||
Hypothetical (5% average annual return before expenses) | 1,000.00 | 1,022.50 | 2.74 | |||||||||
* Expenses are equal to the Fund’s Class I shares annualized expense ratio of 0.54%, multiplied by the average account value over the period, and multiplied by 184/365 (to reflect the one-half year period). |
|
104
1290 FUNDS
1290 RETIREMENT 2025 FUND
PORTFOLIO OF INVESTMENTS
October 31, 2019
Number of Shares | Value (Note 1) | |||||||
EXCHANGE TRADED FUNDS (ETF): |
| |||||||
Equity (62.8%) |
| |||||||
Invesco S&P 500 Low Volatility ETF | 23,220 | $ | 1,336,775 | |||||
Invesco S&P Emerging Markets Low Volatility ETF | 7,970 | 184,346 | ||||||
Invesco S&P International Developed Low Volatility ETF | 21,240 | 734,267 | ||||||
Invesco S&P MidCap Low Volatility ETF | 14,410 | 768,773 | ||||||
Invesco S&P SmallCap Low Volatility ETF | 7,250 | 363,950 | ||||||
iShares Core MSCI EAFE ETF | 24,320 | 1,537,754 | ||||||
iShares Core MSCI Emerging Markets ETF | 7,030 | 359,725 | ||||||
iShares Core S&P Total US Stock Market ETF | 60,670 | 4,158,322 | ||||||
iShares Edge MSCI Min Vol EAFE ETF | 9,940 | 745,997 | ||||||
iShares Edge MSCI Min Vol Emerging Markets ETF | 2,960 | 172,746 | ||||||
iShares Edge MSCI Min Vol USA ETF | 21,110 | 1,349,984 | ||||||
SPDR SSGA US Small Cap Low Volatility Index ETF | 3,600 | 351,036 | ||||||
|
| |||||||
Total Equity | 12,063,675 | |||||||
|
| |||||||
Fixed Income (37.3%) | ||||||||
iShares Core U.S. Aggregate Bond ETF | 45,520 | 5,150,588 | ||||||
iShares TIPS Bond ETF | 9,300 | 1,079,358 | ||||||
SPDR Bloomberg Barclays High Yield Bond ETF | 2,726 | 294,926 | ||||||
Vanguard Short-Term Bond ETF | 4,450 | 360,317 | ||||||
Vanguard Total International Bond ETF | 4,570 | 267,299 | ||||||
|
| |||||||
Total Fixed Income | 7,152,488 | |||||||
|
| |||||||
Total Investments in Securities (100.1%) | 19,216,163 | |||||||
Other Assets Less Liabilities (-0.1%) | (13,778 | ) | ||||||
|
| |||||||
Net Assets (100%) | $ | 19,202,385 | ||||||
|
|
The following is a summary of the inputs used to value the Fund’s assets and liabilities carried at fair value as of October 31, 2019:
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: |
| |||||||||||||||
Exchange Traded Funds |
| |||||||||||||||
Exchange Traded Funds | $ | 19,216,163 | $ | — | $ | — | $ | 19,216,163 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total Assets | $ | 19,216,163 | $ | — | $ | — | $ | 19,216,163 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total Liabilities | $ | — | $ | — | $ | — | $ | — | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total | $ | 19,216,163 | $ | — | $ | — | $ | 19,216,163 | ||||||||
|
|
|
|
|
|
|
|
The Fund held no derivatives contracts during the year ended October 31, 2019.
Investment security transactions for the year ended October 31, 2019 were as follows:
Cost of Purchases: | ||||
Long-term investments other than U.S. government debt securities | $ | 10,938,238 | ||
Net Proceeds of Sales and Redemptions: | ||||
Long-term investments other than U.S. government debt securities | $ | 3,629,674 |
See Notes to Financial Statements.
105
1290 FUNDS
1290 RETIREMENT 2025 FUND
PORTFOLIO OF INVESTMENTS (Continued)
October 31, 2019
As of October 31, 2019, the gross unrealized appreciation (depreciation) of investments based on the aggregate cost of investments in securities and derivative instruments, if applicable, for Federal income tax purposes was as follows:
Aggregate gross unrealized appreciation | $ | 1,186,330 | ||
Aggregate gross unrealized depreciation | (6,128 | ) | ||
|
| |||
Net unrealized appreciation | $ | 1,180,202 | ||
|
| |||
Federal income tax cost of investments in securities and derivative instruments, if applicable | $ | 18,035,961 | ||
|
|
See Notes to Financial Statements.
106
1290 FUNDS
1290 RETIREMENT 2025 FUND
STATEMENT OF ASSETS AND LIABILITIES
October 31, 2019
ASSETS |
| |||
Investments in Securities, at value (Cost $18,013,339) | $ | 19,216,163 | ||
Cash | 8,347 | |||
Receivable from investment adviser | 13,370 | |||
Prepaid registration and filing fees | 5,352 | |||
Receivable for Fund shares sold | 3,545 | |||
Dividends, interest and other receivables | 224 | |||
Other assets | 392 | |||
|
| |||
Total assets | 19,247,393 | |||
|
| |||
LIABILITIES |
| |||
Transfer agent fees payable | 913 | |||
Accrued expenses | 44,095 | |||
|
| |||
Total liabilities | 45,008 | |||
|
| |||
NET ASSETS | $ | 19,202,385 | ||
|
| |||
Net assets were comprised of: |
| |||
Paid in capital | $ | 17,425,923 | ||
Total distributable earnings (loss) | 1,776,462 | |||
|
| |||
Net assets | $ | 19,202,385 | ||
|
| |||
Class I | ||||
Net asset value and redemption price per share, $19,202,385 / 1,625,687 shares outstanding (unlimited amount authorized: $0.001 par value) | $ | 11.81 | ||
|
|
STATEMENT OF OPERATIONS
For the Year Ended October 31, 2019
INVESTMENT INCOME |
| |||
Dividends | $ | 398,258 | ||
Interest | 1,278 | |||
|
| |||
Total income | 399,536 | |||
|
| |||
EXPENSES |
| |||
Investment advisory fees | 79,095 | |||
Professional fees | 53,937 | |||
Printing and mailing expenses | 36,609 | |||
Administrative fees | 30,008 | |||
Registration and filing fees | 21,837 | |||
Transfer agent fees | 9,340 | |||
Custodian fees | 5,400 | |||
Trustees’ fees | 1,324 | |||
Miscellaneous | 11,924 | |||
|
| |||
Gross expenses | 249,474 | |||
Less: Waiver from investment adviser | (109,103 | ) | ||
Reimbursement from investment adviser | (55,016 | ) | ||
|
| |||
Net expenses | 85,355 | |||
|
| |||
NET INVESTMENT INCOME (LOSS) | 314,181 | |||
|
| |||
REALIZED AND UNREALIZED GAIN (LOSS) |
| |||
Net realized gain (loss) on investments in securities | 326,586 | |||
Net distributions of realized gain received from underlying funds | 71 | |||
|
| |||
Net realized gain (loss) | 326,657 | |||
|
| |||
Net change in unrealized appreciation (depreciation) on investments in securities | 1,336,178 | |||
|
| |||
NET REALIZED AND UNREALIZED GAIN (LOSS) | 1,662,835 | |||
|
| |||
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | $ | 1,977,016 | ||
|
|
STATEMENT OF CHANGES IN NET ASSETS | Year Ended October 31, | |||||||
2019 | 2018 | |||||||
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS: |
| |||||||
Net investment income (loss) | $ | 314,181 | $ | 99,645 | ||||
Net realized gain (loss) | 326,657 | 25,293 | ||||||
Net change in unrealized appreciation (depreciation) | 1,336,178 | (289,343 | ) | |||||
|
|
|
| |||||
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | 1,977,016 | (164,405 | ) | |||||
|
|
|
| |||||
Distributions to shareholders: | ||||||||
Class I | (176,541 | ) | (49,002 | ) | ||||
|
|
|
| |||||
CAPITAL SHARES TRANSACTIONS: | ||||||||
Class I | ||||||||
Capital shares sold [ 1,042,196 and 736,783 shares, respectively ] | 11,528,327 | 8,015,082 | ||||||
Capital shares issued in reinvestment of dividends [ 12,850 and 0# shares, respectively ] | 134,540 | 2 | ||||||
Capital shares repurchased [ (397,479) and (18,673) shares, respectively ] | (4,546,482 | ) | (204,206 | ) | ||||
|
|
|
| |||||
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM CAPITAL SHARE TRANSACTIONS | 7,116,385 | 7,810,878 | ||||||
|
|
|
| |||||
TOTAL INCREASE (DECREASE) IN NET ASSETS | 8,916,860 | 7,597,471 | ||||||
NET ASSETS: |
| |||||||
Beginning of year | 10,285,525 | 2,688,054 | ||||||
|
|
|
| |||||
End of year | $ | 19,202,385 | $ | 10,285,525 | ||||
|
|
|
|
| ||||
# Number of shares is less than 0.5. |
See Notes to Financial Statements.
107
1290 FUNDS
1290 RETIREMENT 2025 FUND
FINANCIAL HIGHLIGHTS
Year Ended October 31, | February 27, 2017* to October 31, 2017 | |||||||||||
Class I | 2019 | 2018 | ||||||||||
Net asset value, beginning of period | $ | 10.62 | $ | 10.75 | $ | 10.00 | ||||||
|
|
|
|
|
| |||||||
Income (loss) from investment operations: | ||||||||||||
Net investment income (loss) (e)(x) | 0.22 | 0.21 | 0.11 | |||||||||
Net realized and unrealized gain (loss) | 1.14 | (0.14 | ) | 0.64 | ||||||||
|
|
|
|
|
| |||||||
Total from investment operations | 1.36 | 0.07 | 0.75 | |||||||||
|
|
|
|
|
| |||||||
Less distributions: | ||||||||||||
Dividends from net investment income | (0.14 | ) | (0.18 | ) | — | |||||||
Distributions from net realized gains | (0.03 | ) | (0.02 | ) | — | |||||||
|
|
|
|
|
| |||||||
Total dividends and distributions | (0.17 | ) | (0.20 | ) | — | |||||||
|
|
|
|
|
| |||||||
Net asset value, end of period | $ | 11.81 | $ | 10.62 | $ | 10.75 | ||||||
|
|
|
|
|
| |||||||
Total return (b) | 12.99 | % | 0.60 | % | 7.50 | % | ||||||
|
|
|
|
|
| |||||||
Ratios/Supplemental Data: | ||||||||||||
Net assets, end of period (000’s) | $ | 19,202 | $ | 10,286 | $ | 2,688 | ||||||
Ratio of expenses to average net assets: | ||||||||||||
After waivers and reimbursements (a)(f) | 0.54 | %(j) | 0.54 | %(j) | 0.53 | %(j) | ||||||
Before waivers and reimbursements (a)(f) | 1.58 | % | 3.23 | % | 5.30 | % | ||||||
Ratio of net investment income (loss) to average net assets: | ||||||||||||
After waivers and reimbursements (a)(f)(x) | 1.99 | % | 1.91 | % | 1.62 | %(l) | ||||||
Before waivers and reimbursements (a)(f)(x) | 0.95 | % | (0.79 | )% | (3.15 | )%(l) | ||||||
Portfolio turnover rate (z)^ | 23 | % | 4 | % | 2 | % |
* | Commencement of Operations. |
^ | Portfolio turnover rate excludes derivatives, if any. |
(a) | Ratios for periods less than one year are annualized. Certain non-recurring expenses incurred by the Fund are not annualized for periods less than one year. |
(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”), if applicable. |
(j) | Including direct and indirect expenses, the net expense ratio after waivers and reimbursements would be 0.65%. |
(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.
108
1290 RETIREMENT 2030 FUND (Unaudited)
INVESTMENT ADVISER
Ø | 1290 Asset Managers® |
PERFORMANCE RESULTS
Annualized Total Returns as of 10/31/19 | ||||||||
1 Year | Since Incept. | |||||||
Fund – Class I Shares* | 13.56 | % | 8.21 | % | ||||
S&P Target Date 2030 Index | 11.27 | 7.55 | ||||||
* Date of inception 2/27/17.
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.
The graph illustrates comparative performance for $10,000 invested in the Class I Shares of the 1290 Retirement 2030 Fund and the S&P Target Date 2030 Index from 2/27/17 to 10/31/19. The performance of the S&P Target Date 2030 Index reflects an initial investment at the end of the month closest to the Fund’s inception. The performance of the Fund assumes reinvestment of all dividends and capital gain distributions, if any, and does not include a sales charge. The performance of the S&P Target Date 2030 Index does not reflect the deduction of expenses or a sales charge associated with a mutual fund and has been adjusted to reflect reinvestment of all dividends, capital gain distributions, and interest of the securities included in the benchmark.
As of March 1, 2019, the gross expense ratio for Class I shares was 4.76%. The net expense ratio for Class I shares was 0.65%. The net expense ratio reflects the Adviser’s decision to contractually limit expenses through April 30, 2020. Fund Performance may also 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.
In addition, 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.
PERFORMANCE SUMMARY
The Fund’s Class I shares returned 13.56% for the year ended October 31, 2019. The Fund’s benchmark, the S&P Target Date 2030 Index, returned 11.27% over the same year.
Overview
Each 1290 Retirement Fund’s (as defined in the Notes to the Financial Statements) performance will reflect the performance of the underlying asset classes and depends upon their percentage weighting within the Fund. Here’s why: The 1290 Retirement Funds are managed to target a specific year of planned retirement. The asset mix will become more conservative each year, until about 10 years after the target retirement year, when it will become relatively stable. The 1290 Retirement Funds balance the need for appreciation with the need for income as retirement approaches and focus on supporting an income stream over a long-term retirement withdrawal horizon. To achieve its asset class exposure, each 1290 Retirement Fund invests in exchange-traded funds (ETFs) representing various equity and bond asset classes. Because of this, each of the 1290 Retirement Fund’s performance will be a function of the asset class performance and the percentage weighting of each asset class in the 1290 Retirement Fund. Current target and actual allocations, as well as performance, are available in a separate quarterly Fund Fact Sheet.
Fund Highlights
What helped performance during the year?
• | The primary driver of outperformance was the fact that the low volatility tilt of the Fund outperformed the market cap weighted benchmark within both domestic and developed markets equities. |
• | Having no exposure to short duration bonds relative to the benchmark contributed to performance. |
What hurt performance during the year?
• | While low volatility benefited domestic and developed markets equities, it was not beneficial within the emerging markets equities as market cap outperformed in that segment of the benchmark. |
• | Within domestic equities, a higher allocation to small cap equities relative to the benchmark detracted from performance as large cap equities were the best performer for the period. |
• | Having no dedicated position in real estate hurt performance, as the sector was up over 24% for the period. |
109
1290 RETIREMENT 2030 FUND (Unaudited)
Table by Asset Class (as a percentage of Total Investments in Securities) As of October 31, 2019 | ||||
Equity | 71.5 | % | ||
Fixed Income | 28.5 |
Top 10 Holdings(as a percentage of Total Investments in Securities) As of October 31, 2019 | ||||
iShares Core S&P Total US Stock Market ETF | 24.5 | % | ||
iShares Core U.S. Aggregate Bond ETF | 24.4 | |||
iShares Core MSCI EAFE ETF | 9.2 | |||
Invesco S&P 500 Low Volatility ETF | 7.9 | |||
iShares Edge MSCI Min Vol USA ETF | 7.9 | |||
iShares Edge MSCI Min Vol EAFE ETF | 4.6 | |||
Invesco S&P International Developed Low Volatility ETF | 4.6 | |||
Invesco S&P MidCap Low Volatility ETF | 4.5 | |||
iShares TIPS Bond ETF | 4.1 | |||
Invesco S&P SmallCap Low Volatility ETF | 2.1 | |||
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 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 October 31, 2019 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 5/1/19 | Ending Account Value 10/31/19 | Expenses Paid During Period* 10/31/19 | ||||||||||
Class I |
| |||||||||||
Actual | $1,000.00 | $1,047.60 | $2.78 | |||||||||
Hypothetical (5% average annual return before expenses) | 1,000.00 | 1,022.49 | 2.74 | |||||||||
* Expenses are equal to the Fund’s Class I shares annualized expense ratio of 0.54%, multiplied by the average account value over the period, and multiplied by 184/365 (to reflect the one-half year period). |
|
110
1290 FUNDS
1290 RETIREMENT 2030 FUND
PORTFOLIO OF INVESTMENTS
October 31, 2019
Number of Shares | Value (Note 1) | |||||||
EXCHANGE TRADED FUNDS (ETF): |
| |||||||
Equity (71.1%) | ||||||||
Invesco S&P 500 Low Volatility ETF | 9,200 | $ | 529,644 | |||||
Invesco S&P Emerging Markets Low Volatility ETF | 3,110 | 71,934 | ||||||
Invesco S&P International Developed Low Volatility ETF | 8,910 | 308,019 | ||||||
Invesco S&P MidCap Low Volatility ETF | 5,610 | 299,294 | ||||||
Invesco S&P SmallCap Low Volatility ETF | 2,860 | 143,572 | ||||||
iShares Core MSCI EAFE ETF | 9,700 | 613,331 | ||||||
iShares Core MSCI Emerging Markets ETF | 2,770 | 141,741 | ||||||
iShares Core S&P Total US Stock Market ETF | 23,860 | 1,635,364 | ||||||
iShares Edge MSCI Min Vol EAFE ETF | 4,110 | 308,455 | ||||||
iShares Edge MSCI Min Vol Emerging Markets ETF | 1,070 | 62,445 | ||||||
iShares Edge MSCI Min Vol USA ETF | 8,250 | 527,588 | ||||||
SPDR SSGA US Small Cap Low Volatility Index ETF | 1,420 | 138,464 | ||||||
|
| |||||||
Total Equity | 4,779,851 | |||||||
|
| |||||||
Fixed Income (28.3%) | ||||||||
iShares Core U.S. Aggregate Bond ETF | 14,420 | 1,631,623 | ||||||
iShares TIPS Bond ETF | 2,350 | 272,741 | ||||||
|
| |||||||
Total Fixed Income | 1,904,364 | |||||||
|
| |||||||
Total Investments in Securities (99.4%) | 6,684,215 | |||||||
Other Assets Less Liabilities (0.6%) | 40,020 | |||||||
|
| |||||||
Net Assets (100%) | $ | 6,724,235 | ||||||
|
|
The following is a summary of the inputs used to value the Fund’s assets and liabilities carried at fair value as of October 31, 2019:
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: |
| |||||||||||||||
Exchange Traded Funds | ||||||||||||||||
Exchange Traded Funds | $ | 6,684,215 | $ | — | $ | — | $ | 6,684,215 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total Assets | $ | 6,684,215 | $ | — | $ | — | $ | 6,684,215 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total Liabilities | $ | — | $ | — | $ | — | $ | — | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total | $ | 6,684,215 | $ | — | $ | — | $ | 6,684,215 | ||||||||
|
|
|
|
|
|
|
|
The Fund held no derivatives contracts during the year ended October 31, 2019.
Investment security transactions for the year ended October 31, 2019 were as follows:
Cost of Purchases: | ||||
Long-term investments other than U.S. government debt securities | $ | 2,112,981 | ||
Net Proceeds of Sales and Redemptions: | ||||
Long-term investments other than U.S. government debt securities | $ | 259,884 |
See Notes to Financial Statements.
111
1290 FUNDS
1290 RETIREMENT 2030 FUND
PORTFOLIO OF INVESTMENTS (Continued)
October 31, 2019
As of October 31, 2019, the gross unrealized appreciation (depreciation) of investments based on the aggregate cost of investments in securities and derivative instruments, if applicable, for Federal income tax purposes was as follows:
Aggregate gross unrealized appreciation | $ | 612,529 | ||
Aggregate gross unrealized depreciation | (334 | ) | ||
|
| |||
Net unrealized appreciation | $ | 612,195 | ||
|
| |||
Federal income tax cost of investments in securities and derivative instruments, if applicable | $ | 6,072,020 | ||
|
|
See Notes to Financial Statements.
112
1290 FUNDS
1290 RETIREMENT 2030 FUND
STATEMENT OF ASSETS AND LIABILITIES
October 31, 2019
ASSETS |
| |||
Investments in Securities, at value (Cost $6,071,368) | $ | 6,684,215 | ||
Cash | 65,556 | |||
Receivable from investment adviser | 10,042 | |||
Prepaid registration and filing fees | 4,696 | |||
Receivable for Fund shares sold | 1,590 | |||
Dividends, interest and other receivables | 31 | |||
Other assets | 106 | |||
|
| |||
Total assets | 6,766,236 | |||
|
| |||
LIABILITIES |
| |||
Transfer agent fees payable | 913 | |||
Accrued expenses | 41,088 | |||
|
| |||
Total liabilities | 42,001 | |||
|
| |||
NET ASSETS | $ | 6,724,235 | ||
|
| |||
Net assets were comprised of: |
| |||
Paid in capital | $ | 6,020,357 | ||
Total distributable earnings (loss) | 703,878 | |||
|
| |||
Net assets | $ | 6,724,235 | ||
|
| |||
Class I | ||||
Net asset value and redemption price per share, $6,724,235 / 565,680 shares outstanding (unlimited amount authorized: $0.001 par value) | $ | 11.89 | ||
|
|
STATEMENT OF OPERATIONS
For the Year Ended October 31, 2019
INVESTMENT INCOME |
| |||
Dividends | $ | 132,737 | ||
Interest | 730 | |||
|
| |||
Total income | 133,467 | |||
|
| |||
EXPENSES |
| |||
Professional fees | 43,113 | |||
Administrative fees | 30,013 | |||
Investment advisory fees | 26,513 | |||
Printing and mailing expenses | 24,810 | |||
Registration and filing fees | 21,160 | |||
Transfer agent fees | 9,340 | |||
Custodian fees | 4,400 | |||
Trustees’ fees | 451 | |||
Miscellaneous | 6,679 | |||
|
| |||
Gross expenses | 166,479 | |||
Less: Waiver from investment adviser | (56,526 | ) | ||
Reimbursement from investment adviser | (81,454 | ) | ||
|
| |||
Net expenses | 28,499 | |||
|
| |||
NET INVESTMENT INCOME (LOSS) | 104,968 | |||
|
| |||
REALIZED AND UNREALIZED GAIN (LOSS) |
| |||
Net realized gain (loss) on investments in securities | 19,025 | |||
Net change in unrealized appreciation (depreciation) on investments in securities | 544,946 | |||
|
| |||
NET REALIZED AND UNREALIZED GAIN (LOSS) | 563,971 | |||
|
| |||
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | $ | 668,939 | ||
|
|
STATEMENT OF CHANGES IN NET ASSETS | Year Ended October 31, | |||||||
2019 | 2018 | |||||||
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS: |
| |||||||
Net investment income (loss) | $ | 104,968 | $ | 58,197 | ||||
Net realized gain (loss) | 19,025 | 13,651 | ||||||
Net change in unrealized appreciation (depreciation) | 544,946 | (103,899 | ) | |||||
|
|
|
| |||||
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | 668,939 | (32,051 | ) | |||||
|
|
|
| |||||
Distributions to shareholders: | ||||||||
Class I | (88,204 | ) | (46,752 | ) | ||||
|
|
|
| |||||
CAPITAL SHARES TRANSACTIONS: | ||||||||
Class I | ||||||||
Capital shares sold [ 189,006 and 154,723 shares, respectively ] | 2,128,791 | 1,706,177 | ||||||
Capital shares issued in reinvestment of dividends [ 3,168 and 0# shares, respectively ] | 33,204 | 2 | ||||||
Capital shares repurchased [ (26,204) and (5,023) shares, respectively ] | (291,050 | ) | (56,090 | ) | ||||
|
|
|
| |||||
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM CAPITAL SHARE TRANSACTIONS | 1,870,945 | 1,650,089 | ||||||
|
|
|
| |||||
TOTAL INCREASE (DECREASE) IN NET ASSETS | 2,451,680 | 1,571,286 | ||||||
NET ASSETS: | ||||||||
Beginning of year | 4,272,555 | 2,701,269 | ||||||
|
|
|
| |||||
End of year | $ | 6,724,235 | $ | 4,272,555 | ||||
|
|
|
|
| ||||
# Number of shares is less than 0.5. |
See Notes to Financial Statements.
113
1290 FUNDS
1290 RETIREMENT 2030 FUND
FINANCIAL HIGHLIGHTS
Year Ended October 31, | February 27, 2017* to October 31, 2017 | |||||||||||
Class I | 2019 | 2018 | ||||||||||
Net asset value, beginning of period | $ | 10.69 | $ | 10.80 | $ | 10.00 | ||||||
|
|
|
|
|
| |||||||
Income (loss) from investment operations: | ||||||||||||
Net investment income (loss) (e)(x) | 0.22 | 0.20 | 0.11 | |||||||||
Net realized and unrealized gain (loss) | 1.20 | (0.12 | ) | 0.69 | ||||||||
|
|
|
|
|
| |||||||
Total from investment operations | 1.42 | 0.08 | 0.80 | |||||||||
|
|
|
|
|
| |||||||
Less distributions: | ||||||||||||
Dividends from net investment income | (0.18 | ) | (0.18 | ) | — | |||||||
Distributions from net realized gains | (0.04 | ) | (0.01 | ) | — | |||||||
|
|
|
|
|
| |||||||
Total dividends and distributions | (0.22 | ) | (0.19 | ) | — | |||||||
|
|
|
|
|
| |||||||
Net asset value, end of period | $ | 11.89 | $ | 10.69 | $ | 10.80 | ||||||
|
|
|
|
|
| |||||||
Total return (b) | 13.56 | % | 0.70 | % | 8.00 | % | ||||||
|
|
|
|
|
| |||||||
Ratios/Supplemental Data: | ||||||||||||
Net assets, end of period (000’s) | $ | 6,724 | $ | 4,273 | $ | 2,701 | ||||||
Ratio of expenses to average net assets: | ||||||||||||
After waivers and reimbursements (a)(f) | 0.54 | %(j) | 0.54 | %(j) | 0.53 | %(j) | ||||||
Before waivers and reimbursements (a)(f) | 3.14 | % | 4.74 | % | 5.27 | % | ||||||
Ratio of net investment income (loss) to average net assets: | ||||||||||||
After waivers and reimbursements (a)(f)(x) | 1.98 | % | 1.78 | % | 1.59 | %(l) | ||||||
Before waivers and reimbursements (a)(f)(x) | (0.62 | )% | (2.41 | )% | (3.15 | )%(l) | ||||||
Portfolio turnover rate (z)^ | 5 | % | 3 | % | 1 | % |
* | Commencement of Operations. |
^ | Portfolio turnover rate excludes derivatives, if any. |
(a) | Ratios for periods less than one year are annualized. Certain non-recurring expenses incurred by the Fund are not annualized for periods less than one year. |
(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”), if applicable. |
(j) | Including direct and indirect expenses, the net expense ratio after waivers and reimbursements would be 0.65%. |
(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.
114
1290 RETIREMENT 2035 FUND (Unaudited)
INVESTMENT ADVISER
Ø | 1290 Asset Managers® |
PERFORMANCE RESULTS
Annualized Total Returns as of 10/31/19 | ||||||||
1 Year | Since Incept. | |||||||
Fund – Class I Shares* | 13.61 | % | 8.49 | % | ||||
S&P Target Date 2035 Index | 11.52 | 7.98 | ||||||
* Date of inception 2/27/17.
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.
The graph illustrates comparative performance for $10,000 invested in the Class I Shares of the 1290 Retirement 2035 Fund and the S&P Target Date 2035 Index from 2/27/17 to 10/31/19. The performance of the S&P Target Date 2035 Index reflects an initial investment at the end of the month closest to the Fund’s inception. The performance of the Fund assumes reinvestment of all dividends and capital gain distributions, if any, and does not include a sales charge. The performance of the S&P Target Date 2035 Index does not reflect the deduction of expenses or a sales charge associated with a mutual fund and has been adjusted to reflect reinvestment of all dividends, capital gain distributions, and interest of the securities included in the benchmark.
As of March 1, 2019, the gross expense ratio for Class I shares was 4.00%. The net expense ratio for Class I shares was 0.65%. The net expense ratio reflects the Adviser’s decision to contractually limit expenses through April 30, 2020. Fund Performance may also 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.
In addition, 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.
PERFORMANCE SUMMARY
The Fund’s Class I shares returned 13.61% for the year ended October 31, 2019. The Fund’s benchmark, the S&P Target Date 2035 Index, returned 11.52% over the same year.
Overview
Each 1290 Retirement Fund’s (as defined in the Notes to the Financial Statements) performance will reflect the performance of the underlying asset classes and depends upon their percentage weighting within the Fund. Here’s why: The 1290 Retirement Funds are managed to target a specific year of planned retirement. The asset mix will become more conservative each year, until about 10 years after the target retirement year, when it will become relatively stable. The 1290 Retirement Funds balance the need for appreciation with the need for income as retirement approaches and focus on supporting an income stream over a long-term retirement withdrawal horizon. To achieve its asset class exposure, each 1290 Retirement Fund invests in exchange-traded funds (ETFs) representing various equity and bond asset classes. Because of this, each of the 1290 Retirement Fund’s performance will be a function of the asset class performance and the percentage weighting of each asset class in the 1290 Retirement Fund. Current target and actual allocations, as well as performance, are available in a separate quarterly Fund Fact Sheet.
Fund Highlights
What helped performance during the year?
• | The primary driver of outperformance was the fact that the low volatility tilt of the Fund outperformed the market cap weighted benchmark within both domestic and developed markets equities. |
• | Having no exposure to short duration bonds relative to the benchmark contributed to performance. |
What hurt performance during the year?
• | While low volatility benefited domestic and developed markets equities, it was not beneficial within the emerging markets equities as market cap outperformed in that segment of the benchmark. |
• | Within domestic equities, a higher allocation to small cap equities relative to the benchmark detracted from performance as large cap equities were the best performer for the period. |
• | Having no dedicated position in real estate hurt performance, as the sector was up over 24% for the period. |
Table by Asset Class(as a percentage of Total Investments in Securities) As of October 31, 2019 | ||||
Equity | 76.4 | % | ||
Fixed Income | 23.6 |
115
1290 RETIREMENT 2035 FUND (Unaudited)
Top 10 Holdings(as a percentage of Total Investments in Securities) As of October 31, 2019 | ||||
iShares Core S&P Total US Stock Market ETF | 26.4 | % | ||
iShares Core U.S. Aggregate Bond ETF | 20.1 | |||
iShares Core MSCI EAFE ETF | 9.7 | |||
iShares Edge MSCI Min Vol USA ETF | 8.6 | |||
Invesco S&P 500 Low Volatility ETF | 8.3 | |||
iShares Edge MSCI Min Vol EAFE ETF | 4.9 | |||
Invesco S&P International Developed Low Volatility ETF | 4.8 | |||
Invesco S&P MidCap Low Volatility ETF | 4.8 | |||
iShares TIPS Bond ETF | 3.6 | |||
SPDR SSGA US Small Cap Low Volatility Index ETF | 2.2 | |||
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 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 October 31, 2019 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 5/1/19 | Ending Account Value 10/31/19 | Expenses Paid During Period* 5/1/19 - 10/31/19 | ||||||||||
Class I |
| |||||||||||
Actual | $ | 1,000.00 | $ | 1,047.00 | $ | 2.75 | ||||||
Hypothetical (5% average annual return before expenses) | 1,000.00 | 1,022.51 | 2.72 | |||||||||
* Expenses are equal to the Fund’s Class I shares annualized expense ratio of 0.53%, multiplied by the average account value over the period, and multiplied by 184/365 (to reflect the one-half year period). |
|
116
1290 FUNDS
1290 RETIREMENT 2035 FUND
PORTFOLIO OF INVESTMENTS
October 31, 2019
Number of Shares | Value (Note 1) | |||||||
EXCHANGE TRADED FUNDS (ETF): |
| |||||||
Equity (75.9%) | ||||||||
Invesco S&P 500 Low Volatility ETF | 12,020 | $ | 691,991 | |||||
Invesco S&P Emerging Markets Low Volatility ETF | 3,540 | 81,880 | ||||||
Invesco S&P International Developed Low Volatility ETF | 11,630 | 402,049 | ||||||
Invesco S&P MidCap Low Volatility ETF | 7,470 | 398,525 | ||||||
Invesco S&P SmallCap Low Volatility ETF | 3,650 | 183,230 | ||||||
iShares Core MSCI EAFE ETF | 12,800 | 809,344 | ||||||
iShares Core MSCI Emerging Markets ETF | 3,600 | 184,212 | ||||||
iShares Core S&P Total US Stock Market ETF | 32,030 | 2,195,336 | ||||||
iShares Edge MSCI Min Vol EAFE ETF | 5,420 | 406,771 | ||||||
iShares Edge MSCI Min Vol Emerging Markets ETF | 1,650 | 96,294 | ||||||
iShares Edge MSCI Min Vol USA ETF | 11,180 | 714,961 | ||||||
SPDR SSGA US Small Cap Low Volatility Index ETF | 1,910 | 186,244 | ||||||
|
| |||||||
Total Equity | 6,350,837 | |||||||
|
| |||||||
Fixed Income (23.5%) | ||||||||
iShares Core U.S. Aggregate Bond ETF | 14,750 | 1,668,962 | ||||||
iShares TIPS Bond ETF | 2,560 | 297,114 | ||||||
|
| |||||||
Total Fixed Income | 1,966,076 | |||||||
|
| |||||||
Total Exchange Traded Funds (99.4%) | 8,316,913 | |||||||
|
| |||||||
SHORT-TERM INVESTMENT: | ||||||||
Investment Company (0.0%) | ||||||||
JPMorgan Prime Money Market Fund, IM Shares | 2,730 | 2,732 | ||||||
|
| |||||||
Total Short-Term Investment (0.0%) | 2,732 | |||||||
|
| |||||||
Total Investments in Securities (99.4%) | 8,319,645 | |||||||
Other Assets Less Liabilities (0.6%) | 49,828 | |||||||
|
| |||||||
Net Assets (100%) | $ | 8,369,473 | ||||||
|
|
The following is a summary of the inputs used to value the Fund’s assets and liabilities carried at fair value as of October 31, 2019:
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: |
| |||||||||||||||
Exchange Traded Funds | ||||||||||||||||
Exchange Traded Funds | $ | 8,316,913 | $ | — | $ | — | $ | 8,316,913 | ||||||||
Short-Term Investment | ||||||||||||||||
Investment Company | 2,732 | — | — | 2,732 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Assets | $ | 8,319,645 | $ | — | $ | — | $ | 8,319,645 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total Liabilities | $ | — | $ | — | $ | — | $ | — | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total | $ | 8,319,645 | $ | — | $ | — | $ | 8,319,645 | ||||||||
|
|
|
|
|
|
|
|
The Fund held no derivatives contracts during the year ended October 31, 2019.
Investment security transactions for the year ended October 31, 2019 were as follows:
Cost of Purchases: | ||||
Long-term investments other than U.S. government debt securities | $ | 1,906,041 | ||
Net Proceeds of Sales and Redemptions: | ||||
Long-term investments other than U.S. government debt securities | $ | 951,074 |
See Notes to Financial Statements.
117
1290 FUNDS
1290 RETIREMENT 2035 FUND
PORTFOLIO OF INVESTMENTS (Continued)
October 31, 2019
As of October 31, 2019, the gross unrealized appreciation (depreciation) of investments based on the aggregate cost of investments in securities and derivative instruments, if applicable, for Federal income tax purposes was as follows:
Aggregate gross unrealized appreciation | $ | 710,987 | ||
Aggregate gross unrealized depreciation | (2,839 | ) | ||
|
| |||
Net unrealized appreciation | $ | 708,148 | ||
|
| |||
Federal income tax cost of investments in securities and derivative instruments, if applicable | $ | 7,611,497 | ||
|
|
See Notes to Financial Statements.
118
1290 FUNDS
1290 RETIREMENT 2035 FUND
STATEMENT OF ASSETS AND LIABILITIES
October 31, 2019
ASSETS | ||||
Investments in Securities, at value (Cost $7,609,967) | $ | 8,319,645 | ||
Cash | 75,000 | |||
Receivable from investment adviser | 10,241 | |||
Prepaid registration and filing fees | 4,831 | |||
Receivable for Fund shares sold | 2,019 | |||
Dividends, interest and other receivables | 38 | |||
Other assets | 143 | |||
|
| |||
Total assets | 8,411,917 | |||
|
| |||
LIABILITIES | ||||
Transfer agent fees payable | 913 | |||
Accrued expenses | 41,531 | |||
|
| |||
Total liabilities | 42,444 | |||
|
| |||
NET ASSETS | $ | 8,369,473 | ||
|
| |||
Net assets were comprised of: | ||||
Paid in capital | $ | 7,494,473 | ||
Total distributable earnings (loss) | 875,000 | |||
|
| |||
Net assets | $ | 8,369,473 | ||
|
| |||
Class I | ||||
Net asset value and redemption price per share, $8,369,473 / 695,906 shares outstanding (unlimited amount authorized: $0.001 par value) | $ | 12.03 | ||
|
|
STATEMENT OF OPERATIONS
For the Year Ended October 31, 2019
INVESTMENT INCOME | ||||
Dividends | $ | 182,150 | ||
Interest | 1,036 | |||
|
| |||
Total income | 183,186 | |||
|
| |||
EXPENSES | ||||
Professional fees | 45,203 | |||
Investment advisory fees | 36,342 | |||
Administrative fees | 30,019 | |||
Printing and mailing expenses | 26,732 | |||
Registration and filing fees | 21,378 | |||
Transfer agent fees | 9,340 | |||
Custodian fees | 4,375 | |||
Trustees’ fees | 635 | |||
Miscellaneous | 8,100 | |||
|
| |||
Gross expenses | 182,124 | |||
Less: Waiver from investment adviser | (66,361 | ) | ||
Reimbursement from investment adviser | (76,803 | ) | ||
|
| |||
Net expenses | 38,960 | |||
|
| |||
NET INVESTMENT INCOME (LOSS) | 144,226 | |||
|
| |||
REALIZED AND UNREALIZED GAIN (LOSS) | ||||
Net realized gain (loss) on investments in securities | 63,099 | |||
Net change in unrealized appreciation (depreciation) on investments in securities | 696,566 | |||
|
| |||
NET REALIZED AND UNREALIZED GAIN (LOSS) | 759,665 | |||
|
| |||
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | $ | 903,891 | ||
|
|
STATEMENT OF CHANGES IN NET ASSETS | Year Ended October 31, | |||||||
2019 | 2018 | |||||||
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS: | ||||||||
Net investment income (loss) | $ | 144,226 | $ | 70,735 | ||||
Net realized gain (loss) | 63,099 | 10,917 | ||||||
Net change in unrealized appreciation (depreciation) | 696,566 | (169,314 | ) | |||||
|
|
|
| |||||
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | 903,891 | (87,662 | ) | |||||
|
|
|
| |||||
Distributions to shareholders: | ||||||||
Class I | (107,092 | ) | (46,752 | ) | ||||
|
|
|
| |||||
CAPITAL SHARES TRANSACTIONS: | ||||||||
Class I | ||||||||
Capital shares sold [ 166,637 and 372,084 shares, respectively ] | 1,919,697 | 4,119,218 | ||||||
Capital shares issued in reinvestment of dividends [ 6,075 and 0# shares, respectively ] | 64,342 | 2 | ||||||
Capital shares repurchased [ (98,499) and (401) shares, respectively ] | (1,103,345 | ) | (4,509 | ) | ||||
|
|
|
| |||||
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM CAPITAL SHARE TRANSACTIONS | 880,694 | 4,114,711 | ||||||
|
|
|
| |||||
TOTAL INCREASE (DECREASE) IN NET ASSETS | 1,677,493 | 3,980,297 | ||||||
NET ASSETS: | ||||||||
Beginning of year | 6,691,980 | 2,711,683 | ||||||
|
|
|
| |||||
End of year | $ | 8,369,473 | $ | 6,691,980 | ||||
|
|
|
|
| ||||
# Number of shares is less than 0.5. |
See Notes to Financial Statements.
119
1290 FUNDS
1290 RETIREMENT 2035 FUND
FINANCIAL HIGHLIGHTS
Year Ended October 31, | February 27, 2017* to October 31, 2017 | |||||||||||
Class I | 2019 | 2018 | ||||||||||
Net asset value, beginning of period | $ | 10.76 | $ | 10.85 | $ | 10.00 | ||||||
|
|
|
|
|
| |||||||
Income (loss) from investment operations: | ||||||||||||
Net investment income (loss) (e)(x) | 0.22 | 0.19 | 0.11 | |||||||||
Net realized and unrealized gain (loss) | 1.23 | (0.09 | ) | 0.74 | ||||||||
|
|
|
|
|
| |||||||
Total from investment operations | 1.45 | 0.10 | 0.85 | |||||||||
|
|
|
|
|
| |||||||
Less distributions: | ||||||||||||
Dividends from net investment income | (0.16 | ) | (0.18 | ) | — | |||||||
Distributions from net realized gains | (0.02 | ) | (0.01 | ) | — | |||||||
|
|
|
|
|
| |||||||
Total dividends and distributions | (0.18 | ) | (0.19 | ) | — | |||||||
|
|
|
|
|
| |||||||
Net asset value, end of period | $ | 12.03 | $ | 10.76 | $ | 10.85 | ||||||
|
|
|
|
|
| |||||||
Total return (b) | 13.61 | % | 0.88 | % | 8.50 | % | ||||||
|
|
|
|
|
| |||||||
Ratios/Supplemental Data: | ||||||||||||
Net assets, end of period (000’s) | $ | 8,369 | $ | 6,692 | $ | 2,712 | ||||||
Ratio of expenses to average net assets: | ||||||||||||
After waivers and reimbursements (a)(f) | 0.54 | %(j) | 0.53 | %(j) | 0.53 | %(j) | ||||||
Before waivers and reimbursements (a)(f) | 2.50 | % | 3.95 | % | 5.28 | % | ||||||
Ratio of net investment income (loss) to average net assets: | ||||||||||||
After waivers and reimbursements (a)(f)(x) | 1.98 | % | 1.73 | % | 1.58 | %(l) | ||||||
Before waivers and reimbursements (a)(f)(x) | 0.01 | % | (1.68 | )% | (3.17 | )%(l) | ||||||
Portfolio turnover rate (z)^ | 13 | % | 2 | % | 1 | % |
* | Commencement of Operations. |
^ | Portfolio turnover rate excludes derivatives, if any. |
(a) | Ratios for periods less than one year are annualized. Certain non-recurring expenses incurred by the Fund are not annualized for periods less than one year. |
(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”), if applicable. |
(j) | Including direct and indirect expenses, the net expense ratio after waivers and reimbursements would be 0.65%. |
(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.
120
1290 RETIREMENT 2040 FUND (Unaudited)
INVESTMENT ADVISER
Ø | 1290 Asset Managers® |
PERFORMANCE RESULTS
Annualized Total Returns as of 10/31/19 | ||||||||
1 Year | Since Incept. | |||||||
Fund – Class I Shares* | 13.79 | % | 8.86 | % | ||||
S&P Target Date 2040 Index | 11.69 | 8.28 | ||||||
* Date of inception 2/27/17.
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.
The graph illustrates comparative performance for $10,000 invested in the Class I Shares of the 1290 Retirement 2040 Fund and the S&P Target Date 2040 Index from 2/27/17 to 10/31/19. The performance of the S&P Target Date 2040 Index reflects an initial investment at the end of the month closest to the Fund’s inception. The performance of the Fund assumes reinvestment of all dividends and capital gain distributions, if any, and does not include a sales charge. The performance of the S&P Target Date 2040 Index does not reflect the deduction of expenses or a sales charge associated with a mutual fund and has been adjusted to reflect reinvestment of all dividends, capital gain distributions, and interest of the securities included in the benchmark.
As of March 1, 2019, the gross expense ratio for Class I shares was 5.31%. The net expense ratio for Class I shares was 0.65%. The net expense ratio reflects the Adviser’s decision to contractually limit expenses through April 30, 2020. Fund Performance may also 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.
In addition, 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.
PERFORMANCE SUMMARY
The Fund’s Class I shares returned 13.79% for the year ended October 31, 2019. The Fund’s benchmark, the S&P Target Date 2040 Index, returned 11.69% over the same year.
Overview
Each 1290 Retirement Fund’s (as defined in the Notes to the Financial Statements) performance will reflect the performance of the underlying asset classes and depends upon their percentage weighting within the Fund. Here’s why: The 1290 Retirement Funds are managed to target a specific year of planned retirement. The asset mix will become more conservative each year, until about 10 years after the target retirement year, when it will become relatively stable. The 1290 Retirement Funds balance the need for appreciation with the need for income as retirement approaches and focus on supporting an income stream over a long-term retirement withdrawal horizon. To achieve its asset class exposure, each 1290 Retirement Fund invests in exchange-traded funds (ETFs) representing various equity and bond asset classes. Because of this, each of the 1290 Retirement Fund’s performance will be a function of the asset class performance and the percentage weighting of each asset class in the 1290 Retirement Fund. Current target and actual allocations, as well as performance, are available in a separate quarterly Fund Fact Sheet.
Fund Highlights
What helped performance during the year?
• | The primary driver of outperformance was the fact that the low volatility tilt of the Fund outperformed the market cap weighted benchmark within both domestic and developed markets equities. |
• | Having no exposure to short duration bonds relative to the benchmark contributed to performance. |
What hurt performance during the year?
• | While low volatility benefited domestic and developed markets equities, it was not beneficial within the emerging markets equities as market cap outperformed in that segment of the benchmark. |
• | Within domestic equities, a higher allocation to small cap equities relative to the benchmark detracted from performance as large cap equities were the best performer for the period. |
• | Having no dedicated position in real estate hurt performance, as the sector was up over 24% for the period. |
Table by Asset Class(as a percentage of Total Investments in Securities) | ||||
As of October 31, 2019 | ||||
Equity | 81.3 | % | ||
Fixed Income | 18.7 |
121
1290 RETIREMENT 2040 FUND (Unaudited)
Top 10 Holdings(as a percentage of Total Investments in Securities) | ||||
As of October 31, 2019 | ||||
iShares Core S&P Total US Stock Market ETF | 28.4 | % | ||
iShares Core U.S. Aggregate Bond ETF | 15.9 | |||
iShares Core MSCI EAFE ETF | 10.2 | |||
iShares Edge MSCI Min Vol USA ETF | 9.3 | |||
Invesco S&P 500 Low Volatility ETF | 9.2 | |||
iShares Edge MSCI Min Vol EAFE ETF | 5.1 | |||
Invesco S&P International Developed Low Volatility ETF | 5.0 | |||
Invesco S&P MidCap Low Volatility ETF | 5.0 | |||
iShares TIPS Bond ETF | 2.8 | |||
Invesco S&P SmallCap Low Volatility ETF | 2.3 | |||
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 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 October 31, 2019 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 5/1/19 | Ending Account Value 10/31/19 | Expenses Paid During | ||||||||||
Class I |
| |||||||||||
Actual | $1,000.00 | $1,046.00 | $2.74 | |||||||||
Hypothetical (5% average annual return before expenses) | 1,000.00 | 1,022.53 | 2.71 | |||||||||
* Expenses are equal to the Fund’s Class I shares annualized expense ratio of 0.53%, multiplied by the average account value over the period, and multiplied by 184/365 (to reflect the one-half year period). |
|
122
1290 FUNDS
1290 RETIREMENT 2040 FUND
PORTFOLIO OF INVESTMENTS
October 31, 2019
Number of Shares | Value (Note 1) | |||||||
EXCHANGE TRADED FUNDS (ETF): |
| |||||||
Equity (81.6%) | ||||||||
Invesco S&P 500 Low Volatility ETF | 6,450 | $ | 371,327 | |||||
Invesco S&P Emerging Markets Low Volatility ETF | 1,980 | 45,797 | ||||||
Invesco S&P International Developed Low Volatility ETF | 5,840 | 201,889 | ||||||
Invesco S&P MidCap Low Volatility ETF | 3,760 | 200,596 | ||||||
Invesco S&P SmallCap Low Volatility ETF | 1,850 | 92,870 | ||||||
iShares Core MSCI EAFE ETF | 6,470 | 409,098 | ||||||
iShares Core MSCI Emerging Markets ETF | 1,750 | 89,548 | ||||||
iShares Core S&P Total US Stock Market ETF | 16,640 | 1,140,506 | ||||||
iShares Edge MSCI Min Vol EAFE ETF | 2,720 | 204,136 | ||||||
iShares Edge MSCI Min Vol Emerging Markets ETF | 810 | 47,272 | ||||||
iShares Edge MSCI Min Vol USA ETF | 5,850 | 374,107 | ||||||
SPDR SSGA US Small Cap Low Volatility Index ETF | 940 | 91,659 | ||||||
|
| |||||||
Total Equity | 3,268,805 | |||||||
|
| |||||||
Fixed Income (18.8%) | ||||||||
iShares Core U.S. Aggregate Bond ETF | 5,660 | 640,429 | ||||||
iShares TIPS Bond ETF | 970 | 112,578 | ||||||
|
| |||||||
Total Fixed Income | 753,007 | |||||||
|
| |||||||
Total Investments in Securities (100.4%) | 4,021,812 | |||||||
Other Assets Less Liabilities (-0.4%) | (16,377 | ) | ||||||
|
| |||||||
Net Assets (100%) | $ | 4,005,435 | ||||||
|
|
The following is a summary of the inputs used to value the Fund’s assets and liabilities carried at fair value as of October 31, 2019:
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: |
| |||||||||||||||
Exchange Traded Funds | ||||||||||||||||
Exchange Traded Funds | $ | 4,021,812 | $ | — | $ | — | $ | 4,021,812 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total Assets | $ | 4,021,812 | $ | — | $ | — | $ | 4,021,812 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total Liabilities | $ | — | $ | — | $ | — | $ | — | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total | $ | 4,021,812 | $ | — | $ | — | $ | 4,021,812 | ||||||||
|
|
|
|
|
|
|
|
The Fund held no derivatives contracts during the year ended October 31, 2019.
Investment security transactions for the year ended October 31, 2019 were as follows:
Cost of Purchases: | ||||
Long-term investments other than U.S. government debt securities | $ | 837,617 | ||
Net Proceeds of Sales and Redemptions: | ||||
Long-term investments other than U.S. government debt securities | $ | 94,930 |
See Notes to Financial Statements.
123
1290 FUNDS
1290 RETIREMENT 2040 FUND
PORTFOLIO OF INVESTMENTS (Continued)
October 31, 2019
As of October 31, 2019, the gross unrealized appreciation (depreciation) of investments based on the aggregate cost of investments in securities and derivative instruments, if applicable, for Federal income tax purposes was as follows:
Aggregate gross unrealized appreciation | $ | 509,834 | ||
Aggregate gross unrealized depreciation | — | |||
|
| |||
Net unrealized appreciation | $ | 509,834 | ||
|
| |||
Federal income tax cost of investments in securities and derivative instruments, if applicable | $ | 3,511,978 | ||
|
|
See Notes to Financial Statements.
124
1290 FUNDS
1290 RETIREMENT 2040 FUND
STATEMENT OF ASSETS AND LIABILITIES
October 31, 2019
ASSETS |
| |||
Investments in Securities, at value (Cost $3,511,813) | $ | 4,021,812 | ||
Cash | 9,223 | |||
Receivable from investment adviser | 9,413 | |||
Prepaid registration and filing fees | 4,570 | |||
Receivable for Fund shares sold | 1,173 | |||
Dividends, interest and other receivables | 12 | |||
Other assets | 40 | |||
|
| |||
Total assets | 4,046,243 | |||
|
| |||
LIABILITIES | ||||
Accrued professional fees | 31,205 | |||
Transfer agent fees payable | 909 | |||
Accrued expenses | 8,694 | |||
|
| |||
Total liabilities | 40,808 | |||
|
| |||
NET ASSETS | $ | 4,005,435 | ||
|
| |||
Net assets were comprised of: | ||||
Paid in capital | $ | 3,446,829 | ||
Total distributable earnings (loss) | 558,606 | |||
|
| |||
Net assets | $ | 4,005,435 | ||
|
| |||
Class I | ||||
Net asset value and redemption price per share, $4,005,435 / 332,367 shares outstanding (unlimited amount authorized: $0.001 par value) | $ | 12.05 | ||
|
|
STATEMENT OF OPERATIONS
For the Year Ended October 31, 2019
INVESTMENT INCOME |
| |||
Dividends | $ | 81,587 | ||
Interest | 472 | |||
|
| |||
Total income | 82,059 | |||
|
| |||
EXPENSES | ||||
Professional fees | 40,989 | |||
Administrative fees | 30,011 | |||
Printing and mailing expenses | 22,406 | |||
Registration and filing fees | 21,017 | |||
Investment advisory fees | 16,445 | |||
Transfer agent fees | 9,440 | |||
Custodian fees | 4,270 | |||
Trustees’ fees | 285 | |||
Miscellaneous | 5,623 | |||
|
| |||
Gross expenses | 150,486 | |||
Less: Waiver from investment adviser | (46,456 | ) | ||
Reimbursement from investment adviser | (86,559 | ) | ||
|
| |||
Net expenses | 17,471 | |||
|
| |||
NET INVESTMENT INCOME (LOSS) | 64,588 | |||
|
| |||
REALIZED AND UNREALIZED GAIN (LOSS) | ||||
Net realized gain (loss) on investments in securities | 6,331 | |||
Net change in unrealized appreciation (depreciation) on investments in securities | 351,616 | |||
|
| |||
NET REALIZED AND UNREALIZED GAIN (LOSS) | 357,947 | |||
|
| |||
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | $ | 422,535 | ||
|
|
STATEMENT OF CHANGES IN NET ASSETS | Year Ended October 31, | |||||||
2019 | 2018 | |||||||
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS: |
| |||||||
Net investment income (loss) | $ | 64,588 | $ | 51,108 | ||||
Net realized gain (loss) | 6,331 | 12,319 | ||||||
Net change in unrealized appreciation (depreciation) | 351,616 | (34,838 | ) | |||||
|
|
|
| |||||
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | 422,535 | 28,589 | ||||||
|
|
|
| |||||
Distributions to shareholders: | ||||||||
Class I | (68,399 | ) | (47,002 | ) | ||||
|
|
|
| |||||
CAPITAL SHARES TRANSACTIONS: | ||||||||
Class I | ||||||||
Capital shares sold [ 71,724 and 18,938 shares, respectively ] | 832,237 | 211,909 | ||||||
Capital shares issued in reinvestment of dividends [ 557 and 0# shares, respectively ] | 5,899 | 2 | ||||||
Capital shares repurchased [ (8,837) and (25) shares, respectively ] | (102,332 | ) | (286 | ) | ||||
|
|
|
| |||||
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM CAPITAL SHARE TRANSACTIONS | 735,804 | 211,625 | ||||||
|
|
|
| |||||
TOTAL INCREASE (DECREASE) IN NET ASSETS | 1,089,940 | 193,212 | ||||||
NET ASSETS: | ||||||||
Beginning of year | 2,915,495 | 2,722,283 | ||||||
|
|
|
| |||||
End of year | $ | 4,005,435 | $ | 2,915,495 | ||||
|
|
|
|
| ||||
# Number of shares is less than 0.5. |
See Notes to Financial Statements.
125
1290 FUNDS
1290 RETIREMENT 2040 FUND
FINANCIAL HIGHLIGHTS
Class I | Year Ended October 31, | February 27, 2017* to October 31, 2017 | ||||||||||
2019 | 2018 | |||||||||||
Net asset value, beginning of period | $ | 10.84 | $ | 10.89 | $ | 10.00 | ||||||
|
|
|
|
|
| |||||||
Income (loss) from investment operations: | ||||||||||||
Net investment income (loss) (e)(x) | 0.22 | 0.20 | 0.11 | |||||||||
Net realized and unrealized gain (loss) | 1.24 | (0.06 | ) | 0.78 | ||||||||
|
|
|
|
|
| |||||||
Total from investment operations | 1.46 | 0.14 | 0.89 | |||||||||
|
|
|
|
|
| |||||||
Less distributions: | ||||||||||||
Dividends from net investment income | (0.20 | ) | (0.18 | ) | — | |||||||
Distributions from net realized gains | (0.05 | ) | (0.01 | ) | — | |||||||
|
|
|
|
|
| |||||||
Total dividends and distributions | (0.25 | ) | (0.19 | ) | — | |||||||
|
|
|
|
|
| |||||||
Net asset value, end of period | $ | 12.05 | $ | 10.84 | $ | 10.89 | ||||||
|
|
|
|
|
| |||||||
Total return (b) | 13.79 | % | 1.26 | % | 8.90 | % | ||||||
|
|
|
|
|
| |||||||
Ratios/Supplemental Data: | ||||||||||||
Net assets, end of period (000’s) | $ | 4,005 | $ | 2,915 | $ | 2,722 | ||||||
Ratio of expenses to average net assets: | ||||||||||||
After waivers and reimbursements (a)(f) | 0.53 | %(j) | 0.53 | %(j) | 0.53 | %(j) | ||||||
Before waivers and reimbursements (a)(f) | 4.57 | % | 5.31 | % | 5.28 | % | ||||||
Ratio of net investment income (loss) to average net assets: | ||||||||||||
After waivers and reimbursements (a)(f)(x) | 1.96 | % | 1.80 | % | 1.57 | %(l) | ||||||
Before waivers and reimbursements (a)(f)(x) | (2.08 | )% | (2.99 | )% | (3.18 | )%(l) | ||||||
Portfolio turnover rate (z)^ | 3 | % | 2 | % | 1 | % |
* | Commencement of Operations. |
^ | Portfolio turnover rate excludes derivatives, if any. |
(a) | Ratios for periods less than one year are annualized. Certain non-recurring expenses incurred by the Fund are not annualized for periods less than one year. |
(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”), if applicable. |
(j) | Including direct and indirect expenses, the net expense ratio after waivers and reimbursements would be 0.65%. |
(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.
126
1290 RETIREMENT 2045 FUND (Unaudited)
INVESTMENT ADVISER
Ø | 1290 Asset Managers® |
PERFORMANCE RESULTS
Annualized Total Returns as of 10/31/19 | ||||||||
1 Year | Since Incept. | |||||||
Fund – Class I Shares* | 13.85 | % | 9.14 | % | ||||
S&P Target Date 2045 Index | 11.79 | 8.43 | ||||||
* Date of inception 2/27/17.
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.
The graph illustrates comparative performance for $10,000 invested in the Class I Shares of the 1290 Retirement 2045 Fund and the S&P Target Date 2045 Index from 2/27/17 to 10/31/19. The performance of the S&P Target Date 2045 Index reflects an initial investment at the end of the month closest to the Fund’s inception. The performance of the Fund assumes reinvestment of all dividends and capital gain distributions, if any, and does not include a sales charge. The performance of the S&P Target Date 2045 Index does not reflect the deduction of expenses or a sales charge associated with a mutual fund and has been adjusted to reflect reinvestment of all dividends, capital gain distributions, and interest of the securities included in the benchmark.
As of March 1, 2019, the gross expense ratio for Class I shares was 4.95%. The net expense ratio for Class I shares was 0.65%. The net expense ratio reflects the Adviser’s decision to contractually limit expenses through April 30, 2020. Fund Performance may also 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.
In addition, 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.
PERFORMANCE SUMMARY
The Fund’s Class I shares returned 13.85% for the year ended October 31, 2019. The Fund’s benchmark, the S&P Target Date 2045 Index, returned 11.79% over the same year.
Overview
Each 1290 Retirement Fund’s (as defined in the Notes to the Financial Statements) performance will reflect the performance of the underlying asset classes and depends upon their percentage weighting within the Fund. Here’s why: The 1290 Retirement Funds are managed to target a specific year of planned retirement. The asset mix will become more conservative each year, until about 10 years after the target retirement year, when it will become relatively stable. The 1290 Retirement Funds balance the need for appreciation with the need for income as retirement approaches and focus on supporting an income stream over a long-term retirement withdrawal horizon. To achieve its asset class exposure, each 1290 Retirement Fund invests in exchange-traded funds (ETFs) representing various equity and bond asset classes. Because of this, each of the 1290 Retirement Fund’s performance will be a function of the asset class performance and the percentage weighting of each asset class in the 1290 Retirement Fund. Current target and actual allocations, as well as performance, are available in a separate quarterly Fund Fact Sheet.
Fund Highlights
What helped performance during the year?
• | The primary driver of outperformance was the fact that the low volatility tilt of the Fund outperformed the market cap weighted benchmark within both domestic and developed markets equities. |
• | Having no exposure to short duration bonds relative to the benchmark contributed to performance. |
What hurt performance during the year?
• | While low volatility benefited domestic and developed markets equities, it was not beneficial within the emerging markets equities as market cap outperformed in that segment of the benchmark. |
• | Within domestic equities, a higher allocation to small cap equities relative to the benchmark detracted from performance as large cap equities were the best performer for the period. |
• | Having no dedicated position in real estate hurt performance, as the sector was up over 24% for the period. |
Table by Asset Class(as a percentage of Total Investments in Securities) | ||||
As of October 31, 2019 | ||||
Equity | 86.2 | % | ||
Fixed Income | 13.8 |
127
1290 RETIREMENT 2045 FUND (Unaudited)
Top 10 Holdings(as a percentage of Total Investments in Securities) | ||||
As of October 31, 2019 | ||||
iShares Core S&P Total US Stock Market ETF | 30.2 | % | ||
iShares Core U.S. Aggregate Bond ETF | 11.7 | |||
iShares Core MSCI EAFE ETF | 10.7 | |||
Invesco S&P 500 Low Volatility ETF | 9.9 | |||
iShares Edge MSCI Min Vol USA ETF | 9.8 | |||
Invesco S&P International Developed Low Volatility ETF | 5.3 | |||
iShares Edge MSCI Min Vol EAFE ETF | 5.3 | |||
Invesco S&P MidCap Low Volatility ETF | 5.2 | |||
iShares Core MSCI Emerging Markets ETF | 2.5 | |||
Invesco S&P SmallCap Low Volatility ETF | 2.5 | |||
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 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 October 31, 2019 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 5/1/19 | Ending Account Value 10/31/19 | Expenses Paid During Period* 5/1/19 - 10/31/19 | ||||||||||
Class I |
| |||||||||||
Actual | $1,000.00 | $1,045.50 | $2.72 | |||||||||
Hypothetical (5% average annual return before expenses) | 1,000.00 | 1,022.54 | 2.69 | |||||||||
* Expenses are equal to the Fund’s Class I shares annualized expense ratio of 0.53%, multiplied by the average account value over the period, and multiplied by 184/365 (to reflect the one-half year period). |
|
128
1290 FUNDS
1290 RETIREMENT 2045 FUND
PORTFOLIO OF INVESTMENTS
October 31, 2019
Number of Shares | Value (Note 1) | |||||||
EXCHANGE TRADED FUNDS (ETF): |
| |||||||
Equity (85.1%) | ||||||||
Invesco S&P 500 Low Volatility ETF | 9,600 | $ | 552,672 | |||||
Invesco S&P Emerging Markets Low Volatility ETF | 2,860 | 66,152 | ||||||
Invesco S&P International Developed Low Volatility ETF | 8,550 | 295,574 | ||||||
Invesco S&P MidCap Low Volatility ETF | 5,450 | 290,758 | ||||||
Invesco S&P SmallCap Low Volatility ETF | 2,740 | 137,548 | ||||||
iShares Core MSCI EAFE ETF | 9,440 | 596,891 | ||||||
iShares Core MSCI Emerging Markets ETF | 2,720 | 139,182 | ||||||
iShares Core S&P Total US Stock Market ETF | 24,510 | 1,679,915 | ||||||
iShares Edge MSCI Min Vol EAFE ETF | 3,890 | 291,944 | ||||||
iShares Edge MSCI Min Vol Emerging Markets ETF | 1,160 | 67,698 | ||||||
iShares Edge MSCI Min Vol USA ETF | 8,490 | 542,935 | ||||||
SPDR SSGA US Small Cap Low Volatility Index ETF | 1,360 | 132,614 | ||||||
|
| |||||||
Total Equity | 4,793,883 | |||||||
|
| |||||||
Fixed Income (13.6%) | ||||||||
iShares Core U.S. Aggregate Bond ETF | 5,770 | 652,876 | ||||||
iShares TIPS Bond ETF | 990 | 114,899 | ||||||
|
| |||||||
Total Fixed Income | 767,775 | |||||||
|
| |||||||
Total Investments in Securities (98.7%) | 5,561,658 | |||||||
Other Assets Less Liabilities (1.3%) | 73,206 | |||||||
|
| |||||||
Net Assets (100%) | $ | 5,634,864 | ||||||
|
|
The following is a summary of the inputs used to value the Fund’s assets and liabilities carried at fair value as of October 31, 2019:
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 interest rates, prepayment speeds, credit risk, etc.) | Level 3 Fund’s own assumptions in | Total | ||||||||||||
Assets: |
| |||||||||||||||
Exchange Traded Funds | ||||||||||||||||
Exchange Traded Funds | $ | 5,561,658 | $ | — | $ | — | $ | 5,561,658 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total Assets | $ | 5,561,658 | $ | — | $ | — | $ | 5,561,658 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total Liabilities | $ | — | $ | — | $ | — | $ | — | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total | $ | 5,561,658 | $ | — | $ | — | $ | 5,561,658 | ||||||||
|
|
|
|
|
|
|
|
The Fund held no derivatives contracts during the year ended October 31, 2019.
Investment security transactions for the year ended October 31, 2019 were as follows:
Cost of Purchases: | ||||
Long-term investments other than U.S. government debt securities | $ | 1,265,523 | ||
Net Proceeds of Sales and Redemptions: | ||||
Long-term investments other than U.S. government debt securities | $ | 32,651 |
As of October 31, 2019, the gross unrealized appreciation (depreciation) of investments based on the aggregate cost of investments in securities and derivative instruments, if applicable, for Federal income tax purposes was as follows:
Aggregate gross unrealized appreciation | $ | 649,967 | ||
Aggregate gross unrealized depreciation | (767 | ) | ||
|
| |||
Net unrealized appreciation | $ | 649,200 | ||
|
| |||
Federal income tax cost of investments in securities and derivative instruments, if applicable | $ | 4,912,458 | ||
|
|
See Notes to Financial Statements.
129
1290 FUNDS
1290 RETIREMENT 2045 FUND
STATEMENT OF ASSETS AND LIABILITIES
October 31, 2019
ASSETS |
| |||
Investments in Securities, at value (Cost $4,912,012) | $ | 5,561,658 | ||
Cash | 32,161 | |||
Receivable for Fund shares sold | 67,735 | |||
Receivable from investment adviser | 9,879 | |||
Prepaid registration and filing fees | 4,649 | |||
Other assets | 71 | |||
|
| |||
Total assets | 5,676,153 | |||
|
| |||
LIABILITIES | ||||
Accrued professional fees | 31,526 | |||
Transfer agent fees payable | 798 | |||
Accrued expenses | 8,965 | |||
|
| |||
Total liabilities | 41,289 | |||
|
| |||
NET ASSETS | $ | 5,634,864 | ||
|
| |||
Net assets were comprised of: | ||||
Paid in capital | $ | 4,919,860 | ||
Total distributable earnings (loss) | 715,004 | |||
|
| |||
Net assets | $ | 5,634,864 | ||
|
| |||
Class I | ||||
Net asset value and redemption price per share, $5,634,864 / 462,585 shares outstanding (unlimited amount authorized: $0.001 par value) | $ | 12.18 | ||
|
|
STATEMENT OF OPERATIONS
For the Year Ended October 31, 2019
INVESTMENT INCOME |
| |||
Dividends | $ | 114,182 | ||
Interest | 744 | |||
|
| |||
Total income | 114,926 | |||
|
| |||
EXPENSES | ||||
Professional fees | 42,383 | |||
Administrative fees | 30,005 | |||
Printing and mailing expenses | 24,445 | |||
Investment advisory fees | 23,006 | |||
Registration and filing fees | 21,116 | |||
Transfer agent fees | 9,350 | |||
Custodian fees | 4,530 | |||
Trustees’ fees | 396 | |||
Miscellaneous | 6,276 | |||
|
| |||
Gross expenses | 161,507 | |||
Less: Waiver from investment adviser | (53,011 | ) | ||
Reimbursement from investment adviser | (84,152 | ) | ||
|
| |||
Net expenses | 24,344 | |||
|
| |||
NET INVESTMENT INCOME (LOSS) | 90,582 | |||
|
| |||
REALIZED AND UNREALIZED GAIN (LOSS) | ||||
Net realized gain (loss) on investments in securities | 422 | |||
Net change in unrealized appreciation (depreciation) on investments in securities | 506,810 | |||
|
| |||
NET REALIZED AND UNREALIZED GAIN (LOSS) | 507,232 | |||
|
| |||
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | $ | 597,814 | ||
|
|
STATEMENT OF CHANGES IN NET ASSETS | Year Ended October 31, | |||||||
2019 | 2018 | |||||||
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS: |
| |||||||
Net investment income (loss) | $ | 90,582 | $ | 55,392 | ||||
Net realized gain (loss) | 422 | 11,861 | ||||||
Net change in unrealized appreciation (depreciation) | 506,810 | (61,892 | ) | |||||
|
|
|
| |||||
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | 597,814 | 5,361 | ||||||
|
|
|
| |||||
Distributions to shareholders: | ||||||||
Class I | (75,322 | ) | (47,142 | ) | ||||
|
|
|
| |||||
CAPITAL SHARES TRANSACTIONS: | ||||||||
Class I | ||||||||
Capital shares sold [ 117,575 and 100,702 shares, respectively ] | 1,356,581 | 1,134,558 | ||||||
Capital shares issued in reinvestment of dividends [ 2,113 and 13 shares, respectively ] | 22,572 | 143 | ||||||
Capital shares repurchased [ (8,569) and (9) shares, respectively ] | (100,710 | ) | (101 | ) | ||||
|
|
|
| |||||
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM CAPITAL SHARE TRANSACTIONS | 1,278,443 | 1,134,600 | ||||||
|
|
|
| |||||
TOTAL INCREASE (DECREASE) IN NET ASSETS | 1,800,935 | 1,092,819 | ||||||
NET ASSETS: | ||||||||
Beginning of year | 3,833,929 | 2,741,110 | ||||||
|
|
|
| |||||
End of year | $ | 5,634,864 | $ | 3,833,929 | ||||
|
|
|
|
See Notes to Financial Statements.
130
1290 FUNDS
1290 RETIREMENT 2045 FUND
FINANCIAL HIGHLIGHTS
Year Ended October 31, | February 27, 2017* to October 31, 2017 | |||||||||||
Class I | 2019 | 2018 | ||||||||||
Net asset value, beginning of period | $ | 10.91 | $ | 10.93 | $ | 10.00 | ||||||
|
|
|
|
|
| |||||||
Income (loss) from investment operations: | ||||||||||||
Net investment income (loss) (e)(x) | 0.23 | 0.20 | 0.11 | |||||||||
Net realized and unrealized gain (loss) | 1.25 | (0.03 | ) | 0.82 | ||||||||
|
|
|
|
|
| |||||||
Total from investment operations | 1.48 | 0.17 | 0.93 | |||||||||
|
|
|
|
|
| |||||||
Less distributions: | ||||||||||||
Dividends from net investment income | (0.18 | ) | (0.18 | ) | — | |||||||
Distributions from net realized gains | (0.03 | ) | (0.01 | ) | — | |||||||
|
|
|
|
|
| |||||||
Total dividends and distributions | (0.21 | ) | (0.19 | ) | — | |||||||
|
|
|
|
|
| |||||||
Net asset value, end of period | $ | 12.18 | $ | 10.91 | $ | 10.93 | ||||||
|
|
|
|
|
| |||||||
Total return (b) | 13.85 | % | 1.53 | % | 9.30 | % | ||||||
|
|
|
|
|
| |||||||
Ratios/Supplemental Data: | ||||||||||||
Net assets, end of period (000’s) | $ | 5,635 | $ | 3,834 | $ | 2,741 | ||||||
Ratio of expenses to average net assets: | ||||||||||||
After waivers and reimbursements (a)(f) | 0.53 | %(j) | 0.53 | %(j) | 0.52 | %(j) | ||||||
Before waivers and reimbursements (a)(f) | 3.51 | % | 4.91 | % | 5.29 | % | ||||||
Ratio of net investment income (loss) to average net assets: | ||||||||||||
After waivers and reimbursements (a)(f)(x) | 1.97 | % | 1.76 | % | 1.55 | %(l) | ||||||
Before waivers and reimbursements (a)(f)(x) | (1.01 | )% | (2.62 | )% | (3.22 | )%(l) | ||||||
Portfolio turnover rate (z)^ | 1 | % | 2 | % | 1 | % |
* | Commencement of Operations. |
^ | Portfolio turnover rate excludes derivatives, if any. |
(a) | Ratios for periods less than one year are annualized. Certain non-recurring expenses incurred by the Fund are not annualized for periods less than one year. |
(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”), if applicable. |
(j) | Including direct and indirect expenses, the net expense ratio after waivers and reimbursements would be 0.65%. |
(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.
131
1290 RETIREMENT 2050 FUND (Unaudited)
INVESTMENT ADVISER
Ø | 1290 Asset Managers® |
PERFORMANCE RESULTS
Annualized Total Returns as of 10/31/19 | ||||||||
1 Year | Since Incept. | |||||||
Fund – Class I Shares* | 14.18 | % | 9.48 | % | ||||
S&P Target Date 2050 Index | 11.77 | 8.53 | ||||||
* Date of inception 2/27/17.
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.
The graph illustrates comparative performance for $10,000 invested in the Class I Shares of the 1290 Retirement 2050 Fund and the S&P Target Date 2050 Index from 2/27/17 to 10/31/19. The performance of the S&P Target Date 2050 Index reflects an initial investment at the end of the month closest to the Fund’s inception. The performance of the Fund assumes reinvestment of all dividends and capital gain distributions, if any, and does not include a sales charge. The performance of the S&P Target Date 2050 Index does not reflect the deduction of expenses or a sales charge associated with a mutual fund and has been adjusted to reflect reinvestment of all dividends, capital gain distributions, and interest of the securities included in the benchmark.
As of March 1, 2019, the gross expense ratio for Class I shares was 5.21%. The net expense ratio for Class I shares was 0.65%. The net expense ratio reflects the Adviser’s decision to contractually limit expenses through April 30, 2020. Fund Performance may also 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.
In addition, 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.
PERFORMANCE SUMMARY
The Fund’s Class I shares returned 14.18% for the year ended October 31, 2019. The Fund’s benchmark, the S&P Target Date 2050 Index, returned 11.77% over the same year.
Overview
Each 1290 Retirement Fund’s (as defined in the Notes to the Financial Statements) performance will reflect the performance of the underlying asset classes and depends upon their percentage weighting within the Fund. Here’s why: The 1290 Retirement Funds are managed to target a specific year of planned retirement. The asset mix will become more conservative each year, until about 10 years after the target retirement year, when it will become relatively stable. The 1290 Retirement Funds balance the need for appreciation with the need for income as retirement approaches and focus on supporting an income stream over a long-term retirement withdrawal horizon. To achieve its asset class exposure, each 1290 Retirement Fund invests in exchange-traded funds (ETFs) representing various equity and bond asset classes. Because of this, each of the 1290 Retirement Fund’s performance will be a function of the asset class performance and the percentage weighting of each asset class in the 1290 Retirement Fund. Current target and actual allocations, as well as performance, are available in a separate quarterly Fund Fact Sheet.
Fund Highlights
What helped performance during the year?
• | The primary driver of outperformance was the fact that the low volatility tilt of the Fund outperformed the market cap weighted benchmark within both domestic and developed markets equities. |
• | Having no exposure to short duration bonds relative to the benchmark contributed to performance. |
What hurt performance during the year?
• | While low volatility benefited domestic and developed markets equities, it was not beneficial within the emerging markets equities as market cap outperformed in that segment of the benchmark. |
• | Within domestic equities, a higher allocation to small cap equities relative to the benchmark detracted from performance as large cap equities were the best performer for the period. |
• | Having no dedicated position in real estate hurt performance, as the sector was up over 24% for the period. |
Table by Asset Class(as a percentage of Total Investments in Securities) As of October 31, 2019 | ||||
Equity | 91.2 | % | ||
Fixed Income | 8.8 |
132
1290 RETIREMENT 2050 FUND (Unaudited)
Top 10 Holdings(as a percentage of Total Investments in Securities) As of October 31, 2019 | ||||
iShares Core S&P Total US Stock Market ETF | 32.0 | % | ||
iShares Core MSCI EAFE ETF | 11.3 | |||
iShares Edge MSCI Min Vol USA ETF | 10.6 | |||
Invesco S&P 500 Low Volatility ETF | 10.4 | |||
iShares Core U.S. Aggregate Bond ETF | 7.6 | |||
Invesco S&P MidCap Low Volatility ETF | 5.6 | |||
Invesco S&P International Developed Low Volatility ETF | 5.6 | |||
iShares Edge MSCI Min Vol EAFE ETF | 5.6 | |||
iShares Core MSCI Emerging Markets ETF | 2.6 | |||
SPDR SSGA US Small Cap Low Volatility Index ETF | 2.5 | |||
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 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 October 31, 2019 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 5/1/19 | Ending Account Value 10/31/19 | Expenses Paid During Period* 5/1/19 - 10/31/19 | ||||||||||
Class I |
| |||||||||||
Actual | $1,000.00 | $1,045.30 | $2.71 | |||||||||
Hypothetical (5% average annual return before expenses) | 1,000.00 | 1,022.56 | 2.68 | |||||||||
* Expenses are equal to the Fund’s Class I shares annualized expense ratio of 0.52%, multiplied by the average account value over the period, and multiplied by 184/365 (to reflect the one-half year period). |
|
133
1290 FUNDS
1290 RETIREMENT 2050 FUND
PORTFOLIO OF INVESTMENTS
October 31, 2019
Number of Shares | Value (Note 1) | |||||||
EXCHANGE TRADED FUNDS (ETF): |
| |||||||
Equity (91.0%) | ||||||||
Invesco S&P 500 Low Volatility ETF | 6,770 | $ | 389,749 | |||||
Invesco S&P Emerging Markets Low Volatility ETF | 1,990 | 46,029 | ||||||
Invesco S&P International Developed Low Volatility ETF | 6,030 | 208,457 | ||||||
Invesco S&P MidCap Low Volatility ETF | 3,920 | 209,132 | ||||||
Invesco S&P SmallCap Low Volatility ETF | 1,850 | 92,870 | ||||||
iShares Core MSCI EAFE ETF | 6,710 | 424,273 | ||||||
iShares Core MSCI Emerging Markets ETF | 1,900 | 97,223 | ||||||
iShares Core S&P Total US Stock Market ETF | 17,470 | 1,197,394 | ||||||
iShares Edge MSCI Min Vol EAFE ETF | 2,770 | 207,888 | ||||||
iShares Edge MSCI Min Vol Emerging Markets ETF | 810 | 47,272 | ||||||
iShares Edge MSCI Min Vol USA ETF | 6,170 | 394,571 | ||||||
SPDR SSGA US Small Cap Low Volatility Index ETF | 970 | 94,585 | ||||||
|
| |||||||
Total Equity | 3,409,443 | |||||||
|
| |||||||
Fixed Income (8.8%) | ||||||||
iShares Core U.S. Aggregate Bond ETF | 2,510 | 284,007 | ||||||
iShares TIPS Bond ETF | 400 | 46,424 | ||||||
|
| |||||||
Total Fixed Income | 330,431 | |||||||
|
| |||||||
Total Investments in Securities (99.8%)(Cost $3,180,657) | 3,739,874 | |||||||
Other Assets Less Liabilities (0.2%) | 6,775 | |||||||
|
| |||||||
Net Assets (100%) | $ | 3,746,649 | ||||||
|
|
The following is a summary of the inputs used to value the Fund’s assets and liabilities carried at fair value as of October 31, 2019:
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: |
| |||||||||||||||
Exchange Traded Funds | ||||||||||||||||
Exchange Traded Funds | $ | 3,739,874 | $ | — | $ | — | $ | 3,739,874 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total Assets | $ | 3,739,874 | $ | — | $ | — | $ | 3,739,874 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total Liabilities | $ | — | $ | — | $ | — | $ | — | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total | $ | 3,739,874 | $ | — | $ | — | $ | 3,739,874 | ||||||||
|
|
|
|
|
|
|
|
The Fund held no derivatives contracts during the year ended October 31, 2019.
Investment security transactions for the year ended October 31, 2019 were as follows:
Cost of Purchases: | ||||
Long-term investments other than U.S. government debt securities | $ | 371,773 | ||
Net Proceeds of Sales and Redemptions: | ||||
Long-term investments other than U.S. government debt securities | $ | 77,070 |
See Notes to Financial Statements.
134
1290 FUNDS
1290 RETIREMENT 2050 FUND
PORTFOLIO OF INVESTMENTS (Continued)
October 31, 2019
As of October 31, 2019, the gross unrealized appreciation (depreciation) of investments based on the aggregate cost of investments in securities and derivative instruments, if applicable, for Federal income tax purposes was as follows:
Aggregate gross unrealized appreciation | $ | 559,217 | ||
Aggregate gross unrealized depreciation | — | |||
|
| |||
Net unrealized appreciation | $ | 559,217 | ||
|
| |||
Federal income tax cost of investments in securities and derivative instruments, if applicable | $ | 3,180,657 | ||
|
|
See Notes to Financial Statements.
135
1290 FUNDS
1290 RETIREMENT 2050 FUND
STATEMENT OF ASSETS AND LIABILITIES
October 31, 2019
ASSETS |
| |||
Investments in Securities, at value (Cost $3,180,657) | $ | 3,739,874 | ||
Cash | 32,293 | |||
Receivable from investment adviser | 9,562 | |||
Prepaid registration and filing fees | 4,564 | |||
Receivable for Fund shares sold | 1,118 | |||
Other assets | 40 | |||
|
| |||
Total assets | 3,787,451 | |||
|
| |||
LIABILITIES | ||||
Accrued professional fees | 31,139 | |||
Transfer agent fees payable | 915 | |||
Accrued expenses | 8,748 | |||
|
| |||
Total liabilities | 40,802 | |||
|
| |||
NET ASSETS | $ | 3,746,649 | ||
|
| |||
Net assets were comprised of: | ||||
Paid in capital | $ | 3,139,768 | ||
Total distributable earnings (loss) | 606,881 | |||
|
| |||
Net assets | $ | 3,746,649 | ||
|
| |||
Class I | ||||
Net asset value and redemption price per share, $3,746,649 / 306,153 shares outstanding (unlimited amount authorized: $0.001 par value) | $ | 12.24 | ||
|
|
STATEMENT OF OPERATIONS
For the Year Ended October 31, 2019
INVESTMENT INCOME |
| |||
Dividends | $ | 82,403 | ||
Interest | 498 | |||
|
| |||
Total income | 82,901 | |||
|
| |||
EXPENSES | ||||
Professional fees | 41,056 | |||
Administrative fees | 30,004 | |||
Printing and mailing expenses | 22,557 | |||
Registration and filing fees | 21,039 | |||
Investment advisory fees | 16,692 | |||
Transfer agent fees | 9,140 | |||
Custodian fees | 4,175 | |||
Trustees’ fees | 294 | |||
Miscellaneous | 5,821 | |||
|
| |||
Gross expenses | 150,778 | |||
Less: Waiver from investment adviser | (46,696 | ) | ||
Reimbursement from investment adviser | (86,568 | ) | ||
|
| |||
Net expenses | 17,514 | |||
|
| |||
NET INVESTMENT INCOME (LOSS) | 65,387 | |||
|
| |||
REALIZED AND UNREALIZED GAIN (LOSS) | ||||
Net realized gain (loss) on investments in securities | 6,188 | |||
Net change in unrealized appreciation (depreciation) on investments in securities | 370,029 | |||
|
| |||
NET REALIZED AND UNREALIZED GAIN (LOSS) | 376,217 | |||
|
| |||
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | $ | 441,604 | ||
|
|
STATEMENT OF CHANGES IN NET ASSETS | Year Ended October 31, | |||||||
2019 | 2018 | |||||||
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS: |
| |||||||
Net investment income (loss) | $ | 65,387 | $ | 51,919 | ||||
Net realized gain (loss) | 6,188 | 12,718 | ||||||
Net change in unrealized appreciation (depreciation) | 370,029 | (26,033 | ) | |||||
|
|
|
| |||||
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | 441,604 | 38,604 | ||||||
|
|
|
| |||||
Distributions to shareholders: | ||||||||
Class I | (70,591 | ) | (47,252 | ) | ||||
|
|
|
| |||||
CAPITAL SHARES TRANSACTIONS: | ||||||||
Class I | ||||||||
Capital shares sold [ 29,945 and 29,754 shares, respectively ] | 343,550 | 335,197 | ||||||
Capital shares issued in reinvestment of dividends [ 756 and 0# shares, respectively ] | 8,091 | 2 | ||||||
Capital shares repurchased [ (4,097) and (214) shares, respectively ] | (44,001 | ) | (2,461 | ) | ||||
|
|
|
| |||||
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM CAPITAL SHARE TRANSACTIONS | 307,640 | 332,738 | ||||||
|
|
|
| |||||
TOTAL INCREASE (DECREASE) IN NET ASSETS | 678,653 | 324,090 | ||||||
NET ASSETS: | ||||||||
Beginning of year | 3,067,996 | 2,743,906 | ||||||
|
|
|
| |||||
End of year | $ | 3,746,649 | $ | 3,067,996 | ||||
|
|
|
|
| ||||
# Number of shares is less than 0.5. |
See Notes to Financial Statements.
136
1290 FUNDS
1290 RETIREMENT 2050 FUND
FINANCIAL HIGHLIGHTS
Year Ended October 31, | February 27, 2017* to October 31, 2017 | |||||||||||
Class I | 2019 | 2018 | ||||||||||
Net asset value, beginning of period | $ | 10.97 | $ | 10.98 | $ | 10.00 | ||||||
|
|
|
|
|
| |||||||
Income (loss) from investment operations: | ||||||||||||
Net investment income (loss) (e)(x) | 0.22 | 0.20 | 0.11 | |||||||||
Net realized and unrealized gain (loss) | 1.30 | (0.02 | ) | 0.87 | ||||||||
|
|
|
|
|
| |||||||
Total from investment operations | 1.52 | 0.18 | 0.98 | |||||||||
|
|
|
|
|
| |||||||
Less distributions: | ||||||||||||
Dividends from net investment income | (0.20 | ) | (0.18 | ) | — | |||||||
Distributions from net realized gains | (0.05 | ) | (0.01 | ) | — | |||||||
|
|
|
|
|
| |||||||
Total dividends and distributions | (0.25 | ) | (0.19 | ) | — | |||||||
|
|
|
|
|
| |||||||
Net asset value, end of period | $ | 12.24 | $ | 10.97 | $ | 10.98 | ||||||
|
|
|
|
|
| |||||||
Total return (b) | 14.18 | % | 1.63 | % | 9.80 | % | ||||||
|
|
|
|
|
| |||||||
Ratios/Supplemental Data: | ||||||||||||
Net assets, end of period (000’s) | $ | 3,747 | $ | 3,068 | $ | 2,744 | ||||||
Ratio of expenses to average net assets: | ||||||||||||
After waivers and reimbursements (a)(f) | 0.52 | %(j) | 0.52 | %(j) | 0.52 | %(j) | ||||||
Before waivers and reimbursements (a)(f) | 4.52 | % | 5.20 | % | 5.26 | % | ||||||
Ratio of net investment income (loss) to average net assets: | ||||||||||||
After waivers and reimbursements (a)(f)(x) | 1.96 | % | 1.77 | % | 1.54 | %(l) | ||||||
Before waivers and reimbursements (a)(f)(x) | (2.03 | )% | (2.90 | )% | (3.20 | )%(l) | ||||||
Portfolio turnover rate (z)^ | 2 | % | 2 | % | 1 | % |
* | Commencement of Operations. |
^ | Portfolio turnover rate excludes derivatives, if any. |
(a) | Ratios for periods less than one year are annualized. Certain non-recurring expenses incurred by the Fund are not annualized for periods less than one year. |
(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”), if applicable. |
(j) | Including direct and indirect expenses, the net expense ratio after waivers and reimbursements would be 0.65%. |
(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.
137
1290 RETIREMENT 2055 FUND (Unaudited)
INVESTMENT ADVISER
Ø | 1290 Asset Managers® |
PERFORMANCE RESULTS
Annualized Total Returns as of 10/31/19 | ||||||||
1 Year | Since Incept. | |||||||
Fund – Class I Shares* | 14.29 | % | 9.78 | % | ||||
S&P Target Date 2055 Index | 11.82 | 8.60 | ||||||
* Date of inception 2/27/17.
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.
The graph illustrates comparative performance for $10,000 invested in the Class I Shares of the 1290 Retirement 2055 Fund and the S&P Target Date 2055 Index from 2/27/17 to 10/31/19. The performance of the S&P Target Date 2055 Index reflects an initial investment at the end of the month closest to the Fund’s inception. The performance of the Fund assumes reinvestment of all dividends and capital gain distributions, if any, and does not include a sales charge. The performance of the S&P Target Date 2055 Index does not reflect the deduction of expenses or a sales charge associated with a mutual fund and has been adjusted to reflect reinvestment of all dividends, capital gain distributions, and interest of the securities included in the benchmark.
As of March 1, 2019, the gross expense ratio for Class I shares was 5.28%. The net expense ratio for Class I shares was 0.65%. The net expense ratio reflects the Adviser’s decision to contractually limit expenses through April 30, 2020. Fund Performance may also 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.
In addition, 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.
PERFORMANCE SUMMARY
The Fund’s Class I shares returned 14.29% for the year ended October 31, 2019. The Fund’s benchmark, the S&P Target Date 2055 Index, returned 11.82% over the same year.
Overview
Each 1290 Retirement Fund’s (as defined in the Notes to the Financial Statements) performance will reflect the performance of the underlying asset classes and depends upon their percentage weighting within the Fund. Here’s why: The 1290 Retirement Funds are managed to target a specific year of planned retirement. The asset mix will become more conservative each year, until about 10 years after the target retirement year, when it will become relatively stable. The 1290 Retirement Funds balance the need for appreciation with the need for income as retirement approaches and focus on supporting an income stream over a long-term retirement withdrawal horizon. To achieve its asset class exposure, each 1290 Retirement Fund invests in exchange-traded funds (ETFs) representing various equity and bond asset classes. Because of this, each of the 1290 Retirement Fund’s performance will be a function of the asset class performance and the percentage weighting of each asset class in the 1290 Retirement Fund. Current target and actual allocations, as well as performance, are available in a separate quarterly Fund Fact Sheet.
Fund Highlights
What helped performance during the year?
• | The primary driver of outperformance was the fact that the low volatility tilt of the Fund outperformed the market cap weighted benchmark within both domestic and developed markets equities. |
• | Having no exposure to short duration bonds relative to the benchmark contributed to performance. |
What hurt performance during the year?
• | While low volatility benefited domestic and developed markets equities, it was not beneficial within the emerging markets equities as market cap outperformed in that segment of the benchmark. |
• | Within domestic equities, a higher allocation to small cap equities relative to the benchmark detracted from performance as large cap equities were the best performer for the period. |
• | Having no dedicated position in real estate hurt performance, as the sector was up over 24% for the period. |
Table by Asset Class(as a percentage of Total Investments in Securities) As of October 31, 2019 | ||||
Equity | 96.4 | % | ||
Fixed Income | 3.6 |
138
1290 RETIREMENT 2055 FUND (Unaudited)
Top 10 Holdings(as a percentage of Total Investments in Securities) As of October 31, 2019 | ||||
iShares Core S&P Total US Stock Market ETF | 33.9 | % | ||
iShares Core MSCI EAFE ETF | 11.9 | |||
Invesco S&P 500 Low Volatility ETF | 11.2 | |||
iShares Edge MSCI Min Vol USA ETF | 10.9 | |||
Invesco S&P MidCap Low Volatility ETF | 6.0 | |||
iShares Edge MSCI Min Vol EAFE ETF | 5.9 | |||
Invesco S&P International Developed Low Volatility ETF | 5.8 | |||
iShares Core U.S. Aggregate Bond ETF | 3.0 | |||
iShares Core MSCI Emerging Markets ETF | 2.8 | |||
Invesco S&P SmallCap Low Volatility ETF | 2.7 | |||
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 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 October 31, 2019 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 5/1/19 | Ending Account Value 10/31/19 | Expenses Paid During Period* 5/1/19 - 10/31/19 | ||||||||||
Class I |
| |||||||||||
Actual | $ | 1,000.00 | $ | 1,045.00 | $ | 2.69 | ||||||
Hypothetical (5% average annual return before expenses) | 1,000.00 | 1,022.58 | 2.66 | |||||||||
* Expenses are equal to the Fund’s Class I shares annualized expense ratio of 0.52%, multiplied by the average account value over the period, and multiplied by 184/365 (to reflect the one-half year period). |
|
139
1290 FUNDS
1290 RETIREMENT 2055 FUND
PORTFOLIO OF INVESTMENTS
October 31, 2019
Number of Shares | Value (Note 1) | |||||||
EXCHANGE TRADED FUNDS (ETF): |
| |||||||
Equity (96.4%) | ||||||||
Invesco S&P 500 Low Volatility ETF | 6,880 | $ | 396,082 | |||||
Invesco S&P Emerging Markets Low Volatility ETF | 2,130 | 49,267 | ||||||
Invesco S&P International Developed Low Volatility ETF | 5,930 | 205,000 | ||||||
Invesco S&P MidCap Low Volatility ETF | 3,970 | 211,800 | ||||||
Invesco S&P SmallCap Low Volatility ETF | 1,920 | 96,384 | ||||||
iShares Core MSCI EAFE ETF | 6,680 | 422,376 | ||||||
iShares Core MSCI Emerging Markets ETF | 1,920 | 98,246 | ||||||
iShares Core S&P Total US Stock Market ETF | 17,540 | 1,202,192 | ||||||
iShares Edge MSCI Min Vol EAFE ETF | 2,780 | 208,639 | ||||||
iShares Edge MSCI Min Vol Emerging Markets ETF | 790 | 46,104 | ||||||
iShares Edge MSCI Min Vol USA ETF | 6,050 | 386,897 | ||||||
SPDR SSGA US Small Cap Low Volatility Index ETF | 970 | 94,585 | ||||||
|
| |||||||
Total Equity | 3,417,572 | |||||||
|
| |||||||
Fixed Income (3.6%) | ||||||||
iShares Core U.S. Aggregate Bond ETF | 940 | 106,361 | ||||||
iShares TIPS Bond ETF | 180 | 20,891 | ||||||
|
| |||||||
Total Fixed Income | 127,252 | |||||||
|
| |||||||
Total Investments in Securities (100.0%) | 3,544,824 | |||||||
Other Assets Less Liabilities (0.0%) | 462 | |||||||
|
| |||||||
Net Assets (100%) | $ | 3,545,286 | ||||||
|
|
The following is a summary of the inputs used to value the Fund’s assets and liabilities carried at fair value as of October 31, 2019:
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: |
| |||||||||||||||
Exchange Traded Funds | ||||||||||||||||
Exchange Traded Funds | $ | 3,544,824 | $ | — | $ | — | $ | 3,544,824 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total Assets | $ | 3,544,824 | $ | — | $ | — | $ | 3,544,824 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total Liabilities | $ | — | $ | — | $ | — | $ | — | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total | $ | 3,544,824 | $ | — | $ | — | $ | 3,544,824 | ||||||||
|
|
|
|
|
|
|
|
The Fund held no derivatives contracts during the year ended October 31, 2019.
Investment security transactions for the year ended October 31, 2019 were as follows:
Cost of Purchases: | ||||
Long-term investments other than U.S. government debt securities | $ | 321,455 | ||
Net Proceeds of Sales and Redemptions: | ||||
Long-term investments other than U.S. government debt securities | $ | 53,674 |
See Notes to Financial Statements.
140
1290 FUNDS
1290 RETIREMENT 2055 FUND
PORTFOLIO OF INVESTMENTS (Continued)
October 31, 2019
As of October 31, 2019, the gross unrealized appreciation (depreciation) of investments based on the aggregate cost of investments in securities and derivative instruments, if applicable, for Federal income tax purposes was as follows:
Aggregate gross unrealized appreciation | $ | 565,980 | ||
Aggregate gross unrealized depreciation | — | |||
|
| |||
Net unrealized appreciation | $ | 565,980 | ||
|
| |||
Federal income tax cost of investments in securities and derivative instruments, if applicable | $ | 2,978,844 | ||
|
|
See Notes to Financial Statements.
141
1290 FUNDS
1290 RETIREMENT 2055 FUND
STATEMENT OF ASSETS AND LIABILITIES
October 31, 2019
ASSETS |
| |||
Investments in Securities, at value (Cost $2,978,558) | $ | 3,544,824 | ||
Cash | 25,727 | |||
Receivable from investment adviser | 9,404 | |||
Prepaid registration and filing fees | 4,555 | |||
Receivable for Fund shares sold | 1,430 | |||
Other assets | 35 | |||
|
| |||
Total assets | 3,585,975 | |||
|
| |||
LIABILITIES | ||||
Accrued professional fees | 31,135 | |||
Transfer agent fees payable | 913 | |||
Trustees’ fees payable | 3 | |||
Accrued expenses | 8,638 | |||
|
| |||
Total liabilities | 40,689 | |||
|
| |||
NET ASSETS | $ | 3,545,286 | ||
|
| |||
Net assets were comprised of: | ||||
Paid in capital | $ | 2,937,400 | ||
Total distributable earnings (loss) | 607,886 | |||
|
| |||
Net assets | $ | 3,545,286 | ||
|
| |||
Class I | ||||
Net asset value and redemption price per share, $3,545,286 / 287,785 shares outstanding (unlimited amount authorized: $0.001 par value) | $ | 12.32 | ||
|
|
STATEMENT OF OPERATIONS
For the Year Ended October 31, 2019
INVESTMENT INCOME |
| |||
Dividends | $ | 77,404 | ||
Interest | 463 | |||
|
| |||
Total income | 77,867 | |||
|
| |||
EXPENSES | ||||
Professional fees | 40,858 | |||
Administrative fees | 30,003 | |||
Printing and mailing expenses | 22,348 | |||
Registration and filing fees | 21,068 | |||
Investment advisory fees | 15,741 | |||
Transfer agent fees | 9,340 | |||
Custodian fees | 4,175 | |||
Trustees’ fees | 278 | |||
Miscellaneous | 5,522 | |||
|
| |||
Gross expenses | 149,333 | |||
Less: Waiver from investment adviser | (45,744 | ) | ||
Reimbursement from investment adviser | (87,183 | ) | ||
|
| |||
Net expenses | 16,406 | |||
|
| |||
NET INVESTMENT INCOME (LOSS) | 61,461 | |||
|
| |||
REALIZED AND UNREALIZED GAIN (LOSS) | ||||
Net realized gain (loss) on investments in securities | 3,941 | |||
Net change in unrealized appreciation (depreciation) on investments in securities | 355,603 | |||
|
| |||
NET REALIZED AND UNREALIZED GAIN (LOSS) | 359,544 | |||
|
| |||
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | $ | 421,005 | ||
|
|
STATEMENT OF CHANGES IN NET ASSETS | Year Ended October 31, | |||||||
2019 | 2018 | |||||||
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS: |
| |||||||
Net investment income (loss) | $ | 61,461 | $ | 49,960 | ||||
Net realized gain (loss) | 3,941 | 13,439 | ||||||
Net change in unrealized appreciation (depreciation) | 355,603 | (15,674 | ) | |||||
|
|
|
| |||||
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | 421,005 | 47,725 | ||||||
|
|
|
| |||||
Distributions to shareholders: | ||||||||
Class I | (69,041 | ) | (47,252 | ) | ||||
|
|
|
| |||||
CAPITAL SHARES TRANSACTIONS: | ||||||||
Class I | ||||||||
Capital shares sold [ 23,882 and 14,321 shares, respectively ] | 280,169 | 163,155 | ||||||
Capital shares issued in reinvestment of dividends [ 376 and 0# shares, respectively ] | 4,042 | 2 | ||||||
Capital shares repurchased [ (777) and (26) shares, respectively ] | (9,079 | ) | (281 | ) | ||||
|
|
|
| |||||
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM CAPITAL SHARE TRANSACTIONS | 275,132 | 162,876 | ||||||
|
|
|
| |||||
TOTAL INCREASE (DECREASE) IN NET ASSETS | 627,096 | 163,349 | ||||||
NET ASSETS: | ||||||||
Beginning of year | 2,918,190 | 2,754,841 | ||||||
|
|
|
| |||||
End of year | $ | 3,545,286 | $ | 2,918,190 | ||||
|
|
|
|
| ||||
# Number of shares is less than 0.5. |
See Notes to Financial Statements.
142
1290 FUNDS
1290 RETIREMENT 2055 FUND
FINANCIAL HIGHLIGHTS
Year Ended October 31, | February 27, 2017* to October 31, 2017 | |||||||||||
Class I | 2019 | 2018 | ||||||||||
Net asset value, beginning of period | $ | 11.04 | $ | 11.02 | $ | 10.00 | ||||||
|
|
|
|
|
| |||||||
Income (loss) from investment operations: | ||||||||||||
Net investment income (loss) (e)(x) | 0.22 | 0.20 | 0.11 | |||||||||
Net realized and unrealized gain (loss) | 1.32 | 0.01 | † | 0.91 | ||||||||
|
|
|
|
|
| |||||||
Total from investment operations | 1.54 | 0.21 | 1.02 | |||||||||
|
|
|
|
|
| |||||||
Less distributions: | ||||||||||||
Dividends from net investment income | (0.21 | ) | (0.18 | ) | — | |||||||
Distributions from net realized gains | (0.05 | ) | (0.01 | ) | — | |||||||
|
|
|
|
|
| |||||||
Total dividends and distributions | (0.26 | ) | (0.19 | ) | — | |||||||
|
|
|
|
|
| |||||||
Net asset value, end of period | $ | 12.32 | $ | 11.04 | $ | 11.02 | ||||||
|
|
|
|
|
| |||||||
Total return (b) | 14.29 | % | 1.90 | % | 10.20 | % | ||||||
|
|
|
|
|
| |||||||
Ratios/Supplemental Data: | ||||||||||||
Net assets, end of period (000’s) | $ | 3,545 | $ | 2,918 | $ | 2,755 | ||||||
Ratio of expenses to average net assets: | ||||||||||||
After waivers and reimbursements (a)(f) | 0.52 | %(j) | 0.52 | %(j) | 0.52 | %(j) | ||||||
Before waivers and reimbursements (a)(f) | 4.74 | % | 5.27 | % | 5.25 | % | ||||||
Ratio of net investment income (loss) to average net assets: | ||||||||||||
After waivers and reimbursements (a)(f)(x) | 1.95 | % | 1.73 | % | 1.53 | %(l) | ||||||
Before waivers and reimbursements (a)(f)(x) | (2.27 | )% | (3.02 | )% | (3.21 | )%(l) | ||||||
Portfolio turnover rate (z)^ | 2 | % | 2 | % | 1 | % |
* | Commencement of Operations. |
† | The amount shown for a share outstanding throughout the period does not accord with the aggregate net income and/or gain on investments for that period because of the timing of sales and repurchases of the Fund shares in relation to fluctuating market value of the investments in the Fund. |
^ | Portfolio turnover rate excludes derivatives, if any. |
(a) | Ratios for periods less than one year are annualized. Certain non-recurring expenses incurred by the Fund are not annualized for periods less than one year. |
(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”), if applicable. |
(j) | Including direct and indirect expenses, the net expense ratio after waivers and reimbursements would be 0.65%. |
(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.
143
1290 RETIREMENT 2060 FUND (Unaudited)
INVESTMENT ADVISER
Ø | 1290 Asset Managers® |
PERFORMANCE RESULTS
Annualized Total Returns as of 10/31/19 | ||||||||
1 Year | Since Incept. | |||||||
Fund – Class I Shares* | 14.43 | % | 9.94 | % | ||||
S&P Target Date 2060+ Index | 11.85 | 8.72 | ||||||
* Date of inception 2/27/17.
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.
The graph illustrates comparative performance for $10,000 invested in the Class I Shares of the 1290 Retirement 2060 Fund and the S&P Target Date 2060+ Index from 2/27/17 to 10/31/19. The performance of the S&P Target Date 2060+ Index reflects an initial investment at the end of the month closest to the Fund’s inception. The performance of the Fund assumes reinvestment of all dividends and capital gain distributions, if any, and does not include a sales charge. The performance of the S&P Target Date 2060+ Index does not reflect the deduction of expenses or a sales charge associated with a mutual fund and has been adjusted to reflect reinvestment of all dividends, capital gain distributions, and interest of the securities included in the benchmark.
As of March 1, 2019, the gross expense ratio for Class I shares was 5.28%. The net expense ratio for Class I shares was 0.65%. The net expense ratio reflects the Adviser’s decision to contractually limit expenses through April 30, 2020. Fund Performance may also 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.
In addition, 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.
PERFORMANCE SUMMARY
The Fund’s Class I shares returned 14.43% for the year ended October 31, 2019. The Fund’s benchmark, the S&P Target Date 2060+ Index, returned 11.85% over the same year.
Overview
Each 1290 Retirement Fund’s (as defined in the Notes to the Financial Statements) performance will reflect the performance of the underlying asset classes and depends upon their percentage weighting within the Fund. Here’s why: The 1290 Retirement Funds are managed to target a specific year of planned retirement. The asset mix will become more conservative each year, until about 10 years after the target retirement year, when it will become relatively stable. The 1290 Retirement Funds balance the need for appreciation with the need for income as retirement approaches and focus on supporting an income stream over a long-term retirement withdrawal horizon. To achieve its asset class exposure, each 1290 Retirement Fund invests in exchange-traded funds (ETFs) representing various equity and bond asset classes. Because of this, each of the 1290 Retirement Fund’s performance will be a function of the asset class performance and the percentage weighting of each asset class in the 1290 Retirement Fund. Current target and actual allocations, as well as performance, are available in a separate quarterly Fund Fact Sheet.
Fund Highlights
What helped performance during the year?
• | The primary driver of outperformance was the fact that the low volatility tilt of the Fund outperformed the market cap weighted benchmark within both domestic and developed markets equities. |
• | Having no exposure to short duration bonds relative to the benchmark contributed to performance. |
What hurt performance during the year?
• | While low volatility benefited domestic and developed markets equities, it was not beneficial within the emerging markets equities as market cap outperformed in that segment of the benchmark. |
• | Within domestic equities, a higher allocation to small cap equities relative to the benchmark detracted from performance as large cap equities were the best performer for the period. |
• | Having no dedicated position in real estate hurt performance, as the sector was up over 24% for the period. |
Table by Asset Class(as a percentage of Total Investments in Securities) As of October 31, 2019 | ||||
Equity | 100.0 | % |
144
1290 RETIREMENT 2060 FUND (Unaudited)
Top 10 Holdings(as a percentage of Total Investments in Securities) As of October 31, 2019 | ||||
iShares Core S&P Total US Stock Market ETF | 35.0 | % | ||
iShares Core MSCI EAFE ETF | 12.4 | |||
Invesco S&P 500 Low Volatility ETF | 11.9 | |||
iShares Edge MSCI Min Vol USA ETF | 11.7 | |||
Invesco S&P MidCap Low Volatility ETF | 6.1 | |||
iShares Edge MSCI Min Vol EAFE ETF | 6.0 | |||
Invesco S&P International Developed Low Volatility ETF | 5.8 | |||
Invesco S&P SmallCap Low Volatility ETF | 2.9 | |||
iShares Core MSCI Emerging Markets ETF | 2.8 | |||
SPDR SSGA US Small Cap Low Volatility Index ETF | 2.8 | |||
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 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 October 31, 2019 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 5/1/19 | Ending Account Value 10/31/19 | Expenses Paid During Period* 5/1/19 - 10/31/19 | ||||||||||
Class I |
| |||||||||||
Actual | $1,000.00 | $1,044.70 | $2.67 | |||||||||
Hypothetical (5% average annual return before expenses) | 1,000.00 | 1,022.59 | 2.65 | |||||||||
* Expenses are equal to the Fund’s Class I shares annualized expense ratio of 0.52%, multiplied by the average account value over the period, and multiplied by 184/365 (to reflect the one-half year period). |
|
145
1290 FUNDS
1290 RETIREMENT 2060 FUND
PORTFOLIO OF INVESTMENTS
October 31, 2019
Number of Shares | Value (Note 1) | |||||||
EXCHANGE TRADED FUNDS (ETF): |
| |||||||
Equity (99.9%) | ||||||||
Invesco S&P 500 Low Volatility ETF | 7,200 | $ | 414,504 | |||||
Invesco S&P Emerging Markets Low Volatility ETF | 1,900 | 43,947 | ||||||
Invesco S&P International Developed Low Volatility ETF | 5,890 | 203,617 | ||||||
Invesco S&P MidCap Low Volatility ETF | 3,990 | 212,867 | ||||||
Invesco S&P SmallCap Low Volatility ETF | 2,010 | 100,902 | ||||||
iShares Core MSCI EAFE ETF | 6,860 | 433,758 | ||||||
iShares Core MSCI Emerging Markets ETF | 1,930 | 98,758 | ||||||
iShares Core S&P Total US Stock Market ETF | 17,800 | 1,220,012 | ||||||
iShares Edge MSCI Min Vol EAFE ETF | 2,790 | 209,389 | ||||||
iShares Edge MSCI Min Vol Emerging Markets ETF | 780 | 45,521 | ||||||
iShares Edge MSCI Min Vol USA ETF | 6,370 | 407,361 | ||||||
SPDR SSGA US Small Cap Low Volatility Index ETF | 990 | 96,535 | ||||||
|
| |||||||
Total Investments in Securities (99.9%) | 3,487,171 | |||||||
Other Assets Less Liabilities (0.1%) | 2,985 | |||||||
|
| |||||||
Net Assets (100%) | $ | 3,490,156 | ||||||
|
|
The following is a summary of the inputs used to value the Fund’s assets and liabilities carried at fair value as of October 31, 2019:
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: |
| |||||||||||||||
Exchange Traded Funds | ||||||||||||||||
Exchange Traded Funds | $ | 3,487,171 | $ | — | $ | — | $ | 3,487,171 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total Assets | $ | 3,487,171 | $ | — | $ | — | $ | 3,487,171 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total Liabilities | $ | — | $ | — | $ | — | $ | — | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total | $ | 3,487,171 | $ | — | $ | — | $ | 3,487,171 | ||||||||
|
|
|
|
|
|
|
|
The Fund held no derivatives contracts during the year ended October 31, 2019.
Investment security transactions for the year ended October 31, 2019 were as follows:
Cost of Purchases: | ||||
Long-term investments other than U.S. government debt securities | $ | 308,081 | ||
Net Proceeds of Sales and Redemptions: | ||||
Long-term investments other than U.S. government debt securities | $ | 52,690 |
As of October 31, 2019, the gross unrealized appreciation (depreciation) of investments based on the aggregate cost of investments in securities and derivative instruments, if applicable, for Federal income tax purposes was as follows:
Aggregate gross unrealized appreciation | $ | 573,618 | ||
Aggregate gross unrealized depreciation | — | |||
|
| |||
Net unrealized appreciation | $ | 573,618 | ||
|
| |||
Federal income tax cost of investments in securities and derivative instruments, if applicable | $ | 2,913,553 | ||
|
|
See Notes to Financial Statements.
146
1290 FUNDS
1290 RETIREMENT 2060 FUND
STATEMENT OF ASSETS AND LIABILITIES
October 31, 2019
ASSETS |
| |||
Investments in Securities, at value (Cost $2,913,553) | $ | 3,487,171 | ||
Cash | 27,626 | |||
Receivable from investment adviser | 10,347 | |||
Prepaid registration and filing fees | 4,552 | |||
Receivable for Fund shares sold | 1,039 | |||
Other assets | 35 | |||
|
| |||
Total assets | 3,530,770 | |||
|
| |||
LIABILITIES | ||||
Accrued professional fees | 31,141 | |||
Transfer agent fees payable | 907 | |||
Trustees’ fees payable | 1 | |||
Accrued expenses | 8,565 | |||
|
| |||
Total liabilities | 40,614 | |||
|
| |||
NET ASSETS | $ | 3,490,156 | ||
|
| |||
Net assets were comprised of: | ||||
Paid in capital | $ | 2,873,896 | ||
Total distributable earnings (loss) | 616,260 | |||
|
| |||
Net assets | $ | 3,490,156 | ||
|
| |||
Class I | ||||
Net asset value and redemption price per share, $3,490,156 / 281,951 shares outstanding (unlimited amount authorized: $0.001 par value) | $ | 12.38 | ||
|
|
STATEMENT OF OPERATIONS
For the Year Ended October 31, 2019
INVESTMENT INCOME |
| |||
Dividends | $ | 75,271 | ||
Interest | 416 | |||
|
| |||
Total income | 75,687 | |||
|
| |||
EXPENSES | ||||
Professional fees | 40,799 | |||
Administrative fees | 30,003 | |||
Printing and mailing expenses | 23,115 | |||
Registration and filing fees | 21,020 | |||
Investment advisory fees | 15,480 | |||
Transfer agent fees | 9,440 | |||
Custodian fees | 4,050 | |||
Trustees’ fees | 272 | |||
Miscellaneous | 5,520 | |||
|
| |||
Gross expenses | 149,699 | |||
Less: Waiver from investment adviser | (45,483 | ) | ||
Reimbursement from investment adviser | (88,153 | ) | ||
|
| |||
Net expenses | 16,063 | |||
|
| |||
NET INVESTMENT INCOME (LOSS) | 59,624 | |||
|
| |||
REALIZED AND UNREALIZED GAIN (LOSS) | ||||
Net realized gain (loss) on investments in securities | 5,740 | |||
Net change in unrealized appreciation (depreciation) on investments in securities | 352,798 | |||
|
| |||
NET REALIZED AND UNREALIZED GAIN (LOSS) | 358,538 | |||
|
| |||
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | $ | 418,162 | ||
|
|
STATEMENT OF CHANGES IN NET ASSETS | Year Ended October 31, | |||||||
2019 | 2018 | |||||||
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS: |
| |||||||
Net investment income (loss) | $ | 59,624 | $ | 49,725 | ||||
Net realized gain (loss) | 5,740 | 11,078 | ||||||
Net change in unrealized appreciation (depreciation) | 352,798 | (8,835 | ) | |||||
|
|
|
| |||||
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | 418,162 | 51,968 | ||||||
|
|
|
| |||||
Distributions to shareholders: | ||||||||
Class I | (65,105 | ) | (47,502 | ) | ||||
|
|
|
| |||||
CAPITAL SHARES TRANSACTIONS: | ||||||||
Class I | ||||||||
Capital shares sold [ 24,271 and 9,241 shares, respectively ] | 286,685 | 106,171 | ||||||
Capital shares issued in reinvestment of dividends [ 242 and 0# shares, respectively ] | 2,604 | 2 | ||||||
Capital shares repurchased [ (1,648) and (164) shares, respectively ] | (19,043 | ) | (1,908 | ) | ||||
|
|
|
| |||||
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM CAPITAL SHARE TRANSACTIONS | 270,246 | 104,265 | ||||||
|
|
|
| |||||
TOTAL INCREASE (DECREASE) IN NET ASSETS | 623,303 | 108,731 | ||||||
NET ASSETS: | ||||||||
Beginning of year | 2,866,853 | 2,758,122 | ||||||
|
|
|
| |||||
End of year | $ | 3,490,156 | $ | 2,866,853 | ||||
|
|
|
|
| ||||
# Number of shares is less than 0.5. |
See Notes to Financial Statements.
147
1290 FUNDS
1290 RETIREMENT 2060 FUND
FINANCIAL HIGHLIGHTS
Year Ended October 31, | February 27, 2017* to October 31, 2017 | |||||||||||
Class I | 2019 | 2018 | ||||||||||
Net asset value, beginning of period | $ | 11.07 | $ | 11.03 | $ | 10.00 | ||||||
|
|
|
|
|
| |||||||
Income (loss) from investment operations: | ||||||||||||
Net investment income (loss) (e)(x) | 0.22 | 0.20 | 0.11 | |||||||||
Net realized and unrealized gain (loss) | 1.34 | 0.03 | 0.92 | |||||||||
|
|
|
|
|
| |||||||
Total from investment operations | 1.56 | 0.23 | 1.03 | |||||||||
|
|
|
|
|
| |||||||
Less distributions: | ||||||||||||
Dividends from net investment income | (0.21 | ) | (0.18 | ) | — | |||||||
Distributions from net realized gains | (0.04 | ) | (0.01 | ) | — | |||||||
|
|
|
|
|
| |||||||
Total dividends and distributions | (0.25 | ) | (0.19 | ) | — | |||||||
|
|
|
|
|
| |||||||
Net asset value, end of period | $ | 12.38 | $ | 11.07 | $ | 11.03 | ||||||
|
|
|
|
|
| |||||||
Total return (b) | 14.43 | % | 2.09 | % | 10.30 | % | ||||||
|
|
|
|
|
| |||||||
Ratios/Supplemental Data: | ||||||||||||
Net assets, end of period (000’s) | $ | 3,490 | $ | 2,867 | $ | 2,758 | ||||||
Ratio of expenses to average net assets: | ||||||||||||
After waivers and reimbursements (a)(f) | 0.52 | %(j) | 0.52 | %(j) | 0.52 | %(j) | ||||||
Before waivers and reimbursements (a)(f) | 4.83 | % | 5.27 | % | 5.25 | % | ||||||
Ratio of net investment income (loss) to average net assets: | ||||||||||||
After waivers and reimbursements (a)(f)(x) | 1.93 | % | 1.73 | % | 1.52 | %(l) | ||||||
Before waivers and reimbursements (a)(f)(x) | (2.39 | )% | (3.02 | )% | (3.21 | )%(l) | ||||||
Portfolio turnover rate (z)^ | 2 | % | 2 | % | 1 | % |
* | Commencement of Operations. |
^ | Portfolio turnover rate excludes derivatives, if any. |
(a) | Ratios for periods less than one year are annualized. Certain non-recurring expenses incurred by the Fund are not annualized for periods less than one year. |
(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”), if applicable. |
(j) | Including direct and indirect expenses, the net expense ratio after waivers and reimbursements would be 0.65%. |
(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.
148
1290 SMARTBETA EQUITY FUND (Unaudited)
INVESTMENT ADVISER
Ø | 1290 Asset Managers® |
INVESTMENT SUB-ADVISER
Ø | AXA Rosenberg Investment Management LLC |
PERFORMANCE RESULTS
Annualized Total Returns as of 10/31/19 | ||||||||||||
1 Year | Since Incept. | |||||||||||
Fund – Class A Shares* | without Sales Charge | 15.81 | % | 8.22 | % | |||||||
with Sales Charge (a | ) | 9.47 | 7.00 | |||||||||
Fund – Class I Shares* | 16.16 | 8.49 | ||||||||||
Fund – Class R Shares* | 15.55 | 7.95 | ||||||||||
Fund – Class T Shares*† | without Sales Charge | 16.16 | 8.49 | |||||||||
with Sales Charge (b | ) | 13.27 | 7.93 | |||||||||
MSCI World (Net) Index | 12.69 | 7.53 | ||||||||||
* Date of inception 11/12/14.
† Class T Shares currently are not offered for sale.
(a) A 5.50% front-end sales charge was deducted.
(b) A 2.50% front-end sales charge was deducted.
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.
The graph illustrates comparative performance for $10,000 invested in the Class I Shares of the 1290 SmartBeta Equity Fund and the MSCI World (Net) Index from 11/12/14 to 10/31/19. The performance of the MSCI World (Net) Index reflects an initial investment at the end of the month closest to the Fund’s inception. The performance of the Fund assumes reinvestment of all dividends and capital gain distributions, if any, and does not include a sales charge. The performance of the MSCI World (Net) Index does not reflect the deduction of expenses or a sales charge associated with a mutual fund and has been adjusted to reflect reinvestment of all dividends, capital gain distributions, and interest of the securities included in the benchmark.
As of March 1, 2019, the gross expense ratios for Class A, I, R and T shares were 2.42%, 2.16%, 2.66% and 2.41%, respectively. The net expense ratios for Class A, I, R and T shares were 1.15%, 0.90%, 1.40% and 1.15%, respectively. The net expense ratios reflect the Adviser’s decision to contractually limit expenses through April 30, 2020. Fund Performance may also 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.
In addition, 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.
PERFORMANCE SUMMARY
The Fund’s Class I shares returned 16.16% for the year ended October 31, 2019. The Fund’s benchmark, the MSCI World (Net) Index, returned 12.69% over the same year.
Overview — AXA Rosenberg Investment Management LLC
Global equity markets rose in value for the twelve-month period ended October 31, 2019. Stocks continued to climb in spite of increased volatility, with escalating trade tensions between the U.S. and China — and growing concerns about their potential impact on global economic growth — intermittently affecting investor sentiment. Amid signs of a slowdown, central banks around the world took steps to stimulate their economies; despite relatively robust U.S. macroeconomic data, the Federal Reserve cut interest rates in both August and September, the first decreases since the Global Financial Crisis. In this context, less cyclical stocks and sectors generally led the market, with real estate delivering the strongest returns.
After several years of low volatility, the recent fluctuations in global stock markets have served as a reminder of the potential benefits of a more defensive approach to equity investing. Given the considerable uncertainty in the global economic and geopolitical outlook, we believe a conservative focus could continue to be rewarded. The shift towards monetary policy easing around the world may serve as an additional tailwind for this type of strategy in the short term. Nonetheless, a thoughtful approach to low volatility investing is required, especially as valuations in some parts of the market have become more demanding.
Fund Highlights
1290 SmartBeta Equity Fund delivered on its objective during the period, outperforming the capitalization weighted index with less risk. In line with our long-term expectations, the strategy achieved the bulk of its excess returns in the more challenging market conditions seen in the fourth quarter of 2018 and in May and August this year.
What helped performance during the year?
• | The Fund’s high-quality profile enabled it to participate in the market’s gains during the year, while the emphasis on less volatile companies provided considerable defensiveness during bouts of market volatility. |
149
1290 SMARTBETA EQUITY FUND (Unaudited)
• | Greater-than-benchmark exposures to less cyclical areas of the market, such as consumer staples and utilities, added value, as did an underweight exposure to energy stocks, which badly lagged the broader market. |
• | At an individual stock level, several of the top contributors to returns reflected this broader market backdrop, with an overweight to Procter & Gamble and not holding Royal Dutch Shell adding to excess returns. |
What hurt performance during the year?
• | The strategy’s less-than-benchmark exposure to information technology held back relative returns given the sector’s ongoing ascendancy. |
• | While offset by positive selection in other areas, underweight positions in large, high momentum stocks such as Microsoft Corp., Facebook, Inc. and Apple, Inc. were a drag on relative returns. |
Sector Weightings as of October 31, 2019 | % of Net Assets | |||
Financials | 19.4 | % | ||
Industrials | 14.3 | |||
Consumer Staples | 13.1 | |||
Information Technology | 12.9 | |||
Health Care | 11.6 | |||
Consumer Discretionary | 8.2 | |||
Communication Services | 5.9 | |||
Utilities | 4.9 | |||
Real Estate | 4.3 | |||
Materials | 3.0 | |||
Energy | 1.6 | |||
Investment Company | 0.1 | |||
Cash and Other | 0.7 | |||
|
| |||
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 R and Class T 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 October 31, 2019 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.
150
1290 SMARTBETA EQUITY FUND (Unaudited)
EXAMPLE
Beginning Account Value 5/1/19 | Ending Account Value 10/31/19 | Expenses Paid During Period* 5/1/19 - 10/31/19 | ||||||||||
Class A |
| |||||||||||
Actual | $1,000.00 | $1,054.50 | $5.96 | |||||||||
Hypothetical (5% average annual return before expenses) | 1,000.00 | 1,019.41 | 5.85 | |||||||||
Class I | ||||||||||||
Actual | 1,000.00 | 1,056.10 | 4.66 | |||||||||
Hypothetical (5% average annual return before expenses) | 1,000.00 | 1,020.67 | 4.58 | |||||||||
Class R | ||||||||||||
Actual | 1,000.00 | 1,053.00 | 7.24 | |||||||||
Hypothetical (5% average annual return before expenses) | 1,000.00 | 1,018.15 | 7.12 | |||||||||
Class T** | ||||||||||||
Actual | 1,000.00 | 1,056.10 | 4.66 | |||||||||
Hypothetical (5% average annual return before expenses) | 1,000.00 | 1,020.67 | 4.58 | |||||||||
* Expenses are equal to the Fund’s Class A, I, R and T shares annualized expense ratios of 1.15%, 0.90%, 1.40% and 0.90%, respectively, multiplied by the average account value over the period, and multiplied by 184/365 (to reflect the one-half year period).
** Class T shares currently are not offered for sale. |
|
151
1290 FUNDS
1290 SMARTBETA EQUITY FUND
PORTFOLIO OF INVESTMENTS
October 31, 2019
Number of Shares | Value (Note 1) | |||||||
COMMON STOCKS: | ||||||||
Communication Services (5.9%) | ||||||||
Diversified Telecommunication Services (3.7%) |
| |||||||
AT&T, Inc. | 5,937 | $ | 228,515 | |||||
BCE, Inc. | 1,200 | 56,925 | ||||||
Deutsche Telekom AG (Registered) | 7,200 | 126,620 | ||||||
Elisa OYJ | 600 | 32,770 | ||||||
Nippon Telegraph & Telephone Corp. | 900 | 44,804 | ||||||
Singapore Telecommunications Ltd. | 39,200 | 95,086 | ||||||
Swisscom AG (Registered) | 120 | 61,308 | ||||||
Telefonica SA | 3,355 | 25,725 | ||||||
Telenor ASA | 1,900 | 35,568 | ||||||
Telia Co. AB | 4,000 | 17,585 | ||||||
Verizon Communications, Inc. | 3,900 | 235,833 | ||||||
|
| |||||||
960,739 | ||||||||
|
| |||||||
Interactive Media & Services (0.7%) | ||||||||
Alphabet, Inc., Class A* | 146 | 183,785 | ||||||
|
| |||||||
Media (0.7%) | ||||||||
Comcast Corp., Class A | 1,870 | 83,813 | ||||||
Omnicom Group, Inc. | 800 | 61,752 | ||||||
Quebecor, Inc., Class B | 2,000 | 46,496 | ||||||
|
| |||||||
192,061 | ||||||||
|
| |||||||
Wireless Telecommunication Services (0.8%) |
| |||||||
KDDI Corp. | 2,000 | 55,542 | ||||||
NTT DOCOMO, Inc. | 2,700 | 74,382 | ||||||
Rogers Communications, Inc., Class B | 1,700 | 80,037 | ||||||
|
| |||||||
209,961 | ||||||||
|
| |||||||
Total Communication Services | 1,546,546 | |||||||
|
| |||||||
Consumer Discretionary (8.2%) | ||||||||
Auto Components (0.1%) | ||||||||
Bridgestone Corp. | 600 | 25,130 | ||||||
|
| |||||||
Automobiles (0.4%) | ||||||||
General Motors Co. | 1,700 | 63,172 | ||||||
Toyota Motor Corp. | 700 | 48,888 | ||||||
|
| |||||||
112,060 | ||||||||
|
| |||||||
Hotels, Restaurants & Leisure (2.0%) | ||||||||
Compass Group plc | 1,923 | 51,214 | ||||||
Darden Restaurants, Inc. | 200 | 22,454 | ||||||
Domino’s Pizza, Inc. | 100 | 27,162 | ||||||
Hilton Worldwide Holdings, Inc. | 300 | 29,088 | ||||||
Marriott International, Inc., Class A | 200 | 25,310 | ||||||
McDonald’s Corp. | 300 | 59,010 | ||||||
Restaurant Brands International, Inc. | 500 | 32,712 | ||||||
Starbucks Corp. | 2,000 | 169,120 | ||||||
Yum! Brands, Inc. | 1,100 | 111,881 | ||||||
|
| |||||||
527,951 | ||||||||
|
| |||||||
Household Durables (0.6%) | ||||||||
NVR, Inc.* | 10 | 36,366 | ||||||
Panasonic Corp. | 3,900 | 33,113 | ||||||
Sekisui Chemical Co. Ltd. | 2,000 | 35,170 | ||||||
Sekisui House Ltd. | 3,000 | 65,062 | ||||||
|
| |||||||
169,711 | ||||||||
|
| |||||||
Internet & Direct Marketing Retail (0.1%) |
| |||||||
eBay, Inc. | 700 | 24,675 | ||||||
|
| |||||||
Multiline Retail (0.8%) | ||||||||
Dollar General Corp. | 500 | 80,170 | ||||||
Target Corp. | 800 | 85,528 | ||||||
Wesfarmers Ltd. | 1,800 | 49,335 | ||||||
|
| |||||||
215,033 | ||||||||
|
| |||||||
Specialty Retail (2.7%) | ||||||||
AutoZone, Inc.* | 100 | 114,438 | ||||||
Home Depot, Inc. (The) | 900 | 211,122 | ||||||
Industria de Diseno Textil SA | 2,000 | 62,345 | ||||||
Nitori Holdings Co. Ltd. | 100 | 15,289 | ||||||
O’Reilly Automotive, Inc.* | 200 | 87,102 | ||||||
Ross Stores, Inc. | 700 | 76,769 | ||||||
TJX Cos., Inc. (The) | 2,400 | 138,360 | ||||||
|
| |||||||
705,425 | ||||||||
|
| |||||||
Textiles, Apparel & Luxury Goods (1.5%) |
| |||||||
adidas AG | 360 | 111,158 | ||||||
Gildan Activewear, Inc. | 800 | 20,439 | ||||||
LVMH Moet Hennessy Louis Vuitton SE | 200 | 85,320 | ||||||
NIKE, Inc., Class B | 1,200 | 107,460 | ||||||
VF Corp. | 700 | 57,603 | ||||||
|
| |||||||
381,980 | ||||||||
|
| |||||||
Total Consumer Discretionary | 2,161,965 | |||||||
|
| |||||||
Consumer Staples (13.1%) | ||||||||
Beverages (3.4%) | ||||||||
Asahi Group Holdings Ltd. | 700 | 35,198 | ||||||
Brown-Forman Corp., Class B | 500 | 32,760 | ||||||
Carlsberg A/S, Class B | 200 | 28,136 | ||||||
Coca-Cola Co. (The) | 5,100 | 277,593 | ||||||
Diageo plc | 2,400 | 98,379 | ||||||
Heineken NV | 800 | 81,604 | ||||||
Kirin Holdings Co. Ltd. | 1,000 | 21,345 | ||||||
PepsiCo, Inc. | 2,030 | 278,455 | ||||||
Pernod Ricard SA | 200 | 36,917 | ||||||
|
| |||||||
890,387 | ||||||||
|
| |||||||
Food & Staples Retailing (2.2%) | ||||||||
Alimentation Couche-Tard, Inc., Class B | 1,400 | 41,986 | ||||||
Costco Wholesale Corp. | 700 | 207,977 | ||||||
Koninklijke Ahold Delhaize NV | 800 | 19,919 | ||||||
Loblaw Cos. Ltd. | 800 | 42,664 | ||||||
Seven & i Holdings Co. Ltd. | 900 | 34,170 | ||||||
Sysco Corp. | 1,200 | 95,844 | ||||||
Walgreens Boots Alliance, Inc. | 1,000 | 54,780 | ||||||
Walmart, Inc. | 200 | 23,452 | ||||||
Woolworths Group Ltd. | 2,200 | 56,598 | ||||||
|
| |||||||
577,390 | ||||||||
|
|
See Notes to Financial Statements.
152
1290 FUNDS
1290 SMARTBETA EQUITY FUND
PORTFOLIO OF INVESTMENTS (Continued)
October 31, 2019
Number of Shares | Value (Note 1) | |||||||
Food Products (3.1%) | ||||||||
Chocoladefabriken Lindt & Spruengli AG (Registered) | 1 | $ | 81,906 | |||||
Danone SA | 651 | 53,990 | ||||||
General Mills, Inc. | 1,600 | 81,376 | ||||||
Hershey Co. (The) | 600 | 88,122 | ||||||
Kellogg Co. | 900 | 57,177 | ||||||
McCormick & Co., Inc. (Non-Voting) | 300 | 48,207 | ||||||
Mondelez International, Inc., Class A | 3,300 | 173,085 | ||||||
Mowi ASA | 700 | 17,066 | ||||||
Nestle SA (Registered) | 1,700 | 181,494 | ||||||
Tyson Foods, Inc., Class A | 400 | 33,116 | ||||||
|
| |||||||
815,539 | ||||||||
|
| |||||||
Household Products (2.6%) | ||||||||
Church & Dwight Co., Inc. | 1,000 | 69,940 | ||||||
Clorox Co. (The) | 300 | 44,307 | ||||||
Colgate-Palmolive Co. | 1,000 | 68,600 | ||||||
Henkel AG & Co. KGaA (Preference)(q) | 420 | 43,648 | ||||||
Kimberly-Clark Corp. | 1,000 | 132,880 | ||||||
Procter & Gamble Co. (The) | 2,500 | 311,275 | ||||||
|
| |||||||
670,650 | ||||||||
|
| |||||||
Personal Products (1.8%) | ||||||||
Beiersdorf AG | 180 | 21,310 | ||||||
Estee Lauder Cos., Inc. (The), Class A | 600 | 111,762 | ||||||
Kao Corp. | 500 | 40,485 | ||||||
L’Oreal SA | 270 | 78,836 | ||||||
Unilever NV | 2,600 | 153,543 | ||||||
Unilever plc | 1,300 | 77,841 | ||||||
|
| |||||||
483,777 | ||||||||
|
| |||||||
Total Consumer Staples | 3,437,743 | |||||||
|
| |||||||
Energy (1.6%) | ||||||||
Oil, Gas & Consumable Fuels (1.6%) |
| |||||||
Chevron Corp. | 200 | 23,228 | ||||||
ConocoPhillips | 500 | 27,600 | ||||||
Enbridge, Inc. | 800 | 29,137 | ||||||
Eni SpA | 1,400 | 21,188 | ||||||
Equinor ASA | 1,600 | 29,595 | ||||||
Exxon Mobil Corp. | 2,000 | 135,140 | ||||||
Neste OYJ | 1,200 | 43,309 | ||||||
Repsol SA | 1,802 | 29,544 | ||||||
TOTAL SA | 1,400 | 73,598 | ||||||
|
| |||||||
Total Energy | 412,339 | |||||||
|
| |||||||
Financials (19.4%) | ||||||||
Banks (6.3%) | ||||||||
Bank Hapoalim BM | 4,000 | 31,994 | ||||||
Bank Leumi Le-Israel BM | 3,000 | 21,842 | ||||||
Bank of America Corp. | 3,600 | 112,572 | ||||||
Bank of Montreal | 1,100 | 81,429 | ||||||
Bank of Nova Scotia (The) | 1,300 | 74,559 | ||||||
Bankinter SA | 2,000 | 13,830 | ||||||
BB&T Corp. | 800 | 42,440 | ||||||
Canadian Imperial Bank of Commerce | 500 | 42,635 | ||||||
Citigroup, Inc. | 1,100 | 79,046 | ||||||
Citizens Financial Group, Inc. | 600 | 21,096 | ||||||
Commonwealth Bank of Australia | 511 | 27,709 | ||||||
DNB ASA | 900 | 16,354 | ||||||
Hang Seng Bank Ltd. | 1,400 | 29,265 | ||||||
ING Groep NV | 2,700 | 30,499 | ||||||
JPMorgan Chase & Co. | 500 | 62,460 | ||||||
KBC Group NV | 200 | 14,026 | ||||||
M&T Bank Corp. | 200 | 31,306 | ||||||
Mizrahi Tefahot Bank Ltd. | 1,800 | 44,637 | ||||||
National Australia Bank Ltd. | 1,400 | 27,611 | ||||||
National Bank of Canada | 1,400 | 72,301 | ||||||
Oversea-Chinese Banking Corp. Ltd. | 3,000 | 24,168 | ||||||
PNC Financial Services Group, Inc. (The) | 700 | 102,690 | ||||||
Royal Bank of Canada | 2,000 | 161,324 | ||||||
Skandinaviska Enskilda Banken AB, Class A | 6,000 | 57,491 | ||||||
SunTrust Banks, Inc. | 700 | 47,838 | ||||||
Svenska Handelsbanken AB, Class A | 4,000 | 40,043 | ||||||
Swedbank AB, Class A | 2,600 | 36,365 | ||||||
Toronto-Dominion Bank (The) | 3,400 | 194,149 | ||||||
United Overseas Bank Ltd. | 1,000 | 19,721 | ||||||
US Bancorp | 1,800 | 102,636 | ||||||
|
| |||||||
1,664,036 | ||||||||
|
| |||||||
Capital Markets (3.7%) | ||||||||
Ameriprise Financial, Inc. | 300 | 45,267 | ||||||
ASX Ltd. | 400 | 22,699 | ||||||
Bank of New York Mellon Corp. (The) | 1,500 | 70,125 | ||||||
BlackRock, Inc. | 300 | 138,510 | ||||||
CME Group, Inc. | 500 | 102,875 | ||||||
Deutsche Boerse AG | 400 | 61,988 | ||||||
FactSet Research Systems, Inc. | 100 | 25,352 | ||||||
Hong Kong Exchanges & Clearing Ltd. | 700 | 21,886 | ||||||
Intercontinental Exchange, Inc. | 1,400 | 132,048 | ||||||
Moody’s Corp. | 200 | 44,138 | ||||||
MSCI, Inc. | 300 | 70,368 | ||||||
Northern Trust Corp. | 400 | 39,872 | ||||||
S&P Global, Inc. | 500 | 128,995 | ||||||
T. Rowe Price Group, Inc. | 500 | 57,900 | ||||||
|
| |||||||
962,023 | ||||||||
|
| |||||||
Consumer Finance (0.7%) | ||||||||
American Express Co. | 900 | 105,552 | ||||||
Capital One Financial Corp. | 600 | 55,950 | ||||||
Discover Financial Services | 400 | 32,104 | ||||||
|
| |||||||
193,606 | ||||||||
|
| |||||||
Diversified Financial Services (0.8%) | ||||||||
Berkshire Hathaway, Inc., Class B* | 1,000 | 212,580 | ||||||
|
| |||||||
Insurance (7.9%) | ||||||||
Aflac, Inc. | 1,600 | 85,056 | ||||||
Allianz SE (Registered) | 628 | 153,389 | ||||||
Allstate Corp. (The) | 1,100 | 117,062 | ||||||
American Financial Group, Inc. | 400 | 41,616 | ||||||
Aon plc | 800 | 154,528 |
See Notes to Financial Statements.
153
1290 FUNDS
1290 SMARTBETA EQUITY FUND
PORTFOLIO OF INVESTMENTS (Continued)
October 31, 2019
Number of Shares | Value (Note 1) | |||||||
Arch Capital Group Ltd.* | 600 | $ | 25,056 | |||||
Chubb Ltd. | 1,200 | 182,904 | ||||||
Cincinnati Financial Corp. | 300 | 33,963 | ||||||
Great-West Lifeco, Inc. | 1,200 | 29,182 | ||||||
Hartford Financial Services Group, Inc. (The) | 800 | 45,664 | ||||||
Insurance Australia Group Ltd. | 7,676 | 42,014 | ||||||
Intact Financial Corp. | 500 | 51,591 | ||||||
Legal & General Group plc | 8,000 | 27,327 | ||||||
Loews Corp. | 1,100 | 53,900 | ||||||
Manulife Financial Corp. | 3,400 | 63,323 | ||||||
Marsh & McLennan Cos., Inc. | 1,600 | 165,792 | ||||||
Medibank Pvt Ltd. | 8,700 | 20,271 | ||||||
Muenchener Rueckversicherungs-Gesellschaft AG in Muenchen (Registered) | 452 | 125,525 | ||||||
Principal Financial Group, Inc. | 500 | 26,690 | ||||||
Progressive Corp. (The) | 1,600 | 111,520 | ||||||
Sampo OYJ, Class A | 1,600 | 65,562 | ||||||
Sun Life Financial, Inc. | 2,500 | 112,159 | ||||||
Tokio Marine Holdings, Inc. | 500 | 27,169 | ||||||
Travelers Cos., Inc. (The) | 900 | 117,954 | ||||||
Willis Towers Watson plc | 400 | 74,760 | ||||||
Zurich Insurance Group AG | 280 | 109,417 | ||||||
|
| |||||||
2,063,394 | ||||||||
|
| |||||||
Total Financials | 5,095,639 | |||||||
|
| |||||||
Health Care (11.6%) | ||||||||
Biotechnology (0.7%) | ||||||||
Amgen, Inc. | 664 | 141,598 | ||||||
CSL Ltd. | 200 | 35,299 | ||||||
|
| |||||||
176,897 | ||||||||
|
| |||||||
Health Care Equipment & Supplies (3.5%) |
| |||||||
Abbott Laboratories | 1,000 | 83,610 | ||||||
Baxter International, Inc. | 800 | 61,360 | ||||||
Cochlear Ltd. | 200 | 29,165 | ||||||
Coloplast A/S, Class B | 400 | 48,200 | ||||||
Danaher Corp. | 700 | 96,474 | ||||||
Hoya Corp. | 400 | 35,570 | ||||||
IDEXX Laboratories, Inc.* | 200 | 57,002 | ||||||
Intuitive Surgical, Inc.* | 100 | 55,295 | ||||||
Koninklijke Philips NV | 614 | 26,892 | ||||||
Medtronic plc | 2,200 | 239,580 | ||||||
STERIS plc | 200 | 28,314 | ||||||
Stryker Corp. | 600 | 129,762 | ||||||
Terumo Corp. | 900 | 29,586 | ||||||
|
| |||||||
920,810 | ||||||||
|
| |||||||
Health Care Providers & Services (1.6%) |
| |||||||
AmerisourceBergen Corp. | 200 | 17,076 | ||||||
Anthem, Inc. | 200 | 53,816 | ||||||
HCA Healthcare, Inc. | 400 | 53,416 | ||||||
Henry Schein, Inc.* | 400 | 25,034 | ||||||
Humana, Inc. | 100 | 29,420 | ||||||
UnitedHealth Group, Inc. | 900 | 227,430 | ||||||
|
| |||||||
406,192 | ||||||||
|
| |||||||
Life Sciences Tools & Services (0.8%) |
| |||||||
Agilent Technologies, Inc. | 500 | 37,875 | ||||||
Mettler-Toledo International, Inc.* | 100 | 70,494 | ||||||
Thermo Fisher Scientific, Inc. | 300 | 90,594 | ||||||
Waters Corp.* | 100 | 21,162 | ||||||
|
| |||||||
220,125 | ||||||||
|
| |||||||
Pharmaceuticals (5.0%) | ||||||||
Astellas Pharma, Inc. | 3,000 | 51,630 | ||||||
Chugai Pharmaceutical Co. Ltd. | 400 | 33,892 | ||||||
Eli Lilly & Co. | 1,300 | 148,135 | ||||||
GlaxoSmithKline plc | 2,000 | 45,819 | ||||||
Johnson & Johnson | 1,200 | 158,448 | ||||||
Merck & Co., Inc. | 2,200 | 190,652 | ||||||
Merck KGaA | 200 | 23,845 | ||||||
Novartis AG (Registered) | 861 | 75,138 | ||||||
Novo Nordisk A/S, Class B | 1,700 | 92,844 | ||||||
Otsuka Holdings Co. Ltd. | 400 | 16,809 | ||||||
Pfizer, Inc. | 5,100 | 195,687 | ||||||
Roche Holding AG | 520 | 156,448 | ||||||
Shionogi & Co. Ltd. | 300 | 18,107 | ||||||
Zoetis, Inc. | 900 | 115,128 | ||||||
|
| |||||||
1,322,582 | ||||||||
|
| |||||||
Total Health Care | 3,046,606 | |||||||
|
| |||||||
Industrials (14.3%) | ||||||||
Aerospace & Defense (2.6%) | ||||||||
Airbus SE | 270 | 38,671 | ||||||
CAE, Inc. | 1,000 | 25,078 | ||||||
General Dynamics Corp. | 500 | 88,400 | ||||||
HEICO Corp. | 200 | 24,668 | ||||||
L3Harris Technologies, Inc. | 400 | 82,524 | ||||||
Lockheed Martin Corp. | 400 | 150,672 | ||||||
MTU Aero Engines AG | 100 | 26,700 | ||||||
Northrop Grumman Corp. | 400 | 140,992 | ||||||
Thales SA | 200 | 19,549 | ||||||
United Technologies Corp. | 500 | 71,790 | ||||||
|
| |||||||
669,044 | ||||||||
|
| |||||||
Air Freight & Logistics (0.7%) | ||||||||
DSV Panalpina A/S | 300 | 29,110 | ||||||
Expeditors International of Washington, Inc. | 800 | 58,352 | ||||||
United Parcel Service, Inc., Class B | 900 | 103,653 | ||||||
|
| |||||||
191,115 | ||||||||
|
| |||||||
Building Products (0.9%) | ||||||||
Allegion plc | 200 | 23,208 | ||||||
Assa Abloy AB, Class B | 1,200 | 28,460 | ||||||
Daikin Industries Ltd. | 200 | 28,206 | ||||||
Geberit AG (Registered) | 140 | 71,043 | ||||||
Johnson Controls International plc | 1,200 | 51,996 | ||||||
Lennox International, Inc. | 100 | 24,736 | ||||||
|
| |||||||
227,649 | ||||||||
|
| |||||||
Commercial Services & Supplies (1.1%) |
| |||||||
Cintas Corp. | 200 | 53,734 | ||||||
Copart, Inc.* | 300 | 24,792 | ||||||
Dai Nippon Printing Co. Ltd. | 1,000 | 26,929 | ||||||
Republic Services, Inc. | 400 | 35,004 | ||||||
Secom Co. Ltd. | 700 | 65,242 | ||||||
Waste Management, Inc. | 800 | 89,768 | ||||||
|
| |||||||
295,469 | ||||||||
|
|
See Notes to Financial Statements.
154
1290 FUNDS
1290 SMARTBETA EQUITY FUND
PORTFOLIO OF INVESTMENTS (Continued)
October 31, 2019
Number of Shares | Value (Note 1) | |||||||
Construction & Engineering (0.8%) |
| |||||||
HOCHTIEF AG | 120 | $ | 14,963 | |||||
Kajima Corp. | 2,000 | 27,706 | ||||||
Obayashi Corp. | 2,000 | 20,743 | ||||||
Shimizu Corp. | 3,000 | 28,169 | ||||||
Taisei Corp. | 800 | 31,855 | ||||||
Vinci SA | 500 | 56,099 | ||||||
WSP Global, Inc. | 400 | 24,958 | ||||||
|
| |||||||
204,493 | ||||||||
|
| |||||||
Electrical Equipment (0.4%) | ||||||||
Legrand SA | 300 | 23,414 | ||||||
Mitsubishi Electric Corp. | 2,000 | 28,827 | ||||||
Rockwell Automation, Inc. | 200 | 34,398 | ||||||
Schneider Electric SE | 300 | 27,858 | ||||||
|
| |||||||
114,497 | ||||||||
|
| |||||||
Industrial Conglomerates (1.7%) | ||||||||
3M Co. | 900 | 148,491 | ||||||
Honeywell International, Inc. | 800 | 138,184 | ||||||
Roper Technologies, Inc. | 200 | 67,392 | ||||||
Siemens AG (Registered) | 822 | 94,776 | ||||||
|
| |||||||
448,843 | ||||||||
|
| |||||||
Machinery (1.6%) | ||||||||
Atlas Copco AB, Class A | 1,500 | 52,989 | ||||||
Caterpillar, Inc. | 500 | 68,900 | ||||||
Cummins, Inc. | 300 | 51,744 | ||||||
Illinois Tool Works, Inc. | 500 | 84,290 | ||||||
Ingersoll-Rand plc | 700 | 88,823 | ||||||
Kone OYJ, Class B | 600 | 38,170 | ||||||
Sandvik AB | 2,000 | 35,285 | ||||||
|
| |||||||
420,201 | ||||||||
|
| |||||||
Marine (0.1%) | ||||||||
Kuehne + Nagel International AG (Registered) | 180 | 29,076 | ||||||
|
| |||||||
Professional Services (1.3%) | ||||||||
CoStar Group, Inc.* | 100 | 54,952 | ||||||
Recruit Holdings Co. Ltd. | 800 | 26,751 | ||||||
SGS SA (Registered) | 17 | 44,253 | ||||||
TransUnion | 300 | 24,786 | ||||||
Verisk Analytics, Inc. | 400 | 57,880 | ||||||
Wolters Kluwer NV | 1,635 | 120,389 | ||||||
|
| |||||||
329,011 | ||||||||
|
| |||||||
Road & Rail (1.8%) | ||||||||
Canadian National Railway Co. | 1,000 | 89,439 | ||||||
Canadian Pacific Railway Ltd. | 200 | 45,480 | ||||||
Central Japan Railway Co. | 200 | 41,291 | ||||||
East Japan Railway Co. | 1,000 | 91,203 | ||||||
Hankyu Hanshin Holdings, Inc. | 1,000 | 40,282 | ||||||
Kintetsu Group Holdings Co. Ltd. | 1,000 | 54,727 | ||||||
MTR Corp. Ltd. | 4,000 | 22,971 | ||||||
Odakyu Electric Railway Co. Ltd. | 2,000 | 48,949 | ||||||
Union Pacific Corp. | 300 | 49,638 | ||||||
|
| |||||||
483,980 | ||||||||
|
| |||||||
Trading Companies & Distributors (1.0%) |
| |||||||
Brenntag AG | 400 | 20,075 | ||||||
Bunzl plc | 600 | 15,606 | ||||||
Fastenal Co. | 1,000 | 35,940 | ||||||
Ferguson plc | 473 | 40,353 | ||||||
ITOCHU Corp. | 1,500 | 31,545 | ||||||
Marubeni Corp. | 3,000 | 21,274 | ||||||
Mitsubishi Corp. | 1,200 | 30,714 | ||||||
Mitsui & Co. Ltd. | 1,900 | 32,857 | ||||||
Sumitomo Corp. | 2,300 | 37,549 | ||||||
|
| |||||||
265,913 | ||||||||
|
| |||||||
Transportation Infrastructure (0.3%) | ||||||||
Aena SME SA(m) | 270 | 49,536 | ||||||
Kamigumi Co. Ltd. | 1,400 | 31,814 | ||||||
|
| |||||||
81,350 | ||||||||
|
| |||||||
Total Industrials | 3,760,641 | |||||||
|
| |||||||
Information Technology (12.9%) | ||||||||
Communications Equipment (0.6%) | ||||||||
Cisco Systems, Inc. | 3,271 | 155,405 | ||||||
F5 Networks, Inc.* | 100 | 14,408 | ||||||
|
| |||||||
169,813 | ||||||||
|
| |||||||
Electronic Equipment, Instruments & Components (1.0%) |
| |||||||
Amphenol Corp., Class A | 600 | 60,198 | ||||||
Hexagon AB, Class B | 300 | 15,314 | ||||||
Hitachi Ltd. | 600 | 22,608 | ||||||
Keyence Corp. | 100 | 63,728 | ||||||
Kyocera Corp. | 400 | 26,454 | ||||||
TE Connectivity Ltd. | 700 | 62,650 | ||||||
|
| |||||||
250,952 | ||||||||
|
| |||||||
IT Services (5.2%) | ||||||||
Accenture plc, Class A | 1,200 | 222,504 | ||||||
Amadeus IT Group SA | 700 | 51,792 | ||||||
Automatic Data Processing, Inc. | 1,100 | 178,453 | ||||||
Broadridge Financial Solutions, Inc. | 200 | 25,044 | ||||||
CGI, Inc.* | 1,000 | 77,731 | ||||||
Cognizant Technology Solutions Corp., Class A | 800 | 48,752 | ||||||
Fidelity National Information Services, Inc. | 500 | 65,880 | ||||||
Fiserv, Inc.* | 1,000 | 106,140 | ||||||
Fujitsu Ltd. | 400 | 35,637 | ||||||
Jack Henry & Associates, Inc. | 300 | 42,468 | ||||||
Mastercard, Inc., Class A | 600 | 166,086 | ||||||
Paychex, Inc. | 1,100 | 92,004 | ||||||
Visa, Inc., Class A | 1,400 | 250,404 | ||||||
|
| |||||||
1,362,895 | ||||||||
|
| |||||||
Semiconductors & Semiconductor Equipment (1.4%) |
| |||||||
ASML Holding NV | 390 | 102,217 | ||||||
Intel Corp. | 2,400 | 135,672 | ||||||
Texas Instruments, Inc. | 1,100 | 129,789 | ||||||
|
| |||||||
367,678 | ||||||||
|
| |||||||
Software (3.7%) | ||||||||
Adobe, Inc.* | 500 | 138,965 | ||||||
ANSYS, Inc.* | 100 | 22,015 | ||||||
Cadence Design Systems, Inc.* | 400 | 26,140 | ||||||
Citrix Systems, Inc. | 200 | 21,772 | ||||||
Dassault Systemes SE | 175 | 26,554 | ||||||
Intuit, Inc. | 500 | 128,750 |
See Notes to Financial Statements.
155
1290 FUNDS
1290 SMARTBETA EQUITY FUND
PORTFOLIO OF INVESTMENTS (Continued)
October 31, 2019
Number of Shares | Value (Note 1) | |||||||
Microsoft Corp. | 2,128 | $ | 305,091 | |||||
Oracle Corp. | 2,200 | 119,878 | ||||||
SAP SE | 1,100 | 145,748 | ||||||
Synopsys, Inc.* | 200 | 27,150 | ||||||
|
| |||||||
962,063 | ||||||||
|
| |||||||
Technology Hardware, Storage & Peripherals (1.0%) |
| |||||||
Apple, Inc. | 800 | 199,008 | ||||||
Canon, Inc. | 1,300 | 35,657 | ||||||
FUJIFILM Holdings Corp. | 700 | 30,985 | ||||||
|
| |||||||
265,650 | ||||||||
|
| |||||||
Total Information Technology | 3,379,051 | |||||||
|
| |||||||
Materials (3.0%) | ||||||||
Chemicals (2.5%) | ||||||||
Air Products & Chemicals, Inc. | 300 | 63,978 | ||||||
Akzo Nobel NV | 670 | 61,686 | ||||||
Chr Hansen Holding A/S | 200 | 15,352 | ||||||
Ecolab, Inc. | 900 | 172,863 | ||||||
Givaudan SA (Registered) | 33 | 96,909 | ||||||
Koninklijke DSM NV | 312 | 36,972 | ||||||
Novozymes A/S, Class B | 400 | 18,833 | ||||||
PPG Industries, Inc. | 500 | 62,560 | ||||||
Sherwin-Williams Co. (The) | 100 | 57,232 | ||||||
Shin-Etsu Chemical Co. Ltd. | 300 | 33,781 | ||||||
Symrise AG | 300 | 28,869 | ||||||
|
| |||||||
649,035 | ||||||||
|
| |||||||
Containers & Packaging (0.2%) | ||||||||
Ball Corp. | 800 | 55,976 | ||||||
|
| |||||||
Metals & Mining (0.2%) | ||||||||
BHP Group Ltd. | 1,243 | 30,804 | ||||||
Rio Tinto Ltd. | 411 | 25,748 | ||||||
|
| |||||||
56,552 | ||||||||
|
| |||||||
Paper & Forest Products (0.1%) | ||||||||
UPM-Kymmene OYJ | 600 | 19,500 | ||||||
|
| |||||||
Total Materials | 781,063 | |||||||
|
| |||||||
Real Estate (4.3%) | ||||||||
Equity Real Estate Investment Trusts (REITs) (3.5%) |
| |||||||
Ascendas REIT (REIT) | 12,000 | 27,961 | ||||||
AvalonBay Communities, Inc. (REIT) | 500 | 108,830 | ||||||
CapitaLand Mall Trust (REIT) | 19,000 | 35,474 | ||||||
Dexus (REIT) | 4,200 | 34,657 | ||||||
Equity LifeStyle Properties, Inc. (REIT) | 1,000 | 69,940 | ||||||
Equity Residential (REIT) | 900 | 79,794 | ||||||
Goodman Group (REIT) | 3,500 | 34,719 | ||||||
GPT Group (The) (REIT) | 19,392 | 79,539 | ||||||
H&R REIT (REIT) | 1,400 | 23,682 | ||||||
Japan Retail Fund Investment Corp. (REIT) | 9 | 21,002 | ||||||
Link REIT (REIT) | 2,000 | 21,810 | ||||||
Mirvac Group (REIT) | 13,600 | 30,094 | ||||||
Prologis, Inc. (REIT) | 1,200 | 105,312 | ||||||
Public Storage (REIT) | 300 | 66,858 | ||||||
Regency Centers Corp. (REIT) | 300 | 20,172 | ||||||
Simon Property Group, Inc. (REIT) | 600 | 90,408 | ||||||
United Urban Investment Corp. (REIT) | 30 | 60,561 | ||||||
Vornado Realty Trust (REIT) | 200 | 13,126 | ||||||
|
| |||||||
923,939 | ||||||||
|
| |||||||
Real Estate Management & Development (0.8%) |
| |||||||
CBRE Group, Inc., Class A* | 600 | 32,130 | ||||||
Daiwa House Industry Co. Ltd. | 1,000 | 34,587 | ||||||
First Capital Realty, Inc. (REIT) | 2,200 | 36,413 | ||||||
Mitsubishi Estate Co. Ltd. | 1,000 | 19,516 | ||||||
Mitsui Fudosan Co. Ltd. | 1,000 | 25,752 | ||||||
Swiss Prime Site AG (Registered)* | 583 | 60,043 | ||||||
|
| |||||||
208,441 | ||||||||
|
| |||||||
Total Real Estate | 1,132,380 | |||||||
|
| |||||||
Utilities (4.9%) | ||||||||
Electric Utilities (1.6%) | ||||||||
Chubu Electric Power Co., Inc. | 3,100 | 46,662 | ||||||
Enel SpA | 12,000 | 92,882 | ||||||
Eversource Energy | 1,300 | 108,862 | ||||||
Orsted A/S(m) | 643 | 56,402 | ||||||
Red Electrica Corp. SA | 2,000 | 40,263 | ||||||
Terna Rete Elettrica Nazionale SpA | 13,465 | 88,964 | ||||||
|
| |||||||
434,035 | ||||||||
|
| |||||||
Gas Utilities (0.7%) | ||||||||
Atmos Energy Corp. | 500 | 56,240 | ||||||
Hong Kong & China Gas Co. Ltd. | 17,303 | 33,608 | ||||||
Naturgy Energy Group SA | 800 | 21,780 | ||||||
Snam SpA | 6,000 | 30,782 | ||||||
Tokyo Gas Co. Ltd. | 2,000 | 49,004 | ||||||
|
| |||||||
191,414 | ||||||||
|
| |||||||
Multi-Utilities (2.1%) | ||||||||
CenterPoint Energy, Inc. | 2,200 | 63,954 | ||||||
CMS Energy Corp. | 1,200 | 76,704 | ||||||
Consolidated Edison, Inc. | 1,300 | 119,886 | ||||||
E.ON SE | 7,606 | 76,661 | ||||||
National Grid plc | 1,400 | 16,345 | ||||||
Public Service Enterprise Group, Inc. | 1,300 | 82,303 | ||||||
Sempra Energy | 800 | 115,608 | ||||||
|
| |||||||
551,461 | ||||||||
|
| |||||||
Water Utilities (0.5%) | ||||||||
American Water Works Co., Inc. | 700 | 86,289 | ||||||
Severn Trent plc | 1,200 | 35,052 | ||||||
|
| |||||||
121,341 | ||||||||
|
| |||||||
Total Utilities | 1,298,251 | |||||||
|
| |||||||
Total Common Stocks (99.2%) | 26,052,224 | |||||||
|
|
See Notes to Financial Statements.
156
1290 FUNDS
1290 SMARTBETA EQUITY FUND
PORTFOLIO OF INVESTMENTS (Continued)
October 31, 2019
Number of Shares | Value (Note 1) | |||||||
SHORT-TERM INVESTMENT: | ||||||||
Investment Company (0.1%) | ||||||||
JPMorgan Prime Money Market | 24,118 | $ | 24,127 | |||||
|
| |||||||
Total Short-Term Investment (0.1%) | 24,127 | |||||||
|
| |||||||
Total Investments in Securities (99.3%) | 26,076,351 | |||||||
Other Assets Less Liabilities (0.7%) | 185,147 | |||||||
|
| |||||||
Net Assets (100%) | $ | 26,261,498 | ||||||
|
|
* | 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 October 31, 2019, the market value of these securities amounted to $105,938 or 0.4% 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. |
Country Diversification As a Percentage of Total Net Assets | ||||
Australia | 2.1 | % | ||
Belgium | 0.0 | # | ||
Canada | 5.9 | |||
Denmark | 1.1 | |||
Finland | 0.7 | |||
France | 2.0 | |||
Germany | 4.1 | |||
Hong Kong | 0.5 | |||
Israel | 0.4 | |||
Italy | 0.9 | |||
Japan | 7.6 | |||
Netherlands | 1.8 | |||
Norway | 0.4 | |||
Singapore | 0.8 | |||
Spain | 1.1 | |||
Sweden | 1.1 | |||
Switzerland | 3.7 | |||
United Kingdom | 2.0 | |||
United States | 63.1 | |||
Cash and Other | 0.7 | |||
|
| |||
100.0 | % | |||
|
|
# | Percent shown is less than 0.05%. |
The following is a summary of the inputs used to value the Fund’s assets and liabilities carried at fair value as of October 31, 2019:
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: |
| |||||||||||||||
Common Stocks | ||||||||||||||||
Communication Services | $ | 977,156 | $ | 569,390 | $ | — | $ | 1,546,546 | ||||||||
Consumer Discretionary | 1,579,941 | 582,024 | — | 2,161,965 | ||||||||||||
Consumer Staples | 2,275,358 | 1,162,385 | — | 3,437,743 | ||||||||||||
Energy | 215,105 | 197,234 | — | 412,339 | ||||||||||||
Financials | 3,982,837 | 1,112,802 | — | 5,095,639 | ||||||||||||
Health Care | 2,327,362 | 719,244 | — | 3,046,606 | ||||||||||||
Industrials | 2,114,662 | 1,645,979 | — | 3,760,641 | ||||||||||||
Information Technology | 2,822,357 | 556,694 | — | 3,379,051 | ||||||||||||
Materials | 412,609 | 368,454 | — | 781,063 | ||||||||||||
Real Estate | 646,665 | 485,715 | — | 1,132,380 | ||||||||||||
Utilities | 709,846 | 588,405 | — | 1,298,251 | ||||||||||||
Short-Term Investment | ||||||||||||||||
Investment Company | 24,127 | — | — | 24,127 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Assets | $ | 18,088,025 | $ | 7,988,326 | $ | — | $ | 26,076,351 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total Liabilities | $ | — | $ | — | $ | — | $ | — | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total | $ | 18,088,025 | $ | 7,988,326 | $ | — | $ | 26,076,351 | ||||||||
|
|
|
|
|
|
|
|
See Notes to Financial Statements.
157
1290 FUNDS
1290 SMARTBETA EQUITY FUND
PORTFOLIO OF INVESTMENTS (Continued)
October 31, 2019
The Fund held no derivatives contracts during the year ended October 31, 2019.
Investment security transactions for the year ended October 31, 2019 were as follows:
Cost of Purchases: | ||||
Long-term investments other than U.S. government debt securities | $ | 12,166,433 | ||
Net Proceeds of Sales and Redemptions: | ||||
Long-term investments other than U.S. government debt securities | $ | 6,519,902 |
As of October 31, 2019, the gross unrealized appreciation (depreciation) of investments based on the aggregate cost of investments in securities and derivative instruments, if applicable, for Federal income tax purposes was as follows:
Aggregate gross unrealized appreciation | $ | 4,437,763 | ||
Aggregate gross unrealized depreciation | (370,125 | ) | ||
|
| |||
Net unrealized appreciation | $ | 4,067,638 | ||
|
| |||
Federal income tax cost of investments in securities and derivative instruments, if applicable | $ | 22,008,713 | ||
|
|
See Notes to Financial Statements.
158
1290 FUNDS
1290 SMARTBETA EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES
October 31, 2019
ASSETS |
| |||
Investments in Securities, at value (Cost $21,973,131) | $ | 26,076,351 | ||
Cash | 383,000 | |||
Foreign cash (Cost $42,476) | 42,694 | |||
Receivable for securities sold | 207,507 | |||
Receivable for Fund shares sold | 123,490 | |||
Dividends, interest and other receivables | 57,945 | |||
Prepaid registration and filing fees | 19,899 | |||
Receivable from investment adviser | 7,699 | |||
Other assets | 229 | |||
|
| |||
Total assets | 26,918,814 | |||
|
| |||
LIABILITIES | ||||
Payable for securities purchased | 592,838 | |||
Transfer agent fees payable | 3,775 | |||
Payable for Fund shares redeemed | 2,206 | |||
Distribution fees payable – Class A | 419 | |||
Distribution fees payable – Class R | 63 | |||
Accrued expenses | 58,015 | |||
|
| |||
Total liabilities | 657,316 | |||
|
| |||
NET ASSETS | $ | 26,261,498 | ||
|
| |||
Net assets were comprised of: | ||||
Paid in capital | $ | 21,620,098 | ||
Total distributable earnings (loss) | 4,641,400 | |||
|
| |||
Net assets | $ | 26,261,498 | ||
|
| |||
Class A | ||||
Net asset value and redemption price per share, $2,014,069 / 150,979 shares outstanding (unlimited amount authorized: $0.001 par value) | $ | 13.34 | ||
Maximum sales charge (5.50% of offering price) | 0.78 | |||
|
| |||
Maximum offering price per share | $ | 14.12 | ||
|
| |||
Class I | ||||
Net asset value and redemption price per share, $23,958,738 / 1,791,799 shares outstanding (unlimited amount authorized: $0.001 par value) | $ | 13.37 | ||
|
| |||
Class R | ||||
Net asset value and redemption price per share, $150,578 / 11,313 shares outstanding (unlimited amount authorized: $0.001 par value) | $ | 13.31 | ||
|
| |||
Class T** | ||||
Net asset value and redemption price per share, $138,113 / 10,332 shares outstanding (unlimited amount authorized: $0.001 par value) | $ | 13.37 | ||
Maximum sales charge (2.50% of offering price) | 0.34 | |||
|
| |||
Maximum offering price per share | $ | 13.71 | ||
|
|
** | Class T shares currently are not offered for sale. |
STATEMENT OF OPERATIONS
For the Year Ended October 31, 2019
INVESTMENT INCOME |
| |||
Dividends (net of $31,408 foreign withholding tax) | $ | 501,182 | ||
Interest | 3,258 | |||
|
| |||
Total income | 504,440 | |||
|
| |||
EXPENSES | ||||
Investment advisory fees | 148,021 | |||
Professional fees | 71,134 | |||
Transfer agent fees | 48,650 | |||
Registration and filing fees | 43,387 | |||
Printing and mailing expenses | 32,163 | |||
Administrative fees | 31,719 | |||
Custodian fees | 28,175 | |||
Distribution fees – Class A | 3,522 | |||
Trustees’ fees | 1,812 | |||
Distribution fees – Class R | 703 | |||
Distribution fees – Class T** | 321 | |||
Miscellaneous | 21,561 | |||
|
| |||
Gross expenses | 431,168 | |||
Less: Waiver from investment adviser | (179,740 | ) | ||
Waiverfrom distributor | (321 | ) | ||
Reimbursementfrom investment adviser | (56,512 | ) | ||
|
| |||
Netexpenses | 194,595 | |||
|
| |||
NET INVESTMENT INCOME (LOSS) | 309,845 | |||
|
| |||
REALIZED AND UNREALIZED GAIN (LOSS) | ||||
Realized gain (loss) on: | ||||
Investments in securities | 299,003 | |||
Foreign currency transactions | (1,830 | ) | ||
|
| |||
Net realized gain (loss) | 297,173 | |||
|
| |||
Change in unrealized appreciation (depreciation) on: | ||||
Investments in securities | 2,510,608 | |||
Foreign currency translations | 656 | |||
|
| |||
Net change in unrealized appreciation (depreciation) | 2,511,264 | |||
|
| |||
NET REALIZED AND UNREALIZED GAIN (LOSS) | 2,808,437 | |||
|
| |||
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | $ | 3,118,282 | ||
|
|
** | Class T shares currently are not offered for sale. |
See Notes to Financial Statements.
159
1290 FUNDS
1290 SMARTBETA EQUITY FUND
STATEMENT OF CHANGES IN NET ASSETS
Year Ended October 31, | ||||||||
2019 | 2018 | |||||||
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS: |
| |||||||
Net investment income (loss) | $ | 309,845 | $ | 239,589 | ||||
Net realized gain (loss) | 297,173 | 636,892 | ||||||
Net change in unrealized appreciation (depreciation) | 2,511,264 | (657,820 | ) | |||||
|
|
|
| |||||
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | 3,118,282 | 218,661 | ||||||
|
|
|
| |||||
Distributions to shareholders: | ||||||||
Class A | (49,479 | ) | (16,661 | ) | ||||
Class I | (823,783 | ) | (426,857 | ) | ||||
Class R | (6,108 | ) | (3,515 | ) | ||||
Class T** | (6,200 | ) | (3,823 | ) | ||||
|
|
|
| |||||
Total distributions to shareholders | (885,570 | ) | (450,856 | ) | ||||
|
|
|
| |||||
CAPITAL SHARES TRANSACTIONS: | ||||||||
Class A | ||||||||
Capital shares sold [ 94,431 and 51,694 shares, respectively ] | 1,199,186 | 633,484 | ||||||
Capital shares issued in reinvestment of dividends [ 3,763 and 1,060 shares, respectively ] | 43,270 | 12,925 | ||||||
Capital shares repurchased [ (40,087) and (15,913) shares, respectively ] | (494,261 | ) | (196,268 | ) | ||||
|
|
|
| |||||
Total Class A transactions | 748,195 | 450,141 | ||||||
|
|
|
| |||||
Class I | ||||||||
Capital shares sold [ 503,495 and 218,679 shares, respectively ] | 6,334,750 | 2,716,062 | ||||||
Capital shares issued in reinvestment of dividends [ 21,002 and 5,562 shares, respectively ] | 241,529 | 67,799 | ||||||
Capital shares repurchased [ (81,503) and (30,974) shares, respectively ] | (1,019,728 | ) | (385,697 | ) | ||||
|
|
|
| |||||
Total Class I transactions | 5,556,551 | 2,398,164 | ||||||
|
|
|
| |||||
Class R | ||||||||
Capital shares sold [ 127 and 72 shares, respectively ] | 1,616 | 888 | ||||||
Capital shares issued in reinvestment of dividends [ 25 and 12 shares, respectively ] | 283 | 139 | ||||||
Capital shares repurchased [ (143) and (3) shares, respectively ] | (1,887 | ) | (31 | ) | ||||
|
|
|
| |||||
Total Class R transactions | 12 | 996 | ||||||
|
|
|
| |||||
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM CAPITAL SHARE TRANSACTIONS | 6,304,758 | 2,849,301 | ||||||
|
|
|
| |||||
TOTAL INCREASE (DECREASE) IN NET ASSETS | 8,537,470 | 2,617,106 | ||||||
NET ASSETS: | ||||||||
Beginning of year | 17,724,028 | 15,106,922 | ||||||
|
|
|
| |||||
End of year | $ | 26,261,498 | $ | 17,724,028 | ||||
|
|
|
|
| ||||
** Class T shares currently are not offered for sale. Class T shares were formerly known as Class C shares. |
See Notes to Financial Statements.
160
1290 FUNDS
1290 SMARTBETA EQUITY FUND
FINANCIAL HIGHLIGHTS
Year Ended October 31, | November 12, 2014* to October 31, 2015 | |||||||||||||||||||
Class A | 2019 | 2018 | 2017 | 2016 | ||||||||||||||||
Net asset value, beginning of period | $ | 12.09 | $ | 12.23 | $ | 10.25 | $ | 10.24 | $ | 10.00 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss) (e) | 0.15 | 0.15 | 0.13 | 0.12 | ## | 0.11 | ||||||||||||||
Net realized and unrealized gain (loss) | 1.67 | 0.06 | † | 1.96 | 0.04 | 0.16 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total from investment operations | 1.82 | 0.21 | 2.09 | 0.16 | 0.27 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Less distributions: | ||||||||||||||||||||
Dividends from net investment income | (0.14 | ) | (0.15 | ) | (0.11 | ) | (0.15 | ) | (0.03 | ) | ||||||||||
Distributions from net realized gains | (0.43 | ) | (0.20 | ) | — | — | — | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total dividends and distributions | (0.57 | ) | (0.35 | ) | (0.11 | ) | (0.15 | ) | (0.03 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net asset value, end of period | $ | 13.34 | $ | 12.09 | $ | 12.23 | $ | 10.25 | $ | 10.24 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total return (b) | 15.81 | % | 1.64 | % | 20.58 | % | 1.58 | % | 2.70 | % | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Ratios/Supplemental Data: | ||||||||||||||||||||
Net assets, end of period (000’s) | $ | 2,014 | $ | 1,123 | $ | 685 | $ | 269 | $ | 3,111 | ||||||||||
Ratio of expenses to average net assets: | ||||||||||||||||||||
After waivers and reimbursements (a)(f) | 1.15 | % | 1.15 | % | 1.20 | % | 1.35 | % | 1.35 | % | ||||||||||
Before waivers and reimbursements (a)(f) | 2.26 | % | 2.42 | % | 2.77 | % | 2.76 | % | 4.21 | % | ||||||||||
Ratio of net investment income (loss) to average net assets: | ||||||||||||||||||||
After waivers and reimbursements (a)(f) | 1.19 | % | 1.21 | % | 1.17 | % | 1.23 | %(aa) | 1.14 | %(l) | ||||||||||
Before waivers and reimbursements (a)(f) | 0.08 | % | (0.06 | )% | (0.41 | )% | (0.18 | )%(aa) | (1.73 | )%(l) | ||||||||||
Portfolio turnover rate (z)^ | 31 | % | 49 | % | 41 | % | 27 | % | 29 | % | ||||||||||
Year Ended October 31, | November 12, 2014* to October 31, 2015 | |||||||||||||||||||
Class I | 2019 | 2018 | 2017 | 2016 | ||||||||||||||||
Net asset value, beginning of period | $ | 12.11 | $ | 12.25 | $ | 10.27 | $ | 10.26 | $ | 10.00 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss) (e) | 0.19 | 0.18 | 0.17 | 0.15 | ## | 0.14 | ||||||||||||||
Net realized and unrealized gain (loss) | 1.67 | 0.06 | † | 1.95 | 0.03 | 0.15 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total from investment operations | 1.86 | 0.24 | 2.12 | 0.18 | 0.29 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Less distributions: | ||||||||||||||||||||
Dividends from net investment income | (0.17 | ) | (0.18 | ) | (0.14 | ) | (0.17 | ) | (0.03 | ) | ||||||||||
Distributions from net realized gains | (0.43 | ) | (0.20 | ) | — | — | — | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total dividends and distributions | (0.60 | ) | (0.38 | ) | (0.14 | ) | (0.17 | ) | (0.03 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net asset value, end of period | $ | 13.37 | $ | 12.11 | $ | 12.25 | $ | 10.27 | $ | 10.26 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total return (b) | 16.16 | % | 1.86 | % | 20.85 | % | 1.84 | % | 2.94 | % | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Ratios/Supplemental Data: | ||||||||||||||||||||
Net assets, end of period (000’s) | $ | 23,959 | $ | 16,340 | $ | 14,158 | $ | 10,838 | $ | 3,218 | ||||||||||
Ratio of expenses to average net assets: | ||||||||||||||||||||
After waivers and reimbursements (a)(f) | 0.90 | % | 0.90 | % | 0.96 | % | 1.10 | % | 1.10 | % | ||||||||||
Before waivers and reimbursements (a)(f) | 2.02 | % | 2.16 | % | 2.49 | % | 2.51 | % | 3.96 | % | ||||||||||
Ratio of net investment income (loss) to average net assets: | ||||||||||||||||||||
After waivers and reimbursements (a)(f) | 1.49 | % | 1.47 | % | 1.48 | % | 1.44 | %(aa) | 1.38 | %(l) | ||||||||||
Before waivers and reimbursements (a)(f) | 0.37 | % | 0.21 | % | (0.05 | )% | 0.04 | %(aa) | (1.48 | )%(l) | ||||||||||
Portfolio turnover rate (z)^ | 31 | % | 49 | % | 41 | % | 27 | % | 29 | % |
See Notes to Financial Statements.
161
1290 FUNDS
1290 SMARTBETA EQUITY FUND
FINANCIAL HIGHLIGHTS (Continued)
Year Ended October 31, | November 12, 2014* to October 31, 2015 | |||||||||||||||||||
Class R | 2019 | 2018 | 2017 | 2016 | ||||||||||||||||
Net asset value, beginning of period | $ | 12.06 | $ | 12.20 | $ | 10.23 | $ | 10.22 | $ | 10.00 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss) (e) | 0.12 | 0.12 | 0.11 | 0.10 | ## | 0.09 | ||||||||||||||
Net realized and unrealized gain (loss) | 1.67 | 0.06 | † | 1.94 | 0.03 | 0.16 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total from investment operations | 1.79 | 0.18 | 2.05 | 0.13 | 0.25 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Less distributions: | ||||||||||||||||||||
Dividends from net investment income | (0.11 | ) | (0.12 | ) | (0.08 | ) | (0.12 | ) | (0.03 | ) | ||||||||||
Distributions from net realized gains | (0.43 | ) | (0.20 | ) | — | — | — | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total dividends and distributions | (0.54 | ) | (0.32 | ) | (0.08 | ) | (0.12 | ) | (0.03 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net asset value, end of period | $ | 13.31 | $ | 12.06 | $ | 12.20 | $ | 10.23 | $ | 10.22 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total return (b) | 15.55 | % | 1.39 | % | 20.21 | % | 1.32 | % | 2.47 | % | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Ratios/Supplemental Data: | ||||||||||||||||||||
Net assets, end of period (000’s) | $ | 151 | $ | 136 | $ | 137 | $ | 115 | $ | 3,073 | ||||||||||
Ratio of expenses to average net assets: | ||||||||||||||||||||
After waivers and reimbursements (a)(f) | 1.40 | % | 1.40 | % | 1.46 | % | 1.60 | % | 1.60 | % | ||||||||||
Before waivers and reimbursements (a)(f) | 2.52 | % | 2.66 | % | 2.98 | % | 3.01 | % | 4.46 | % | ||||||||||
Ratio of net investment income (loss) to average net assets: | ||||||||||||||||||||
After waivers and reimbursements (a)(f) | 1.00 | % | 0.98 | % | 0.98 | % | 0.98 | %(aa) | 0.89 | %(l) | ||||||||||
Before waivers and reimbursements (a)(f) | (0.12 | )% | (0.29 | )% | (0.54 | )% | (0.43 | )%(aa) | (1.98 | )%(l) | ||||||||||
Portfolio turnover rate (z)^ | 31 | % | 49 | % | 41 | % | 27 | % | 29 | % | ||||||||||
Year Ended October 31, | November 12, 2014* to October 31, 2015 | |||||||||||||||||||
Class T** | 2019 | 2018 | 2017 | 2016 | ||||||||||||||||
Net asset value, beginning of period | $ | 12.11 | $ | 12.25 | $ | 10.27 | $ | 10.26 | $ | 10.00 | ||||||||||
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Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss) (e) | 0.19 | 0.18 | 0.17 | 0.15 | ## | 0.14 | ||||||||||||||
Net realized and unrealized gain (loss) | 1.67 | 0.06 | † | 1.95 | 0.03 | 0.15 | ||||||||||||||
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Total from investment operations | 1.86 | 0.24 | 2.12 | 0.18 | 0.29 | |||||||||||||||
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Less distributions: | ||||||||||||||||||||
Dividends from net investment income | (0.17 | ) | (0.18 | ) | (0.14 | ) | (0.17 | ) | (0.03 | ) | ||||||||||
Distributions from net realized gains | (0.43 | ) | (0.20 | ) | — | — | — | |||||||||||||
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| |||||||||||
Total dividends and distributions | (0.60 | ) | (0.38 | ) | (0.14 | ) | (0.17 | ) | (0.03 | ) | ||||||||||
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Net asset value, end of period | $ | 13.37 | $ | 12.11 | $ | 12.25 | $ | 10.27 | $ | 10.26 | ||||||||||
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Total return (b) | 16.16 | % | 1.86 | % | 20.85 | % | 1.84 | % | 2.94 | % | ||||||||||
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Ratios/Supplemental Data: | ||||||||||||||||||||
Net assets, end of period (000’s) | $ | 138 | $ | 125 | $ | 127 | $ | 106 | $ | 1,029 | ||||||||||
Ratio of expenses to average net assets: | ||||||||||||||||||||
After waivers and reimbursements (a)(f) | 0.90 | % | 0.90 | % | 0.96 | % | 1.10 | % | 1.10 | % | ||||||||||
Before waivers and reimbursements (a)(f) | 2.27 | % | 2.41 | % | 2.96 | % | 3.51 | % | 4.96 | % | ||||||||||
Ratio of net investment income (loss) to average net assets: | ||||||||||||||||||||
After waivers and reimbursements (a)(f) | 1.50 | % | 1.47 | % | 1.48 | % | 1.48 | %(aa) | 1.39 | %(l) | ||||||||||
Before waivers and reimbursements (a)(f) | 0.13 | % | (0.04 | )% | (0.52 | )% | (0.93 | )%(aa) | (2.48 | )%(l) | ||||||||||
Portfolio turnover rate (z)^ | 31 | % | 49 | % | 41 | % | 27 | % | 29 | % |
See Notes to Financial Statements.
162
1290 FUNDS
1290 SMARTBETA EQUITY FUND
FINANCIAL HIGHLIGHTS (Continued)
* | Commencement of Operations. |
** | Class T shares currently are not offered for sale. Class T shares were formerly known as Class C shares. |
† | The amount shown for a share outstanding throughout the period does not accord with the aggregate net income and/or gain on investments for that period because of the timing of sales and repurchases of the Fund shares in relation to fluctuating market value of the investments in the Fund. |
## | Includes income resulting from a special dividend. Without this dividend, the per share income amounts would be $0.08, $0.11, $0.06 and $0.11 for Class A, Class I, Class R and Class T, respectively. |
^ | Portfolio turnover rate excludes derivatives, if any. |
(a) | Ratios for periods less than one year are annualized. Certain non-recurring expenses incurred by the Fund are not annualized for periods less than one year. |
(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”), if applicable. |
(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 each class would have been 0.37% lower. |
See Notes to Financial Statements.
163
NOTES TO FINANCIAL STATEMENTS
October 31, 2019
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 anopen-end management investment company with eighteen 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”).
On June 8, 2018 and June 13, 2018, FMG LLC redeemed capital out of the 1290 Diversified Bond Fund in the amount of $20,000,000 and $19,591,184, respectively, for Class I shares. On June 8, 2018 and June 13, 2018, FMG LLC contributed capital into the 1290 GAMCO Small/Mid Cap Value Fund in the amount of $20,000,000 and $19,591,184, respectively, for Class I shares.
On September 10, 2019, FMG LLC redeemed capital out of the 1290 Retirement 2025 Fund in the amount of $2,905,000 for Class I shares.
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. A Fund’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund. However, based on experience, the Trust and management expect the risk of loss to be remote.
Each of the investmentsub-advisers (each a“Sub-Adviser”) independently chooses and maintains a portfolio of securities for their respective Fund.
The 1290 Retirement 2020 Fund, 1290 Retirement 2025 Fund, 1290 Retirement 2030 Fund, 1290 Retirement 2035 Fund, 1290 Retirement 2040 Fund, 1290 Retirement 2045 Fund, 1290 Retirement 2050 Fund, 1290 Retirement 2055 Fund and the 1290 Retirement 2060 Fund (each, a “1290 Retirement Fund” and together, the “1290 Retirement Funds”) as well as 1290 Multi- Alternative Strategies Fund and 1290 Low Volatility Global Equity Fund are types of mutual funds often described as“fund-of-funds.” These Funds pursue their investment objectives by investing exclusively in other unaffiliated investment companies or exchange-traded funds (“ETFs”). The underlying funds’ financial statements are publicly available through the SEC’s EDGAR database (https://www.sec.gov/edgar/searchedgar/companysearch.html).
The Trust has authorized four classes of shares, Class A, Class I, Class R and Class T on behalf of each of the eighteen Funds. Class T shares are currently not offered for sale. Additionally, 1290 Low Volatility Global Equity Fund and each 1290 Retirement Fund currently only offer Class I shares for sale.
The Class A, Class R and Class T shares are subject to distribution fees imposed under distribution plans (“Distribution Plans”) adopted pursuant to Rule12b-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 maximumfront-end sales charge of up to 4.50% for 1290 Convertible Securities Fund, 1290 Diversified Bond Fund and 1290 High Yield Bond Fund, and up to 5.50% for 1290 DoubleLine Dynamic Allocation Fund, 1290 GAMCO Small/ Mid Cap Value Fund, 1290 Global Talents Fund, 1290 Low Volatility Global Equity Fund, 1290 Multi-Alternative Strategies Fund, 1290 SmartBeta Equity Fund and each 1290 Retirement Fund. Class A shares sold without afront-end sales charge are subject to a contingent deferred sales charge (“CDSC”) of 1% of the lesser of the original net asset value (“NAV”) of the redeemed shares at the time of purchase or the aggregate NAV of the redeemed shares at the time of redemption, if redeemed within 12 months of purchase. Class T shares are subject to a maximumfront-end sales charge of up to 2.50%.
164
1290 FUNDS
NOTES TO FINANCIAL STATEMENTS (Continued)
October 31, 2019
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 Diversified Bond Fund(sub-advised by Brandywine Global Investment Management, LLC (“Brandywine Global”)) — Seeks to maximize total return consisting of income and capital appreciation.
1290 DoubleLine Dynamic Allocation Fund(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 Talents Fund(sub-advised by AXA Investment Managers, Inc. (“AXA IM”)) — Seeks to provide long-term capital growth.
1290 High Yield Bond Fund(sub-advised by AXA IM) — Seeks to maximize current income.
1290 Low Volatility Global Equity Fund — Seeks long-term capital appreciation while managing portfolio volatility.
1290 Multi-Alternative Strategies Fund — Seeks long-term growth of capital.
1290 Retirement 2020 Fund — Seeks the highest total return over time consistent with its asset mix while managing portfolio volatility. Total return includes capital growth and income.
1290 Retirement 2025 Fund — Seeks the highest total return over time consistent with its asset mix while managing portfolio volatility. Total return includes capital growth and income.
1290 Retirement 2030 Fund — Seeks the highest total return over time consistent with its asset mix while managing portfolio volatility. Total return includes capital growth and income.
1290 Retirement 2035 Fund — Seeks the highest total return over time consistent with its asset mix while managing portfolio volatility. Total return includes capital growth and income.
1290 Retirement 2040 Fund — Seeks the highest total return over time consistent with its asset mix while managing portfolio volatility. Total return includes capital growth and income.
1290 Retirement 2045 Fund — Seeks the highest total return over time consistent with its asset mix while managing portfolio volatility. Total return includes capital growth and income.
1290 Retirement 2050 Fund — Seeks the highest total return over time consistent with its asset mix while managing portfolio volatility. Total return includes capital growth and income.
1290 Retirement 2055 Fund — Seeks the highest total return over time consistent with its asset mix while managing portfolio volatility. Total return includes capital growth and income.
1290 Retirement 2060 Fund — Seeks the highest total return over time consistent with its asset mix while managing portfolio volatility. Total return includes capital growth and income.
1290 SmartBeta Equity Fund(sub-advised by AXA Rosenberg Investment Management LLC) — Seeks to achieve long-term capital appreciation.
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
165
1290 FUNDS
NOTES TO FINANCIAL STATEMENTS (Continued)
October 31, 2019
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.
In March 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. (“ASU”)2017-08, “Receivables — Nonrefundable Fees and Other Costs (Subtopic310-20): Premium Amortization on Purchased Callable Debt Securities.” ASU2017-08 shortens the amortization period for certain callable debt securities, held at a premium, to be amortized to the earliest call date rather than the contractual maturity date. The Funds will adopt and apply ASU2017-08 on a modified retrospective basis through a cumulative-effect adjustment as of November 1, 2019. As a result of the adoption of ASU2017-08, as of November 1, 2019, for each Fund within-scope securities, the amortized cost basis of investments will be reduced and unrealized appreciation of investments will be increased, but there will be no impact on net assets or overall results from operations.
Valuation:
Equity securities (including securities issued by ETFs) listed on national securities exchanges are generally 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 generally 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 and municipal bonds and notes are generally valued on the basis of prices provided by a pricing service. The pricing services may utilize many inputs that are observable in making evaluations which may include, but are not limited to, trading activity for similar securities, issuer details, yields, default rates, credit spreads, quoted prices and any developments related to the specific securities. However, when such prices are not available, such bonds and notes are generally valued at a bid price estimated by a broker.
Convertible preferred stocks listed on national securities exchanges are generally 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 generally 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 generally 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 may 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.
166
1290 FUNDS
NOTES TO FINANCIAL STATEMENTS (Continued)
October 31, 2019
U.S. Treasury securities and other obligations issued or guaranteed by the U.S. Government, its agencies or instrumentalities, are generally 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.
Foreign securities, including foreign government securities, not traded directly in the U.S., or traded in American Depositary Receipts (“ADR”) or similar form, are generally 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 ofopen-end investment companies (other than ETFs) held by a Fund are generally valued at the NAV of the shares of such funds as described in the underlying funds’ prospectuses.
Futures contracts are generally valued at their last settlement price or, if there is no sale, at the latest available bid price.
Forward foreign currency contracts are generally 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 rates gathered from leading market makers and foreign currency trading centers throughout the world in making evaluations. Forward foreign currency contracts may be settled with the counterparty in U.S. dollars without the delivery of foreign currency.
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 aremarked-to-market daily based upon values from third party vendors, which may include a clearing counterparty, 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.
Total return swap agreements involve commitments where cash flows are exchanged based on the price of an underlying reference and based on a fixed or variable rate. Total return swap agreements may involve commitments to pay interest in exchange for a market-linked return. One counterparty pays out the total return of a specific reference asset, which may include an underlying equity, index, or bond, and in return receives a fixed or variable rate. At the maturity date, a net cash flow is exchanged where the total return is equivalent to the return of the underlying reference less a financing rate, if any. As a receiver, the Fund would receive payments based on any positive total return and would owe payments in the event of a negative total return. As the payer, the Fund would owe payments on any net positive total return, and would receive payment in the event of a negative total return. In connection with total return
167
1290 FUNDS
NOTES TO FINANCIAL STATEMENTS (Continued)
October 31, 2019
swap agreements, securities or cash may be identified as collateral or margin in accordance with the terms of the respective swap agreements to provide assets of value and recourse in the event of default or bankruptcy/insolvency.
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 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 amarked-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.
168
1290 FUNDS
NOTES TO FINANCIAL STATEMENTS (Continued)
October 31, 2019
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.
During the year ended October 31, 2019, certain Funds 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 change in unrealized gains or losses in forward foreign currency 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 instrument, such security and instrument shall be referred to the Trust’s Valuation Committee (“Committee”), which will value the asset 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 each 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 asub-administration agreement with JPMorgan Chase Bank, N.A. (the“Sub-Administrator”), which assists 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) |
A summary of inputs used to value each Fund’s assets and liabilities carried at fair value as of October 31, 2019, is included in the Portfolio of Investments for each Fund. Changes in valuation techniques may result in transfers in or out of an investment’s assigned level.
Transfers into and transfers out of Level 3 are included in the Level 3 reconciliation following the Portfolio of Investments for each Fund, if any. 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 observable market inputs to determine price.
169
1290 FUNDS
NOTES TO FINANCIAL STATEMENTS (Continued)
October 31, 2019
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 has the ability to meet and review reports based on the valuation techniques used to value Level 3 securities. As part of a review, the Committee would consider obtaining updates from its pricing vendors andSub-Advisers for fair valued securities. For example, with respect to model driven prices, the Committee could receive reports regarding a review and recalculation of pricing models and related discounts. For those securities which are valued based on broker quotes, the Committee may evaluate variances between existing broker quotes and any alternative broker quotes provided by aSub-Adviser or other pricing source.
To substantiate unobservable inputs used in a fair valuation, the Secretary of the Committee can perform an independent verification as well as additional research for fair value notifications received from the pricing agents. Among other factors, particular areas of focus may include: description of security, historical pricing,intra-day price movement, last trade information, corporate actions, related securities, any available company news and announcements, 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 a NAV for each applicable Fund when the Adviser deems that the particular event or circumstance would materially affect such Fund’s NAV. At October 31, 2019, none of the Funds applied these procedures.
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 theex-dividend date, except that certain dividends from foreign securities, if any, are recognized as soon as the Fund is informed of theex-dividend date.Non-cash dividends, if any, are recorded at the fair market value of the asset received. 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.
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.
170
1290 FUNDS
NOTES TO FINANCIAL STATEMENTS (Continued)
October 31, 2019
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.
All income earned and expenses incurred by each Fund are borne on apro-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.
Reported realized foreign currency gains and losses arise from the disposition of foreign currency, currency gains or losses realized between the trade and settlement dates on securities transactions, and the difference between the amounts of dividends, interest and foreign withholding taxes recorded on each Fund’s books on the transaction date and the U.S. dollar equivalent of the amounts actually received or paid. These reported realized foreign currency gains and losses are included in Net realized gain (loss) on foreign currency transactions on the Statements of Operations. Unrealized foreign currency gains and losses arise from changes (due to changes in exchange rates) in the value of foreign currency and other assets and liabilities denominated in foreign currencies, which are held at period end and are included in Change in net unrealized appreciation/depreciation on foreign currency translations on the Statements of Operations.
Taxes:
Each Fund intends 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 provisions 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, 2019, the Funds did not incur any interest or penalties. Each of the tax years in the four year period ended October 31, 2019 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 Diversified Bond Fund and 1290 High Yield Bond Fund declare and distribute monthly). Dividends to shareholders of a Fund to which
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such gains are attributable 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. The tax character of distributions for the years ended October 31, 2019 and October 31, 2018 and the tax composition of undistributed ordinary income and undistributed long term gains at October 31, 2019 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 wash sale loss deferrals (1290 GAMCO Small/Mid Cap Value) and capital loss carryover (1290 High Yield Bond and 1290 Multi-Alternative Strategies).
Year Ended October 31, 2019 | As of October 31, 2019 | Year Ended October 31, 2018 | ||||||||||||||||||||||
Funds: | Distributed Ordinary Income | Distributed Long Term Gains | Accumulated Undistributed Ordinary Income | Accumulated Undistributed Long Term Gains | Distributed Ordinary Income | Distributed Long Term Gains | ||||||||||||||||||
1290 Convertible Securities | $ | 568,167 | $ | 820,812 | $ | 471,472 | $ | 741,420 | $ | 550,306 | $ | 245,075 | ||||||||||||
1290 Diversified Bond | 2,216,565 | — | 2,516,863 | 1,134,557 | 2,638,391 | — | ||||||||||||||||||
1290 DoubleLine Dynamic Allocation | 1,100,643 | 1,627,303 | 2,285,165 | 930,995 | 1,554,308 | 2,764,419 | ||||||||||||||||||
1290 GAMCO Small/Mid Cap Value | 1,094,928 | 212,987 | 951,714 | 684,088 | 369,101 | 242,379 | ||||||||||||||||||
1290 Global Talents | 20,882 | 1,259,775 | 47,352 | 117,541 | 33,488 | — | ||||||||||||||||||
1290 High Yield Bond | 1,894,976 | — | — | — | 1,818,704 | — | ||||||||||||||||||
1290 Low Volatility Global Equity | 83,091 | 5,361 | 42,885 | 14,810 | 59,429 | — | ||||||||||||||||||
1290 Multi-Alternative Strategies | 203,361 | 21,640 | 194,450 | — | 38,183 | 69,201 | ||||||||||||||||||
1290 Retirement 2020 | 120,395 | 22,023 | 153,589 | 146,857 | 49,252 | 250 | ||||||||||||||||||
1290 Retirement 2025 | 161,829 | 14,712 | 249,117 | 347,143 | 49,002 | — | ||||||||||||||||||
1290 Retirement 2030 | 84,195 | 4,009 | 73,287 | 18,396 | 46,752 | — | ||||||||||||||||||
1290 Retirement 2035 | 105,840 | 1,252 | 102,650 | 64,202 | 46,752 | — | ||||||||||||||||||
1290 Retirement 2040 | 65,663 | 2,736 | 44,182 | 4,590 | 47,002 | — | ||||||||||||||||||
1290 Retirement 2045 | 73,894 | 1,428 | 65,471 | 333 | 47,142 | — | ||||||||||||||||||
1290 Retirement 2050 | 67,767 | 2,824 | 43,378 | 4,286 | 47,252 | — | ||||||||||||||||||
1290 Retirement 2055 | 66,386 | 2,655 | 39,356 | 2,550 | 47,252 | — | ||||||||||||||||||
1290 Retirement 2060 | 62,501 | 2,604 | 38,412 | 4,230 | 47,502 | — | ||||||||||||||||||
1290 SmartBeta Equity | 248,559 | 637,011 | 276,406 | 297,433 | 290,538 | 160,318 |
Ordinary losses incurred after December 31st and within the taxable year are deemed to arise on the first business day of a Fund’s next taxable year. For the year ended October 31, 2019, the Fund elected to defer late year losses, in the amount listed below:
Fund: | Deferred Late Year Losses | |||
1290 Multi-Alternative Strategies | $ | 1,381 |
The following Fund had a Return of Capital during the year ended October 31, 2019:
Fund: | Return of Capital | |||
1290 High Yield Bond | $ | 37,045 |
The following Fund had a Return of Capital during the year ended October 31, 2018:
Fund: | Return of Capital | |||
1290 Diversified Bond | $ | 174,948 |
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October 31, 2019
Permanent book and tax differences relating to shareholder distributions resulted in reclassifications to undistributed (overdistributed) net investment income (loss), accumulated net realized gain (loss) andpaid-in-capital at October 31, 2019 as follows:
Funds: | Undistributed Net Investment Income (Loss) (a) | Accumulated Net Realized Gain (Loss) (a) | Paid In Capital | |||||||||
1290 Convertible Securities | $ | 397,548 | $ | (397,547 | ) | $ | (1 | ) | ||||
1290 Diversified Bond | (99,489 | ) | 94,645 | 4,844 | ||||||||
1290 DoubleLine Dynamic Allocation | 62,584 | (62,584 | ) | — | ||||||||
1290 GAMCO Small/Mid Cap Value | (19,867 | ) | 19,867 | — | ||||||||
1290 Global Talents | (4,499 | ) | 4,499 | — | ||||||||
1290 Low Volatility Global Equity | (1,695 | ) | 1,695 | — | ||||||||
1290 Multi-Alternative Strategies | (3,146 | ) | 10,844 | (7,698 | ) | |||||||
1290 Retirement 2020 | (331 | ) | 536 | (205 | ) | |||||||
1290 Retirement 2025 | (615 | ) | 987 | (372 | ) | |||||||
1290 Retirement 2030 | (3,403 | ) | 3,403 | — | ||||||||
1290 Retirement 2035 | (942 | ) | 1,084 | (142 | ) | |||||||
1290 Retirement 2040 | (1,973 | ) | 1,973 | — | ||||||||
1290 Retirement 2045 | (584 | ) | 625 | (41 | ) | |||||||
1290 Retirement 2050 | (2,271 | ) | 2,271 | — | ||||||||
1290 Retirement 2055 | (832 | ) | 832 | — | ||||||||
1290 Retirement 2060 | (1,078 | ) | 1,078 | — | ||||||||
1290 SmartBeta Equity | (3,942 | ) | 3,942 | — |
(a) | These components of net assets are included in Total Distributable Earnings (Loss) in the Statement of Assets and Liabilities. |
The significant permanent book and tax difference related to the adjustments above is investments in contingent payment debt instruments (1290 Convertible Securities).
Net capital losses recognized by the Funds may get carried forward indefinitely, and retain their character as short-term and/or long-term losses. A portion of 1290 High Yield Bond’s capital loss carryforward is subject to an annual limitation under the Internal Revenue Code and related regulations. The following Funds have capital losses incurred that will be carried forward as follows:
Utilized | Losses Carried Forward | |||||||||||||||
Funds: | Short Term | Long Term | Short Term | Long Term | ||||||||||||
1290 Diversified Bond | $ | 29,675 | $ | — | $ | — | $ | — | ||||||||
1290 High Yield Bond | 89,979 | — | 661,104 | 1,769,147 | ||||||||||||
1290 Multi-Alternative Strategies | — | — | 81,786 | 148,639 |
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 in the Statements of Operations. 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.
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Options:
Certain Funds may 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 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 and Foreign Currency 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.
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The Funds may be exposed to foreign currency risks associated with Fund investments. Certain Funds may purchase foreign currency on a spot (or cash) basis. In addition, certain Funds enter into contracts to purchase or sell foreign currencies at a future date (“forward contracts”). A forward foreign currency 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 Funds may engage in these forward contracts to protect against uncertainty in the level of future 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 contracts to gain exposure to currencies. The Funds are subject tooff-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.
Forward Settling Transactions:
Certain Funds make contracts to purchase or sell securities for a fixed price at a future date beyond customary settlement time (“forward settling transactions”). 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 settling transactions 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 increases prior to the settlement date, which is a risk in addition to the risk of decline in value of the Funds’ 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 settling transaction 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.
Certain Funds may enter into to-be-announced purchase or sale commitments (“TBA transactions”), pursuant to which it agrees to purchase or sell, respectively, mortgage backed securities for a fixed unit price, with payment and delivery at a scheduled future date beyond the customary settlement period for such securities. With TBA transactions, the particular securities to be received or delivered by a Fund are not identified at the trade date; however, the securities must meet specified terms, including issuer, rate, and mortgage term, and be within industry accepted “good delivery” standards. Funds may enter into TBA transactions with the intention of taking possession of or relinquishing the underlying securities, may elect to extend the settlement by “rolling” the transaction, and/or may use TBA transactions to gain or reduce interim exposure to underlying securities. Until settlement, a Fund maintains liquid assets sufficient to settle its commitment to purchase a TBA or, in the case of a sale commitment, a Fund maintains an entitlement to the security to be sold.
Master netting arrangements and collateral:
International Swaps and Derivatives Association, Inc. Master Agreements (“ISDA Master Agreements”) govern bilateral OTC derivative transactions entered into by theSub-Advisors on behalf of the Funds with select counterparties. ISDA Master Agreements maintain provisions for general obligations, representations, agreements, collateral posting and events of default or termination. Events of termination include conditions that may entitle counterparties to elect to
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October 31, 2019
terminate early and cause settlement of all outstanding transactions under the applicable ISDA Master Agreement. Any election to terminate early could be material to the financial statements. In limited circumstances, the ISDA Master Agreement may contain additional provisions that add counterparty protection beyond coverage of existing daily exposure if the counterparty has a decline in credit quality below a predefined level. These amounts, if any, may be segregated with a third-party custodian. The market value of OTC financial derivative instruments, collateral received or pledged, and net exposure by counterparty as of period end are disclosed in the Portfolio of Investments.
Master Securities Forward Transaction Agreements (“Master Forward Agreements”) govern certain forward settling transactions, such as TBA transactions, delayed-delivery or sale buybacks by and between theSub-Advisors on behalf of the Funds and select counterparties. The Master Forward Agreements maintain provisions for, among other things, transaction initiation and confirmation, payment and transfer, events of default, termination, and maintenance of collateral. The market value of forward settling transactions, collateral pledged and/or received, and the net exposure by counterparty as of period end is disclosed in the Portfolio of Investments.
ISDA Master Agreements and Master Forward Agreements 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. Under most ISDA Master Agreements and Master Forward Agreements, collateral is routinely pledged if the total net exposure to certain transactions (net of existing collateral already in place) governed under the relevant master agreement with a counterparty in a given account exceeds a specified threshold, which typically ranges from zero to $250,000 (on a per counterparty basis) depending on the counterparty and the type of master agreement.
Collateral on OTC derivatives and centrally cleared derivatives may be in the form of cash or debt securities issued by the U.S. government or related agencies or foreign governments. Cash pledged as collateral by a Fund is reflected as cash held as collateral at the broker in the accompanying financial statements and generally is restricted from withdrawal by the Fund; securities pledged by a Fund are so noted in the accompanying Portfolio of Investments; both remain in the Fund’s assets. Securities received as collateral by counterparties are not included in the Fund’s assets because the Fund does not obtain effective control over those securities. The obligation to return cash collateral received from counterparties is included as a liability in the accompanying financial statements. Collateral posted or received by the Fund may be held in a segregated account at the respective counterparty or Fund’s custodian. For OTC derivatives, collateral posted or received by the Fund is held in a segregated account at the respective counterparty or Fund’s custodian. As of October 31, 2019, collateral pledged by counterparties to 1290 DoubleLine Dynamic Allocation for OTC derivatives consisted of $449,262 in the form of a U.S. Treasury Bond and a U.S. Treasury Inflation Linked Bond.
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, foreign securities, forward settling transactions 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 decreases. 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. As of
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October 31, 2019
October 31, 2019, interest rates are near historic lows in the United States, and below zero in other parts of the world, including certain European countries and Japan. A Fund is subject to greater risk of rising interest rates due to these market conditions. A significant or rapid rise in interest rates could result in losses to the Fund.
Many debt securities, derivatives and other financial instruments utilize the London Interbank Offered Rate (“LIBOR”) as the reference or benchmark rate for variable interest rate calculations. In July 2017, the UK Financial Conduct Authority announced that after 2021 it will cease its active encouragement of UK banks to provide quotations needed to sustain LIBOR, suggesting that LIBOR may cease to be published after that time. Financial industry groups have begun planning for a transition to the use of a different benchmark, but there are obstacles to converting certain longer term securities and transactions to a new benchmark. The transition process might lead to increased volatility and illiquidity in markets that currently rely on the LIBOR to determine interest rates, a reduction in the values of some LIBOR-based investments, and reduced effectiveness of certain hedging strategies, which may adversely affect a Portfolio’s performance or net asset value. Since the usefulness of LIBOR as a benchmark could deteriorate during the transition period, these effects could occur prior to the end of 2021. In addition, the alternative reference or benchmark rate may be an ineffective substitute resulting in prolonged adverse market conditions for a Portfolio.
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.
Foreign (non-U.S.) securities in this report are classified by the country of risk of a holding. Investments in foreign securities, including depositary receipts, involve risks not associated with investment in U.S. securities. Foreign markets may be less liquid, more volatile and subject to less government supervision and regulation than U.S. markets. Differences between U.S. and foreign legal, political and economic systems, regulatory regimes and market practices also may impact security values, and it may take more time to clear and settle trades involving foreign securities. In addition, foreign operations or holding can involve risks relating to conditions in foreign countries.
Forward settling transactions and forward foreign currency 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.
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October 31, 2019
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 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 (commonly known as “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.
Because certain Funds invest in affiliated mutual funds, unaffiliated investment companies or ETFs, the Funds indirectly bear a portion of the fees and expenses incurred by the underlying funds and ETFs. As a result, the cost of investing in the Funds may be higher than the cost of investing in a Fund that exclusively invests directly in individual stocks and bonds. The Fund’s net asset value is subject to fluctuations in the net asset values of the underlying funds and the market values of the ETFs. The Funds are also subject to certain risks related to the underlying funds’ and ETFs’ investments in securities and financial instruments (such as fixed income securities, including high yield, asset-backed and mortgage-related securities, equity securities, foreign and emerging markets securities, commodities and real estate securities) and the ability of the Fund to meet its investment objective will directly depend on the ability of the underlying fund or ETF to meet its investment objective. With respect to the Fund’s investments in ETFs, there is also the risk that an ETF’s performance may not match that of the relevant index. It is also possible that an active trading market for an ETF may not develop or be maintained, in which case the liquidity and value of the Fund’s investments in the ETF could be substantially and adversely affected. The extent to which the investment performance and risks associated with the Fund correlate to those of a particular underlying fund or ETF will depend upon the extent to which the Fund’s assets are allocated from time to time for investment in the underlying fund or ETF, which will vary.
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 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
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October 31, 2019
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:
Funds: | Investment Advisory Fees | |
1290 Retirement 2020 | 0.500% of average daily net assets | |
1290 Retirement 2025 | 0.500% of average daily net assets | |
1290 Retirement 2030 | 0.500% of average daily net assets | |
1290 Retirement 2035 | 0.500% of average daily net assets | |
1290 Retirement 2040 | 0.500% of average daily net assets | |
1290 Retirement 2045 | 0.500% of average daily net assets | |
1290 Retirement 2050 | 0.500% of average daily net assets | |
1290 Retirement 2055 | 0.500% of average daily net assets | |
1290 Retirement 2060 | 0.500% of average daily net assets |
(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 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) | ||||||||||||||||
Funds: | First $4 Billion | Next $4 Billion | Next $2 Billion | Thereafter | ||||||||||||
1290 Low Volatility Global Equity | 0.500 | % | 0.490 | % | 0.480 | % | 0.470 | % | ||||||||
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 Diversified Bond | 0.600 | 0.580 | 0.560 | |||||||||
1290 High Yield Bond | 0.600 | 0.580 | 0.560 |
On behalf of the Trust, the Adviser has entered into an investmentsub-advisory agreement(“Sub-Advisory Agreements”) with each of theSub-Advisers. Each of theSub-Advisory Agreements obligates theSub-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 respectiveSub-Advisers; and (iii) perform certain limited related administrative functions in connection therewith. The Adviser pays the expenses of providing investmentsub-advisory services to the Funds, including the fees of theSub-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 asub-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 I, Class R and Class T shares.
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NOTES TO FINANCIAL STATEMENTS (Continued)
October 31, 2019
The Board has approved Distribution Plans pursuant to Rule12b-1 under the 1940 Act for Class A, Class R and Class T 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 R | 0.50 | |||
Class T* | 0.25 |
* | The Distribution Fees for Class T shares are currently being waived. This waiver is voluntary and could be eliminated at any time at the discretion of the Distributor. The amounts waived for the year ended October 31, 2019 are included in Waiver from distributor on the Statement of Operations for each Fund and are not eligible for recoupment. |
The Trust, on behalf of the Funds, has entered into a transfer agency and service agreement (the “Transfer Agency Agreement”) with DST Asset Manager Solutions, Inc. (“DST”). Pursuant to the Transfer Agency Agreement, DST 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, DST 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, on behalf of the Funds, has entered into a custody agreement (the “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. At year end, certain of the Funds maintain significant cash balances with the Custodian or its affiliates. These balances are presented as cash on each Fund’s Statement of Assets and Liabilities.
The Adviser has contractually agreed to limit the expenses of certain Funds (exclusive of taxes, interest, brokerage commissions, dividend and interest expenses on securities sold short, capitalized expenses (other than offering costs), fees and expenses of other investment companies in which a Fund may invest (except as noted in the table below), 12b-1 fees and extraordinary expenses not incurred in the ordinary course of such Fund’s business) through April 30, 2021 (unless the Board consents to an earlier revision or termination of this arrangement) (“Expense Limitation Agreement”), pursuant to which the Adviser has agreed to make payments or waive or limit its fees so that the total annual operating expenses do not exceed the following annual rates:
Funds: | Total Expense Limited For All Share Classes to (% of daily net assets) | |||
1290 Convertible Securities** | 0.90 | % | ||
1290 Diversified Bond | 0.50 | |||
1290 DoubleLine Dynamic Allocation*, *** | 0.95 | |||
1290 GAMCO Small/Mid Cap Value* | 1.00 | |||
1290 Global Talents | 1.00 | |||
1290 High Yield Bond*** | 0.75 | |||
1290 Low Volatility Global Equity* | 0.65 |
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October 31, 2019
Funds: | Total Expense Limited For All Share Classes to (% of daily net assets) | |||
1290 Multi-Alternative Strategies* | 1.40 | % | ||
1290 Retirement 2020* | 0.65 | |||
1290 Retirement 2025* | 0.65 | |||
1290 Retirement 2030* | 0.65 | |||
1290 Retirement 2035* | 0.65 | |||
1290 Retirement 2040* | 0.65 | |||
1290 Retirement 2045* | 0.65 | |||
1290 Retirement 2050* | 0.65 | |||
1290 Retirement 2055* | 0.65 | |||
1290 Retirement 2060* | 0.65 | |||
1290 SmartBeta Equity | 0.90 |
* | Includes fees and expenses of other investment companies in which the Fund invests. |
** | Effective October 1, 2019. |
*** | Effective January 1, 2019. |
Prior to October 1, 2019 the expense limitation was as follows:
Funds: | Total Expense Limited For All Share Classes to (% of daily net assets) | |||
1290 Convertible Securities | 1.00 | % |
Prior to January 1, 2019, the expense limitations were as follows:
Funds | Total Expense Limited For All Share Classes to (% of daily net assets) | |||
1290 Convertible Securities | 1.05 | % | ||
1290 DoubleLine Dynamic Allocation* | 1.00 | |||
1290 High Yield Bond | 0.80 |
* | Includes fees and expenses of other investment companies in which the Fund invests. |
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 three years of payments or waivers being recorded, 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 the Fund’s total annual expense ratio is less than the respective percentages stated above for the respective period. 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 year ended October 31, 2019, the Funds did not incur recoupment fees. At October 31, 2019, 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: | 2020 | 2021 | 2022 | |||||||||||||
1290 Convertible Securities | $ | — | $ | — | $ | 149,972 | $ | 149,972 | ||||||||
1290 Diversified Bond | 311,753 | 350,461 | 436,563 | 1,098,777 | ||||||||||||
1290 DoubleLine Dynamic Allocation | — | — | 229,925 | 229,925 |
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October 31, 2019
Amount Eligible Through | Total Eligible For Reimbursement | |||||||||||||||
Funds: | 2020 | 2021 | 2022 | |||||||||||||
1290 GAMCO Small/Mid Cap Value | $ | 198,074 | $ | 292,540 | $ | 407,167 | $ | 897,781 | ||||||||
1290 Global Talents | 198,217 | 196,463 | 210,795 | 605,475 | ||||||||||||
1290 High Yield Bond | — | — | 227,837 | 227,837 | ||||||||||||
1290 Low Volatility Global Equity | 93,099 | 138,255 | 133,039 | 364,393 | ||||||||||||
1290 Multi-Alternative Strategies | 163,049 | 141,540 | 152,126 | 456,715 | ||||||||||||
1290 Retirement 2020 | 96,299 | 139,205 | 148,122 | 383,626 | ||||||||||||
1290 Retirement 2025 | 96,317 | 140,647 | 164,119 | 401,083 | ||||||||||||
1290 Retirement 2030 | 95,969 | 136,903 | 137,980 | 370,852 | ||||||||||||
1290 Retirement 2035 | 96,339 | 139,321 | �� | 143,164 | 378,824 | |||||||||||
1290 Retirement 2040 | 96,423 | 136,054 | 133,015 | 365,492 | ||||||||||||
1290 Retirement 2045 | 97,023 | 138,025 | 137,163 | 372,211 | ||||||||||||
1290 Retirement 2050 | 96,472 | 136,781 | 133,264 | 366,517 | ||||||||||||
1290 Retirement 2055 | 96,529 | 136,944 | 132,927 | 366,400 | ||||||||||||
1290 Retirement 2060 | 96,563 | 136,329 | 133,636 | 366,528 | ||||||||||||
1290 SmartBeta Equity | 198,111 | 208,207 | 236,252 | 642,570 |
During the year ended October 31, 2019, FMG LLC voluntarily waived fees for certain Funds. These amounts are included in Voluntary waiver from investment adviser on the Statement of Operations for each Fund and are not eligible for recoupment.
FMG LLC also voluntarily agreed to forgo any amounts eligible for recoupment that were waived or reimbursed prior to December 31, 2018 in conjunction with the expense limitation change effective January 1, 2019 for 1290 Convertible Securities, 1290 DoubleLine Dynamic Allocation and 1290 High Yield Bond.
Note 3 | Sales Charges |
The Distributor receives sales charges on the Funds’ Class A and Class T shares and the proceeds of contingent deferred sales charges paid by the investor in connection with certain redemptions of the Funds’ Class A shares. The Distributor has advised the Funds that for the year ended October 31, 2019, the proceeds retained from sales and redemptions are as follows:
Class A | Class T | |||||||||||
Funds: | Front End Sales Charge | Contingent Deferred Sales Charge | Front End Sales Charge | |||||||||
1290 Convertible Securities | $ | 3,672 | $ | — | $ | — | ||||||
1290 Diversified Bond | 39,483 | — | — | |||||||||
1290 DoubleLine Dynamic Allocation | 19,877 | — | — | |||||||||
1290 GAMCO Small/Mid Cap Value | 43,071 | — | — | |||||||||
1290 Global Talents | 16,323 | — | — | |||||||||
1290 High Yield Bond | 9,809 | — | — | |||||||||
1290 Multi-Alternative Strategies | 2,844 | — | — | |||||||||
1290 SmartBeta Equity | 47,303 | — | — |
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 | Compensation of Officers |
Each officer of the Trust is an employee of AXA Equitable, FMG LLC and/or AXA Distributors, LLC. No officer of the Trust, other than the Chief Compliance Officer, receives
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1290 FUNDS
NOTES TO FINANCIAL STATEMENTS (Concluded)
October 31, 2019
compensation paid by Trust. During the year ended October 31, 2019, the Chief Compliance Officer received, from the three trusts in the fund complex, compensation in the amount of $75,000, of which the Trust paid $181.
Note 5 | Percentage of Ownership by Affiliates |
At October 31, 2019, 1290 Asset Managers and AXA Equitable held investments in each of the Funds as follows:
Funds: | Percentage of Ownership | |||
1290 Convertible Securities | 89 | % | ||
1290 Diversified Bond | 37 | |||
1290 DoubleLine Dynamic Allocation | 90 | |||
1290 GAMCO Small/Mid Cap Value | 42 | |||
1290 Global Talents | 91 | |||
1290 High Yield Bond | 75 | |||
1290 Low Volatility Global Equity | 84 | |||
1290 Multi-Alternative Strategies | 57 | |||
1290 Retirement 2020 | 99 | |||
1290 Retirement 2025 | 100 | |||
1290 Retirement 2030 | 99 | |||
1290 Retirement 2035 | 99 | |||
1290 Retirement 2040 | 99 | |||
1290 Retirement 2045 | 99 | |||
1290 Retirement 2050 | 100 | |||
1290 Retirement 2055 | 100 | |||
1290 Retirement 2060 | 100 | |||
1290 SmartBeta Equity | 53 |
Note 6 | Subsequent Events |
The Adviser evaluated subsequent events from October 31, 2019, the date of these financial statements, through the date these financial statements were issued. There were no subsequent events to disclose.
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Report of Independent Registered Public Accounting Firm
TotheBoard of Trustees of 1290 Funds and Shareholders of each of the eighteen funds listed in the table below:
Opinions on the Financial Statements
We have audited the accompanying statements of assets and liabilities, including the portfolios of investments, of each of the funds listed in the table below (constituting 1290 Funds, hereafter collectively referred to as the “Funds”) as of October 31, 2019, the related statements of operations for the year ended October 31, 2019, the statements of changes in net assets for each of the two years in the period ended October 31, 2019, including the related notes, and the financial highlights for each of the periods indicated therein (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of each of the Funds as of October 31, 2019, the results of each of their operations for the year then ended, the changes in each of their net assets for each of the two years in the period ended October 31, 2019 and each of the financial highlights for each of the periods indicated therein in conformity with accounting principles generally accepted in the United States of America.
1290 Convertible Securities Fund | 1290 Retirement 2025 Fund | |
1290 Diversified Bond Fund | 1290 Retirement 2030 Fund | |
1290 DoubleLine Dynamic Allocation Fund | 1290 Retirement 2035 Fund | |
1290 GAMCO Small/Mid Cap Value Fund | 1290 Retirement 2040 Fund | |
1290 Global Talents Fund | 1290 Retirement 2045 Fund | |
1290 High Yield Bond Fund | 1290 Retirement 2050 Fund | |
1290 Low Volatility Global Equity Fund | 1290 Retirement 2055 Fund | |
1290 Multi-Alternative Strategies Fund | 1290 Retirement 2060 Fund | |
1290 Retirement 2020 Fund | 1290 SmartBeta Equity Fund |
Basis for Opinions
These financial statements are the responsibility of the Funds’ management. Our responsibility is to express an opinion on the Funds’ financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Funds in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of October 31, 2019 by correspondence with the custodian, transfer agents and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinions.
/s/ PricewaterhouseCoopers LLP
New York, New York
December 16, 2019
We have served as the auditor of one or more investment companies in the AXA FMG LLC — advised mutual fund complex since 1997.
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DISCLOSURE REGARDING ADVISORY CONTRACT APPROVALS
APPROVALS OF INVESTMENT ADVISORY AND INVESTMENTSUB-ADVISORY AGREEMENTS DURING THESIX-MONTH PERIOD ENDED OCTOBER 31, 2019 (UNAUDITED)
At a meeting held on July16-18, 2019, 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 (the “1940 Act”)) of such parties or the Trust (the “Independent Trustees”), considered and unanimously approved the renewal of the Investment Advisory Agreement (the “Advisory Agreement”) between the Trust and AXA Equitable Funds Management Group, LLC (d/b/a 1290 Asset Managers®) (“1290 Asset Managers” or the “Adviser”) and, as applicable, the renewal of the InvestmentSub-Advisory Agreement (each, a“Sub-Advisory Agreement” and together with the Advisory Agreement, the “Agreements”) between the Adviser and each investmentsub-adviser (each, a“Sub-Adviser” and together, the“Sub-Advisers”), as shown in the table below with respect to the Funds listed, for an additionalone-year term.
Funds | Agreement(s) Renewed by the Trust’s Board | |
1290 Low Volatility Global Equity Fund 1290 Multi-Alternative Strategies Fund | Advisory Agreement with 1290 Asset Managers | |
1290 Retirement 2020 Fund 1290 Retirement 2025 Fund 1290 Retirement 2030 Fund 1290 Retirement 2035 Fund 1290 Retirement 2040 Fund 1290 Retirement 2045 Fund 1290 Retirement 2050 Fund 1290 Retirement 2055 Fund 1290 Retirement 2060 Fund (collectively, the “1290 Retirement Funds”) | ||
1290 Convertible Securities Fund | Advisory Agreement with 1290 Asset Managers Sub-Advisory Agreement with Palisade Capital Management LLC | |
1290 Diversified Bond Fund | Advisory Agreement with 1290 Asset Managers Sub-Advisory Agreement with Brandywine Global Investment Management LLC (“Brandywine”) | |
1290 DoubleLine Dynamic Allocation Fund | Advisory Agreement with 1290 Asset Managers Sub-Advisory Agreement with DoubleLine Capital LP and DoubleLine Equity LP | |
1290 GAMCO Small/Mid Cap Value Fund | Advisory Agreement with 1290 Asset Managers Sub-Advisory Agreement with GAMCO Asset Management, Inc. | |
1290 Global Talents Fund | Advisory Agreement with 1290 Asset Managers Sub-Advisory Agreement with AXA Investment Managers Inc. (“AXA IM”) | |
1290 High Yield Bond Fund | Advisory Agreement with 1290 Asset Managers Sub-Advisory Agreement with AXA IM | |
1290 SmartBeta Equity Fund | Advisory Agreement with 1290 Asset Managers Sub-Advisory Agreement with AXA Rosenberg Investment Management LLC (“AXA Rosenberg”) |
In reaching its decision to renew the Agreement(s) with respect to each Fund, the Board considered the overall fairness of the Agreement and whether the Agreement was in the best interests of the Fund and its
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shareholders. The Board further considered all factors it deemed relevant with respect to each Fund, including: (1) the nature, quality and extent of the overall services to be provided to the Fund by the Adviser, the relevantSub-Adviser and, where applicable, their respective affiliates, including the investment performance of the Fund; (2) the level of the Fund’s advisory fee and, where applicable,sub-advisory fee, and the Fund’s expense ratios relative to those of peer funds; (3) the costs of the services to be provided by, and the profits to be realized by, the Adviser and its affiliates from their relationships with the Fund; (4) the anticipated effect of growth and size on the Fund’s performance and expenses, including any potential economies of scale and, if so, whether any such economies of scale are equitably shared with shareholders; and (5)“fall-out” benefits that may accrue to the Adviser, the relevantSub-Adviser and their respective affiliates (that is, indirect benefits that they would not receive but for their relationships with the Fund). In considering each Agreement, the Board members did not identify any particular factor or information that wasall-important or controlling, and each Trustee may have given different weights to different factors and, thus, each Trustee may have had a different basis for his or her decision.
In connection with its deliberations, the Board took into account information (both written and oral) provided to the Board, including its various committees, throughout the year, as well as information provided specifically in connection with the annual renewal process. The Trustees also recognized that the contractual arrangements for the Funds have been reviewed by the Trustees and discussed with the Adviser in prior years and that the Trustees’ conclusions may be based, in part, on their consideration of these same arrangements in prior years.
Information provided and discussed throughout the year included investment performance reports and related financial and general market outlook information for each Fund, as well as periodic reports on, among other matters, brokerage allocation and execution; pricing and valuation; legal and compliance matters; shareholder and other services and support provided to the Funds by the Adviser, the relevantSub-Adviser and their respective affiliates; actual and potential conflicts of interest that could impact the business operations and relationships of the Adviser and the Trust or affect the Adviser’s recommendations aboutSub-Advisers; sales and marketing activity; and risk management. In addition, thesub-groups of the Board’s Investment Committee, composed of Independent Trustees, met individually and engaged in extensive discussions, along with management representatives and outside legal counsel, with Sub-Advisers duringin-person presentations made at regularly scheduled Investment Committee meetings during the year.
Information provided and discussed specifically in connection with the annual renewal process included a report prepared by Broadridge Financial Solutions Inc. (“Broadridge”), an independent provider of mutual fund industry data, as well as additional substantial material prepared by management. Broadridge provided its report directly to the Independent Trustees and included in its report comparative fee, expense, and investment performance information for each Fund. The materials provided by Broadridge in connection with the July 2019 annual renewal process reflected certain enhancements to the presentation and format of the materials provided by Broadridge in connection with the July 2018 annual renewal process. The enhancements were based on a review of the materials by the Independent Trustees, in consultation with their independent legal counsel, intended to ensure that the Independent Trustees continue to receive comparative fee, expense, and investment performance information in a format that enhances their review of the Funds’ investment advisory arrangements. The additional material prepared by management generally includedFund-by-Fund information showing each Fund’s average net assets; advisory fees and, where applicable,sub-advisory fees; expense ratios; expense limitation arrangements; investment performance (in addition to the performance information prepared by Broadridge); and profitability information, including information regarding the profitability of the Adviser’s operations on an overall Trust basis, as well as on aFund-by-Fund basis. In addition, for each Fund, the Adviser and the relevantSub-Adviser provided separate materials describing the Fund’s investment performance over various time periods and the services provided and the fees charged with respect to the Fund, and discussing whether the Fund had performed as expected over time and other matters.
The annual renewal process extends over at least two regular meetings of the Board in June and July to ensure that the Adviser and theSub-Advisers have time to respond to any questions the Independent Trustees may have on their initial review of the materials and that the Independent Trustees have time to consider those responses. The Independent Trustees also held a conference call in advance of the meeting at which the Board approved the renewal of the Agreements to review the information provided and communicatedfollow-up questions for management to address at the renewal meeting. The Independent Trustees also met in executive sessions during the meeting to discuss the Agreements and the information provided. When invited,
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management representatives attended portions of the executive sessions to review and discuss matters relating to the Agreements and to provide additional information requested by the Independent Trustees. At the meeting and during the portions of the executive sessions attended by management, the Independent Trustees and management engaged in extensive discussions and negotiations regarding the Agreements. As noted below, as a result of these extensive discussions and negotiations, the Adviser proposed to lower the contractual expense limitation arrangement for one of the Funds. The Independent Trustees were assisted by independent legal counsel prior to and during the meeting and during their deliberations regarding the Agreements and also received from legal counsel materials addressing, among other things, the legal standards applicable to their consideration of the proposed renewal of the Agreements. In addition, the Independent Trustees reviewed information and met during the year to discuss information relevant to their annual consideration of the Agreements.
The Board also noted that the Trust is an affiliated investment company of EQ Advisors Trust and AXA Premier VIP Trust, which are also managed by the Adviser, and that all of the Board members also currently serve on the Boards of Trustees of EQ Advisors Trust and AXA Premier VIP Trust. The Board also noted that eachSub-Adviser other than Brandywine currently serves as investmentsub-adviser for one or more portfolios, or allocated portion(s) of portfolio(s), of EQ Advisors Trust (suchSub-Advisers together, the “EQATSub-Advisers”). The Trustees took into account information relating to the Adviser and the EQATSub-Advisers 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 EQATSub-Advisers, and the portfolios of EQ Advisors Trust and AXA Premier VIP Trust gained from their service on the Boards of Trustees of EQ Advisors Trust, AXA Premier VIP Trust, and the Trust.
Although the Board approved the renewal of the Agreements for all of the Funds at the same Board meeting, the Board considered each Fund separately. In approving the renewal of the relevant Agreement(s) with respect to each Fund, each Trustee, including the Independent Trustees, on the basis of their business judgment after review of the information provided, determined that the advisory fee and, where applicable,sub-advisory fee were fair and reasonable and that the renewal of the Agreement(s) was in the best interests of the applicable Fund and its shareholders. Although the Board gave attention to all information provided, the following discusses some of the primary factors it deemed relevant to its decision to renew the Agreements.
Nature, Quality and Extent of Services
The Board evaluated the nature, quality and extent of the overall services to be provided to each Fund and its shareholders by the Adviser, the relevantSub-Adviser and, where applicable, their respective affiliates. In addition to the investment performance and expense information discussed below, the Board considered the Adviser’s and each relevantSub-Adviser’s responsibilities with respect to each Fund and the Adviser’s and each relevantSub-Adviser’s experience in serving as an investment adviser for the Fund(s) and for portfolios and accounts similar to the Fund(s) each advises, including, as applicable, portfolios or allocated portion(s) of portfolio(s) of EQ Advisors Trust and AXA Premier VIP Trust.
With respect to the Adviser, the Board considered that the Adviser is responsible for, among other things, developing investment strategies for the Funds (and the portions thereof); researching, selecting and hiringSub-Advisers, conducting ongoing “due diligence” on and monitoringSub-Advisers, and, when necessary or advisable, terminating or replacingSub-Advisers; allocating and rebalancing Fund assets amongSub-Advisers; overseeing the selection of investments for the Funds (or the portions thereof) that theSub-Adviserssub-advise; making investment decisions for the Funds (or the portions thereof) that it manages directly; monitoring and evaluating the performance of the Funds (or the portions thereof); monitoring the investment operations and composition of the Funds (or the portions thereof) and, in connection therewith, monitoring compliance with the Funds’ investment objectives, policies and restrictions, as well as the Funds’ compliance with applicable law and the Trust’s compliance policies and procedures; 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 Funds among theSub-Advisers and other applicable parties; coordinating responses to regulatory agency inquiries relating to the operations of the Trust and coordinating litigation matters involving the Adviser and the Trust; and implementing Board directives as they relate to the Funds. The Board also considered information regarding the Adviser’s process
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for selecting and monitoring theSub-Advisers and the other service providers to the Funds and its process for making investment decisions for the Funds (or the portions thereof) that it manages directly, as well as information regarding the qualifications and experience of, and resources available to, the personnel who perform those functions with respect to the Funds. The Board further considered that the Adviser also provides the Trust with personnel, including Trust officers, in connection with carrying out its responsibilities and is responsible for coordinating the development of new initiatives and evaluating the impact of proposed products and services on the Trust and its assets. The Board also considered that the Adviser has assumed significant entrepreneurial risk in sponsoring the Funds and that the Adviser also bears and assumes significant ongoing risks, including investment, operational, enterprise, litigation, regulatory and compliance risks, with respect to the Funds. The Board considered that the Adviser’s responsibilities include daily monitoring of investment, operational, enterprise, litigation, regulatory and compliance risks as they relate to the Funds. The Board also considered information regarding, and met regularly with the Trust’s Director of Risk to discuss, the Adviser’s ongoing risk management activities and reporting.
With respect to theSub-Advisers, the Board considered that eachSub-Adviser, subject to the oversight of the Adviser, is responsible for making investment decisions for the Fund(s) (or the portion(s) thereof) that itsub-advises; placing with brokers or dealers orders for the purchase and sale of investments for the Fund(s) (or the portion(s) thereof) that itsub-advises; and performing certain related administrative functions. The Board also reviewed information regarding eachSub-Adviser’s process for selecting investments for the Fund(s) (or the portion(s) thereof) that itsub-advises, as well as information regarding the qualifications and experience of theSub-Adviser’s portfolio managers who provide services to the Fund(s). The Board also considered information regarding eachSub-Adviser’s procedures for executing portfolio transactions for the Fund(s) (or the portion(s) thereof) that itsub-advises and procedures for selecting brokers and dealers and, where applicable, obtaining research from those brokers and dealers.
The Board also considered, among other factors, periodic reports provided to the Board regarding the services provided by the Adviser, theSub-Advisers and, where applicable, their affiliates. In addition, the Board considered the allocation of Fund brokerage, including allocations to broker-dealers affiliated with the Adviser or aSub-Adviser. The Board also considered the use of “soft” commission dollars to pay for research services, as applicable. In this regard, the Board also considered the Adviser’s and eachSub-Adviser’s trading experience and received information regarding how the Adviser and eachSub-Adviser seek to achieve “best execution” on behalf of a Fund (or portion thereof), including a report by an independent portfolio trading analytical firm. The Board also considered the Trust’s Chief Compliance Officer’s evaluation of the Adviser’s and eachSub-Adviser’s compliance programs, policies and procedures, including those relating to cybersecurity, and any compliance matters involving the Adviser and any applicableSub-Adviser that had been brought to the Board’s attention during the year. In addition, the Board considered whether there were any pending lawsuits, enforcement proceedings or regulatory investigations involving the Adviser and theSub-Advisers and reviewed information regarding the Adviser’s and eachSub-Adviser’s financial condition and history of operations and potential conflicts of interest in managing the Funds. The Board also considered information as to the overall amount of assetssub-advised by eachSub-Adviser and noted the largestSub-Adviser relationships. In addition to periodic reports throughout the year, the Independent Trustees received information about business relationships that the Adviser and/or its affiliates, including AXA Equitable Life Insurance Company, have withSub-Advisers and/or their affiliates in addition to the relationships involving the Funds. In this regard, the Board also received materials regarding the practices, policies and procedures adopted by the Adviser and the Trust to identify and mitigate actual and potential conflicts of interest, including conflicts that may arise in connection with those additional business relationships.
The Board also considered the benefits to shareholders from participation in a Fund sponsored 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. The Board likewise considered that shareholders have chosen to invest in mutual funds sponsored by the Adviser. In addition, the Board considered the nature, quality and extent of the administrative, shareholder servicing and distribution support services that the Adviser and its affiliates provide to the Funds and their shareholders. The Board also noted that, throughout the past year, the Adviser and its affiliates had continued or undertaken initiatives intended to enhance various aspects of the Trust’s and the Board’s operations and shareholders’ experience with the mutual funds sponsored by the Adviser. The Board noted that two new Independent Trustees, who had been serving as consultants to the
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Board and attending Board meetings since September 1, 2018, were elected to the Board effective January 1, 2019. The Board also noted strategic and other actions and initiatives that the Adviser had identified, including actions and initiatives that are part of a broader effort to coordinate and enhance the collective efficiency of the governance and oversight of the fund complex and provide for potential cost savings to shareholders that may result from such efficiencies. In this regard, the Board also noted that the Adviser continually reviews the overallline-up of investment options and conductsin-depth analysis of its entire fund complex to provide recommendations to the Board to streamline and strengthen the fund complex’sline-up.
The Board also considered strategic and other actions taken by the Adviser in response to recent events within the mutual fund industry, including actions taken in response to regulatory initiatives, as well as other significant judicial and other developments affecting the mutual fund industry. The Board also considered strategic and other actions taken by the Adviser and theSub-Advisers in response to recent market conditions and considered the overall performance of the Adviser and theSub-Advisers in this context. In this regard, among other things, the Board also requested and received throughout the past year information from the Adviser and various service providers on various topics impacting all mutual funds, including pricing and valuation of portfolio securities; liquidity risk management; cybersecurity; new reporting and disclosure requirements for mutual funds; trustee independence; and evolving technologies in the mutual fund industry. The Board noted that certain of these topics may present significant ongoing challenges for mutual funds and result in an increase in the responsibilities and costs of mutual fund service providers, including the Adviser.
The Board also considered that, since the July 2018 annual renewal process, the Adviser and its affiliates had continued to update the Board on matters relating to the ongoing sale by AXA S.A. (“AXA”), the Adviser’s ultimate parent company, of its remaining ownership interest in its U.S. subsidiary, AXA Equitable Holdings, Inc. (“AEH”) — and, indirectly, the Adviser — through a series of sales of AEH’s common stock (the “Sell-Down Plan”). In this regard, the Board also noted that it had received from the Adviser and its affiliates representations that their separation from AXA as contemplated by the Sell-Down Plan would not lead to a reduction in the quality or scope of portfolio management, administrative, regulatory compliance and other services provided by those firms to the Funds.
For purposes of evaluating the nature, quality and extent of the overall services provided to each Fund, the Board also took into account discussions with the Adviser and the relevantSub-Adviser about Fund investment performance that occur at Board and Investment Committee meetings throughout the year. In this regard, the Board noted that, as part of regularly scheduled Fund reviews and other detailed reports to the Board on Fund performance, the Board periodically considered information regarding each Fund’s performance over various time periods on both an absolute basis and relative to an appropriate broad-based securities market index (“benchmark”) and/or a custom blended index developed by the Adviser that comprises broad-based indexes (“blended benchmark”), and a peer group of other mutual funds deemed by Broadridge to be comparable to the Fund (��peer group”). The performance information generally included, among other information, annual total returns, average annual total returns, cumulative returns and/or rolling period total returns. The Board also considered certain information, reflected in Appendix A, provided to the Board regarding each Fund’s performance relative to a benchmark and/or a blended benchmark and a peer group for theone- and three-year periods, as applicable, and since inception periods ended March 31, 2019. The Board noted that this information supplemented other performance information provided to the Board throughout the year and in connection with the annual renewal process. The Board also considered information, provided directly to the Board by Broadridge, regarding each Fund’s performance over various time periods relative to a benchmark and/or a blended benchmark and peer groups. The Board noted that the Funds have relatively short operating histories and also took note of the relatively small size of each Fund and the likely impact that a Fund’s size has on its relative expenses and performance.
The Board received a description of, and factored into its evaluation of each Fund’s performance the limitations inherent in, Broadridge’s methodology for developing and constructing peer groups and determining, from year to year, which mutual funds should be included in which peer groups, among other things. The Board also noted that the number of mutual funds included in a peer group may be relatively small and may differ significantly from peer group to peer group and from year to year and that the constituent mutual funds included in a peer group also may differ from year to year, which, among other factors, can limit the relevance of the comparisons. While recognizing these inherent limitations, the Board believed the independent analysis conducted by Broadridge provided a useful measure of comparative performance.
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In evaluating the Funds’ performance, the Board also took into account factors including general market conditions (including the amount of volatility in the market over the past year); the “style” in which the Funds are managed, as applicable, and whether that style is in or out of favor in the market; issuer-specific information; and fund cash flows. In this regard, the Board also noted how changes in time periods for performance calculations (for example, whether aone-year period is from December to December or March to March) can significantly impact a Fund’s returns and peer ranking on a relative basis. The Board also considered that variations in performance among a Fund’s operating classes reflect variations in class expenses, which result in lower performance for higher expense classes.
Allocation Funds
With respect to the performance of the 1290 DoubleLine Dynamic Allocation Fund, the Board considered that the Fund allocates its assets between equity and fixed income investments and is advised by a singleSub-Adviser.
With respect to the performance of each of the 1290 Retirement Funds, the Board considered that each Fund operates as afund-of-funds and invests in exchange traded securities of other investment companies or investment vehicles (“ETFs”) and recognized, therefore, that each Fund’s performance is based, in part, on the total returns of the ETFs in which it invests. The Board also considered that each of the 1290 Retirement Funds allocates its assets between equity and fixed income investments through its investments in ETFs. The Board also noted that each of the 1290 Retirement Funds had only a short operating history on which to evaluate performance.
The Board also factored into its evaluation of each Fund’s performance the limitations inherent in comparing the performance of asset allocation funds, such as the Funds, which may invest in equity and fixed income investments, to the performance of a peer group that includes funds that may allocate their assets between equity and fixed income investments in different percentages over time than the Funds and among other asset classes.
Active Funds
With respect to the performance of the 1290 Convertible Securities, 1290 Diversified Bond, 1290 GAMCO Small/Mid Cap Value, 1290 Global Talents, 1290 High Yield Bond and 1290 SmartBeta Equity Funds, the Board considered that each Fund is actively managed and advised by a singleSub-Adviser. The Board also noted that, in connection with a restructuring of the 1290 Diversified Bond Fund on or about June 15, 2018, the Fund had replaced its two formersub-advisers with a newsub-adviser, and changed its investment objective, policies and strategy, performance benchmark, and fee and expense structure and, therefore, the Board focused on the Fund’s performance since that time. The Board also noted that the 1290 Global Talents Fund had only a short operating history on which to evaluate performance. The Board also noted that, prior to January 1, 2018, the 1290 SmartBeta Equity Fund did not integrate Environmental, Social and Governance filters into its portfolio construction process.
With respect to the performance of the 1290 Low Volatility Global Equity and 1290 Multi-Alternative Strategies Funds, the Board considered that each Fund operates as afund-of-funds and invests in ETFs and recognized, therefore, that each Fund’s performance is based, in part, on the total returns of the ETFs in which it invests. The Board also noted that the 1290 Low Volatility Global Equity Fund had only a short operating history on which to evaluate performance.
All Funds
The Board and the Adviser discussed the performance of each Fund, including whether the Fund had performed as expected over time. The Board and the Adviser also discussed, where applicable, the reasons for a Fund’s underperformance for certain periods relative to its peer group and/or benchmark and/or blended benchmark, as applicable, and efforts to improve the Fund’s performance. Where applicable, the Board also considered steps that the Adviser and, where applicable, the relevantSub-Adviser had taken to address a Fund’s performance, including any changes or additions to theSub-Advisers or portfolio managers advising a Fund and any changes to the investment strategies of a Fund. In this regard, the Board noted that performance is only one of the factors that it deems relevant to its consideration of a Fund’s Agreement(s) and that, after considering all relevant factors, it can reach a decision to renew an Agreement notwithstanding a Fund’s underperformance.
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Based on its review and the explanations provided by the Adviser and, where applicable, the relevantSub-Adviser regarding the performance of each Fund, the Board determined, with respect to each Fund, that (i) the Fund and its shareholders would benefit from the Adviser’s and, where applicable, the relevantSub-Adviser’s continued management of the Fund, and (ii) the nature, quality and extent of the overall services provided by the Adviser, the relevantSub-Adviser and, where applicable, their respective affiliates were appropriate for the Fund in light of its investment objective(s) and, thus, supported a decision to approve the renewal of the Agreement(s).
Expenses
The Board considered each Fund’s advisory fee and, where applicable,sub-advisory fee in light of the nature, quality and extent of the overall services provided by the Adviser and, where applicable, the relevantSub-Adviser. The Board also reviewed comparative fee and expense information for each Fund provided directly to the Board by Broadridge. For the 1290 Diversified Bond Fund, the comparative fee and expense information was based upon the Fund’s new fees and expenses that went into effect in connection with the Fund’s June 2018 restructuring and were provided to Broadridge by the Adviser. The information provided by Broadridge included an analysis of how each Fund’s contractual advisory fee, actual advisory fee, other expense components, and total expense ratio compared with those of peer groups of other mutual funds selected by Broadridge as constituting an appropriate expense comparison for the Fund (a Fund’s “Broadridge category”). For each Fund, Broadridge provided information on the Fund’s contractual advisory fee in comparison with the contractual advisory fee that would have been charged by other funds within a Broadridge category assuming the other funds were similar in size to the Fund, as well as information on the Fund’s actual advisory fee and total expense ratio in comparison with those of other funds within a Broadridge category. The advisory fee analysis includes within such fee any separate administrative fee paid by a fund, including the administrative fee a Fund paid to the Adviser in its capacity as administrator for the Fund. The contractual advisory fee analysis does not take into account any fee reimbursements or waivers, whereas the actual advisory fee analysis does take into account any advisory (including any administrative) fee reimbursements or waivers that benefit a fund. The total expense ratio represents a fund’s total net operating expenses and takes into account any expense reimbursements or fee waivers that benefit a fund. Broadridge provided, and the Board considered, total expense ratio comparisons including and excluding any12b-1 or non12b-1 service fees and, as applicable, including fees and expenses of any underlying funds in which a fund invests.
Except for the 1290 Diversified Bond Fund, the Broadridge expense data was based upon historical information taken from each Fund’s audited annual report for the period ended October 31, 2018. For the 1290 Diversified Bond Fund, the Broadridge expense data was based upon the Fund’s new fees and expenses that went into effect in connection with the Fund’s June 2018 restructuring and were provided to Broadridge by the Adviser. Broadridge provided expense data for Class I shares of each Fund. The Board reviewed the expense data for Class I shares as a proxy for all of a Fund’s share classes. In this regard, the Board noted that the expenses for a Fund’s Class I shares are generally lower than the expenses for a Fund’s other share classes and that the expense comparisons may differ for different classes. Fund-specific contractual advisory fee and total expense ratio comparisons are provided below. The total expense ratio comparisons exclude any12b-1 or non12b-1 service fees. For thefunds-of-funds and certain other Funds as noted below, the total expense ratio comparisons include fees and expenses of any underlying funds in which a fund invests. The Board also took note of the relatively small size of each Fund and the likely impact that a Fund’s size has on its relative expenses.
The Board received a description of, and factored into its evaluation of each Fund’s fees and expenses the limitations inherent in, Broadridge’s methodology for developing and constructing Broadridge categories and for determining, from year to year, which mutual funds should be included in which Broadridge categories, among other things. The Board recognized these inherent limitations and, taking into account commentary and supporting data presented by management, also recognized that comparisons between a Fund and other mutual funds in a Broadridge category may not be as relevant in certain circumstances, given that in some cases a Fund may exhibit notable differences (for example, in its objective(s), management techniques, and relative size) when compared to other mutual funds in a Broadridge category. The Board also noted that the number of mutual funds included in a Broadridge category may be relatively small and may differ significantly from category to category and from year to year and that the constituent mutual funds included in a
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Broadridge category (as well as their respective advisory/administrative fees and total expense ratios) also may differ from year to year, which can limit the relevance of the comparisons. The Board also noted that there is no standard definition of advisory and administrative services, meaning that different mutual funds may receive different services, rendering fee and expense comparisons more difficult. Nonetheless, the Board believed that the independent analysis conducted by Broadridge assisted the Board in evaluating the reasonableness of each Fund’s advisory fee and total expense ratio. The Board also considered that the full effects of certain expense changes that the Adviser had agreed to implement during 2018 were not reflected in the Broadridge expense data, but that all current fees and expenses of each Fund are explicitly disclosed in Fund offering documents.
In addition, with respect to eachsub-advised Fund, the Board further considered the relative levels of thesub-advisory fee paid to the relevantSub-Adviser and the advisory fee retained by the Adviser in light of, among other factors, the nature and extent of responsibilities retained and risks assumed by the Adviser and not delegated to or assumed by the relevantSub-Adviser, and the information prepared by management regarding the level of profits realized by the Adviser in connection with its operation of the Fund. The Board also considered thesub-advisory fee paid to eachSub-Adviser in light of fees charged by theSub-Adviser to similar funds advised orsub-advised by theSub-Adviser.
Allocation Funds
The Board considered that the contractual advisory fee for the 1290 DoubleLine Dynamic Allocation Fund and each of the 1290 Retirement Funds was above the median for the Fund’s respective Broadridge category. The Board also considered that the total expense ratio for the Class I shares of each of these Funds was above the median for the Fund’s respective Broadridge category. For each Fund, the total expense ratio included the fees and expenses of the underlying funds in which the Fund invests.
The Board also considered each 1290 Retirement Fund’s advisory fee rate relative to the advisory fee rates of other portfolios managed by the Adviser that, like the Funds, are structured asfunds-of-funds, and noted that differences in the level of the fees reflected differences between a Fund and otherfunds-of-funds managed by the Adviser.
Active Funds
The Board considered that the contractual advisory fee for the 1290 Low Volatility Global Equity Fund was below the median for the Fund’s Broadridge category. The Board also considered that the total expense ratio for the Class I shares of the Fund was below the median for the Fund’s Broadridge category. The total expense ratio included the fees and expenses of the underlying funds in which the Fund invests.
The Board considered that the contractual advisory fee for each of the 1290 Diversified Bond, 1290 Multi-Alternative Strategies and 1290 SmartBeta Equity Funds was above (but, in the case of the 1290 SmartBeta Equity Fund, within five basis points of) the median for the Fund’s respective Broadridge category. The Board also considered that the total expense ratio for the Class I shares of each of these Funds was at or below the median for the Fund’s respective Broadridge category. For the 1290 Multi-Alternative Strategies Fund, the total expense ratio included the fees and expenses of the underlying funds in which the Fund invests.
The Board considered that the contractual advisory fee for each of the 1290 Convertible Securities, 1290 GAMCO Small/Mid Cap Value, 1290 Global Talents and 1290 High Yield Bond Funds was above (but, in the case of the 1290 GAMCO Small/Mid Cap Value Fund, within five basis points of) the median for the Fund’s respective Broadridge category. The Board also considered that the total expense ratio for the Class I shares of each of these Funds was above the median for the Fund’s respective Broadridge category. For the 1290 GAMCO Small/Mid Cap Value Fund, the total expense ratio included the fees and expenses of underlying funds in which the Fund may invest.
With respect to the 1290 Low Volatility Global Equity and 1290 Multi-Alternative Strategies Funds, the Board also considered each Fund’s advisory fee rate relative to the advisory fee rates of other portfolios managed by the Adviser that, like the Funds, are structured asfunds-of-funds, and noted that differences in the level of the fees reflected differences between a Fund and otherfunds-of-funds managed by the Adviser.
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All Funds
The Board further considered that the advisory fee rate schedules for all Funds other than the 1290 Retirement Funds include breakpoints that reduce the fee rate as a Fund’s assets increase above certain levels. The Board noted that any such reduction in a Fund’s effective advisory fee would result in corresponding reductions in the Fund’s total expense ratios. In addition, the Board considered that the Adviser had contractually agreed to make payments or waive all or a portion of its management, administrative and other fees so that each Fund’s total expense ratios do not exceed certain levels as set forth in its prospectus. In this regard, the Board also noted that the expense limitation arrangements for each of the 1290 DoubleLine Dynamic Allocation, 1290 GAMCO Small/Mid Cap Value, 1290 Low Volatility Global Equity and 1290 Multi-Alternative Strategies Funds and each of the 1290 Retirement Funds include the fees and expenses of any underlying funds in which a Fund invests and, thus, such fees and expenses would not cause a Fund’s annual operating expenses to exceed its expense limitation. The Board noted that, as a result of these expense limitation arrangements, each Fund’s actual advisory fee was lower than its contractual advisory fee and was either at or below the median for the Fund’s respective Broadridge category.
The Board also considered that, after extensive discussions and negotiations with the Adviser, the Adviser had proposed to lower the contractual expense limitation arrangement for the 1290 Convertible Securities Fund effective October 1, 2019, and would present this proposal for the Board’s approval at its September 2019 meeting.
Based on its review, the Board determined, with respect to each Fund, that the Adviser’s advisory fee is fair and reasonable, and the Board determined, with respect to eachsub-advised Fund, that theSub-Adviser’ssub-advisory fee is fair and reasonable.
Profitability and Costs
The Board also considered the level of profits realized by the Adviser and its affiliates in connection with the operation of each Fund. In this respect, the Board reviewed profitability information setting forth the overall profitability of the Trust to the Adviser and its affiliates, as well as the Adviser’s and its affiliates’ profits in providing management and other services to each of the individual Funds during the12-month period ended December 31, 2018, which was the most recent fiscal year for the Adviser. The Board also considered a year-over-year comparison of profitability information for theone-year periods ended December 31, 2018, 2017, and 2016. The Board noted that the Adviser was heavily subsidizing the Funds’ expenses and that the Funds were not profitable.
In reviewing the Adviser’s profitability analysis, attention was given to the methodology the Adviser followed in determining and allocating costs to each Fund. The Board recognized that cost allocation methodologies are inherently subjective and various cost allocation methodologies may each be reasonable while producing different results. In this regard, the Board noted that, although the cost allocation methodology reflected certain changes in the Adviser’s and its affiliates’ cost accounting and other appropriate adjustments, it was consistent with the redesigned cost allocation methodology followed in the profitability report presentation for the Funds made in the prior year. The Board also noted that, in consultation with and through independent legal counsel, the Board’s Audit Committee had engaged an outside consultant to conduct an assessment of the redesigned cost allocation methodology prior to its being integrated into the Adviser’s profitability analysis in connection with the July 2018 annual renewal process. At that time, the Board took into account the consultant’s reported findings that, among other things, the redesigned cost allocation methodology includes expense categories that are reasonable and consistent to the services the Adviser provides to the Funds, the expense categories reviewed are consistent with industry practices and related cost allocation methods, and the allocation of those expenses and associated logic for the allocation to management and administration related revenue categories appear reasonable and consistent with observed industry practices and other established standards. The Board further noted that, in connection with the July 2019 annual renewal process, the Audit Committee had requested that the consultant review and update its prior report in light of the adjustments that had been made to the redesigned cost allocation methodology and that, following such review, the consultant’s aforementioned reported findings remained unchanged. The Board also took into account management’s ongoing costs and expenditures in providing and improving services for the Funds, as well as the need to meet additional regulatory and compliance requirements resulting from changes in rules and other regulations and to adapt to other challenges impacting
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the mutual fund industry. In addition, the Board considered information prepared by management and from third party sources comparing the profitability of the Adviser on an overall basis to the profitability of other publicly held asset managers (including asset managers similar to the Adviser) over various time periods.
In addition, with respect to thesub-advised Funds, the Board also noted that the Board and the Adviser generally are aware of the fees charged by theSub-Advisers to other clients (this information having been provided to the Board and the Adviser by theSub-Advisers in conjunction with the proposed renewal of theSub-Advisory Agreements) and that the Adviser believes that the fees agreed upon with theSub-Advisers are reasonable in light of the nature, quality and extent of the investmentsub-advisory services provided. The Adviser advised the Board that it does not regardSub-Adviser profitability as meaningful to its evaluation of theSub-Advisory Agreements. The Board acknowledged the Adviser’s view ofSub-Adviser profitability, noting the Board’s findings as to the reasonableness of thesub-advisory fees and that the fees paid to theSub-Advisers are the product of negotiations with the Adviser and reflect levels of profitability acceptable to the Adviser and theSub-Advisers based on the particular circumstances in each case for each of them. The Board further noted that eachSub-Adviser’s fee is paid by the Adviser and not thesub-advised Fund and that many responsibilities related to the advisory function are retained by the Adviser. The Board also noted that thesub-advisory fees paid by the Adviser to AXA IM and AXA Rosenberg, which are affiliates of the Adviser, are considered as possiblefall-out benefits.
Based on its consideration of the factors above, the Board determined that the level of profits realized by the Adviser and its affiliates from providing services to each Fund was not excessive in view of the nature, quality and extent of the services provided.
Economies of Scale
The Board also considered whether economies of scale or efficiencies are realized by the Adviser as the Funds grow larger, the extent to which this is reflected in the level of management and administrative fees charged, and whether there is potential for realization of any further economies of scale or efficiencies. While recognizing that any precise determination is inherently subject to assumptions and subjective assessments, the Board considered that any realized 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 manager, and (iv) reinvestment in, and enhancements to, the services that the manager and its affiliates provide to a fund and its shareholders. The Board noted that the advisory fee rate schedules for all Funds other than the 1290 Retirement Funds include breakpoints that reduce the fee rate as Fund assets increase above certain levels. The Board also noted that the Adviser was subsidizing each Fund’s expenses by making payments or waiving all or a portion of its management, administrative and other fees so that the Fund’s total expense ratios do not exceed certain contractual levels as set forth in its prospectus. In this connection, the Board also considered that, after extensive discussions and negotiations with the Adviser, the Adviser had proposed to lower the contractual expense limitation arrangement for one of the Funds, as noted above, effective October 1, 2019, and would present this proposal for the Board’s approval at its September 2019 meeting. In addition, the Board considered that the Adviser shares any realized economies of scale with the Funds in other ways, which may include setting a Fund’s fees so that they are priced to scale. The Board considered that the effect of this pricing strategy is that the Adviser could lose money in the early stages of a Fund’s operation (and bear the risk that the Fund will never become profitable), while shareholders of the Fund receive the benefit of economies of scale that the Adviser expects the Fund will achieve as it grows. The Board further considered that the Adviser shares any realized economies of scale with the Funds through reinvestment in, and enhancements to, the services that the Adviser and its affiliates provide to the Funds and their shareholders, such as hiring additional personnel, providing additional resources in areas relating to management and administration of the Funds, and investing in technology (including cybersecurity improvements).
In addition, the Board noted that thesub-advisory fee schedules for certainSub-Advisers aggregate the assets managed by theSub-Adviser in a Fund and in one or more other mutual funds for which theSub-Adviser serves as investmentsub-adviser and the Adviser serves as investment adviser. The Board also
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noted that thesub-advisory fee schedules for certainSub-Advisers include breakpoints that reduce thesub-advisory fee rate as applicable Fund assets under theSub-Adviser’s management increase above certain levels. In this regard, the Board acknowledged that, at some levels, the breakpoints in asub-advisory fee schedule may result in savings to the Adviser and not to shareholders. The Board also noted that the aggregation of assets may result in the affected Fund(s) reaching a breakpoint sooner than if thesub-advisory fee schedule did not aggregate assets, which also has the potential to benefit the Adviser.
Based on its consideration of the factors above and recognizing that the Funds have relatively short operating histories and relatively low asset levels to date, the Board determined that there was a reasonable sharing of any realized economies of scale or efficiencies under the management, administrative andsub-advisory fee schedules at the present time.
Fall-Out and Other Benefits
The Board also considered the extent to whichfall-out benefits may accrue to the Adviser and its affiliates. In this connection, the Board considered several possiblefall-out benefits and other types of benefits, including the following. The Board noted that the Adviser also serves as the administrator for the Funds and receives compensation for acting in this capacity. In addition, the Board recognized that AXA IM and AXA Rosenberg, affiliates of the Adviser, serve asSub-Advisers to certain of the Funds and receivesub-advisory fees that are paid by the Adviser out of the fees that it earns from those Funds. The Board also noted that AXA Distributors, LLC, also 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 from the Funds compensation (which may include payments pursuant to Rule12b-1 plans with respect to their Class A, Class T (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 Funds. 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 Funds in connection with the purchase and sale of portfolio securities; provided, however, that those transactions, among other things, are consistent with seeking best execution. Based on its review, the Board determined that any“fall-out” benefits and other types of benefits that may accrue to the Adviser are fair and reasonable.
The Board also considered possiblefall-out benefits and other types of benefits that may accrue to aSub-Adviser, including the following. The Board considered that a Sub-Adviser, through its position as a Sub-Adviser to its respective Fund(s), may engage in soft dollar transactions. In addition, the Board considered that a Sub-Adviser may be affiliated with registered broker-dealers who may, from time to time, receive brokerage commissions from a Fund in connection with the purchase and sale of portfolio securities; provided, however, that those transactions, among other things, are consistent with seeking best execution. In cases where aSub-Adviser’s affiliate executed a substantial portion of its respective Fund’s trades, the Board also considered theSub-Adviser’s trading experience and discussed with the Adviser its monitoring of theSub-Adviser’s brokerage selection, commission and other trading costs, and quality of execution. The Board also noted that certainSub-Advisers serve or may serve as investmentsub-advisers for other funds advised by the Adviser and receivesub-advisory fees with respect to those funds. The Board also recognized that aSub-Adviser and its affiliates may sell, and earn sales commissions and/or other compensation with respect to, the Funds and other investment products issued by the Adviser or its affiliates. In addition, the Board noted that aSub-Adviser may benefit from greater exposure in the marketplace with respect to theSub-Adviser’s investment process and from expanding its level of assets under management, and aSub-Adviser 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 eachSub-Adviser are fair and reasonable.
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1290 Funds Performance Appendix
The Board noted that the following information regarding each Fund’s performance relative to a benchmark and/or a blended benchmark and a peer group for theone- and three-year periods, as applicable, and since inception periods ended March 31, 2019, supplemented other performance information (including performance based on rolling time periods) provided to the Board throughout the year and in connection with the annual renewal process. The performance results may differ from the performance results for more recent periods, including those shown elsewhere in this report.
1290 Funds Investment Performance
For the periods ended March 31, 2019
1 Year | 3 Year | Since Inception | ||||||||||||||||||||||||||
Inception Date | Without Sales Charge | With Sales Charge | Without Sales Charge | With Sales Charge | Without Sales Charge | With Sales Charge | ||||||||||||||||||||||
1290 GAMCO Small/Mid Cap Value Fund - Class A | 11/12/2014 | 2.02 | (3.62 | ) | 9.99 | 7.96 | 7.70 | 6.32 | ||||||||||||||||||||
1290 GAMCO Small/Mid Cap Value Fund - Class T | 11/12/2014 | 2.22 | (0.30 | ) | 10.27 | 9.34 | 7.96 | 7.33 | ||||||||||||||||||||
1290 GAMCO Small/Mid Cap Value Fund - Class I | 11/12/2014 | 2.22 | n/a | 10.27 | n/a | 7.96 | n/a | |||||||||||||||||||||
1290 GAMCO Small/Mid Cap Value Fund - Class R | 11/12/2014 | 1.75 | n/a | 9.71 | n/a | 7.42 | n/a | |||||||||||||||||||||
LipperSmall-Cap Core Funds | 0.09 | n/a | 10.06 | n/a | 6.44 | n/a | ||||||||||||||||||||||
Russell 2500 Value Index | 1.84 | n/a | 9.85 | n/a | 6.23 | n/a | ||||||||||||||||||||||
1290 Convertible Securities Fund - Class A | 07/06/2015 | 5.56 | 0.80 | 9.90 | 8.22 | 5.62 | 4.33 | |||||||||||||||||||||
1290 Convertible Securities Fund - Class I | 07/06/2015 | 5.80 | n/a | 10.17 | n/a | 5.88 | n/a | |||||||||||||||||||||
1290 Convertible Securities Fund - Class R | 07/06/2015 | 5.22 | n/a | 9.60 | n/a | 5.34 | n/a | |||||||||||||||||||||
Lipper Convertible Securities Funds | 6.34 | n/a | 10.68 | n/a | 6.35 | n/a | ||||||||||||||||||||||
ICE BofA Merrill Lynch US Convertible Index | 7.84 | n/a | 12.09 | n/a | 7.33 | n/a | ||||||||||||||||||||||
1290 Multi-Alternative Strategies Fund - Class A | 07/06/2015 | 0.86 | (4.66 | ) | 2.20 | 0.31 | 1.11 | (0.41 | ) | |||||||||||||||||||
1290 Multi-Alternative Strategies Fund - Class I | 07/06/2015 | 1.02 | n/a | 2.42 | n/a | 1.34 | n/a | |||||||||||||||||||||
1290 Multi-Alternative Strategies Fund - Class R | 07/06/2015 | 0.61 | n/a | 1.97 | n/a | 0.86 | n/a | |||||||||||||||||||||
Lipper Alternative Multi-Strategy Funds | (0.72 | ) | n/a | 1.91 | n/a | 0.79 | n/a | |||||||||||||||||||||
ICE BofA Merrill Lynch US3-Month Treasury Bill Index | 2.12 | n/a | 1.19 | n/a | 0.99 | n/a | ||||||||||||||||||||||
1290 Global Talents Fund - Class A | 04/11/2016 | (3.67 | ) | (8.94 | ) | 8.84 | 6.80 | |||||||||||||||||||||
1290 Global Talents Fund - Class I | 04/11/2016 | (3.42 | ) | n/a | 9.11 | n/a | ||||||||||||||||||||||
1290 Global Talents Fund - Class R | 04/11/2016 | (3.91 | ) | n/a | 8.58 | n/a | ||||||||||||||||||||||
Lipper GlobalMulti-Cap Growth Funds | 3.21 | n/a | 11.92 | n/a | ||||||||||||||||||||||||
MSCI ACWI (Net) Index | 2.60 | n/a | 11.14 | n/a | ||||||||||||||||||||||||
1290 Low Volatility Global Equity Fund - Class I | 02/27/2017 | 6.40 | n/a | 8.62 | n/a | |||||||||||||||||||||||
Lipper GlobalMulti-Cap Core Funds | 0.64 | n/a | 7.59 | n/a | ||||||||||||||||||||||||
MSCI ACWI Minimum Volatility (Net) Index | 9.04 | n/a | 9.72 | n/a | ||||||||||||||||||||||||
MSCI ACWI (Net) Index | 2.60 | n/a | 8.72 | n/a | ||||||||||||||||||||||||
1290 SmartBeta Equity Fund - Class A | 11/12/2014 | 6.96 | 1.09 | 9.70 | 7.66 | 7.36 | 5.99 | |||||||||||||||||||||
1290 SmartBeta Equity Fund - Class T | 11/12/2014 | 7.22 | 4.54 | 9.96 | 9.04 | 7.63 | 7.00 | |||||||||||||||||||||
1290 SmartBeta Equity Fund - Class I | 11/12/2014 | 7.22 | n/a | 9.96 | n/a | 7.63 | n/a | |||||||||||||||||||||
1290 SmartBeta Equity Fund - Class R | 11/12/2014 | 6.69 | n/a | 9.40 | n/a | 7.09 | n/a | |||||||||||||||||||||
Lipper GlobalLarge-Cap Core Funds | 1.97 | n/a | 9.99 | n/a | 5.80 | n/a | ||||||||||||||||||||||
MSCI World (Net) Index | 4.01 | n/a | 10.68 | n/a | 6.87 | n/a | ||||||||||||||||||||||
1290 High Yield Bond Fund - Class A | 11/12/2014 | 4.88 | 0.16 | 7.74 | 6.10 | 3.89 | 2.80 | |||||||||||||||||||||
1290 High Yield Bond Fund - Class T | 11/12/2014 | 5.15 | 2.56 | 8.00 | 7.08 | 4.14 | 3.53 | |||||||||||||||||||||
1290 High Yield Bond Fund - Class I | 11/12/2014 | 5.03 | n/a | 7.99 | n/a | 4.14 | n/a | |||||||||||||||||||||
1290 High Yield Bond Fund - Class R | 11/12/2014 | 4.63 | n/a | 7.48 | n/a | 3.64 | n/a |
196
1 Year | 3 Year | Since Inception | ||||||||||||||||||||||||||
Inception Date | Without Sales Charge | With Sales Charge | Without Sales Charge | With Sales Charge | Without Sales Charge | With Sales Charge | ||||||||||||||||||||||
Lipper High Yield Funds | 4.39 | n/a | 6.93 | n/a | 3.89 | n/a | ||||||||||||||||||||||
ICE BofA Merrill Lynch US High Yield Index | 5.94 | n/a | 8.69 | n/a | 4.99 | n/a | ||||||||||||||||||||||
1290 Diversified Bond Fund - Class A | 07/06/2015 | 4.96 | 0.28 | 4.29 | 2.69 | 2.94 | 1.68 | |||||||||||||||||||||
1290 Diversified Bond Fund - Class I | 07/06/2015 | 5.30 | n/a | 4.56 | n/a | 3.22 | n/a | |||||||||||||||||||||
1290 Diversified Bond Fund - Class R | 07/06/2015 | 4.73 | n/a | 4.02 | n/a | 2.68 | n/a | |||||||||||||||||||||
Lipper Core Plus Bond Funds | 4.02 | n/a | 2.93 | n/a | 2.70 | n/a | ||||||||||||||||||||||
Bloomberg Barclays U.S. Aggregate Bond Index | 4.48 | n/a | 2.03 | n/a | 2.54 | n/a | ||||||||||||||||||||||
1290 DoubleLine Dynamic Allocation Fund - Class A | 03/07/2016 | 5.01 | (0.80 | ) | 6.23 | 4.25 | 6.71 | 4.76 | ||||||||||||||||||||
1290 DoubleLine Dynamic Allocation Fund - Class I | 03/07/2016 | 5.18 | n/a | 6.48 | n/a | 6.95 | n/a | |||||||||||||||||||||
1290 DoubleLine Dynamic Allocation Fund - Class R | 03/07/2016 | 4.74 | n/a | 5.94 | n/a | 6.43 | n/a | |||||||||||||||||||||
Lipper Mixed-Asset Target Allocation Moderate Funds | 3.17 | n/a | 6.74 | n/a | 6.74 | n/a | ||||||||||||||||||||||
60% S&P 500 Index / 40% Bloomberg Barclays U.S. Aggregate Bond Index | 7.78 | n/a | 8.95 | n/a | 9.57 | n/a | ||||||||||||||||||||||
1290 Retirement 2020 Fund - Class I | 02/27/2017 | 5.16 | n/a | 6.13 | n/a | |||||||||||||||||||||||
Lipper Mixed-Asset Target 2020 Funds | 3.24 | n/a | 5.23 | n/a | ||||||||||||||||||||||||
S&P Target Date 2020 Index | 3.94 | n/a | 5.73 | n/a | ||||||||||||||||||||||||
1290 Retirement 2025 Fund - Class I | 02/27/2017 | 5.50 | n/a | 6.85 | n/a | |||||||||||||||||||||||
Lipper Mixed-Asset Target 2025 Funds | 3.32 | n/a | 5.98 | n/a | ||||||||||||||||||||||||
S&P Target Date 2025 Index | 3.90 | n/a | 6.31 | n/a | ||||||||||||||||||||||||
1290 Retirement 2030 I Fund - Class I | 02/27/2017 | 5.60 | n/a | 7.29 | n/a | |||||||||||||||||||||||
Lipper Mixed-Asset Target 2030 Funds | 3.16 | n/a | 6.64 | n/a | ||||||||||||||||||||||||
S&P Target Date 2030 Index | 3.82 | n/a | 6.84 | n/a | ||||||||||||||||||||||||
1290 Retirement 2035 Fund - Class I | 02/27/2017 | 5.65 | n/a | 7.59 | n/a | |||||||||||||||||||||||
Lipper Mixed-Asset Target 2035 Funds | 3.06 | n/a | 7.43 | n/a | ||||||||||||||||||||||||
S&P Target Date 2035 Index | 3.66 | n/a | 7.30 | n/a | ||||||||||||||||||||||||
1290 Retirement 2040 Fund - Class I | 02/27/2017 | 5.93 | n/a | 8.01 | n/a | |||||||||||||||||||||||
Lipper Mixed-Asset Target 2040 Funds | 2.89 | n/a | 7.57 | n/a | ||||||||||||||||||||||||
S&P Target Date 2040 Index | 3.59 | n/a | 7.63 | n/a | ||||||||||||||||||||||||
1290 Retirement 2045 Fund - Class I | 02/27/2017 | 5.98 | n/a | 8.31 | n/a | |||||||||||||||||||||||
Lipper Mixed-Asset Target 2045 Funds | 2.90 | n/a | 8.01 | n/a | ||||||||||||||||||||||||
S&P Target Date 2045 Index | 3.46 | n/a | 7.78 | n/a | ||||||||||||||||||||||||
1290 Retirement 2050 Fund - Class I | 02/27/2017 | 6.14 | n/a | 8.68 | n/a | |||||||||||||||||||||||
Lipper Mixed-Asset Target 2050 Funds | 2.80 | n/a | 7.87 | n/a | ||||||||||||||||||||||||
S&P Target Date 2050 Index | 3.41 | n/a | 7.93 | n/a | ||||||||||||||||||||||||
1290 Retirement 2055 Fund - Class I | 02/27/2017 | 6.11 | n/a | 8.99 | n/a | |||||||||||||||||||||||
Lipper Mixed-Asset Target 2055+ Funds | 2.87 | n/a | 8.21 | n/a | ||||||||||||||||||||||||
S&P Target Date 2055 Index | 3.37 | n/a | 7.99 | n/a | ||||||||||||||||||||||||
1290 Retirement 2060 Fund - Class I | 02/27/2017 | 6.38 | n/a | 9.17 | n/a | |||||||||||||||||||||||
Lipper Mixed-Asset Target 2055+ Funds | 2.87 | n/a | 8.21 | n/a | ||||||||||||||||||||||||
S&P Target Date 2060+ Index | 3.50 | n/a | 8.13 | n/a |
197
Federal Income Tax Information (Unaudited)
Funds: | 70% Dividend Received Deduction | Foreign Taxes | Foreign Source Income | Long Term Capital Gain | ||||||||||||
1290 Convertible Securities | 0.00 | % | — | % | — | % | $ | 820,812 | ||||||||
1290 Diversified Bond | 0.00 | — | — | — | ||||||||||||
1290 DoubleLine Dynamic Allocation | 12.28 | — | — | 1,627,303 | ||||||||||||
1290 GAMCO Small/Mid Cap Value | 100.00 | — | — | 212,987 | ||||||||||||
1290 Global Talents | 100.00 | — | — | 1,259,775 | ||||||||||||
1290 High Yield Bond | 0.00 | — | — | — | ||||||||||||
1290 Low Volatility Global Equity | 44.02 | 3,838 | 31,638 | 5,361 | ||||||||||||
1290 Multi-Alternative Strategies | 42.72 | 2,591 | 21,324 | 21,640 | ||||||||||||
1290 Retirement 2020 | 51.47 | 3,650 | 40,897 | 22,023 | ||||||||||||
1290 Retirement 2025 | 75.75 | 7,076 | 70,262 | 14,712 | ||||||||||||
1290 Retirement 2030 | 54.67 | 2,730 | 25,728 | 4,009 | ||||||||||||
1290 Retirement 2035 | 69.79 | 3,975 | 37,475 | 1,252 | ||||||||||||
1290 Retirement 2040 | 54.01 | 1,866 | 17,645 | 2,736 | ||||||||||||
1290 Retirement 2045 | 65.08 | 2,794 | 26,442 | 1,428 | ||||||||||||
1290 Retirement 2050 | 61.23 | 2,131 | 20,180 | 2,824 | ||||||||||||
1290 Retirement 2055 | 65.01 | 2,103 | 19,899 | 2,655 | ||||||||||||
1290 Retirement 2060 | 64.96 | 2,072 | 19,734 | 2,604 | ||||||||||||
1290 SmartBeta Equity | 72.04 | — | — | 637,011 |
198
MANAGEMENT OF THE TRUST (UNAUDITED)
The Trust’s Board is responsible for the overall management of the Trust and the Funds, including general supervision and review of the Funds’ investment activities and their conformity with federal and state law as well as the stated policies of the Funds. The Board elects the officers of the Trust who are responsible for administering the Trust’s day-to-day operations. The Trustees of the Trust are identified in the table below along with information as to their principal business occupations held during the last five years and certain other information are shown below. The SAI includes additional information about the Trust’s Board and is available at the Funds’ website www.1290funds.com and available without charge upon request by calling1-888-310-0416 or by sending an e-mail request to 1290funds@dfinsolutions.com.
The Trustees
Name, Address and Year of Birth | Position(s) Held With Fund | Term of Office** and Length of Time Served | Principal Occupation(s) During Past 5 Years | Number of in Fund by Trustee† | Other Directorships Held by Trustee During Past 5 Years | |||||
Interested Trustees | ||||||||||
Steven M. Joenk* 1290 Avenue of the Americas, New York, New York (1958) | Trustee, President and Chief Executive Officer | From October 1, 2017 to present, Trustee, President and Chief Executive Officer and from June 9, 2014 through September 30, 2017, Trustee, Chairman, President and Chief Executive Officer | From May 2011 to present, Chairman of the Board, Chief Executive Officer and President, 1290 Asset Managers; from April 2017 to present, Senior Vice President and Chief Investment Officer of AXA Financial, Inc.; from April 2017 to present, Managing Director and Chief Investment Officer and from September 1999 to April 2017, Managing Director, AXA Equitable Life Insurance Company (“AXA Equitable”); from September 2004 to April 2011, President, AXA Equitable’s Funds Management Group (“FMG”) unit; from July 2004 to October 1, 2013, Senior Vice President, MONY Life Insurance Company; from April 2017 to present, Senior Vice President and Chief Investment Officer and from July 2004 to April 2017, Senior Vice President, MONY Life Insurance Company of America; from April 2017 to present, Senior Vice President and Chief Investment Officer, PlanConnect, LLC; from July 2004 to present, Director, MONY Capital Management, Inc., Director and President, 1740 Advisers, Inc.; from July 2004 to January 2011, Director, Chairman of the Board and President, MONY Asset Management, Inc. and Enterprise Capital Management; from January 2005 to January 2011, Director, MONY Financial Resources of Americas Limited; and from November 2005 to present, Director MONY International Holdings, LLC. | 145 | None |
199
Name, Address and Year of Birth | Position(s) Held With Fund | Term of Office** and Length of Time Served | Principal Occupation(s) During Past 5 Years | Number of in Fund by Trustee† | Other Directorships Held by Trustee During Past 5 Years | |||||
Independent Trustees | ||||||||||
Mark A. Barnard c/o 1290 Funds 1290 Avenue of the Americas New York, NY 10104 (1949) | Trustee | From February 27, 2017 to present | From 1995 to 1998, Manager of Private Investments, from 1998 to 2001, Director of Private Investments, and from 2001 to 2016, Managing Director – Private Investments, Howard Hughes Medical Institute; from 1985 to 1992, Assistant Director of Real Estate, and from 1992 to 1995, Associate Director of Real Estate, Massachusetts Institute of Technology. | 145 | None. | |||||
Thomas W. Brock c/o 1290 Funds 1290 Avenue of the Americas New York, New York 10104 (1947) | Trustee | From January 1, 2016 to present | From June 2016 to May 2017, Director, President and Chief Executive Officer and from January 2016 to June 2016 Director and interim President and Chief Executive Officer, Silver Bay Realty Trust Corp.; from 2006 to 2012, Chief Executive Officer and Co-Founder of Stone Harbor Investment Partners. | 145 | From December 2012 to January 2016, Lead Independent Director, Audit Committee Member and Compensation Committee Chair, Silver Bay Realty Trust Corp.; from 2016 to present, Chair and from 2005 to present, Director and Audit Committee Member, Liberty All-Star Funds (2); and from 2006 to 2012, Director, Stone Harbor Investment Funds (5). | |||||
Michael B. Clement*** c/o 1290 Funds 1290 Avenue of the Americas New York, New York 10104 (1957) | Trustee | From January 1, 2019 to present | From 2011 to present, Professor of Accounting, most recently was appointed Department of Accounting Chair effective September 2018, and from 1997 to 2002, Assistant Professor, University of Texas; from 2002 to 2004, Vice President – Global Investment Research, Goldman Sachs; from 1988 to 1991, Vice President – Capital Planning and Analysis, and from 1982 to 1986, Manager – Audit Division, Citicorp; and from 1980 to 1982, Senior Assistant Accountant, Deloitte Haskins & Sells. | 145 | None. | |||||
Donald E. Foley c/o 1290 Funds 1290 Avenue of the Americas New York, New York 10104 (1951) | Trustee | From June 9, 2014 to present | From 2010 to 2011, Chairman of the Board and Chief Executive Officer, Wilmington Trust Corporation; from 1996 to 2010, Senior Vice President, Treasurer and Director of Tax, ITT Corporation; from 1989 to 1996, Assistant Treasurer, International Paper Company. | 145 | From 2011 to 2012 Director, and from 2012 to 2016, Advisory Committee Member, M&T Corporation; from 2007 to 2011, Director and member of the Audit Committee and Compensation Committee, Wilmington Trust Corporation; from 2008 to 2010, Advisory Board member, Northern Trust Company and Goldman Sachs Management Groups; from 2015 to present, Director, BioSig Technologies, Inc.; and from 2015 to present, Director, Wilmington Funds. |
200
Name, Address and Year of Birth | Position(s) Held With Fund | Term of Office** and Length of Time Served | Principal Occupation(s) During Past 5 Years | Number of in Fund by Trustee† | Other Directorships Held by Trustee During Past 5 Years | |||||
Christopher P.A. Komisarjevsky c/o 1290 Funds 1290 Avenue of the Americas New York, New York 10104 (1945) | Trustee | From June 9, 2014 to present | From 2006 to 2008, Senior Counselor for APCO Worldwide® (global communications consulting) and a member of its International Advisory Council; from 1998 to 2005, President and Chief Executive Officer, Burson-Marsteller Worldwide (public relations); from 1996 to 1998, President and Chief Executive Officer of Burson-Marsteller U.S.A. | 145 | None | |||||
H. Thomas McMeekin c/o 1290 Funds 1290 Avenue of the Americas New York, New York 10104 (1953) | Trustee | From June 9, 2014 to present | From 2015 to present, CEO of Blue Key Services, LLC., from 2000 to present, Managing Partner and Founder of Griffin Investments, LLC; from 2009 to 2012 Chief Investment Officer, AIG Life & Retirement and United Guaranty Corporation and Senior Managing Director of AIG Asset Management. | 145 | From 2015 to present, Director, Blue Key Services LLC; from 2012 to present, Director, Achaean Financial Group; from 2011 to 2012, Director, US Life Insurance Company in the City of New York. | |||||
Gloria D. Reeg c/o 1290 Funds 1290 Avenue of the Americas New York, New York 10104 (1951) | Trustee | From February 27, 2017 to present | From 2007 to 2016, Chief Investment Officer and Senior Vice President, New York-Presbyterian Hospital; from 2005 to 2007, Trustee and Treasurer, Casey Family Programs (foundation); from 2002 to 2004, Global Head of Fixed Income and Executive Director, Principal Global Investors (asset management firm); 1992 to 2000, Managing Director – Global Consulting, Russell Investment Group. | 145 | None. | |||||
Gary S. Schpero c/o 1290 Funds 1290 Avenue of the Americas New York, New York 10104 | Chairman of the Board | From June 9, 2014 to present Independent Trustee, from October 1, 2017 to present, Chairman of the Board and from June 9, 2014 through September 2017, Lead Independent Trustee | Prior to January 1, 2000, Partner of Simpson Thacher & Bartlett (law firm) and Managing Partner of the Investment Management and Investment Company Practice Group. | 145 | From May 2012 to present, Trustee, Blackstone/GSO Senior Floating Rate Term Fund and Blackstone/GSO Long – Short Credit Income Fund; from October 2012 to present, Trustee, Blackstone/GSO Strategic Credit Fund; from September 2017 to present, Trustee, Blackstone/GSO Floating Rate Enhanced Income Fund. |
201
Name, Address and Year of Birth | Position(s) Held With Fund | Term of Office** and Length of Time Served | Principal Occupation(s) During Past 5 Years | Number of in Fund by Trustee† | Other Directorships Held by Trustee During Past 5 Years | |||||
Kathleen Stephansen*** c/o 1290 Funds 1290 Avenue of the Americas New York, New York 10104 (1954) | Trustee | From January 1, 2019 to present | From 2018 to present and in 2016, Senior Economic Advisor-Henderson Institute Center for Macroeconomics, Boston Consulting Group; From 2016 to 2018, Chief Economist, Huawei Technologies USA Inc.; from 2010 to 2016, held various positions at American International Group, including Chief Economist and Senior Managing Director and Senior Investment Strategies and Global Head of Sovereign Research – AIG Asset Management; from 2009 to 2010, Chief Economist and Managing Director, Aladdin Capital; from 2000 to 2009, Director and Head of Global Economics, Credit Suisse Securities (USA) LLC; and from 1984 to 2000,Co-Head of Economic Research and Chief International Economist, Donaldson, Lufkin & Jenrette Corporation. | 145 | None. | |||||
Caroline L. Williams c/o 1290 Funds 1290 Avenue of the Americas New York, New York 10104 (1946) | Trustee | From June 9, 2014 to present | From July 2010 to December 2012, Executive Vice President, from May 2005 to December 2007, Consultant and from May 2001 to May 2005, Chief Financial and Investment Officer, Nathan Cummings Foundation (non-profit organization); from 1988 to 1992, Managing Director, from 1982 to 1988, Senior Vice President, from 1978 to 1982, Vice President and from 1971 to 1976, Associate, Donaldson, Lufkin & Jenrette Securities Corporation (investment bank) from 1997 to 2009, Director, Hearst-Argyle Television. | 145 | None. |
* | Affiliated with the Adviser. |
** | Each Trustee serves during the existence of the Trust until the next meeting of shareholders called for the purpose of electing Trustees and until the election and qualification of his or her successor or, if sooner, until he or she dies, declines to serve, resigns, retires, is removed, is incapacitated or is otherwise unable or unwilling to serve. Each Independent Trustee shall retire from the Board as of the last day of the calendar year in which he or she attains the age of 75 years. |
*** | Mr. Clement and Ms. Stephansen each served as a consultant to the Board from September 1, 2018, through December 31, 2018. Mr. Clement and Ms. Stephansen began serving as Trustees of the Trust effective as of January 1, 2019. |
† | The registered investment companies in the fund complex include the AXA Premier VIP Trust, EQ Advisors Trust and 1290 Funds. Mr. Joenk serves as Trustee, President and Chief Executive Officer for each of the registered investment companies in the fund complex. Mr. Schpero serves as Chairman of the Board for each such company. |
202
The Trust’s Officers
Each officer of the Trust is an employee of AXA Equitable, FMG LLC, and/or AXA Distributors, LLC (“AXA Distributors”). The Trust’s principal officers are:
Name, Address and Year of Birth | Position(s) Held With Fund | Term of Office and Length of Time Served* | Principal Occupation(s) During Past 5 Years | |||
Steven M. Joenk 1290 Avenue of the Americas, New York, New York 10104 | Trustee, President and Chief Executive Officer | Trustee, President and Chief Executive Officer from June 2014 to present; Chairman of the Board from June 2014 through September 2017 | From May 2011 to present, Chairman of the Board, Chief Executive Officer and President, 1290 Asset Managers; from April 2017 to present, Senior Vice President and Chief Investment Officer, AXA Financial, Inc.; from April 2017 to present, Managing Director and Chief Investment Officer and from September 1999 to April 2017, Managing Director, AXA Equitable; from September 2004 to April 2011, President, AXA Equitable’s Funds Management Group unit; from July 2004 to October 2013, Senior Vice President, MONY Life Insurance Company; from April 2017 to present, Senior Vice President and Chief Investment Officer, MONY Financial Services, Inc.; from April 2017 to present, Senior Vice President and Chief Investment Officer and from July 2004 to April 2017, Senior Vice President, MONY Life Insurance Company of America; from April 2017 to present, Senior Vice President and Chief Investment Officer, PlanConnect, LLC; from July 2004 to present, Director, MONY Capital Management, Inc. and Director and President, 1740 Advisers, Inc.; from July 2004 to January 2011, Director, Chairman of the Board and President, MONY Asset Management, Inc. and Enterprise Capital Management; from January 2005 to January 2011, Director, MONY Financial Resources of Americas Limited; and from November 2005 to present, Director MONY International Holdings, LLC. | |||
William MacGregor 1290 Avenue of the Americas, New York, New York 10104 (1975) | Chief Legal Officer, Senior Vice President and Secretary | Senior Vice President and Secretary from August 2018 to present; Chief Legal Officer from October 2018 to present | From August 2018 to present, Managing Director and Associate General Counsel of AXA Equitable; Executive Vice President and Secretary of 1290 Asset Managers; from January 2017 to June 2018, Executive Director and Deputy General Counsel at UBS Business Solutions LLC; from July 2015 to June 2018, Executive Director and Deputy General Counsel at UBS Asset Management (Americas) Inc.; from June 2012 to July 2015, Senior Vice President, Secretary and Associate General Counsel of 1290 Asset Managers; from May 2008 to July 2015, Lead Director and Associate Counsel of AXA Equitable. | |||
Brian Walsh 1290 Avenue of the Americas, New York, New York 10104 (1968) | Chief Financial Officer and Treasurer | From June 2014 to present | From May 2011 to present, Senior Vice President of 1290 Asset Managers; from February 2011 to present, member of the Board of Directors of 1290 Asset Managers; from February 2003 to present, Lead Director of AXA Equitable. |
203
Name, Address and Year of Birth | Position(s) Held With Fund | Term of Office and Length of Time Served* | Principal Occupation(s) During Past 5 Years | |||
Kenneth Kozlowski 1290 Avenue of the Americas New York, New York 10104 | Senior Vice President and Chief Investment Officer | From June 2014 to present | From June 2012 to present, Executive Vice President and Chief Investment Officer of 1290 Asset Managers; from May 2011 to June 2012, Senior Vice President of 1290 Asset Managers; from September 2011 to present, Managing Director of AXA Financial and AXA Equitable; from February 2001 to September 2011, Vice President of AXA Equitable; from July 2004 to January 2011, Director, Enterprise Capital Management, Inc. | |||
Joseph J. Paolo 1290 Avenue of the Americas, New York, New York 10104 (1970) | Chief Compliance Officer and Vice President | From June 2014 to present | From May 2011 to present, Senior Vice President and Chief Compliance Officer of 1290 Asset Managers; from June 2007 to present, Lead Director of AXA Equitable and Chief Compliance Officer of AXA Equitable’s FMG. | |||
Alwi Chan 1290 Avenue of the Americas, New York, New York 10104 | Vice President and Deputy Chief Investment Officer | From June 2014 to present | From June 2012 to present, Senior Vice President and Deputy Chief Investment Officer of 1290 Asset Managers; from May 2011 to June 2012, Vice President of 1290 Asset Managers; from February 2007 to present, Lead Director of AXA Equitable. | |||
James Kelly 1290 Avenue of the Americas, New York, New York 10104 (1968) | Controller | From June 2014 to present | From May 2011 to present, Vice President of 1290 Asset Managers; from September 2008 to present, Senior Director of AXA Equitable; from March 2006 to September 2008, Assistant Vice President, AXA Equitable. | |||
Mary E. Cantwell 1290 Avenue of the Americas, New York, New York 10104 | Vice President | From June 2014 to present | From June 2012 to present, Senior Vice President of 1290 Asset Managers; from February 2011 to present member of Board of Directors of 1290 Asset Managers; from May 2011 to June 2012, Vice President of 1290 Asset Managers; and from February 2001 to present, Lead Director, AXA Equitable. | |||
Roselle Ibanga 1290 Avenue of the Americas, New York, New York 10104 (1978) | Assistant Controller | From June 2014 to present | From February 2009 to present, Director of AXA Equitable. | |||
Lisa Perrelli 1290 Avenue of the Americas, New York, New York 10104 (1974) | Assistant Controller | From June 2014 to present | From November 2012 to present, Senior Director of AXA Equitable; from September 2008 to November 2012, Assistant Vice President of AXA Equitable. | |||
Kiesha T. Astwood-Smith, Esq. 1290 Avenue of the Americas, New York, New York 10104 (1973) | Vice President and Assistant Secretary | From September 2015 to present | From December 2015 to present, Vice President, Assistant Secretary and Associate General Counsel of 1290 Asset Managers; from September 2015 to present, Senior Director and Counsel of AXA Equitable. From July 2006 to September 2015, Counsel of The Bank of New York Mellon; and from January 2010 to September 2015 Vice President and Assistant Secretary of the Dreyfus Family of Funds. | |||
Victoria Zozulya, Esq. 1290 Avenue of the Americas, New York, New York 10104 (1983) | Vice President and Assistant Secretary | From December 2018 to present. | From September 2018 to present, Senior Director and Counsel of AXA Equitable; from May 2011 to March 2014, Compliance Analyst, and from March 2014 to August 2018, Vice President and Assistant General Counsel, Neuberger Berman. |
204
Name, Address and Year of Birth | Position(s) Held With Fund | Term of Office and Length of Time Served* | Principal Occupation(s) During Past 5 Years | |||
Carla Byer 1290 Avenue of the Americas, New York, New York 10104 (1976) | Vice President | From June 2017 to present | From April 2017 to present, Vice President of 1290 Asset Managers. From April 2014 through August 2016, Senior Vice President, Zealot Networks. From September 2008 through April 2012, Vice President of FMG LLC. | |||
Patricia Cox 1290 Avenue of the Americas, New York, New York 10104 (1958) | Vice President and Anti-Money Laundering Compliance Officer | From June 2014 to present | From June 2014 to present, Vice President of 1290 Asset Managers; from April 2014 to present, Senior Director of AXA Equitable; Operations Consultant for Wells Real Estate Funds March 2009-September 2010; Director of Transfer Agent Operations for Wells Real Estate Funds October 2010 - March 2014; Senior VP of Operations for the AXA Enterprise Group of Funds August 2004-August 2008. | |||
Miao Hu 1290 Avenue of the Americas, New York, New York 10104 (1978) | Vice President | From June 2016 to present | From June 2016 to present, Vice President of 1290 Asset Managers; from December 2014 to present, Director of Portfolio Analytics of AXA Equitable; from November 2013 to December 2014, Lead Manager of Portfolio Analytics of AXA Equitable; from January 2011 to November 2013, Financial Services Sector Specialist of FactSet Research Systems. | |||
Michal Levy 1290 Avenue of the Americas, New York, New York 10104 (1979) | Vice President | From June 2016 to present | From December 2014 to present, member of the Board of Directors; from March 2017 to present, Senior Vice President and Chief Operating Officer of 1290 Asset Managers; and from June 2014 to March 2017, Vice President of 1290 Asset Managers; from October 2013 to present, Senior Director of AXA Equitable; from October 2011 to October 2013, Assistant Vice President of AXA Equitable; and from October 2008 to October 2011, Vice President of Portfolio Valuation at Duff & Phelps. | |||
Xavier Poutas 1290 Avenue of the Americas, New York, New York 10104 (1977) | Vice President | From June 2016 to present | From May 2011 to present, Assistant Portfolio Manager of 1290 Asset Managers and from June 27, 2016 to present, Vice President of 1290 Asset Managers; from September 2013 to present, Senior Director of AXA Equitable; and from November 2008 to August 2013, Director of AXA Equitable. | |||
Helen Lai 1290 Avenue of the Americas, New York, New York 10104 (1973) | Assistant Vice President | From June 2016 to present | From March 2013 to present, Pricing and Valuation-Compliance of 1290 Asset Managers and Senior Manager, AXA Equitable; and from May 2009 to December 2012, HSBC, Hedge Fund Investor Services. |
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Name, Address and Year of Birth | Position(s) Held With Fund | Term of Office and Length of Time Served* | Principal Occupation(s) During Past 5 Years | |||
Jennifer Mastronardi 1290 Avenue of the Americas, New York, New York 10104 (1985) | Assistant Vice President | From June 2014 to present | From February 2009 to present, Director of AXA Equitable; from April 2015 to present, Vice President of 1290 Asset Managers; from June 2007 to February 2009, Operations Associate in Managed Futures Department, Morgan Stanley. | |||
Helen Espaillat 1290 Avenue of the Americas, New York, New York 10104 (1963) | Assistant Secretary | From June 2014 to present | From July 2004 to present, Lead Manager/Legal Assistant for AXA Equitable and from March 2015 to present Assistant Vice President and Assistant Secretary of 1290 Asset Managers. | |||
Lorelei Fajardo 1290 Avenue of the Americas, New York, New York 10104 (1978) | Assistant Secretary | From June 2016 to present | From July 2013 to present, Senior Manager/Legal Assistant of AXA Equitable; from July 2008 to June 2013, Lead Associate/Legal Assistant of AXA Equitable. | |||
Bradley Tobin 1290 Avenue of the Americas, New York, New York 10104 (1974) | Vice President – Director of Risk | From September 2019 to present | From January 2019 to present, Director of Risk Management for AXA Equitable; from February 2004 to December 2016 Investment Management at Prudential Annuities. | |||
Thomas Lewis 1290 Avenue of the Americas, New York, New York 10104 (1987) | Vice President | From September 2019 to present | From July 2019 to present, Vice President of FMG LLC; from January 2019 to present, Senior Director of AXA Equitable; from June 2015 to December 2018, Director of AXA Equitable; from April 2014 to May 2015 Lead Manager of AXA Equitable; from July 2013 to March 2014, Senior Manager of AXA Equitable. | |||
Artemis Brannigan 1290 Avenue of the Americas, New York, New York 10104 (1974) | Vice President | From September 2019 to present | From August 2019 to present, Senior Director of AXA Equitable; From January 2016 to July 2019, Director of Prudential Financial; From October 2006 to December 2015, Vice President of BlackRock. | |||
Kevin McCarthy 1290 Avenue of the Americas, New York, New York 10104 (1983) | Vice President | From September 2019 to present | From December 2018 to present, Assistant Portfolio Manager and a Director of AXA Equitable. From August 2015 to November 2018, Lead Manager of AXA Equitable; From October 2013 to August 2015, Senior Quantitative Analyst at Aviva Investors. | |||
Cheryl Cherian 1290 Avenue of the Americas, New York, New York 10104 (1979) | Assistant Secretary | From July 2019 to present | From April 2019 to present, Lead Manager – Legal Assistant of AXA Equitable; and from November 2016 to March 2018 worked at a mutual fund company. | |||
Monica Giron 1290 Avenue of the Americas, New York, New York 10104 (1976) | Assistant Secretary | From July 2019 to present | From June 2019 to present, Lead Manager-Senior Legal Assistant of AXA Equitable; and from August 2015 to May 2019, Senior Paralegal at Gemini Fund Services. |
* | The officers in the table above (except Patricia Cox) hold similar positions with other registered investment companies in the fund complex. The registered investment companies in the fund complex include the Trust, AXA Premier VIP Trust and EQ Advisors Trust. |
** | Each officer is elected on an annual basis. |
206
PROXY VOTING RESULTS (UNAUDITED)
At a Special Meeting of Shareholders held on November 1, 2018, shareholders of the 1290 Retirement 2060 Fund approved a new investment advisory agreement between AXA Equitable Funds Management Group, LLC dba 1290 Asset Managers® (the “Adviser”) and the Trust, on behalf of the 1290 Retirement 2060 Fund. The results of the shareholder vote are as follows:
Fund | For | Against | Abstain | |||||||||
1290 Retirement 2060 Fund | 250,001.145 | 0.000 | 0.000 |
At a Special Meeting of Shareholders held on November 1, 2018, shareholders of the 1290 Retirement 2060 Fund approved upon a Change of Control Event prompted by the Sell-Down Plan, a new investment advisory agreement between the Adviser and the Trust, on behalf of the 1290 Retirement 2060 Fund, and under certain circumstances, any future advisory agreements prompted by Change of Control Events that may occur as part of the Sell-Down Plan. The results of the shareholder vote are as follows:
Fund | For | Against | Abstain | |||||||||
1290 Retirement 2060 Fund | 250,001.145 | 0.000 | 0.000 |
At a Special Meeting of Shareholders held on November 27, 2018, shareholders of the 1290 Retirement 2030 Fund approved a new investment advisory agreement between AXA Equitable Funds Management Group, LLC dba 1290 Asset Managers® (the “Adviser”) and the Trust, on behalf of the 1290 Retirement 2030 Fund. The results of the shareholder vote are as follows:
Fund | For | Against | Abstain | |||||||||
1290 Retirement 2030 Fund | 286,711.055 | 0.000 | 313.053 |
At a Special Meeting of Shareholders held on November 27, 2018, shareholders of the 1290 Retirement 2030 Fund approved upon a Change of Control Event prompted by the Sell-Down Plan, a new investment advisory agreement between the Adviser and the Trust, on behalf of the 1290 Retirement 2030 Fund, and under certain circumstances, any future advisory agreements prompted by Change of Control Events that may occur as part of the Sell-Down Plan. The results of the shareholder vote are as follows:
Fund | For | Against | Abstain | |||||||||
1290 Retirement 2030 Fund | 154,055.232 | 132,655.823 | 313.053 |
*******
207
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 schedule of portfolio holdings with the Securities and Exchange Commission for the first and third quarters of each fiscal year as an exhibit to its reports on Form N-PORT. Previously, this information was filed on Form N-Q. These filings are available on the Securities and Exchange Commission’s website at http://www.sec.gov.
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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. | DFIN#808506 |
© 2019 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. |
As of the end of the period covered by this report, the registrant has adopted a “code of ethics,” as defined in Item 2, that applies to the registrant’s principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. A copy of the registrant’s code of ethics is filed as an exhibit pursuant to Item 12(a)(1).
Item 3. | Audit Committee Financial Expert. |
The registrant’s board of trustees has determined that Donald E. Foley and Caroline L. Williams serve on its audit committee as “audit committee financial experts” as defined in Item 3. Ms. Williams and Mr. Foley are considered to be “independent” for purposes of Item 3(a)(2).
Item 4. | Principal Accountant Fees and Services. |
(a) Audit Fees for fiscal year 2019: $255,705 and for fiscal year 2018: $544,450.
(b) Audit-Related Fees fiscal year 2019: $0 and for fiscal year 2018: $40,698.
(c) Tax Fees for fiscal year 2019: $233,660 and for fiscal year 2018: $228,200.
Tax fees include amounts related to tax compliance, tax advice and tax planning.
(d) All Other Fees for fiscal year 2019: $0 and for fiscal year 2018: $0.
All other fees include amounts related to consultation on or review of the registrant’s various regulatory filings.
(e)(1) The registrant’s audit committee has adopted policies and procedures relating topre-approval of services performed by the registrant’s principal accountant for the registrant. Audit, audit-related and tax services provided to the registrant on an annual basis requirepre-approval by the entire audit committee. In the event that the audit fees exceed thepre-approved estimated amount, the audit committee’s delegate, consisting of the audit committee chair, lead independent trustee, the registrant’s chief executive officer and chief financial officer, acting by at least two of such individuals, has the authority to increase the amount by up to 10% of thepre-approved amount. Any additional amount requirespre-approval by the entire audit committee. The audit committee chair or the lead independent trustee also has the authority to approvede minimisnon-audit services (i.e., services in which the fee does not exceed $10,000 per engagement) to be provided by the registrant’s principal accountant for the registrant, provided that each such service is brought to the attention of the audit committee prior to the completion of the audit of the registrant’s financial statements.
(e)(2) None of the services included in (b) – (d) above were approved by the audit committee pursuant to paragraph (c)(7)(i)(C) ofRule 2-01 of RegulationS-X.
(f) Not applicable.
(g) For fiscal year 2019: $523,000 and for fiscal year 2018: $380,398.
(h) The registrant’s audit committee has considered and determined that the provision ofnon-audit services that were rendered to the registrant’s investment adviser (not including anysub-advisers whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant that were notpre-approved pursuant to paragraph (c)(7)(ii) ofRule 2-01 of RegulationS-X is compatible with maintaining the principal accountant’s independence.
Item 5. | Audit Committee of Listed Registrants. |
Not applicable.
Item 6. | Schedule of Investments. |
The Schedule of Investments is included as part of the annual report to Shareholders filed under Item 1 of this FormN-CSR.
Item 7. | Disclosure of Proxy Voting Policies and Procedures forClosed-End Management Investment Companies. |
Not applicable.
Item 8. | Portfolio Managers ofClosed-End Management Investment Companies |
Not applicable.
Item 9. | Purchases of Equity Securities byClosed-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 Rule30a-3(c) under the Investment Company Act of 1940, as amended (the “1940 Act”)) are effective as of a date within 90 days of the filing of this report that includes the disclosure required by this paragraph, based on the evaluation of these controls and procedures required by Rule30a-3(b) under the 1940 Act and Rule15d-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 (as defined inRule 30a-3(d) under the 1940 Act) 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. | Disclosure of Securities Lending Activities forClose-End Management Investment Companies. |
Not Applicable.
Item 13. | Exhibits. |
(a)(1) The Code of Ethics for Senior Officers of the Registrant is filed herewith.
(a)(2) Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 are filed herewith.
(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 | ||
December 27, 2019 |
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.
/s/ Steven M. Joenk | ||
Steven M. Joenk | ||
President and Chief Executive Officer | ||
December 27, 2019 | ||
/s/ Brian E. Walsh | ||
Brian E. Walsh | ||
Chief Financial Officer | ||
December 27, 2019 |