UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-08614
Brandes Investment Trust
(Exact name of registrant as specified in charter)
11988 El Camino Real, Suite 600
San Diego, CA 92130
(Address of principal executive offices) (Zip code)
Michael Glazer
Bingham McCutchen LLP
355 South Grand Ave., Suite 4400
Los Angeles, CA 90071-3106
(Name and address of agent for service)
800-331-2979
Registrant's telephone number, including area code
Date of fiscal year end: September 30, 2013
Date of reporting period: September 30, 2013
Item 1. Reports to Stockholders.
INTERNATIONAL EQUITY FUND
GLOBAL EQUITY FUND
EMERGING MARKETS FUND
INTERNATIONAL
SMALL CAP EQUITY FUND
CORE PLUS FIXED INCOME FUND
CREDIT FOCUS YIELD FUND
ANNUAL REPORT
For the year ended
September 30, 2013
Brandes International Equity Fund
Dear Shareholder:
Amid a banner period for international equities, the net asset value of the Brandes International Equity Fund (Class A Shares without sales charge) increased 26.06% during the 12 months ended September 30, 2013. For the same period, the Fund’s benchmark, the MSCI EAFE Index, rose 23.77%.
In this letter, I will discuss sector-, country- and stock-specific factors that affected the Fund’s performance and describe changes in its composition during the fiscal year. In addition, I will share insight into how the Fund is currently positioned for the future.
The Markets
A number of investor concerns continued to drive volatility in various equity markets. Political turmoil in the Middle East and slowing economic growth in China and India were among the featured headlines that weighed on market sentiment. The specter of rising U.S. interest rates, amid worries the Federal Reserve would be tapering its quantitative easing program, also contributed to market anxiety.
However, as the period drew to a close, the market reacted positively to news such as the expected euro zone recovery and the Fed’s announcement that it would continue its bond purchase program to keep long-term interest rates low and spur economic growth. These developments helped the MSCI EAFE Index finish strong for the period.
The Fund
The Fund’s positions in financials, information technology and consumer staples contributed most to outperformance during the period. In each of these sectors, we saw the benefit of bottom-up stock selection as the Fund’s holdings in these areas outperformed those of the benchmark.
Within consumer staples, positive performance was mostly attributed to the Fund’s allocation to the food & staples retailing industry. It is interesting to note that all of our holdings in this industry (Carrefour, Koninklijke Ahold, J. Sainsbury and William Morrison Supermarket) are domiciled in Europe — a region that has been out of favor amid the economic uncertainty over the last few years. Although we have been attracted to each company for different fundamental reasons (e.g., turnaround prospects as well as industry leading sales growth and profit margins), one theme is consistent for all: attractive valuations. Some of these retailers have been among the lowest-priced consumer staples stocks anywhere.
Performance detraction during the period came mainly from select holdings in telecommunication services — most notably Italy’s Telecom Italia and Mexico-based America Movil. In addition, the Fund’s Japanese pharmaceuticals holdings (e.g., Taisho Pharmaceutical Holding and ONO Pharmaceutical) also negatively affected relative performance.
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Brandes International Equity Fund
From a country perspective, the Fund’s overweight and stock selection in France and the Netherlands aided performance, while its position in Brazil — with representatives such as energy company Petrobras and electric utility provider Eletrobras — weighed most on relative returns.
During the period, we sold a few holdings as their prices appreciated toward our estimates of their intrinsic value. For example, we took advantage of rising Japanese equity prices by selling out the Fund’s holdings in Japan Tobacco and Sony. Other eliminated positions included U.K.-based retailing company Kingfisher and media company ITV.
The Fund also initiated new positions across a number of countries and industries, including France-based multi-utility provider Suez Environment and building products manufacturer Saint Gobain, as well as Japan’s Nissan Motor and electronics company TDK Corporation.
Outlook
As of September 30, 2013, the Brandes International Equity Fund traded at over 30% discount to the MSCI EAFE Index based on price-to-book ratio.
Going forward, we will continue to pursue what we believe are mispriced investment opportunities with appealing long-term prospects in various international markets. This may include emerging markets, where recent macroeconomic and geopolitical turbulence might provide a conducive environment for bottom-up stock picking. Wherever we look for value opportunities, one thing will never change: our belief that valuations always matter and that focusing on individual company fundamentals is paramount in the pursuit of favorable investment results.
Thank you for your continued trust and confidence in us.
Sincerely yours,
Jeffrey A. Busby, CFA
President
Brandes Investment Trust
Past performance does not guarantee future results.
Market conditions may impact performance. The performance results presented were achieved in particular market conditions which may not be repeated. Moreover, the current market volatility and uncertain regulatory environment may have a negative impact on future performance.
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Brandes International Equity Fund
The values of the Fund’s investments fluctuate in response to the activities of individual companies and general stock market and economic conditions. In addition, the performance of foreign securities depends on the political and economic environments and other overall economic conditions in the countries where the Fund invests. Emerging country markets involve greater risk and volatility than more developed markets. Some emerging markets countries may have fixed or managed currencies that are not free-floating against the U.S. dollar. Certain of these currencies have experienced, and may experience in the future, substantial fluctuations or a steady devaluation relative to the U.S. dollar.
Current and future portfolio holdings are subject to risk.
Please refer to the Schedule of Investments in the report for complete holdings information. Fund holdings, geographic allocations and/or sector allocations are subject to change at any time and are not a recommendation to buy or sell any security.
Price/Book: Price per share divided by book value per share.
Price/Earnings: Price per share divided by earnings per share.
Price/Cash Flow: Price per share divided by cash flow per share.
The foregoing reflects the thoughts and opinions of Brandes Investment Partners® exclusively and is subject to change without notice.
Brandes Investment Partners® is a registered trademark of Brandes Investment Partners, L.P. in the United States and Canada.
Must be preceded or accompanied by a prospectus.
Index Guide
The MSCI EAFE (Europe, Australasia, Far East) Index with net dividends is an unmanaged, free float-adjusted market capitalization index that is designed to measure the equity market performance of developed markets, excluding the US & Canada. The MSCI EAFE Index consists of 22 developed market country indices. This index often is used as a benchmark for international equity portfolios and includes dividends and distributions net of withholding taxes, but does not reflect fees, brokerage commissions, or other expenses of investing. Please note that all indices are unmanaged and are not available for direct investment.
The Brandes International Equity Fund is distributed by Quasar Distributors, LLC.
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Brandes International Equity Fund
The following chart compares the value of a hypothetical $10,000 investment in the Brandes International Equity Fund — Class I from September 30, 2003 to September 30, 2013 and in the Morgan Stanley Capital International EAFE Index.
Value of $10,000 vs Morgan Stanley Capital International
EAFE (Europe, Australasia and Far East) Index
Average Annual Total Return | |||||
Periods Ended September 30, 2013 | |||||
One | Five | Ten | Since | ||
Year | Years | Years | Inception(1) | ||
Brandes International Equity Fund | |||||
Class A* | 26.06% | 3.75% | 7.35% | 8.80% | |
Class A* (with maximum sales charge) | 18.85% | 2.54% | 6.72% | 8.42% | |
Class C* | 25.26% | 2.92% | 6.52% | 7.97% | |
Class E* | 26.15% | 3.85% | 7.40% | 8.83% | |
Class I | 26.43% | 3.93% | 7.58% | 9.05% | |
Morgan Stanley Capital International | |||||
EAFE Index | 23.77% | 6.35% | 8.01% | 4.96% |
(1) | The since inception dates are as follows: Class A: January 31, 2011; Class C: January 31, 2013; Class E: October 6, 2008; Class I: January 2, 1997. |
* | Performance shown prior to January 31, 2011 for Class A shares reflects the performance of Class I shares adjusted to reflect Class A expenses. Performance shown prior to January 31, 2013 for Class C shares reflects the performance of Class I shares adjusted to reflect Class C expenses. Performance shown prior to October 6, 2008 for Class E shares reflects the performance of Class I shares adjusted to reflect Class E expenses. |
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Brandes International Equity Fund
Performance data quoted represents past performance; past performance does not guarantee future results. The investment return 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 of the Fund may be lower or higher than the performance quoted. Performance data current to the most recent month end may be obtained by calling 800-331-2979.
The returns shown do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. The Advisor has a fee waiver arrangement in place to limit the Fund’s annual operating expenses. Currently, the expense level has not been exceeded.
Sector Allocation as a Percentage of Total Investments as of
September 30, 2013
The sector classifications represented in the graph above and industry classifications represented in the Schedule of Investments are in accordance with Global Industry Classification Standard (GICS®), which was developed by and/or is the exclusive property of MSCI, Inc. and Standard & Poor Financial Services LLC.
5
Brandes Global Equity Fund
Dear Shareholder:
Amid solid gains in global equity markets, the net asset value of the Brandes Global Equity Fund (Class A Shares without sales charges) increased 29.04% in the 12 months ended September 30, 2013. For the same period, the MSCI World Index rose 20.21%.
In this letter, I will review sector-, country- and stock-specific factors that affected the Fund’s performance and describe changes in its composition during the fiscal year. In addition, I will share insight into how the Fund is currently positioned for the future.
The Markets
During the period, global markets moved higher due in large part to optimism that the global economic recovery from the 2008 financial crisis is perhaps on a more sustainable track, as well as continued efforts by major central banks to keep easy-money policies in place. In the third quarter of 2013, global markets got a boost from the Federal Reserve’s announcement that it will continue its $85-billion-a-month bond purchase program aimed to keep long-term interest rates low and spur economic growth.
These themes helped offset concerns over rising U.S. interest rates, brought on by worries the Fed will be tapering its quantitative easing program, political turmoil in the Middle East and worries over slowing economic growth in some developing countries, including China and India.
The Fund
The Fund’s outperformance during the fiscal year was driven mainly by investments in the United States, Europe and Japan, especially in the information technology, consumer staples and financials sectors. In each of these countries and sectors, we believe the benefits of individual stock selection show well, as Fund holdings generally fared better compared to those in the benchmark.
During the period, technology holdings performed strongly, and our allocation to the sector has been the largest contributor to absolute and relative returns. Holdings that did particularly well included: U.S.-based Western Digital and Hewlett-Packard (HP) in the computers & peripherals industry; Switzerland-based TE Connectivity in the electronic equipment instruments & components industry; and Sweden-based Ericsson in the communications equipment industry.
Over the past several years, technology stocks in general have meaningfully underperformed the market. We believe this has helped create attractive buying opportunities in select technology areas, especially within some of the personal computer (PC) related companies (such as HP, Intel and Microsoft). With regard to PC companies, many of these businesses are now experiencing the very real
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Brandes Global Equity Fund
effects of widely discussed declining PC unit sales, but we continue to believe that many investors have extrapolated and vastly overrated the causes and the pace of that decline (especially when factoring in the growing use of PCs in emerging markets) and have also failed to acknowledge the changing nature of the business mix with some of these companies. Consequently, we were able to buy some of the less-glamorous tech companies that we believe possess strong balance sheets, good free cash flow and generally better growth rates and economics than the overall market, and most importantly at what we believe to be very attractive valuations. Information technology is our second-largest sector overweight as of September 30, 2013.
The Fund’s significant exposure to the food & staples retailing industry led to positive relative and absolute performance in the consumer staples sector during the fiscal year. After struggling through a period of anemic growth and downward pressure on consumer spending, food retailers in Europe (Carrefour, William Morrison Supermarkets and Royal Ahold) and North America (Safeway and Kroger) recovered sharply as a combination of company-specific actions to reshape their business portfolios and an improved economic backdrop helped bolster profitability.
Within financials, insurance firms Swiss RE AG of Switzerland and AEGON, N.V. of the Netherlands experienced substantial gains and contributed positively to the Fund’s fiscal-year returns.
Performance detractors during the period included holdings in the telecommunication services sector, specifically in Europe. Telecom Italia has experienced share-price distress during the period due to declining revenues, and a difficult regulatory environment that may have created excessive competition. Although our positions in European telecoms have not yet performed to our expectations, we continue to believe in their long-term prospects. There is a growing market perception that the telecom sector is perhaps nearing an inflection point, despite some very challenging industry fundamentals. We hold the view that the regulatory environment is now likely to improve, and in the meantime we believe the valuations of these and our other European telecoms are extremely attractive. As long-term value investors, we place the most emphasis on attractive pricing.
Select holdings in the healthcare sector also detracted from relative performance during the period. Marginal relative underperformance of our pharmaceutical holdings, which is one of our largest industry allocations in the Fund, slightly detracted from otherwise strong gains in the fiscal year. In the past holdings in this generally defensive industry tended to lag in strong equity market environments. Such periodic underperformance, however, does not deter us from investing in
7
Brandes Global Equity Fund
what we believe are attractively valued companies. We maintain a large weighting to this diverse industry which has historically been well capitalized and cash-generative.
As always, the Fund’s allocations are a result of our bottom-up stock selection process and not the result of top-down views on the relative attractiveness of specific sectors, industries or regions.
Among the decisions made during the period, the global investment committee divested the Fund’s positions in U.S.-based firms Safeway, HP, Kroger, Twenty-First Century Fox, Boston Scientific, Xerox, Valero Energy and News Corp. In Japan, the Fund sold its holdings in Sumitomo Mitsui Financial, Fujifilm and Sony Corp., as well as its positions in Netherlands-based STMicroelectronics and Brazilian electric utility Centrais Electricas Brasileiras.
Food retailers Kroger and Safeway benefited from the stronger economic environment in the United States and company-specific actions involving disposing of certain lagging assets and returning capital to shareholders. When we sold these two companies toward the close of the Fund’s fiscal year, we believed the market had appropriately reflected the positive steps taken by the companies and the improved operating environment.
HP was one of the Fund’s biggest positive performance contributors during the period and sold at a nice gain in the third quarter of 2013.
We eliminated our positions in electronics manufacturer Sony and multinational document management firm Xerox as their share prices appreciated toward our estimates of intrinsic value. For Xerox, we had reduced our estimates of its intrinsic value over the past few years as we ultimately underestimated the extent and risk of the secular decline to Xerox’s core copier business, brought on by intense competition and the onset of mobile computing. For Sony, we sold our position as we no longer believe the company can overcome the increased competition and margin destruction from lower-cost Korean, Taiwanese and Chinese competitors.
New buys during the period included U.K.-based Imperial Tobacco, South Korea-based Hyundai Mobis and Samsung Electronics, as well as Brazil-based Petroleo Brasileiro and Banco Santander. Resorts operator Genting Malaysia was also added to Fund holdings in the period.
Outlook
The Brandes Global Equity Fund continues to invest in businesses for the long term, seeking companies trading at a meaningful discount to our estimates of their intrinsic value. This discount is also known as the margin of safety, the benefit of which is conceptually about seeking to position a portfolio with more upside than
8
Brandes Global Equity Fund
downside. Amid changing market environments, we remain steadfast in our belief that ultimately, the price paid for an investment matters greatly in the pursuit of long-term financial gains. As always, we appreciate the trust you have placed in us investing on your behalf.
Sincerely yours,
Jeffrey A. Busby, CFA
President
Brandes Investment Trust
Past performance does not guarantee future results.
Market conditions may impact performance. The performance results presented were achieved in particular market conditions which may not be repeated. Moreover, the current market volatility and uncertain regulatory environment may have a negative impact on future performance.
Diversification does not assure a profit nor protect against loss in a declining market.
The values of the Fund’s investments fluctuate in response to the activities of individual companies and general stock market and economic conditions. In addition, the performance of foreign securities depends on the political and economic environments and other overall economic conditions in the countries where the Fund invests. Emerging country markets involve greater risk and volatility than more developed markets. Some emerging markets countries may have fixed or managed currencies that are not free-floating against the U.S. dollar. Certain of these currencies have experienced, and may experience in the future, substantial fluctuations or a steady devaluation relative to the U.S. dollar. The values of the Fund’s convertible securities are also affected by interest rates; if rates rise, the values of convertible securities may fall.
Current and future portfolio holdings are subject to risk.
Free Cash Flow: Operating cash flow minus capital expenditures; represents the cash that a company is able to generate after laying out money required to maintain or expand its asset base.
Margin of Safety: The difference between the intrinsic value of a stock and its market price.
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Brandes Global Equity Fund
Please refer to the Schedule of Investments in the report for complete holdings information. Fund holdings, geographic allocations and/or sector allocations are subject to change at any time and are not a recommendation to buy or sell any security.
The foregoing reflects the thoughts and opinions of Brandes Investment Partners® exclusively and is subject to change without notice.
Brandes Investment Partners® is a registered trademark of Brandes Investment Partners, L.P., in the United States and Canada.
Must be preceded or accompanied by a prospectus.
Index Guide
The MSCI World Index with net dividends is an unmanaged, free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed markets. The MSCI World Index consists of 24 developed-market country indices. This index includes dividends and distributions net of withholding taxes but does not reflect fees, brokerage commissions, or other expenses of investing. Please note that all indices are unmanaged and are not available for direct investment.
The Brandes Global Equity Fund is distributed by Quasar Distributors, LLC.
10
Brandes Global Equity Fund
The following chart compares the value of a hypothetical $10,000 investment in the Brandes Global Equity Fund — Class I from its inception (October 6, 2008) to September 30, 2013 and in the Morgan Stanley Capital International World Index.
Value of $10,000 vs Morgan Stanley Capital International World Index
Average Annual | ||||
Total Return | ||||
Periods Ended | ||||
September 30, 2013 | ||||
One | Three | Since | ||
Year | Years | Inception(1) | ||
Brandes Global Equity Fund | ||||
Class A* | 26.81% | 11.09% | 8.74% | |
Class A* (with maximum sales charge) | 19.50% | 8.92% | 7.45% | |
Class C* | 25.94% | 10.18% | 7.88% | |
Class E | 26.80% | 10.97% | 8.74% | |
Class I | 27.12% | 11.26% | 8.95% | |
Morgan Stanley Capital | ||||
International World Index | 20.21% | 11.82% | 9.99% |
(1) | The since inception dates are as follows: Class A: January 31, 2011; Class C: January 31, 2013; Class E: October 6, 2008; Class I: October 6, 2008. |
* | Performance shown prior to January 31, 2011 for Class A shares reflects the performance of Class I shares adjusted to reflect Class A expenses. Performance shown prior to January 31, 2013 for Class C shares reflects the performance of Class I shares adjusted to reflect Class C expenses. |
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Brandes Global Equity Fund
Performance data quoted represents past performance; past performance does not guarantee future results. The investment return 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 of the Fund may be lower or higher than the performance quoted. Performance data current to the most recent month end may be obtained by calling 800-331-2979.
The returns shown do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. The Advisor has a fee waiver arrangement in place to limit the Fund’s annual operating expenses.
Sector Allocation as a Percentage of Total Investments as of
September 30, 2013
The sector classifications represented in the graph above and industry classifications represented in the Schedule of Investments are in accordance with Global Industry Classification Standard (GICS®), which was developed by and/or is the exclusive property of MSCI, Inc. and Standard & Poor Financial Services LLC.
12
Brandes Emerging Markets Fund
Dear Shareholder:
The net asset value of the Brandes Emerging Markets Fund (Class A shares without sales charge) increased 8.09% during the 12 months ended September 30, 2013. For the same period, the Fund’s benchmark, the MSCI Emerging Markets Index, rose 1.33%.
In this letter, I will discuss sector-, country- and stock-specific factors that affected the Fund’s performance and describe changes in the Fund’s composition during the past year. In addition, I will share insight into how the Fund is currently positioned for the future.
The Markets
A number of investor concerns continued to drive volatility in emerging markets over the past year. After moving up cautiously in the fourth quarter of 2012, emerging-market equities — as represented by the MSCI Emerging Market Index — experienced unfavorable performance in the first half of 2013. News such as worse-than-expected economic growth in China and India contributed to negative market sentiment.
Market confidence returned after several positive developments from around the world, including the Federal Reserve’s announcement to continue its quantitative easing program and the expected euro zone recovery. The subsequent rebound of the MSCI Emerging Markets Index helped the index to deliver its overall positive performance for the period.
The Fund
The Fund’s positions in materials, industrials and financials served as the biggest contributors to outperformance. In each of these sectors, we saw the benefit of bottom-up stock selection as the Fund’s holdings in these areas generally outperformed those of the benchmark.
Notably strong individual performers included Singapore-domiciled electronics manufacturing services company Flextronics, South Korea’s Hyundai Motor and Austria-based commercial bank Erste Group Bank — each up more than 40% for the 12-month period. In our view, the Fund’s allocations to both Flextronics and Erste Group Bank highlight our distinctive investment approach that maintains the flexibility to invest in companies which are based outside of emerging markets, but conduct a significant portion of their business within such countries. We believe this approach could provide us with more opportunities to tap into potentially undervalued emerging-market investments.
From a country perspective, the Fund benefited most from its positions in South Korea, Singapore and Austria — where returns were mainly driven by the top performers mentioned above.
Offsetting some of the Fund’s strong performance were its Mexico-based holdings, among which homebuilders Urbi Desarrollos Urbanos and Desarrolladora Homex
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Brandes Emerging Markets Fund
detracted most from performance. The Fund’s holdings in three electric utility providers — Russia-based RusHydro, Brazil-based Eletrobras and India-based Reliance Infrastructure — also hurt returns.
During the period, we sold select holdings as their prices appreciated toward our estimates of their intrinsic value in order to pursue what we believed were more attractive opportunities. For example, we exited the Fund’s positions in United Arab Emirates-based Air Arabia and DP World, Brazilian Itau Unibanco Holding, and Taiwan-based Novatek Microelectronics.
Other decisions made during the period included initiating positions in Malaysia-based resort company Genting Malaysia, India-based crop-protection products manufacturer United Phosphorus, and Indonesian telecommunication services provider XL Axiata. In addition, following MSCI’s planned reclassification of Greece as an emerging market, which expanded the opportunity set for the Fund, we added two Greek companies: Cement producer Titan Cement and fashion accessories manufacturer and retailer Folli Follie.
Outlook
Amid the ups and downs of emerging-market equities over the past year, we believe the asset class remains attractive for patient, long-term investors. As of September 30, 2013, on a price-to-book (P/B) basis, the MSCI Emerging Markets Index was trading at a 20% discount to its 10-year average and a 25% discount to developed-market equities as represented by the MSCI World Index. The Brandes Emerging Markets Fund offered even lower valuation metrics — trading at a 40% discount to the MSCI Emerging Market Index on a P/B basis.
With the general appeal of emerging-market equities growing, in our view it is important to discriminate between individual opportunities in the asset class. We believe our focus on company-specific fundamentals could help us largely avoid areas that are potentially overvalued and identify individual companies that might be undervalued.
We are excited about the outlook for the Brandes Emerging Markets Fund and thank you for the trust you have placed in us.
Sincerely yours,
Jeffrey A. Busby, CFA
President
Brandes Investment Trust
Past performance does not guarantee future results.
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Brandes Emerging Markets Fund
Market conditions may impact performance. The performance results presented were achieved in particular market conditions which may not be repeated. Moreover, the current market volatility and uncertain regulatory environment may have a negative impact on future performance.
The Fund invests in foreign securities, which involve greater volatility and political, economic and currency risks and differences in accounting methods than domestic securities. Emerging country markets involve greater risk and volatility than more developed markets. Some emerging markets countries may have fixed or managed currencies that are not free-floating against the U.S. dollar. Certain of these currencies have experienced, and may experience in the future, substantial fluctuations or a steady devaluation relative to the U.S. dollar.
Current and future portfolio holdings are subject to risk.
Please refer to the Schedule of Investments in the report for complete holdings information. Fund holdings, geographic allocations and/or sector allocations are subject to change at any time and are not considered a recommendation to buy or sell any security.
Price/Book: Price per share divided by book value per share.
The foregoing reflects the thoughts and opinions of Brandes Investment Partners® exclusively and is subject to change without notice.
Brandes Investment Partners® is a registered trademark of Brandes Investment Partners, L.P. in the United States and Canada.
Must be preceded or accompanied by a prospectus.
Index Guide
The MSCI Emerging Markets Index with gross dividends is an unmanaged, free float-adjusted market-capitalization index designed to measure equity market performance of emerging markets. The MSCI Emerging Markets Index consists of 21 emerging-market country indices. This index includes dividends and distributions, but does not reflect fees, brokerage commissions, withholding taxes or other expenses of investing.
The MSCI World Index with net dividends is an unmanaged, free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed markets. The MSCI World Index consists of 24 developed-market country indices. This index includes dividends and distributions net of withholding taxes but does not reflect fees, brokerage commissions, or other expenses of investing. Please note that all indices are unmanaged and are not available for direct investment.
The Brandes Emerging Markets Fund is distributed by Quasar Distributors, LLC.
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Brandes Emerging Markets Fund
The following chart compares the value of a hypothetical $10,000 investment in the Brandes Emerging Markets Fund — Class I from September 30, 2003 to September 30, 2013 and in the Morgan Stanley Emerging Markets Index.
Value of $10,000 vs Morgan Stanley Capital Emerging Markets Index
Average Annual Total Return | |||||
Periods Ended September 30, 2013** | |||||
One | Five | Ten | Since | ||
Year | Years | Years | Inception(1) | ||
Brandes Emerging Markets Fund | |||||
Class A | 8.09% | 12.63% | 13.98% | 8.94% | |
Class A (with maximum sales charge) | 1.87% | 11.31% | 13.31% | 8.57% | |
Class C* | 7.24% | 11.77% | 13.08% | 8.13% | |
Class I | 8.20% | 12.87% | 14.20% | 9.21% | |
Morgan Stanley Capital International | |||||
Emerging Markets Index | 1.33% | 7.56% | 13.16% | 7.20% |
(1) | The since inception dates are as follow: Class A and Class I: January 31, 2011; Class C: January 31, 2013. | |
* | Performance shown prior to January 31, 2013 for Class C shares reflects the performance of Class I shares adjusted to reflect Class C expenses. | |
** | Prior to January 31, 2011, the Advisor managed a private investment fund with an investment objective, investment policies and strategies that were, in all material respects, equivalent to those of the Brandes Emerging Markets Fund. The performance information shown for the Class I shares for periods before January 31, 2011 is that of the private investment fund and reflects the net expenses of the private investment fund. The performance of the private investment fund prior to January 31, 2011 is based on calculations that are different than the standardized method of calculations presented by the SEC. The performance information shown for the Class A shares has been adjusted to reflect the differences in the net expense ratios between the Class I and A shares. The private |
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Brandes Emerging Markets Fund
investment fund was not registered under the Investment Company Act of 1940 (“1940 Act”) and was not subject to certain investment limitations, diversification requirements, and other restrictions imposed by the 1940 Act and the Internal Revenue Code of 1986, which, if applicable, may have adversely affected its performance. |
Performance data quoted represents past performance; past performance does not guarantee future results. The investment return 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 of the Fund may be lower or higher than the performance quoted. Performance data current to the most recent month end may be obtained by calling 800-331-2979.
The returns shown do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. The Advisor has a fee waiver arrangement in place to limit the Fund’s annual operating expenses.
Sector Allocation as a Percentage of Total Investments as of
September 30, 2013
The sector classifications represented in the graph above and industry classifications represented in the Schedule of Investments are in accordance with Global Industry Classification Standard (GICS®), which was developed by and/or is the exclusive property of MSCI, Inc. and Standard & Poor Financial Services LLC.
17
Brandes International Small Cap Equity Fund
Dear Shareholder:
In another very positive period for international equities, the net asset value of the Brandes International Small Cap Equity Fund (Class A Shares without sales charge) increased 32.98% during the 12 months ended September 30, 2013. For the same period, the Fund’s benchmark, the S&P Developed Ex-U.S. SmallCap Index, rose 25.36%.
In this letter, I will review sector-, country- and stock-specific factors that affected the Fund’s performance and describe changes in its composition during the past year. In addition, I will share insight into how the Fund is currently positioned for the future.
The Markets
A number of investor concerns continued to drive volatility in various equity markets. Political turmoil in the Middle East and slowing economic growth in China and India were among the featured headlines that weighed on market sentiment. The specter of rising U.S. interest rates, amid worries the Federal Reserve would be tapering its quantitative easing program, also contributed to market anxiety.
However, it was not all bad news during the period. For example, equity markets around the world reacted positively to the expected euro zone recovery and the Fed’s announcement that it would continue its bond purchase program to keep long-term interest rates low and spur economic growth. International small-cap equities, as represented by the S&P Developed Ex-U.S. SmallCap Index, closed the period with healthy gains.
The Fund
The Fund’s positions in industrials, materials and consumer staples contributed most to outperformance. Notable individual performers included Switzerland-based freight forwarder Panalpina Welttransport and China’s meat processor People’s Food Holdings (PFH).
Our initial interest in PFH was driven by its position as a low-cost producer, growth opportunities for both production and consumption of pork in China, and its strong balance sheet. We believed the market saw very little value in these positive attributes and was instead pricing the company as an undifferentiated, cyclical and commodity-like hog processor. Amid the company’s strong stock- price appreciation, the Brandes small-cap investment committee believed the holding had reached our estimate of its intrinsic value, and therefore decided to execute a full sell in the first quarter of 2013.
Other top performing holdings during the period included Canadian communications equipment manufacturer Sierra Wireless, U.K. real estate company LSL Property Services and France-based contact center company Teleperformance.
Although all sectors delivered strong absolute returns during the period, select holdings in consumer discretionary detracted from relative performance. Within
18
Brandes International Small Cap Equity Fund
this sector, the Fund’s allocation to the household durables industry, with representatives such as Brazil’s real estate development company Viver Incorporadora e Constructora as well as Mexican homebuilders Urbi Desarrollos and Desarrolladora Homex, weighed most on returns.
From a country perspective, positions in Canada and China were the largest contributors to relative returns. Conversely, the Fund’s allocation to Mexico somewhat offset the strong outperformance — mainly due to the homebuilders mentioned above.
During the period, we sold select holdings as their prices appreciated toward our estimates of their intrinsic value in order to pursue what we believed were more attractive opportunities. In addition to People’s Food Holdings discussed earlier, we also eliminated the Fund’s positions in Norwegian food products company Cermaq, Bermuda-headquartered insurance company Argo Group International and U.K.-based media company ITV.
We initiated new positions across a few industries and countries — both developed and emerging. For example, we added Danish pharmaceutical company H. Lundbeck and Egypt’s leading tobacco company Eastern Tobacco. Other new buys included Japanese electrical equipment manufacturer Futaba Corporation and engineering company Sanki Engineering, as well as India’s private utility provider Reliance Infrastructure and industrial conglomerate Nava Bharat Ventures.
Outlook
The past year marked a positive period for the Brandes International Small Cap Equity Fund. It is important to note that many companies that benefited the Fund during this period, such as the above mentioned People’s Food Holdings and Teleperformance, were the result of investment decisions made some time ago. While we have occasionally seen our investment theses play out over shorter time periods — it has been the exception, not the norm. Amid constantly changing markets, we believe having a long-term outlook is key in pursuing undervalued businesses around the world.
Going forward, we believe the Brandes International Small Cap Equity Fund remains well positioned to take advantage of compelling opportunities to invest in individual companies. As always, thank you for your business and continued trust.
Sincerely yours,
Jeffrey A. Busby, CFA
President
Brandes Investment Trust
19
Brandes International Small Cap Equity Fund
Past performance does not guarantee future results.
Market conditions may impact performance. The performance results presented were achieved in particular market conditions which may not be repeated. Moreover, the current market volatility and uncertain regulatory environment may have a negative impact on future performance.
The Fund invests in foreign securities, which involve greater volatility and political, economic and currency risks and differences in accounting methods than domestic securities. Emerging country markets involve greater risk and volatility than more developed markets. Some emerging markets countries may have fixed or managed currencies that are not free-floating against the U.S. dollar. Certain of these currencies have experienced, and may experience in the future, substantial fluctuations or a steady devaluation relative to the U.S. dollar.
Current and future portfolio holdings are subject to risk.
Please refer to the Schedule of Investments in the report for complete holdings information. Fund holdings, geographic allocations and/or sector allocations are subject to change at any time and are not considered a recommendation to buy or sell any security.
The foregoing reflects the thoughts and opinions of Brandes Investment Partners® exclusively and is subject to change without notice.
Brandes Investment Partners® is a registered trademark of Brandes Investment Partners, L.P. in the United States and Canada.
Must be preceded or accompanied by a prospectus.
Index Guide
The S&P Developed Ex-U.S. SmallCap Index with gross dividends is an unmanaged, float-adjusted market capitalization weighted index that measures the equity performance of small capitalization companies from developed markets around the world, excluding the United States. This index includes dividends and distributions but does not reflect fees, brokerage commissions, withholding taxes, or other expenses of investing. Please note that all indices are unmanaged and are not available for direct investment.
The Brandes International Small Cap Equity Fund is distributed by Quasar Distributors, LLC.
20
Brandes International Small Cap Equity Fund
The following chart compares the value of a hypothetical $10,000 investment in the Brandes International Small Cap Fund — Class I from September 30, 2003 to September 30, 2013 and in the S&P Developed Small Cap — Excluding U.S. Index (“S&P Developed Small Cap — Ex. U.S. Index”) for the same period.
Value of $10,000 vs S&P Developed Small Cap — Ex. U.S. Index
Average Annual Total Return | |||||
Periods Ended September 30, 2013** | |||||
One | Five | Ten | Since | ||
Year | Years | Years | Inception(1) | ||
Brandes International Small Cap Fund | |||||
Class A | 32.98% | 18.46% | 11.35% | 11.01% | |
Class A (with maximum sales charge) | 25.33% | 17.07% | 10.69% | 10.63% | |
Class C* | 32.16% | 17.38% | 10.28% | 9.93% | |
Class I | 33.41% | 18.54% | 11.38% | 11.03% | |
S&P Developed Small Cap – | |||||
Ex. U.S. Index | 25.36% | 10.24% | 10.94% | 7.21% |
(1) | The since inception dates are as follows: Class A and Class I: January 31, 2012; Class C: January 31, 2013. | |
* | Performance shown prior to January 31, 2013 for Class C shares reflects the performance of Class I shares adjusted to reflect Class C expenses. | |
** | Prior to February 1, 2012, the Advisor managed a private investment fund with an investment objective, investment policies and strategies that were, in all material respects, equivalent to those of the Brandes International Small Cap Fund. The performance information shown for the Class I shares for periods before February 1, 2012 is that of the private investment fund and reflects the net expenses of the private investment fund. The performance of the private investment fund prior to February 1, 2012 is based on calculations that are different than the standardized method of calculations presented by the SEC. The performance information shown for the Class A shares has been adjusted to reflect the differences in the net expense ratios between the Class I and A shares. |
21
Brandes International Small Cap Equity Fund
The private investment fund was not registered under the Investment Company Act of 1940 (“1940 Act”) and was not subject to certain investment limitations, diversification requirements, and other restrictions imposed by the 1940 Act and the Internal Revenue Code of 1986, which, if applicable, may have adversely affected its performance. |
Performance data quoted represents past performance; past performance does not guarantee future results. The investment return 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 of the Fund may be lower or higher than the performance quoted. Performance data current to the most recent month end may be obtained by calling 800-331-2979.
The returns shown do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. The Advisor has a fee waiver arrangement in place to limit the Fund’s annual operating expenses.
Sector Allocation as a Percentage of Total Investments as of
September 30, 2013
The sector classifications represented in the graph above and industry classifications represented in the Schedule of Investments are in accordance with Global Industry Classification Standard (GICS®), which was developed by and/or is the exclusive property of MSCI, Inc. and Standard & Poor Financial Services LLC.
22
Brandes Core Plus Fixed Income Fund
Dear Shareholder:
The Brandes Core Plus Fixed Income Fund (Class A Shares without sales charges) gained 0.28% during the 12 months ended September 30, 2013, while its benchmark, the Barclays U.S. Aggregate Bond Index, returned -1.68%.
In this letter, I will examine the sector- and security-specific factors that affected the Fund’s performance. I will also review changes in the Fund’s composition during the fiscal year and how the Fund is positioned for the future.
The Markets
Fixed-income markets recorded gains early in the Fund’s fiscal year, boosted by stimulative central-bank policies globally, a U.S. economy that continued to outperform its developed-country peers despite lackluster performance on an absolute basis, declining euro zone tail risk, strong corporate fundamentals and robust supply/demand technicals.
The positive momentum shifted, however, in the first quarter of 2013, with the markets moving mostly sideways. It is interesting to note that the quarter marked the first negative quarterly return for the Barclays U.S. Aggregate Bond Index since the fourth quarter of 2010, and the first negative first-quarter performance since 2006. Market declines continued into the second quarter of 2013. In May, Federal Reserve Chairman Ben Bernanke mentioned the possibility of tapering the Fed’s unprecedented bond-purchase program if the economic data continues to improve. Virtually all markets globally reacted as if the punch bowl was being taken away prematurely from a rollicking party.
Nonetheless, major fixed-income indices recovered some lost ground in the third quarter of 2013, bolstered by the Fed’s decision to keep the easy-money party going for the indefinite future, which in turn delivered a surprise to the markets.
After the June 2013 meeting of the Federal Open Market Committee, the Fed Chairman indicated that tapering the Fed’s quantitative easing program, designed to stimulate economic growth, could begin relatively soon, and certainly before year end. However, at a scheduled meeting in September, the Fed decided to postpone dialing down its highly accommodative monetary policy. By then, the markets had long since moved on from discounting the onset of the taper, and trained their sights more on its actual dollar amount — with the estimated reduction of the Fed’s purchases of Treasury and mortgage-backed securities (MBS) of $10 billion to $15 billion per month fully discounted by the markets.
The Fund
The Fund’s positive absolute and relative performance during the fiscal year was led by holdings in non-agency MBS and asset-backed securities (ABS) backed by pools of private student loans. Over the past year we have seen improvement in the underlying collateral performance in our holding of non-agency MBS and student loan ABS leading to price increases.
23
Brandes Core Plus Fixed Income Fund
Corporate bonds as a whole added to performance toward the close of the Fund’s fiscal year. Holdings in select industrials and financials led the performance in corporates. Finally, the Fund’s duration was shorter than that of the benchmark throughout the period, this helped relative performance as interest rates rose.
Detracting from performance was a holding in the security of a Mexican homebuilder and a select few bonds in the utilities sector.
Fund activity during the period included initiating positions in the following: Preferred stock in business-services firm Pitney Bowes International; financial services company ING U.S.; integrated steel and mining firm ArcelorMittal; U.S.-dollar denominated issues of Israel Electric Corp; Mexican homebuilding bond Urbi Desarrollos Urbanos SAB de CV; Canadian pharmaceutical company Valeant Pharmaceuticals International; and South African paper company Sappi Papier Holding GmbH. Selling activity was limited to a pare-back of Mohawk Industries, a buildings product company that approached our estimate of its fair value, and the full sale of a subprime ABS originally issued by Countrywide. Toward the close of the Fund’s fiscal year, we added to our holding in energy firm Chesapeake Energy, financial company J.P. Morgan, medical laboratory services firm Laboratory Corp. and US Bancorp. We sold our entire position in electric house-ware manufacturer Spectrum Brands as it traded through our estimate of its fair value.
The duration of the Fund at the end of the quarter remained shorter than that of the benchmark. The Fund’s excess yield compared to the benchmark helped relative returns. The largest overweight was to the corporate sector, where overweight positions relative to the benchmark were in the financial, utility and homebuilding/building products industries. The Fund remained underweight agency mortgage-backed pass-through securities in favor of MBS that, in our view, offer a more compelling value proposition than agency pass throughs: non-agency MBS, trust Interest Only MBS, and private student loan ABS.
Outlook
We believe the Brandes Core Plus Fixed Income Fund remains defensively positioned with respect to interest-rate sensitivity and allocation to value credit opportunities.
We endeavored to create a bottom-up fixed-income investment philosophy and process 14 years ago based upon the value principles of Benjamin Graham. Then, and now, we believed that by focusing on fundamentals and attempting to ignore the noise in the market we could pursue value for our clients’ fixed-income portfolios over the long term. One of the distinguishing features of our value process is our willingness to accept short-term price volatility that, in our view, is unrelated to underlying credit fundamentals.
24
Brandes Core Plus Fixed Income Fund
We firmly believe in the continued efficacy of the value investing process. We feel strongly that the markets going forward will regularly offer patient long-term investors additional mispriced opportunities. We remain singularly focused on pursuing value over the long term and are thankful for the patience and trust that you have placed in us to implement this philosophy and process on your behalf.
Sincerely yours,
Jeffrey A. Busby, CFA
President
Brandes Investment Trust
Duration: The weighted maturity of a fixed-income investment’s cash flows, used in the estimation of the price sensitivity of fixed-income securities for a given change in interest rates.
Yield: Annual income from the investment (dividend, interest, etc.) divided by the current market price of the investment.
Past performance does not guarantee future results.
Market conditions may impact performance. The performance results presented were achieved in particular market conditions which may not be repeated. Moreover, the current market volatility and uncertain regulatory environment may have a negative impact on future performance.
The Fund invests in foreign securities, which involve additional risks, including currency fluctuations, political instability, differences in financial reporting standards and less stringent regulation of securities markets.
International and emerging markets investing is subject to certain risks such as currency fluctuations and social and political changes; such risks may result in greater share price volatility. Emerging market countries involve greater risks, such as immature economic structures, national policies restricting investments by foreigners, and different legal systems. The Fund’s use of derivative instruments, such as options contracts, futures contracts or swap agreements, involves risks different from, or possibly greater than, the risks associated with investing directly in securities and other more traditional investments.
25
Brandes Core Plus Fixed Income Fund
Unlike bonds issued or guaranteed by the U.S. government or its agencies, stocks and other bonds are not backed by the full faith and credit of the United States. Stock and bond prices will experience market fluctuations. Please note that the value of government securities and bonds in general have an inverse relationship to interest rates. Bonds carry the risk of default, or the risk than an issuer will be unable to make income or principal payment. There is no assurance that private guarantors or insurers will meet their obligations. The credit quality of the investments in the portfolio is no guarantee of the safety or stability of the portfolio. Investments in asset-backed and mortgage-backed securities include additional risks that investors should be aware of such as credit risk, prepayment risk, possible illiquidity and default, as well as increased susceptibility to adverse economic developments.
Please refer to the Schedule of Investments in the report for complete holdings information. Fund holdings, geographic allocations and/or sector allocations are subject to change at any time and are not a recommendation to buy or sell any security.
Investment performance reflects fee waivers and/or reimbursement of expenses. In the absence of such waivers/reimbursements, total return would be reduced.
The foregoing reflects the thoughts and opinions of Brandes Investment Partners® exclusively and is subject to change without notice.
Brandes Investment Partners® is a registered trademark of Brandes Investment Partners, L.P. in the United States and Canada.
Must be preceded or accompanied by a prospectus.
Index Guide
The Barclays U.S. Aggregate Bond Index is an unmanaged index consisting of U.S. dollar-denominated, fixed-rate, taxable bonds. The U.S. Aggregate Bond Index is a broad-based benchmark that measures the investment grade, U.S. dollar-denominated, fixed-rate taxable bond market, including Treasuries, government-related and corporate securities, MBS (agency fixed-rate and hybrid ARM passthroughs), ABS, and CMBS. The U.S. Aggregate rolls up into other Barclays Capital flagship indices such as the multi-currency Global Aggregate Index and the U.S. Universal Index, which includes high yield and emerging markets debt. The U.S. Aggregate Index was created in 1986, with index history backfilled to January 1, 1976. The index is a total return index which reflects the price changes and interest of each bond in the index.
Please note that all indices are unmanaged are not available for direct investment.
The Brandes Core Plus Fixed Income Fund is distributed by Quasar Distributors, LLC.
26
Brandes Core Plus Fixed Income Fund
The following chart compares the value of a hypothetical $10,000 investment in the Brandes Core Plus Fixed Income Fund — Class I from its inception (December 28, 2007) to September 30, 2013 and in the Barclays Capital U.S. Aggregate Index.
Value of $10,000 vs Barclays Capital U.S. Aggregate Index
Average Annual Total Return | |||||
Periods Ended September 30, 2013 | |||||
One | Three | Five | Since | ||
Year | Years | Years | Inception(1) | ||
Brandes Core Plus Fixed Income Fund | |||||
Class A* | 0.28% | 4.55% | 7.19% | 4.42% | |
Class A* (with maximum sales charge) | -3.44% | 3.21% | 6.37% | 3.73% | |
Class E* | 0.79% | 4.72% | 7.29% | 4.53% | |
Class I | 0.89% | 4.90% | 7.49% | 4.70% | |
Barclays Capital U.S. Aggregate Index | -1.68% | 2.86% | 5.41% | 4.85% |
(1) | The since inception dates are as follows: Class A: January 31, 2013; Class E: May 28, 2008; Class I: December 28, 2007. | |
* | Performance shown prior to January 31, 2013 for Class A shares reflects the performance of Class I shares adjusted to reflect Class A expenses. Performance shown prior to May 28, 2008 for Class E shares reflects the performance of Class I shares adjusted to reflect Class E expenses. |
Performance data quoted represents past performance; past performance does not guarantee future results. The investment return 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 of the Fund may be lower or higher than the performance quoted. Performance data current to the most recent month end may be obtained by calling 800-331-2979.
27
Brandes Core Plus Fixed Income Fund
The returns shown do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of Fund shares. The Advisor has a fee waiver arrangement in place to limit the Fund’s annual operating expenses.
Sector Allocation as a Percentage of Total Investments as of
September 30, 2013
28
Brandes Credit Focus Yield Fund
Dear Shareholder:
The Brandes Credit Focus Yield Fund (Class A Shares without sales charges) gained 0.13% for the 12-month period ended September 30, 2013, while its benchmark, the Barclays U.S. Intermediate Credit Bond Index, returned 0.09%.
In this letter, I will examine the sector- and security-specific factors that affected the Fund’s performance. I will also review changes in the Fund’s composition during the fiscal year and how it is positioned for the future.
The Markets
Fixed-income markets recorded gains early in the Fund’s fiscal year, boosted by stimulative central-bank policies globally, a U.S. economy that continued to outperform its developed-country peers despite lackluster performance on an absolute basis, declining euro zone tail risk, strong corporate fundamentals and robust supply/demand technicals.
The positive momentum shifted, however, in the first quarter of 2013 with the markets moving mostly sideways. It is interesting to note that the quarter marked the first negative quarterly return for the Barclays U.S. Aggregate Bond index since the fourth quarter of 2010, and the first negative first-quarter performance since 2006. Market declines continued into the second quarter of 2013. In May, Federal Reserve Chairman Ben Bernanke mentioned the possibility of tapering the Fed’s unprecedented bond-purchase program if the economic data continues to improve. Virtually all markets globally reacted as if the punch bowl was being taken away prematurely from a rollicking party.
Nonetheless, major fixed-income indices recovered some lost ground in the third quarter of 2013, boosted by the Fed’s decision to keep the easy-money party going for the indefinite future, which in turn delivered a surprise to the markets.
After the June 2013 meeting of the Federal Open Market Committee, the Fed Chairman indicated that tapering the Fed’s quantitative easing program, designed to stimulate economic growth, could begin relatively soon, and certainly before year end. However, at a scheduled meeting in September, the Fed decided to postpone dialing down its highly accommodative monetary policy. By then, the markets had long since moved on from discounting the onset of the taper, and trained their sights more on its actual dollar amount — with the estimated reduction of the Fed’s purchases of Treasury and mortgage- backed securities of $10 billion to $15 billion per month fully discounted by the markets.
The Fund
During the fiscal year, the Fund’s positive performance relative to the benchmark was led by select corporate bond holdings that included banks, life insurance firms and independent energy companies. The Fund’s excess yield compared to the benchmark also helped relative returns.
29
Brandes Credit Focus Yield Fund
Additionally, the Fund’s allocation to asset-backed securities (ABS) backed by pools of private student loans aided performance. Toward the close of the fiscal year, we started to see stabilization in the performance of the underlying student loan collateral, a trend that is beginning to flow through to the market prices for these securities. Corporate bond holdings in the building products and insurance industries also contributed positively to performance.
The Fund was relatively defensively positioned throughout the fiscal year with a higher allocation to U.S. Treasury securities and a lower allocation to high-yield bonds than at any time over the last five years. This position detracted modestly from performance for most of the Fund’s fiscal year but positively contributed to returns in the third quarter of 2013. We have been holding U.S. Treasuries as currency or dry powder for more compelling value opportunities. While there was a lot written about the rise in U.S. Treasury yields and the resulting negative returns, U.S. Treasuries outperformed all other fixed-income asset classes in the third quarter of 2013, with the exception of high yield (as measured by the Barclays U.S. Corporate High Yield Bond Index), which posted modestly better returns.
Relative returns during the period were also hurt by a Mexican homebuilding bond and corporate holdings in money-center banks.
The Fund’s portfolio activity during the period included initiating positions in the following: Preferred stock of business services firm Pitney Bowes International; financial services company ING U.S.; integrated steel and mining firm ArcelorMittal; medical laboratory services firm Laboratory Corp.; U.S.-dollar denominated issues of Israel Electric Corp; Canadian pharmaceutical company Valeant Pharmaceuticals; and Mexican homebuilder Urbi Desarrollos Urbanos. Sales activity was limited to a pare-back of Mohawk Industries, a building products company that approached our estimate of fair value.
In the third quarter of 2013, we purchased a U.S.-dollar denominated bond issue by Sappi Papier. Sappi is a South African based company that is one of the global market leaders in paper. It is geographically diversified with 60% of sales in Europe, 23% in North America, and 18% in South Africa. The company is also a low-cost leader in the industry. More recently Sappi has undertaken a large capital expenditure program to convert two plants (one in North America and one in South Africa) to produce chemical cellulose. We purchased first lien notes of Sappi, which are secured by physical plant assets from several facilities worldwide. While we expect that credit metrics are at an inflection point and should begin to improve, the asset coverage provided by the first lien structure may provide the Fund with a defensive positioning in the event that liquidity or credit metrics become further stressed.
30
Brandes Credit Focus Yield Fund
The duration of the Fund at the end of the fiscal year remained shorter than that of the benchmark. Within the corporate sector, the largest overweights were in the financial, utility and homebuilder/building products industries.
Our Outlook
We believe the Brandes Credit Focus Yield Fund remains defensively positioned both with respect to interest-rate sensitivity and allocation to value credit opportunities.
We endeavored to create a bottom-up fixed-income investment philosophy and process 14 years ago based upon the value principles of Benjamin Graham. Then, and now, we believed that by focusing on fundamentals and attempting to ignore the noise in the market we could pursue value for our clients’ fixed-income portfolios over the long term. One of the distinguishing features of our value process is our willingness to accept short-term price volatility that, in our view, is unrelated to underlying credit fundamentals.
We firmly believe in the continued efficacy of the value investing process. We feel strongly that the markets going forward will regularly offer patient long-term investors additional mispriced opportunities. We remain singularly focused on pursuing value over the long term and are thankful for the patience and trust that you have placed in us to implement this philosophy and process on your behalf.
Sincerely yours,
Jeffrey A. Busby, CFA
President
Brandes Investment Trust
Securities considered to be dry powder could be Treasuries or other fixed-income investments that can be liquidated on short notice.
Duration: The weighted maturity of a fixed-income investment’s cash flows, used in the estimation of the price sensitivity of fixed-income securities for a given change in interest rates.
Yield: Annual income from the investment (dividend, interest, etc.) divided by the current market price of the investment.
Past performance does not guarantee future results.
Market conditions may impact performance. The performance results presented were achieved in particular market conditions which may not be repeated. Moreover, the current market volatility and uncertain
31
Brandes Credit Focus Yield Fund
regulatory environment may have a negative impact on future performance.
The Fund invests in foreign securities, which involve additional risks, including currency fluctuations, political instability, differences in financial reporting standards and less stringent regulation of securities markets.
International and emerging markets investing is subject to certain risks such as currency fluctuations and social and political changes; such risks may result in greater share price volatility. Emerging market countries involve greater risks, such as immature economic structures, national policies restricting investments by foreigners, and different legal systems. Below investment grade debt securities are speculative and involve a greater risk of default and price change due to changes in the issuer’s creditworthiness. The Fund’s use of derivative instruments, such as options contracts, futures contracts or swap agreements, involves risks different from, or possibly greater than, the risks associated with investing directly in securities and other more traditional investments.
Unlike bonds issued or guaranteed by the U.S. government or its agencies, stocks and other bonds are not backed by the full faith and credit of the United States. Stock and bond prices will experience market fluctuations. Please note that the value of government securities and bonds in general have an inverse relationship to interest rates. Bonds carry the risk of default, or the risk than an issuer will be unable to make income or principal payment. There is no assurance that private guarantors or insurers will meet their obligations. The credit quality of the investments in the portfolio is no guarantee of the safety or stability of the portfolio. Investments in asset-backed and mortgage-backed securities include additional risks that investors should be aware of such as credit risk, prepayment risk, possible illiquidity and default, as well as increased susceptibility to adverse economic developments.
Please refer to the Schedule of Investments in the report for complete holdings information. Fund holdings, geographic allocations and/or sector allocations are subject to change at any time and are not a recommendation to buy or sell any security.
Investment performance reflects fee waivers and/or reimbursement of expenses. In the absence of such waivers/reimbursements, total return would be reduced.
The foregoing reflects the thoughts and opinions of Brandes Investment Partners® exclusively and is subject to change without notice.
32
Brandes Credit Focus Yield Fund
Brandes Investment Partners® is a registered trademark of Brandes Investment Partners, L.P. in the United States and Canada.
Must be preceded or accompanied by a prospectus.
Index Guide
The Barclays U.S. Aggregate Bond Index is an unmanaged index consisting of U.S. dollar-denominated, fixed-rate, taxable bonds. The U.S. Aggregate Bond Index is a broad-based benchmark that measures the investment grade, U.S. dollar-denominated, fixed-rate taxable bond market, including Treasuries, government-related and corporate securities, MBS (agency fixed-rate and hybrid ARM passthroughs), ABS, and CMBS. The U.S. Aggregate rolls up into other Barclays Capital flagship indices such as the multi-currency Global Aggregate Index and the U.S. Universal Index, which includes high yield and emerging markets debt. The U.S. Aggregate Index was created in 1986, with index history backfilled to January 1, 1976. The index is a total return index which reflects the price changes and interest of each bond in the index.
The Barclays U.S. Corporate High-Yield Bond Index is an unmanaged index consisting of U.S. dollar-denominated, non-investment grade, fixed-rate, taxable corporate bonds. The U.S. Corporate High-Yield Index measures the market of USD-denominated, non-investment grade, fixed-rate, taxable corporate bonds. Securities are classified as high yield if the middle rating of Moody’s, Fitch, and S&P is Ba1/BB+/BB+ or below. The index excludes emerging market debt. It was created in 1986, with history backfilled to July 1, 1983. The U.S. Corporate High-Yield Index is part of the U.S. Universal and Global High-Yield Indices. The index is a total return index which reflects the price changes and interest of each bond in the index.
The Barclays U.S. Intermediate Credit Bond Index is an unmanaged index consisting of U.S. dollar-denominated, publicly issued, fixed-rate corporate securities. The index includes
Securities in the intermediate maturity range of the U.S. Credit Index. The Credit Index includes publicly issued U.S. corporate and foreign debentures and secured notes that meet specified maturity, liquidity, and quality requirements. The index is a total return index which reflects the price changes and interest of each bond in the index.
One cannot invest directly in an index.
The Brandes Credit Focus Yield Fund is distributed by Quasar Distributors, LLC.
33
Brandes Credit Focus Yield Fund
The following chart compares the value of a hypothetical $10,000 investment in the Brandes Credit Focus Yield Fund — Class I from September 30, 2003 to September 30, 2013 as compared with the Barclays Capital U.S. Intermediate Credit Index.
Value of $10,000 vs Barclays Capital U.S. Intermediate Credit Index
Average Annual Total Return | |||||
Periods Ended September 30, 2013* | |||||
One | Five | Ten | Since | ||
Year | Years | Years | Inception(1) | ||
Brandes Credit Focus Yield Fund | |||||
Class A* | 0.13% | 9.38% | 5.31% | 6.38% | |
Class A* (with maximum sales charge) | -3.59% | 8.55% | 4.91% | 6.07% | |
Class I | 0.40% | 9.51% | 5.37% | 6.43% | |
Barclays Capital U.S. Intermediate | |||||
Credit Index** | 0.09% | 7.70% | 4.84% | 6.15% |
(1) | The since inception dates are as follows: Class A: March 1, 2012; Class I: January 31, 2012. | |
* | Performance shown prior to March 1, 2012 for Class A shares reflects the performance of Class I shares adjusted to reflect Class A expenses. | |
** | Prior to February 1, 2012, the Advisor managed a private investment fund with an investment objective, investment policies and strategies that were, in all material respects, equivalent to those of the Brandes Credit Focus Yield Fund. The performance information shown for the Class I shares for periods before February 1, 2012 is that of the private investment fund and reflects the net expenses of the private investment fund. The performance of the private investment fund prior to February 1, 2012 is based on calculations that are different than the standardized method of calculations presented by the SEC. The performance information shown for the Class A shares has been adjusted to reflect the differences in the net expense ratios between the Class I and A shares. The private investment fund was not registered under the Investment Company Act of 1940 (“1940 Act”) and was not subject to certain investment limitations, diversification requirements, and other restrictions |
34
Brandes Credit Focus Yield Fund
imposed by the 1940 Act and the Internal Revenue Code of 1986, which, if applicable, may have adversely affected its performance. |
Performance data quoted represents past performance; past performance does not guarantee future results. The investment return 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 of the Fund may be lower or higher than the performance quoted. Performance data current to the most recent month end may be obtained by calling 800-331-2979.
The returns shown do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. The Advisor has a fee waiver arrangement in place to limit the Fund’s annual operating expenses.
Sector Allocation as a Percentage of Total Investments as of
September 30, 2013
35
Brandes Investment Trust
Expense Example (Unaudited)
As a shareholder of a Fund, you incur ongoing costs, including investment advisory and administrative fees and other fund expenses. The examples below are intended to help you understand your ongoing costs (in dollars) of investing in the Funds and to compare these costs with ongoing costs of investing in other mutual funds.
The examples are based on an investment of $1,000 invested at the beginning of the period and held for the entire period from April 1, 2013 to September 30, 2013 (the “Period”).
Actual Expenses
This section provides information about actual account values and actual expenses. The “Ending Account Value” shown is derived from the Fund’s actual return. You may use the information in this section, 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 given for the Fund under the heading “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Class A | ||||||||||||||||
Expenses | ||||||||||||||||
Beginning | Ending | Annual | Paid | |||||||||||||
Account | Account | Expense | During | |||||||||||||
Fund | Value | Value | Ratio | the Period* | ||||||||||||
International Equity Fund | $ | 1,000.00 | $ | 1,150.80 | 1.22 | % | $ | 6.58 | ||||||||
Global Equity Fund | $ | 1,000.00 | $ | 1,130.10 | 1.25 | % | $ | 6.67 | ||||||||
Emerging Markets Fund | $ | 1,000.00 | $ | 1,000.50 | 1.37 | % | $ | 6.87 | ||||||||
International Small Cap Fund | $ | 1,000.00 | $ | 1,149.30 | 1.40 | % | $ | 7.54 | ||||||||
Core Plus Fixed Income Fund | $ | 1,000.00 | $ | 985.70 | 0.70 | % | $ | 3.48 | ||||||||
Credit Focus Yield Fund | $ | 1,000.00 | $ | 982.80 | 0.95 | % | $ | 4.72 | ||||||||
Class C | ||||||||||||||||
Expenses | ||||||||||||||||
Beginning | Ending | Annual | Paid | |||||||||||||
Account | Account | Expense | During | |||||||||||||
Fund | Value | Value | Ratio | the Period* | ||||||||||||
International Equity Fund | $ | 1,000.00 | $ | 1,147.30 | 1.95 | % | $ | 10.50 | ||||||||
Global Equity Fund | $ | 1,000.00 | $ | 1,126.30 | 2.00 | % | $ | 10.66 | ||||||||
Emerging Markets Fund | $ | 1,000.00 | $ | 996.60 | 2.12 | % | $ | 10.61 | ||||||||
International Small Cap Fund | $ | 1,000.00 | $ | 1,145.60 | 2.15 | % | $ | 11.56 |
36
Brandes Investment Trust
Class E | ||||||||||||||||
Expenses | ||||||||||||||||
Beginning | Ending | Annual | Paid | |||||||||||||
Account | Account | Expense | During | |||||||||||||
Fund | Value | Value | Ratio | the Period* | ||||||||||||
International Equity Fund | $ | 1,000.00 | $ | 1,151.50 | 1.23 | % | $ | 6.63 | ||||||||
Global Equity Fund | $ | 1,000.00 | $ | 1,129.70 | 1.25 | % | $ | 6.67 | ||||||||
Core Plus Fixed Income Fund | $ | 1,000.00 | $ | 985.90 | 0.70 | % | $ | 3.48 | ||||||||
Class I | ||||||||||||||||
Expenses | ||||||||||||||||
Beginning | Ending | Annual | Paid | |||||||||||||
Account | Account | Expense | During | |||||||||||||
Fund | Value | Value | Ratio | the Period* | ||||||||||||
International Equity Fund | $ | 1,000.00 | $ | 1,152.50 | 1.01 | % | $ | 5.45 | ||||||||
Global Equity Fund | $ | 1,000.00 | $ | 1,131.60 | 1.00 | % | $ | 5.34 | ||||||||
Emerging Markets Fund | $ | 1,000.00 | $ | 1,001.20 | 1.12 | % | $ | 5.62 | ||||||||
International Small Cap Fund | $ | 1,000.00 | $ | 1,150.60 | 1.15 | % | $ | 6.20 | ||||||||
Core Plus Fixed Income Fund | $ | 1,000.00 | $ | 986.80 | 0.50 | % | $ | 2.49 | ||||||||
Credit Focus Yield Fund | $ | 1,000.00 | $ | 985.00 | 0.70 | % | $ | 3.48 |
Hypothetical Example for Comparison Purposes
This section provides information about hypothetical account values and hypothetical expenses based on the Funds’ actual expense ratios and an assumed rate of return of 5% per year before expenses, which is not the Funds’ 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 Funds and other mutual funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other mutual funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the last column 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.
37
Brandes Investment Trust
Class A | ||||||||||||||||
Expenses | ||||||||||||||||
Beginning | Ending | Annual | Paid | |||||||||||||
Account | Account | Expense | During | |||||||||||||
Fund | Value | Value | Ratio | the Period* | ||||||||||||
International Equity Fund | $ | 1,000.00 | $ | 1,018.95 | 1.22 | % | $ | 6.17 | ||||||||
Global Equity Fund | $ | 1,000.00 | $ | 1,018.80 | 1.25 | % | $ | 6.33 | ||||||||
Emerging Markets Fund | $ | 1,000.00 | $ | 1,018.20 | 1.37 | % | $ | 6.93 | ||||||||
International Small Cap Fund | $ | 1,000.00 | $ | 1,018.05 | 1.40 | % | $ | 7.08 | ||||||||
Core Plus Fixed Income Fund | $ | 1,000.00 | $ | 1,021.56 | 0.70 | % | $ | 3.55 | ||||||||
Credit Focus Yield Fund | $ | 1,000.00 | $ | 1,020.31 | 0.95 | % | $ | 4.81 | ||||||||
Class C | ||||||||||||||||
Expenses | ||||||||||||||||
Beginning | Ending | Annual | Paid | |||||||||||||
Account | Account | Expense | During | |||||||||||||
Fund | Value | Value | Ratio | the Period* | ||||||||||||
International Equity Fund | $ | 1,000.00 | $ | 1,015.29 | 1.95 | % | $ | 9.85 | ||||||||
Global Equity Fund | $ | 1,000.00 | $ | 1,015.04 | 2.00 | % | $ | 10.10 | ||||||||
Emerging Markets Fund | $ | 1,000.00 | $ | 1,014.44 | 2.12 | % | $ | 10.71 | ||||||||
International Small Cap Fund | $ | 1,000.00 | $ | 1,014.29 | 2.15 | % | $ | 10.86 | ||||||||
Class E | ||||||||||||||||
Expenses | ||||||||||||||||
Beginning | Ending | Annual | Paid | |||||||||||||
Account | Account | Expense | During | |||||||||||||
Fund | Value | Value | Ratio | the Period* | ||||||||||||
International Equity Fund | $ | 1,000.00 | $ | 1,018.90 | 1.23 | % | $ | 6.23 | ||||||||
Global Equity Fund | $ | 1,000.00 | $ | 1,018.80 | 1.25 | % | $ | 6.33 | ||||||||
Core Plus Fixed Income Fund | $ | 1,000.00 | $ | 1,021.56 | 0.70 | % | $ | 3.55 | ||||||||
Class I | ||||||||||||||||
Expenses | ||||||||||||||||
Beginning | Ending | Annual | Paid | |||||||||||||
Account | Account | Expense | During | |||||||||||||
Fund | Value | Value | Ratio | the Period* | ||||||||||||
International Equity Fund | $ | 1,000.00 | $ | 1,020.00 | 1.01 | % | $ | 5.11 | ||||||||
Global Equity Fund | $ | 1,000.00 | $ | 1,020.05 | 1.00 | % | $ | 5.06 | ||||||||
Emerging Markets Fund | $ | 1,000.00 | $ | 1,019.45 | 1.12 | % | $ | 5.67 | ||||||||
International Small Cap Fund | $ | 1,000.00 | $ | 1,019.30 | 1.15 | % | $ | 5.82 | ||||||||
Core Plus Fixed Income Fund | $ | 1,000.00 | $ | 1,022.56 | 0.50 | % | $ | 2.54 | ||||||||
Credit Focus Yield Fund | $ | 1,000.00 | $ | 1,021.56 | 0.70 | % | $ | 3.55 |
* | Expenses are equal to the Funds’ expense ratio for the period, multiplied by the average account value over the period, multiplied by 183/365 (to reflect the one-half year period). |
38
Brandes International Equity Fund
SCHEDULE OF INVESTMENTS — September 30, 2013
Shares | Value | |||||||
COMMON STOCKS – 96.81% | ||||||||
Brazil – 3.18% | ||||||||
270,854 | Banco do Brasil SA | $ | 3,153,018 | |||||
443,600 | Banco Santander | |||||||
Brasil SA – ADR | 3,083,020 | |||||||
343,130 | Centrais Electricas | |||||||
Brasileiras SA – ADR | 964,195 | |||||||
271,534 | Tim Participacoes | |||||||
SA – ADR | 6,400,056 | |||||||
13,600,289 | ||||||||
France – 19.03% | ||||||||
372,761 | Carrefour SA | 12,785,619 | ||||||
177,886 | Compagnie De Saint – | |||||||
Gobain | 8,828,915 | |||||||
823,887 | Orange S.A. | 10,316,375 | ||||||
609,757 | GDF Suez | 15,284,039 | ||||||
514,348 | Natixis | 2,462,853 | ||||||
55,100 | Renault SA | 4,394,204 | ||||||
57,735 | Sanofi | 5,847,223 | ||||||
470,599 | Suez | |||||||
Environnement S.A. | 7,638,517 | |||||||
237,594 | Total SA | 13,771,629 | ||||||
81,329,374 | ||||||||
Germany – 3.24% | ||||||||
93,700 | Daimler AG | 7,305,791 | ||||||
450,800 | Deutsche Telekom AG | 6,529,088 | ||||||
13,834,879 | ||||||||
Ireland – 2.69% | ||||||||
479,026 | CRH Plc | 11,505,345 | ||||||
Italy – 7.26% | ||||||||
393,415 | ENI SpA | 9,043,896 | ||||||
1,949,178 | Intesa Sanpaolo SpA | 4,031,936 | ||||||
4,288,712 | Intesa Sanpaolo SpA | |||||||
Savings Shares | 7,286,419 | |||||||
422,400 | Italcementi SpA | |||||||
Savings Shares | 1,691,003 | |||||||
4,166,774 | Telecom Italia SpA | 3,428,375 | ||||||
8,304,250 | Telecom Italia SpA | |||||||
Savings Shares | 5,518,802 | |||||||
31,000,431 | ||||||||
Japan – 24.01% | ||||||||
69,800 | Astellas Pharma, Inc. | 3,565,385 | ||||||
185,500 | Canon, Inc. | 5,939,586 | ||||||
359,400 | Dai Nippon | |||||||
Printing Co. Ltd. | 3,810,433 | |||||||
375,102 | Daiichi Sankyo | |||||||
Co. Ltd. | 6,812,407 | |||||||
288,000 | FUJIFILM | |||||||
Holdings Corp. | 6,940,758 | |||||||
154,400 | Honda Motor Co. Ltd. | 5,901,601 | ||||||
911,700 | Mitsubishi UFJ | |||||||
Financial Group, Inc. | 5,847,970 | |||||||
209,999 | MS&AD Insurance | |||||||
Group Holdings | 5,504,207 | |||||||
194,400 | Nippon Telegraph & | |||||||
Telephone Corp. | 10,118,651 | |||||||
139,400 | Nissan Motor Co. Ltd. | 1,406,927 | ||||||
396,000 | NKSJ Holdings, Inc. | 10,215,088 | ||||||
45,000 | Ono Pharmaceutical | |||||||
Co. Ltd. | 2,764,966 | |||||||
78,900 | Rohm Co. Ltd. | 3,253,584 | ||||||
83,298 | Sumitomo Mitsui | |||||||
Financial Group, Inc. | 4,033,743 | |||||||
1,001,000 | Sumitomo Mitsui Trust | |||||||
Holdings, Inc. | 4,975,037 | |||||||
63,200 | Taisho Pharmaceutical | |||||||
Co. Ltd. | 4,173,544 | |||||||
104,800 | Takeda Pharmaceutical | |||||||
Co. Ltd. | 4,949,707 | |||||||
83,300 | TDK Corp. | 3,281,573 | ||||||
125,700 | Tokio Marine | |||||||
Holdings, Inc. | 4,121,080 | |||||||
77,500 | Toyota Motor Corp. | 4,970,660 | ||||||
102,586,907 | ||||||||
Mexico – 2.47% | ||||||||
329,498 | America Movil | |||||||
SAB de CV – ADR | 6,527,355 | |||||||
359,928 | Cemex SAB de | |||||||
CV – ADR(a) | 4,023,995 | |||||||
10,551,350 | ||||||||
Netherlands – 6.52% | ||||||||
1,193,434 | Aegon NV | 8,830,514 | ||||||
489,052 | Royal Ahold NV | 8,472,931 | ||||||
97,004 | Unilever NV | 3,702,322 | ||||||
265,201 | Wolters Kluwer NV | 6,837,517 | ||||||
27,843,284 | ||||||||
Portugal – 0.84% | ||||||||
793,200 | Portugal | |||||||
Telecom SGPS SA | 3,576,419 |
The accompanying notes are an integral part of these Schedules of Investments.
39
Brandes International Equity Fund
SCHEDULE OF INVESTMENTS — September 30, 2013 (continued)
Shares | Value | |||||||
Russia – 1.58% | ||||||||
106,003 | Lukoil Co. – ADR(a) | $ | 6,737,551 | |||||
Singapore – 0.74% | ||||||||
345,500 | Flextronics | |||||||
International Ltd.(a) | 3,140,595 | |||||||
South Korea – 2.33% | ||||||||
15,950 | Hyundai Mobis | |||||||
Co. Ltd. | 4,243,044 | |||||||
19,241 | POSCO | 5,699,803 | ||||||
9,942,847 | ||||||||
Spain – 1.09% | ||||||||
300,677 | Telefonica SA | 4,674,360 | ||||||
Sweden – 1.69% | ||||||||
542,200 | LM Ericsson | |||||||
Telefon AB Class B | 7,221,423 | |||||||
Switzerland – 4.66% | ||||||||
90,720 | Swiss Re AG | 7,516,196 | ||||||
116,139 | TE Connectivity Ltd. | 6,013,677 | ||||||
310,037 | UBS AG | 6,354,344 | ||||||
19,884,217 | ||||||||
United Kingdom – 15.48% | ||||||||
180,255 | AstraZeneca Plc | 9,370,618 | ||||||
865,521 | Barclays Plc | 3,698,976 | ||||||
2,006,708 | BP Plc | 14,068,790 | ||||||
273,720 | GlaxoSmithKline Plc | 6,882,110 | ||||||
406,000 | HSBC Holdings Plc | 4,394,306 | ||||||
791,400 | J. Sainsbury Plc | 5,015,711 | ||||||
955,919 | Marks & Spencer | |||||||
Group Plc | 7,681,006 | |||||||
1,657,800 | Vodafone Group Plc | 5,818,620 | ||||||
2,025,311 | WM. Morrison | |||||||
Supermarkets Plc | 9,182,770 | |||||||
66,112,907 | ||||||||
TOTAL COMMON STOCKS | ||||||||
(Cost $396,201,107) | $ | 413,542,178 | ||||||
PREFERRED STOCKS – 2.44% | ||||||||
Brazil – 2.44% | ||||||||
457,350 | Petroleo Brasileiro SA | $ | 7,651,465 | |||||
122,963 | Telefonica Brasil SA | 2,759,290 | ||||||
TOTAL PREFERRED STOCKS | ||||||||
(Cost $14,012,330) | $ | 10,410,755 |
Contracts | Value | |||||||
RIGHTS – 0.07% | ||||||||
United Kingdom – 0.07% | ||||||||
Barclays Plc Rights | ||||||||
Expiration Date: October 3, 2013, Exercise Price: $1.85 | 216,380 | $ | 282,867 | |||||
TOTAL RIGHTS | ||||||||
(Cost $398,779) | $ | 282,867 |
Principal | ||||||||
Amount | Value | |||||||
REPURCHASE AGREEMENTS – 2.05% | ||||||||
State Street Bank and Trust Repurchase Agreement, (Dated 09/30/13), | ||||||||
due 10/1/13, 0.00% [Collateralized by $9,875,000 Fannie Mae Bond, | ||||||||
2.08%, 10/17/22, (Market Value $9,210,410)] (proceeds $8,768,579) | $ | 8,768,579 | $ | 8,768,579 | ||||
TOTAL REPURCHASE AGREEMENTS (Cost $8,768,579) | $ | 8,768,579 | ||||||
Total Investments (Cost $419,380,795) – 101.37% | $ | 433,004,379 | ||||||
Liabilities in Excess of Other Assets – (1.37%) | (5,833,973 | ) | ||||||
TOTAL NET ASSETS – 100.00% | $ | 427,170,406 |
__________
Percentages are stated as a percent of net assets.
ADR American Depository Receipt
(a) | Non-income producing security. |
The accompanying notes are an integral part of these Schedules of Investments.
40
Brandes International Equity Fund
SCHEDULE OF INVESTMENTS BY INDUSTRY — September 30, 2013 (Unaudited)
COMMON STOCKS | ||||
Auto Components | 0.99 | % | ||
Automobiles | 5.61 | % | ||
Building Products | 2.07 | % | ||
Capital Markets | 1.49 | % | ||
Commercial Banks | 10.06 | % | ||
Commercial Services & Supplies | 0.89 | % | ||
Communications Equipment | 1.69 | % | ||
Construction Materials | 4.03 | % | ||
Diversified Telecommunication Services | 10.34 | % | ||
Electric Utilities | 0.23 | % | ||
Electronic Equipment, Instruments & Components | 4.54 | % | ||
Food & Staples Retailing | 8.30 | % | ||
Food Products | 0.87 | % | ||
Insurance | 8.47 | % | ||
Media | 1.60 | % | ||
Metals & Mining | 1.33 | % | ||
Multiline Retail | 1.80 | % | ||
Multi-Utilities | 5.37 | % | ||
Office Electronics | 1.39 | % | ||
Oil, Gas & Consumable Fuels | 10.21 | % | ||
Pharmaceuticals | 10.39 | % | ||
Semiconductors & Semiconductor Equipment | 0.75 | % | ||
Wireless Telecommunication Services | 4.39 | % | ||
TOTAL COMMON STOCKS | 96.81 | % | ||
PREFERRED STOCKS | ||||
Diversified Telecommunication Services | 0.65 | % | ||
Oil, Gas & Consumable Fuels | 1.79 | % | ||
TOTAL PREFERRED STOCKS | 2.44 | % | ||
RIGHTS | ||||
Commercial Banks | 0.07 | % | ||
TOTAL RIGHTS | 0.07 | % | ||
REPURCHASE AGREEMENTS | 2.05 | % | ||
TOTAL INVESTMENTS | 101.37 | % | ||
Liabilities in Excess of Other Assets | (1.37 | %) | ||
TOTAL NET ASSETS | 100.00 | % | ||
The industry classifications represented in the Schedule of Investments are in accordance with Global Industry Classification Standards (GICS ), which was developed by and/or is the exclusive property of MSCI, INC. and Standard & Poor Financial Services LLC.
41
Brandes Global Equity Fund
SCHEDULE OF INVESTMENTS — September 30, 2013
Shares | Value |
COMMON STOCKS – 93.64% | ||||||||
Auto Components – 2.13% | ||||||||
3,200 | Hyundai Mobis | |||||||
Co. Ltd. | $ | 851,269 | ||||||
Automobiles – 3.72% | ||||||||
12,900 | Honda Motor Co. Ltd. | 493,074 | ||||||
39,200 | Nissan Motor Co. Ltd. | 395,635 | ||||||
9,300 | Toyota Motor Corp. | 596,479 | ||||||
1,485,188 | ||||||||
Beverages – 1.95% | ||||||||
9,790 | Pepsico, Inc. | 778,305 | ||||||
Building Products – 0.91% | ||||||||
17,100 | Masco Corp. | 363,888 | ||||||
Capital Markets – 2.94% | ||||||||
19,600 | Bank of New York | |||||||
Mellon Corp. | 591,724 | |||||||
8,848 | State Street Corp. | 581,756 | ||||||
1,173,480 | ||||||||
Commercial Banks – 6.23% | ||||||||
63,763 | Banco Santander | |||||||
Brasil SA – ADR | 443,153 | |||||||
77,256 | Intesa Sanpaolo SpA | 159,806 | ||||||
199,000 | Intesa Sanpaolo SpA | |||||||
Savings Shares | 338,096 | |||||||
71,600 | Mitsubishi UFJ | |||||||
Financial Group, Inc. | 459,268 | |||||||
5,530 | PNC Financial Services | |||||||
Group, Inc. | 400,649 | |||||||
16,669 | Wells Fargo & Co. | 688,763 | ||||||
2,489,735 | ||||||||
Communications Equipment – 1.57% | ||||||||
47,100 | LM Ericsson Telefon AB | |||||||
Class B | 627,313 | |||||||
Computers & Peripherals – 2.21% | ||||||||
13,940 | Western Digital Corp. | 883,796 | ||||||
Construction Materials – 2.19% | ||||||||
36,505 | CRH Plc | 876,785 | ||||||
Diversified Financial Services – 3.81% | ||||||||
45,532 | Bank of America Corp. | 628,342 | ||||||
18,406 | Citigroup, Inc. | 892,875 | ||||||
1,521,217 | ||||||||
Diversified Telecommunication | ||||||||
Services – 7.69% | ||||||||
46,400 | Deutsche Telekom AG | 672,027 | ||||||
58,763 | Orange SA | 735,806 | ||||||
15,300 | Nippon Telegraph & | |||||||
Telephone Corp. | 796,376 | |||||||
875,400 | Telecom Italia SpA | |||||||
Savings Shares | 581,769 | |||||||
18,452 | Telefonica SA | 286,857 | ||||||
3,072,835 | ||||||||
Electronic Equipment, Instruments | ||||||||
& Components – 3.20% | ||||||||
48,190 | Corning, Inc. | 703,092 | ||||||
11,100 | TE Connectivity Ltd. | 574,758 | ||||||
1,277,850 | ||||||||
Food & Staples Retailing – 6.03% | ||||||||
24,392 | Carrefour SA | 836,640 | ||||||
46,900 | J. Sainsbury Plc | 297,241 | ||||||
36,600 | Royal Ahold NV | 634,103 | ||||||
141,000 | WM. Morrison | |||||||
Supermarkets Plc | 639,295 | |||||||
2,407,279 | ||||||||
Food Products – 1.18% | ||||||||
12,400 | Unilever NV | 473,267 | ||||||
Hotels, Restaurants & Leisure – 1.46% | ||||||||
450,200 | Genting Malaysia | |||||||
Berhad | 583,186 | |||||||
Insurance – 6.11% | ||||||||
73,839 | Aegon NV | 546,353 | ||||||
16,000 | MS&AD Insurance | |||||||
Group Holdings | 419,370 | |||||||
15,200 | NKSJ Holdings, Inc. | 392,094 | ||||||
7,800 | Swiss Re AG | 646,234 | ||||||
13,300 | Tokio Marine | |||||||
Holdings, Inc. | 436,041 | |||||||
2,440,092 | ||||||||
Multiline Retail – 1.52% | ||||||||
75,600 | Marks & Spencer | |||||||
Group Plc | 607,462 | |||||||
Multi-Utilities – 2.96% | ||||||||
47,184 | GDF Suez | 1,182,704 | ||||||
Office Electronics – 1.27% | ||||||||
15,900 | Canon, Inc. | 509,107 |
The accompanying notes are an integral part of these Schedules of Investments.
42
Brandes Global Equity Fund
SCHEDULE OF INVESTMENTS — September 30, 2013 (continued)
Shares | Value | |||||||
Oil, Gas & Consumable Fuels – 9.96% | ||||||||
129,111 | BP Plc | $ | 905,182 | |||||
32,190 | Chesapeake | |||||||
Energy Corp. | 833,077 | |||||||
33,900 | ENI SpA | 779,299 | ||||||
8,000 | Lukoil Co. – ADR | 508,480 | ||||||
16,478 | Total SA | 955,113 | ||||||
3,981,151 | ||||||||
Pharmaceuticals – 13.99% | ||||||||
11,800 | Astellas Pharma, Inc. | 602,744 | ||||||
15,600 | AstraZeneca Plc | 810,971 | ||||||
32,400 | Daiichi Sankyo Co. Ltd. | 588,432 | ||||||
11,400 | Eli Lilly & Co. | 573,762 | ||||||
24,000 | GlaxoSmithKline Plc | 603,429 | ||||||
12,639 | Merck & Co., Inc. | 601,743 | ||||||
25,054 | Pfizer, Inc. | 719,300 | ||||||
6,000 | Sanofi | 607,662 | ||||||
10,200 | Takeda Pharmaceutical | |||||||
Co. Ltd. | 481,746 | |||||||
5,589,789 | ||||||||
Semiconductors & Semiconductor | ||||||||
Equipment – 3.01% | ||||||||
25,264 | Intel Corp. | 579,051 | ||||||
490 | Samsung Electronics | |||||||
Co. Ltd. | 623,277 | |||||||
1,202,328 | ||||||||
Software – 2.64% | ||||||||
31,700 | Microsoft Corp. | 1,055,927 | ||||||
Tobacco – 2.02% | ||||||||
21,790 | Imperial Tobacco | |||||||
Group Plc | 805,527 | |||||||
Wireless Telecommunication Services – 2.94% | ||||||||
24,800 | America Movil | |||||||
SAB de CV – ADR | 491,288 | |||||||
28,900 | Tim Participacoes | |||||||
SA – ADR | 681,173 | |||||||
1,172,461 | ||||||||
TOTAL COMMON STOCKS | ||||||||
(Cost $31,471,945) | $ | 37,411,941 | ||||||
PREFERRED STOCKS – 1.68% | ||||||||
Oil, Gas & Consumable Fuels – 1.68% | ||||||||
39,940 | Petroleo Brasileiro SA | $ | 668,196 | |||||
TOTAL PREFERRED STOCKS | ||||||||
(Cost $562,570) | $ | 668,196 |
Principal | ||||||||
Amount | Value | |||||||
REPURCHASE AGREEMENTS – 5.42% | ||||||||
Repurchase Agreement – 5.42% | ||||||||
State Street Bank and Trust Repurchase Agreement, (Dated 09/30/13), | ||||||||
due 10/01/13, 0.00% [Collateralized by $2,450,000 Fannie Mae Bond, | ||||||||
2.08%, 11/02/22, (Market Value $2,276,481)] (proceeds $2,167,321) | $ | 2,167,321 | $ | 2,167,321 | ||||
TOTAL REPURCHASE AGREEMENTS (Cost $2,167,321) | $ | 2,167,321 | ||||||
Total Investments (Cost $34,201,836) – 100.74% | $ | 40,247,458 | ||||||
Liabilities in Excess of Other Assets – (0.74%) | (296,080 | ) | ||||||
TOTAL NET ASSETS – 100.00% | $ | 39,951,378 |
__________
Percentages are stated as a percent of net assets.
ADR American Depository Receipt
The accompanying notes are an integral part of these Schedules of Investments.
43
Brandes Global Equity Fund
SCHEDULE OF INVESTMENTS BY COUNTRY — September 30, 2013 (Unaudited)
COMMON STOCKS
Brazil | 2.81 | % | ||
France | 10.81 | % | ||
Germany | 1.68 | % | ||
Ireland | 2.19 | % | ||
Italy | 4.65 | % | ||
Japan | 15.44 | % | ||
Malaysia | 1.46 | % | ||
Mexico | 1.23 | % | ||
Netherlands | 4.14 | % | ||
Russia | 1.27 | % | ||
South Korea | 3.69 | % | ||
Spain | 0.72 | % | ||
Sweden | 1.57 | % | ||
Switzerland | 3.06 | % | ||
United Kingdom | 11.69 | % | ||
United States | 27.23 | % | ||
TOTAL COMMON STOCKS | 93.64 | % | ||
PREFERRED STOCKS | ||||
Brazil | 1.68 | % | ||
TOTAL PREFERRED STOCKS | 1.68 | % | ||
REPURCHASE AGREEMENTS | 5.42 | % | ||
TOTAL INVESTMENTS | 100.74 | % | ||
Liabilities in Excess of Other Assets | (0.74 | %) | ||
TOTAL NET ASSETS | 100.00 | % |
The industry classifications represented in the Schedule of Investments are in accordance with Global Industry Classification Standards (GICS ), which was developed by and/or is the exclusive property of MSCI, INC. and Standard & Poor Financial Services LLC.
The accompanying notes are an integral part of these Schedules of Investments.
44
Brandes Emerging Markets Fund
SCHEDULE OF INVESTMENTS — September 30, 2013
Shares | Value | |||||||
COMMON STOCKS – 81.07% | ||||||||
Argentina – 0.08% | ||||||||
67,028 | Grupo Clarin | |||||||
SA – GDR(a) | $ | 351,897 | ||||||
Austria – 2.48% | ||||||||
333,808 | Erste Group Bank AG | 10,548,892 | ||||||
Brazil – 10.45% | ||||||||
264,830 | Banco Bradesco SA | 4,148,760 | ||||||
583,650 | Banco do Brasil SA | 6,794,284 | ||||||
961,535 | Banco Santander | |||||||
Brasil SA – ADR | 6,682,668 | |||||||
1,282,775 | Centrais Electricas | |||||||
Brasileiras SA – ADR | 3,604,598 | |||||||
58,940 | Cia Paranaense | |||||||
de Energia | 601,022 | |||||||
196,434 | Embraer SA – ADR | 6,378,212 | ||||||
1,607,742 | Marfrig Alimentos | |||||||
SA(a) | 4,359,757 | |||||||
495,318 | Tim Participacoes | |||||||
SA – ADR | 11,674,646 | |||||||
1,419,243 | Viver Incorporadora e | |||||||
Construtora SA(a) | 153,688 | |||||||
44,397,635 | ||||||||
China – 11.33% | ||||||||
414,995 | Asiainfo-Linkage, | |||||||
Inc.(a) | 4,789,042 | |||||||
37,732,000 | Bosideng International | |||||||
Holdings Ltd. | 9,102,958 | |||||||
3,433,934 | Chaoda Modern | |||||||
Agriculture Holdings | ||||||||
Ltd.(a)(c) | 394,902 | |||||||
927,500 | China Mobile Ltd | 10,436,370 | ||||||
94,640 | China Yuchai | |||||||
International Ltd. | 2,249,593 | |||||||
2,553,519 | People’s Food | |||||||
Holdings Ltd. | 2,349,571 | |||||||
12,170,350 | Sinotrans Ltd. | 3,204,493 | ||||||
5,842,377 | Weiqiao Textile Co. | 3,428,301 | ||||||
3,797,450 | Xinhua Winshare | |||||||
Publishing and Media | ||||||||
Co. Ltd. | 2,090,468 | |||||||
10,270,500 | Yingde Gases | 10,059,352 | ||||||
48,105,050 | ||||||||
Czech Republic – 1.69% | ||||||||
452,960 | Telefonica Czech | |||||||
Republic AS | 7,192,568 | |||||||
Egypt – 0.96% | ||||||||
298,145 | Eastern Tobacco Co. | 4,083,971 | ||||||
Greece – 1.87% | ||||||||
47,930 | Folli Follie Group | |||||||
SA(a) | 1,244,787 | |||||||
268,820 | Titan Cement Co. | |||||||
SA(a) | 6,691,588 | |||||||
7,936,375 | ||||||||
Hong Kong – 2.48% | ||||||||
208,228 | Dickson Concepts | |||||||
International Ltd. | 125,379 | |||||||
9,410,899 | First Pacific Co. Ltd. | 10,401,886 | ||||||
10,527,265 | ||||||||
Hungary – 0.98% | ||||||||
2,992,964 | Magyar Telekom | |||||||
Telecommunications | ||||||||
Plc | 4,165,978 | |||||||
India – 6.66% | ||||||||
2,215,390 | Indian Oil Corp. Ltd. | 7,355,193 | ||||||
1,383,808 | Reliance Infrastructure | |||||||
Ltd. | 8,202,015 | |||||||
1,595,230 | Tata Chemicals | 6,066,661 | ||||||
2,881,782 | United Phosphorus | |||||||
Ltd. | 6,674,273 | |||||||
28,298,142 | ||||||||
Indonesia – 0.99% | ||||||||
11,512,380 | PT XL Axiata | 4,225,183 | ||||||
Israel – 0.08% | ||||||||
40,050 | Syneron Medical | |||||||
Ltd.(a) | 345,231 | |||||||
Luxembourg – 2.14% | ||||||||
551,461 | Adecoagro SA(a) | 4,086,326 | ||||||
206,690 | Ternium SA – ADR | 4,964,694 | ||||||
9,051,020 | ||||||||
Malaysia – 1.08% | ||||||||
3,533,700 | Genting Malaysia | |||||||
Berhad | 4,577,533 |
The accompanying notes are an integral part of these Schedules of Investments.
45
Brandes Emerging Markets Fund
SCHEDULE OF INVESTMENTS — September 30, 2013 (continued)
Shares | Value | |||||||
Mexico – 4.94% | ||||||||
416,200 | America Movil SAB | |||||||
de CV – ADR | $ | 8,244,922 | ||||||
564,589 | Cemex SAB de | |||||||
CV – ADR(a) | 6,312,105 | |||||||
4,615,026 | Desarrolladora Homex | |||||||
S.A.B. de C.V.(a) | 1,635,947 | |||||||
618,613 | Grupo Televisa SAB | 3,454,724 | ||||||
2,780 | Grupo Televisa | |||||||
SAB – ADR | 77,701 | |||||||
13,687,865 | Urbi Desarrollos | |||||||
Urbanos SA | ||||||||
de CV(a)(c) | 1,268,611 | |||||||
20,994,010 | ||||||||
Pakistan – 0.20% | ||||||||
962,360 | Nishat Mills Ltd. | 842,531 | ||||||
Panama – 1.49% | ||||||||
253,187 | Banco | |||||||
Latinoamericano de | ||||||||
Comercio Exterior SA | 6,309,420 | |||||||
Poland – 0.62% | ||||||||
1,735,526 | Synthos SA | 2,650,257 | ||||||
Russia – 7.09% | ||||||||
2,414,330 | Federal | |||||||
Hydrogenerating Co. | ||||||||
JSC – ADR(a) | 3,790,498 | |||||||
1,156,178 | Gazprom OAO – | |||||||
ADR(a) | 10,197,490 | |||||||
162,460 | Lukoil Co. – ADR(a) | 10,325,957 | ||||||
481,370 | Sberbank of Russia – | |||||||
ADR(a) | 5,790,881 | |||||||
30,104,826 | ||||||||
Singapore – 1.26% | ||||||||
381,174 | Flextronics | |||||||
International Ltd.(a) | 3,464,872 | |||||||
322,410 | Haw Par Corp. Ltd. | 1,901,567 | ||||||
5,366,439 | ||||||||
South Africa – 1.15% | ||||||||
250,950 | MTN Group Ltd. | 4,900,620 | ||||||
South Korea – 15.47% | ||||||||
180,950 | Hana Financial | |||||||
Group, Inc. | 6,201,574 | |||||||
38,980 | Hyundai Mobis | |||||||
Co. Ltd. | 10,369,521 | |||||||
162,160 | KB Financial | |||||||
Group, Inc. | 5,709,154 | |||||||
25,337 | KB Financial | |||||||
Group, Inc. – ADR | 887,302 | |||||||
66,950 | Kia Motors Corp. | 4,064,298 | ||||||
3,010 | Lotte Chilsung | |||||||
Beverage Co. Ltd. | 4,751,859 | |||||||
2,720 | Lotte Confectionery | |||||||
Co. Ltd. | 4,315,351 | |||||||
18,868 | POSCO – ADR | 1,389,440 | ||||||
30,490 | POSCO | 9,032,117 | ||||||
9,854 | Samsung Electronics | |||||||
Co. Ltd. | 12,534,226 | |||||||
144,040 | Shinhan Financial | |||||||
Group Co. Ltd. | 5,860,601 | |||||||
14,558 | Shinhan Financial | |||||||
Group Co. Ltd. – ADR | 589,599 | |||||||
65,705,042 | ||||||||
Taiwan – 1.17% | ||||||||
6,817,000 | Compal | |||||||
Electronics, Inc. | 4,982,127 | |||||||
Turkey – 4.41% | ||||||||
969,630 | Aygaz AS | 4,310,667 | ||||||
1,968,071 | Selcuk Ecza Deposu | |||||||
Ticaret ve Sanayi A.S. | 1,939,763 | |||||||
1,592,000 | Turkiye Garanti | |||||||
Bankasi AS | 6,280,119 | |||||||
2,691,000 | Turkiye Vakiflar | |||||||
Bankasi Tao | 6,139,279 | |||||||
18,669,828 | ||||||||
TOTAL COMMON STOCKS | ||||||||
(Cost $358,452,104) | $ | 344,331,840 |
The accompanying notes are an integral part of these Schedules of Investments.
46
Brandes Emerging Markets Fund
SCHEDULE OF INVESTMENTS — September 30, 2013 (continued)
Shares | Value | |||||||
PARTICIPATORY NOTES – 3.06% | ||||||||
Saudi Arabia – 3.06% | ||||||||
308,286 | Etihad Etisalat | |||||||
Co.(a)(b)(c) | $ | 6,974,651 | ||||||
234,530 | Saudi Basic Industries | |||||||
Corp.(a)(b)(c) | 6,019,212 | |||||||
TOTAL PARTICIPATORY | ||||||||
NOTES | ||||||||
(Cost $10,529,074) | $ | 12,993,863 | ||||||
PREFERRED STOCKS – 7.58% | ||||||||
Argentina – 0.08% | ||||||||
16,356 | Nortel Inversora | |||||||
SA(a) | $ | 313,872 | ||||||
Brazil – 5.30% | ||||||||
268,850 | Cia Paranaense | |||||||
de Energia | 3,753,146 | |||||||
616,502 | Petroleo Brasileiro SA | 10,314,078 | ||||||
376,771 | Telefonica Brasil SA | 8,454,741 | ||||||
22,521,965 | ||||||||
South Korea – 2.20% | ||||||||
93,060 | Hyundai Motor Co. | 9,351,136 | ||||||
TOTAL PREFERRED STOCKS | ||||||||
(Cost $31,695,006) | $ | 32,186,973 | ||||||
REAL ESTATE INVESTMENT | ||||||||
TRUSTS – 1.01% | ||||||||
Mexico – 1.01% | ||||||||
853,832 | Fibra Uno | |||||||
Administracion | ||||||||
SA de CV | $ | 2,367,208 | ||||||
Macquarie Mexico Real | ||||||||
Estate Management | ||||||||
SA de CV | 1,901,769 | |||||||
TOTAL REAL ESTATE | ||||||||
INVESTMENT TRUSTS | ||||||||
(Cost $3,645,446) | $ | 4,268,977 |
Principal | ||||||||
Amount | Value | |||||||
CONVERTIBLE BONDS – 0.35% | ||||||||
Brazil – 0.35% | ||||||||
Viver Incorporadora e Construtora SA 2.000%, 08/06/2016(c)(d) | $ | 3,299,971 | $ | 1,488,955 | ||||
TOTAL CONVERTIBLE BONDS | ||||||||
(Cost $1,488,955) | $ | 1,488,955 | ||||||
REPURCHASE AGREEMENTS – 6.72% | ||||||||
State Street Bank and Trust Repurchase Agreement, | ||||||||
(Dated 09/30/13), due 10/01/13, 0.00% [Collateralized | ||||||||
by $32,205,000 Freddie Mac Bond, 2.06%, 10/17/22, | ||||||||
(Market Value $29,964,988)] (proceeds $28,535,664) | $ | 28,535,664 | $ | 28,535,664 | ||||
TOTAL REPURCHASE AGREEMENTS | ||||||||
(Cost $28,535,664) | $ | 28,535,664 |
The accompanying notes are an integral part of these Schedules of Investments.
47
Brandes Emerging Markets Fund
SCHEDULE OF INVESTMENTS — September 30, 2013 (continued)
Shares | Value | |||||||
SHORT TERM INVESTMENTS – 0.07% | ||||||||
Money Market Funds – 0.07% | ||||||||
320,231 | Northern Institutional Treasury Portfolio, 0.01% | $ | 320,231 | |||||
TOTAL MONEY MARKET FUNDS (Cost $320,231) | $ | 320,231 | ||||||
Total Investments (Cost $434,666,480) – 99.86% | $ | 424,126,503 | ||||||
Other Assets in Excess of Liabilities – 0.14% | 585,373 | |||||||
TOTAL NET ASSETS – 100.00% | $ | 424,711,876 |
__________
Percentages are stated as a percent of net assets.
GDR Global Depository Receipt
ADR American Depository Receipt
(a) | Non-income producing security. | |
(b) | Represents the underlying security of a participatory note with HSBC Bank Plc. Etihad Etisalat Co. and Saudi Basic Industries Corp. have maturity dates of March 30, 2015 and February 23, 2015, respectively. See Note 2.D of the Notes to Financial Statements. | |
(c) | The prices for these securities were derived from an estimate of fair market value using methods approved by the Fund’s Board of Trustees. These securities represent $16,146,331 or 3.80% of the Fund’s net assets and are classified as Level 2 securities. See Note 2 in the Notes to Financial Statements. | |
(d) | Security was purchased exempt from registration in the U.S. pursuant to Rule 144A of the Securities Act of 1933 (the “Act”) or was acquired in a private placement, and, unless registered under the Act, may only be sold to “qualified institutional buyers” (as defined in the Act) or pursuant to another exemption from registration. The market values of these securities total $1,488,955 which represents 0.35% of total net assets. |
The accompanying notes are an integral part of these Schedules of Investments.
48
Brandes Emerging Markets Fund
SCHEDULE OF INVESTMENTS BY INDUSTRY — September 30, 2013 (Unaudited)
COMMON STOCKS | ||||
Aerospace & Defense | 1.50 | % | ||
Air Freight & Logistics | 0.75 | % | ||
Auto Components | 2.44 | % | ||
Automobiles | 0.96 | % | ||
Beverages | 1.12 | % | ||
Chemicals | 5.99 | % | ||
Commercial Banks | 16.94 | % | ||
Computers & Peripherals | 1.17 | % | ||
Construction Materials | 3.06 | % | ||
Distributors | 0.49 | % | ||
Diversified Financial Services | 2.45 | % | ||
Diversified Telecommunication Services | 3.67 | % | ||
Electric Utilities | 3.81 | % | ||
Electronic Equipment, Instruments & Components | 0.82 | % | ||
Food Products | 3.65 | % | ||
Gas Utilities | 1.01 | % | ||
Health Care Equipment & Supplies | 0.08 | % | ||
Health Care Providers & Services | 0.46 | % | ||
Hotels, Restaurants & Leisure | 1.08 | % | ||
Household Durables | 0.72 | % | ||
Machinery | 0.53 | % | ||
Media | 0.91 | % | ||
Metals & Mining | 3.62 | % | ||
Oil, Gas & Consumable Fuels | 6.56 | % | ||
Pharmaceuticals | 0.45 | % | ||
Semiconductors & Semiconductor Equipment | 2.95 | % | ||
Software | 1.13 | % | ||
Specialty Retail | 0.32 | % | ||
Textiles, Apparel & Luxury Goods | 3.15 | % | ||
Tobacco | 0.97 | % | ||
Wireless Telecommunication Services | 8.31 | % | ||
TOTAL COMMON STOCKS | 81.07 | % | ||
PARTICIPATORY NOTES | ||||
Chemicals | 1.42 | % | ||
Wireless Telecommunication Services | 1.64 | % | ||
TOTAL PARTICIPATORY NOTES | 3.06 | % | ||
PREFERRED STOCKS | ||||
Automobiles | 2.20 | % | ||
Diversified Telecommunication Services | 2.07 | % | ||
Electric Utilities | 0.88 | % | ||
Oil, Gas & Consumable Fuels | 2.43 | % | ||
TOTAL PREFERRED STOCKS | 7.58 | % | ||
REAL ESTATE INVESTMENT TRUST | 1.01 | % |
The accompanying notes are an integral part of these Schedules of Investments.
49
Brandes Emerging Markets Fund
SCHEDULE OF INVESTMENTS BY INDUSTRY — September 30, 2013 (continued)
CONVERTIBLE BONDS | ||||
Household Durables | 0.35 | % | ||
TOTAL CONVERTIBLE BONDS | 0.35 | % | ||
REPURCHASE AGREEMENTS | 6.72 | % | ||
SHORT TERM INVESTMENTS | 0.07 | % | ||
TOTAL INVESTMENTS | 99.86 | % | ||
Other Assets in Excess of Liabilities | 0.14 | % | ||
TOTAL NET ASSETS | 100.00 | % |
The industry classifications represented in the Schedule of Investments are in accordance with Global Industry Classification Standards (GICS ), which was developed by and/or is the exclusive property of MSCI, INC. and Standard & Poor Financial Services LLC.
The accompanying notes are an integral part of these Schedules of Investments.
50
Brandes International Small Cap Equity Fund
SCHEDULE OF INVESTMENTS — September 30, 2013
Shares | Value | |||||||
COMMON STOCKS – 87.57% | ||||||||
Australia – 0.03% | ||||||||
88,243 | Australian | |||||||
Vintage Ltd. | $ | 37,868 | ||||||
Brazil – 0.17% | ||||||||
1,815,154 | Viver Incorporadora e | |||||||
Construtora SA(a) | 196,560 | |||||||
Canada – 9.66% | ||||||||
192,260 | Celestica, Inc.(a) | 2,120,628 | ||||||
78,250 | Dorel Industries, | |||||||
Inc.(a) | 2,848,769 | |||||||
3,184 | E-L Financial | |||||||
Corp. Ltd.(a) | 2,012,314 | |||||||
22,910 | Linamar Corp.(a) | 767,559 | ||||||
200,703 | Sierra Wireless, | |||||||
Inc.(a) | 3,285,508 | |||||||
11,034,778 | ||||||||
China – 2.64% | ||||||||
44,630 | China Yuchai | |||||||
International Ltd. | 1,060,855 | |||||||
3,013,000 | Sinotrans Ltd. | 793,333 | ||||||
1,969,500 | Weiqiao Textile Co. | 1,155,701 | ||||||
3,009,889 | ||||||||
Denmark – 1.43% | ||||||||
75,090 | H. Lundbeck A/S | 1,637,158 | ||||||
Egypt – 1.30% | ||||||||
108,645 | Eastern Tobacco Co. | 1,488,212 | ||||||
France – 4.02% | ||||||||
31,930 | Bongrain SA | 2,188,768 | ||||||
17,020 | Ciments Francais | 1,173,380 | ||||||
25,338 | Teleperformance SA | 1,225,120 | ||||||
4,587,268 | ||||||||
Greece – 3.22% | ||||||||
43,634 | Folli Follie Group SA(a) | 1,133,216 | ||||||
210,640 | Sarantis SA(a) | 1,570,154 | ||||||
38,930 | Titan Cement Co. SA(a) | 969,063 | ||||||
3,672,433 | ||||||||
Hong Kong – 2.42% | ||||||||
1,847,500 | Dickson Concepts | |||||||
International Ltd. | 1,112,421 | |||||||
1,497,600 | First Pacific Co. Ltd. | 1,655,300 | ||||||
2,767,721 | ||||||||
India – 2.43% | ||||||||
109,383 | Nava Bharat | |||||||
Ventures Ltd. | 288,374 | |||||||
418,730 | Reliance | |||||||
Infrastructure Ltd. | 2,481,869 | |||||||
2,770,243 | ||||||||
Ireland – 0.74% | ||||||||
89,312 | Grafton Group Plc | 844,021 | ||||||
Israel – 1.32% | ||||||||
175,369 | Syneron | |||||||
Medical Ltd.(a) | 1,511,681 | |||||||
Italy – 3.31% | ||||||||
1,469,208 | Iren Spa | 1,793,832 | ||||||
381,550 | Italcementi SpA | |||||||
Savings Shares | 1,527,468 | |||||||
4,590 | Italmobiliare SpA(a) | 115,775 | ||||||
192,186 | Natuzzi SpA – ADR(a) | 345,935 | ||||||
3,783,010 | ||||||||
Japan – 25.67% | ||||||||
99,100 | Alpine Electronics, Inc. | 1,080,374 | ||||||
66,300 | Chudenko Corp. | 926,836 | ||||||
364,900 | Fuji Machine | |||||||
Manufacturing | ||||||||
Co. Ltd. | 3,638,743 | |||||||
86,900 | Futaba Corp. | 1,114,837 | ||||||
181,300 | Hibiya | |||||||
Engineering Ltd. | 2,203,444 | |||||||
188,750 | Hosiden Corp. | 1,021,199 | ||||||
15,100 | Makita Corp. | 879,775 | ||||||
207,300 | Noritsu Koki Co. Ltd. | 1,391,602 | ||||||
63,500 | Okinawa Cellular | |||||||
Telephone Co. | 1,617,205 | |||||||
103,100 | Otsuka Kagu Ltd. | 1,060,421 | ||||||
83,100 | San-A Co. Ltd. | 2,343,567 | ||||||
220,000 | Sanki Engineering | |||||||
Co. Ltd. | 1,353,060 | |||||||
16,400 | Tachi-s Co. Ltd. | 249,216 | ||||||
119,000 | Tenma Corporation | 1,625,271 | ||||||
80,400 | Torii Pharmaceutical | |||||||
Co. Ltd. | 2,162,567 | |||||||
155,900 | TSI Holdings Co. Ltd. | 1,056,161 | ||||||
65,200 | Tsutsumi Jewelry | |||||||
Co. Ltd. | 1,710,749 | |||||||
128,900 | Yamaha Corp. | 1,846,877 | ||||||
67,400 | Yamaha Motor Co. Ltd. | 991,334 | ||||||
The accompanying notes are an integral part of these Schedules of Investments.
51
Brandes International Small Cap Equity Fund
SCHEDULE OF INVESTMENTS — September 30, 2013 (continued)
Shares | Value | |||||||
239,000 | Yodogawa Steel | |||||||
Works Ltd. | $ | 1,056,251 | ||||||
29,329,489 | ||||||||
Mexico – 3.46% | ||||||||
6,968,504 | Consorcio ARA | |||||||
S.A.B. de C.V.(a) | 2,800,284 | |||||||
1,671,404 | Desarrolladora Homex | |||||||
S.A.B. de C.V.(a) | 592,484 | |||||||
6,089,400 | Urbi Desarrollos | |||||||
Urbanos SA de CV(a)(b) | 564,375 | |||||||
3,957,143 | ||||||||
Panama – 1.37% | ||||||||
62,639 | Banco | |||||||
Latinoamericano de | ||||||||
Comercio Exterior SA | 1,560,964 | |||||||
Singapore – 4.03% | ||||||||
178,070 | Flextronics | |||||||
International Ltd.(a) | 1,618,656 | |||||||
448,100 | Haw Par Corp. Ltd. | 2,642,884 | ||||||
1,293,000 | HTL International | |||||||
Holdings Ltd. | 345,267 | |||||||
4,606,807 | ||||||||
South Korea – 3.89% | ||||||||
2,060 | Lotte Chilsung | |||||||
Beverage Co. Ltd. | 3,252,102 | |||||||
9,190 | Samchully Co. Ltd. | 1,188,552 | ||||||
4,440,654 | ||||||||
Switzerland – 5.86% | ||||||||
21,890 | Lonza Group AG | 1,792,824 | ||||||
292,701 | Micronas | |||||||
Semiconductor | ||||||||
Holding AG | 2,446,829 | |||||||
16,675 | Panalpina World | |||||||
Transport Holding AG | 2,457,874 | |||||||
6,697,527 | ||||||||
Turkey – 1.53% | ||||||||
1,769,707 | Selcuk Ecza Deposu | |||||||
Ticaret ve Sanayi A.S. | 1,744,253 | |||||||
United Kingdom – 9.07% | ||||||||
470,233 | Chime | |||||||
Communications Plc | 2,295,212 | |||||||
53,270 | Clarkson Plc | 1,940,384 | ||||||
1,043,837 | Debenhams Plc | 1,726,530 | ||||||
206,518 | LSL Property | |||||||
Services Plc | 1,548,801 | |||||||
1,441,660 | Mcbride Plc(a) | 2,835,709 | ||||||
10,346,636 | ||||||||
TOTAL COMMON STOCKS | ||||||||
(Cost $82,833,529) | $ | 100,024,315 | ||||||
PREFERRED STOCKS – 1.54% | ||||||||
Argentina – 0.38% | ||||||||
22,889 | Nortel Inversora SA(a) | $ | 439,240 | |||||
Italy – 1.16% | ||||||||
86,993 | Italmobiliare SpA(a) | 1,320,453 | ||||||
TOTAL PREFERRED STOCKS | ||||||||
(Cost $1,383,738) | $ | 1,759,693 |
Contracts | Value | |||||||
RIGHTS – 0.00% | ||||||||
Australia – 0.00% | ||||||||
Australian Vintage Ltd. Rights | ||||||||
Expiration Date: October 11, 2013, Exercise Price: 0.420(b) | 33,091 | $ | — | |||||
TOTAL RIGHTS | ||||||||
(Cost $305) | $ | — |
The accompanying notes are an integral part of these Schedules of Investments.
52
Brandes International Small Cap Equity Fund
SCHEDULE OF INVESTMENTS — September 30, 2013 (continued)
Principal | ||||||||
Amount | Value | |||||||
CONVERTIBLE BONDS – 0.45% | ||||||||
Brazil – 0.45% | ||||||||
Viver Incorporadora e Construtora SA 2.000%, 08/06/2016(b)(c) | $ | 1,136,056 | $ | 512,591 | ||||
TOTAL CONVERTIBLE BONDS | ||||||||
(Cost $512,591) | $ | 512,591 | ||||||
CORPORATE BONDS – 0.87% | ||||||||
Mexico – 0.87% | ||||||||
Urbi Desarrollos Urbanos SA de CV 8.500%, 04/19/2016(d) | 3,377,000 | $ | 574,090 | |||||
Desarrolladora Homex S.A.B. de C.V. 7.500%, 09/28/2015 | 1,734,000 | 416,160 | ||||||
TOTAL CORPORATE BONDS | ||||||||
(Cost $2,007,894) | $ | 990,250 | ||||||
REPURCHASE AGREEMENTS – 9.20% | ||||||||
State Street Bank and Trust Repurchase Agreement, | ||||||||
(Dated 09/30/13), due 10/1/13, 0.00% [Collateralized | ||||||||
by $11,825,000 Freddie Mac Bond, 2.08%, 10/17/22, | ||||||||
(Market Value $11,029,174)] (proceeds $10,503,041) | 10,503,041 | $ | 10,503,041 | |||||
TOTAL REPURCHASE AGREEMENTS (Cost $10,503,041) | $ | 10,503,041 | ||||||
Total Investments (Cost $97,241,098) – 99.63% | $ | 113,789,890 | ||||||
Other Assets in Excess of Liabilities – 0.37% | 407,945 | |||||||
TOTAL NET ASSETS – 100.00% | $ | 114,197,835 |
__________
Percentages are stated as a percent of net assets.
ADR American Depository Receipt
(a) | Non-income producing security. | |
(b) | The prices for these securities were derived from an estimate of fair market value using methods approved by the Fund’s Board of Trustees. These securities represent $1,076,966 or 0.94% of the Fund’s net assets and are classified as Level 2 securities. See Note 2 in the Notes to Financial Statements. | |
(c) | Security was purchased exempt from registration in the U.S. pursuant to Rule 144A of the Securities Act of 1933 (the “Act”) or was acquired in a private placement, and, unless registered under the Act, may only be sold to “qualified institutional buyers” (as defined in the Act) or pursuant to another exemption from registration. The market values of these securities total $512,591 which represents 0.45% of total net assets. | |
(d) | In Default. |
The accompanying notes are an integral part of these Schedules of Investments.
53
Brandes International Small Cap Equity Fund
SCHEDULE OF INVESTMENTS BY INDUSTRY — September 30, 2013 (Unaudited)
COMMON STOCKS | ||||
Air Freight & Logistics | 2.85 | % | ||
Auto Components | 0.89 | % | ||
Automobiles | 0.87 | % | ||
Beverages | 2.88 | % | ||
Chemicals | 1.42 | % | ||
Commercial Banks | 1.37 | % | ||
Communications Equipment | 2.88 | % | ||
Construction & Engineering | 3.93 | % | ||
Construction Materials | 3.31 | % | ||
Diversified Financial Services | 1.45 | % | ||
Electric Utilities | 2.17 | % | ||
Electrical Equipment | 0.98 | % | ||
Electronic Equipment, Instruments & Components | 4.17 | % | ||
Food & Staples Retailing | 2.05 | % | ||
Food Products | 1.92 | % | ||
Gas Utilities | 1.04 | % | ||
Health Care Equipment & Supplies | 1.32 | % | ||
Health Care Providers & Services | 1.53 | % | ||
Household Durables | 7.68 | % | ||
Household Products | 2.48 | % | ||
Industrial Conglomerates | 0.25 | % | ||
Insurance | 1.76 | % | ||
Leisure Equipment & Products | 2.84 | % | ||
Life Sciences Tools & Services | 1.57 | % | ||
Machinery | 4.88 | % | ||
Marine | 1.70 | % | ||
Media | 2.01 | % | ||
Metals & Mining | 0.92 | % | ||
Multiline Retail | 1.51 | % | ||
Multi-Utilities | 1.57 | % | ||
Personal Products | 1.37 | % | ||
Pharmaceuticals | 5.64 | % | ||
Professional Services | 1.07 | % | ||
Real Estate Management & Development | 1.36 | % | ||
Semiconductors & Semiconductor Equipment | 2.14 | % | ||
Specialty Retail | 4.39 | % | ||
Textiles, Apparel & Luxury Goods | 1.94 | % | ||
Tobacco | 1.30 | % | ||
Trading Companies & Distributors | 0.74 | % | ||
Wireless Telecommunication Services | 1.42 | % | ||
TOTAL COMMON STOCKS | 87.57 | % | ||
PREFERRED STOCKS | ||||
Construction Materials | 1.16 | % | ||
Diversified Telecommunication Services | 0.38 | % | ||
TOTAL PREFERRED STOCKS | 1.54 | % |
The accompanying notes are an integral part of these Schedules of Investments.
54
Brandes International Small Cap Equity Fund
SCHEDULE OF INVESTMENTS BY INDUSTRY — September 30, 2013 (continued)
CONVERTIBLE BONDS | ||||
Household Durables | 0.45 | % | ||
TOTAL CONVERTIBLE BONDS | 0.45 | % | ||
CORPORATE BONDS | ||||
Household Durables | 0.87 | % | ||
TOTAL CORPORATE BONDS | 0.87 | % | ||
REPURCHASE AGREEMENTS | 9.20 | % | ||
TOTAL INVESTMENTS | 99.63 | % | ||
Other Assets in Excess of Liabilities | 0.37 | % | ||
TOTAL NET ASSETS | 100.00 | % |
The industry classifications represented in the Schedule of Investments are in accordance with Global Industry Classification Standards (GICS ), which was developed by and/or is the exclusive property of MSCI, INC. and Standard & Poor Financial Services LLC.
The accompanying notes are an integral part of these Schedules of Investments.
55
Brandes Core Plus Fixed Income Fund
SCHEDULE OF INVESTMENTS — September 30, 2013
Principal | ||||||||
Amount | Value | |||||||
FEDERAL AND FEDERALLY SPONSORED CREDITS – 5.92% | ||||||||
Fannie Mae Interest Only Strip – 0.29% | ||||||||
5.500%, 01/01/2036 | $ | 277,786 | $ | 43,730 | ||||
6.000%, 06/01/2036 | 289,376 | 49,104 | ||||||
92,834 | ||||||||
Federal National Mortgage Association – 3.80% | ||||||||
Pool #MA0918, 4.000%, 12/01/2041 | 710,485 | 745,732 | ||||||
Pool #934124, 5.500%, 07/01/2038 | 210,152 | 228,640 | ||||||
Pool #254631, 5.000%, 02/01/2018 | 236,039 | 251,145 | ||||||
1,225,517 | ||||||||
Freddie Mac Mortgage – 1.83% | ||||||||
Pool #G0-6018, 6.500%, 04/01/2039 | 140,236 | 155,125 | ||||||
Pool #A9-3505, 4.500%, 08/01/2040 | 410,130 | 436,559 | ||||||
591,684 | ||||||||
TOTAL FEDERAL AND FEDERALLY SPONSORED CREDITS | ||||||||
(Cost $1,871,641) | $ | 1,910,035 | ||||||
OTHER MORTGAGE RELATED SECURITIES – 7.79% | ||||||||
Collateralized Mortgage Obligations – 2.11% | ||||||||
Wells Fargo Mortgage Backed Securities Trust | ||||||||
Series 2004-DD, 2.617%, 01/25/2035 | $ | 686,057 | $ | 680,474 | ||||
Series 2006-AR14, 5.782%, 10/25/2036 | 2,094 | 2,016 | ||||||
682,490 | ||||||||
Near Prime Mortgage – 5.37% | ||||||||
Bear Stearns Adjustable Rate Mortgage Trust | ||||||||
Series 2005-10, 2.674%, 10/25/2035 | 788,948 | 764,728 | ||||||
Bear Stearns Alt-A Trust | ||||||||
Series 2004-11, 0.864%, 11/25/2034 | 327,476 | 317,867 | ||||||
Series 2005-7, 0.724%, 08/25/2035 | 386,058 | 343,325 | ||||||
Countrywide Home Loan Mortgage Pass Through Trust | ||||||||
Series 2006-HYB1, 2.636%, 03/20/2036 | 45,997 | 35,815 | ||||||
Opteum Mortgage Acceptance Corp. | ||||||||
Series 2005-3, 0.474%, 07/25/2035 | 280,130 | 269,303 | ||||||
1,731,038 | ||||||||
Sub-Prime Mortgages – 0.31% | ||||||||
JP Morgan Mortgage Acquisition Corp. | ||||||||
Series 2006-NC1, 0.349%, 04/25/2036 | 108,678 | 100,659 | ||||||
TOTAL OTHER MORTGAGE RELATED SECURITIES | ||||||||
(Cost $2,180,072) | $ | 2,514,187 |
The accompanying notes are an integral part of these Schedules of Investments.
56
Brandes Core Plus Fixed Income Fund
SCHEDULE OF INVESTMENTS — September 30, 2013 (continued)
Principal | ||||||||
Amount | Value | |||||||
US GOVERNMENTS – 35.83% | ||||||||
Sovereign – 35.83% | ||||||||
United States Treasury Bond | ||||||||
4.750%, 02/15/2037 | $ | 475,000 | $ | 567,625 | ||||
United States Treasury Note | ||||||||
4.250%, 08/15/2014 | 405,000 | 419,555 | ||||||
4.500%, 02/15/2016 | 1,740,000 | 1,907,339 | ||||||
3.375%, 11/15/2019 | 2,865,000 | 3,142,547 | ||||||
2.000%, 11/15/2021 | 5,020,000 | 4,907,050 | ||||||
2.000%, 02/15/2023 | 655,000 | 623,836 | ||||||
TOTAL US GOVERNMENTS | ||||||||
(Cost $11,749,409) | $ | 11,567,952 | ||||||
Shares | Value | |||||||
COMMON STOCKS – 0.03% | ||||||||
Paper & Forest Products – 0.03% | ||||||||
Resolute Forest Products, Inc.(a) | 691 | $ | 9,135 | |||||
Semiconductors – 0.00% | ||||||||
MagnaChip Semiconductor Corp.(a) | 22 | 474 | ||||||
TOTAL COMMON STOCKS | ||||||||
(Cost $56,874) | $ | 9,609 | ||||||
PREFERRED STOCKS – 1.17% | ||||||||
Banks & Thrifts – 0.65% | ||||||||
Ally Financial, Inc., 8.500% | 7,800 | $ | 208,884 | |||||
Technology Hardware & Equipment – 0.52% | ||||||||
Pitney Bowes International Holdings, Inc., 6.125%(b) | 170 | 169,001 | ||||||
TOTAL PREFERRED STOCKS | ||||||||
(Cost $354,420) | $ | 377,885 | ||||||
Principal | ||||||||
Amount | Value | |||||||
ASSET BACKED SECURITIES – 3.70% | ||||||||
Student Loan – 3.70% | ||||||||
National Collegiate Student Loan Trust | ||||||||
Series A-4, 0.484%, 10/25/2033 | $ | 410,000 | $ | 191,675 | ||||
SLM Student Loan Trust | ||||||||
Series 2004-B, 0.684%, 09/15/2033 | 300,000 | 232,049 | ||||||
Series 2005-A, 0.564%, 12/15/2038 | 400,000 | 298,898 | ||||||
Series 2006-A, 0.544%, 06/15/2039 | 275,000 | 225,658 | ||||||
Series 2007-A, 0.494%, 12/15/2041 | 350,000 | 244,588 | ||||||
TOTAL ASSET BACKED SECURITIES | ||||||||
(Cost $1,343,133) | $ | 1,192,868 |
The accompanying notes are an integral part of these Schedules of Investments.
57
Brandes Core Plus Fixed Income Fund
SCHEDULE OF INVESTMENTS — September 30, 2013 (continued)
Principal | ||||||||
Amount | Value | |||||||
CORPORATE BONDS – 42.61% | ||||||||
Advertising – 0.83% | ||||||||
The Interpublic Group of Companies, Inc. | ||||||||
6.250%, 11/15/2014 | $ | 255,000 | $ | 267,113 | ||||
Banks & Thrifts – 9.18% | ||||||||
Ally Financial, Inc. | ||||||||
6.750%, 12/01/2014 | 520,000 | 546,000 | ||||||
Citigroup, Inc. | ||||||||
6.125%, 11/21/2017 | 235,000 | 270,245 | ||||||
6.875%, 03/05/2038 | 76,000 | 93,953 | ||||||
Fifth Third Bancorp | ||||||||
8.250%, 03/01/2038 | 175,000 | 226,412 | ||||||
First Horizon National Corp. | ||||||||
5.375%, 12/15/2015 | 130,000 | 140,492 | ||||||
JP Morgan Chase & Co. | ||||||||
7.900%, Perpetual | 770,000 | 835,450 | ||||||
National City Corp. | ||||||||
4.900%, 01/15/2015 | 235,000 | 247,081 | ||||||
Regions Financial Corp. | ||||||||
5.750%, 06/15/2015 | 435,000 | 466,106 | ||||||
The Goldman Sachs Group, Inc. | ||||||||
7.500%, 02/15/2019 | 115,000 | 138,951 | ||||||
2,964,690 | ||||||||
Building Materials – 3.09% | ||||||||
CRH America, Inc. | ||||||||
6.000%, 09/30/2016 | 160,000 | 180,016 | ||||||
Masco Corp. | ||||||||
6.125%, 10/03/2016 | 305,000 | 337,406 | ||||||
Mohawk Industries, Inc. | ||||||||
6.375%, 01/15/2016 | 135,000 | 148,500 | ||||||
Owens Corning | ||||||||
6.500%, 12/01/2016 | 80,000 | 89,293 | ||||||
USG Corp. | ||||||||
6.300%, 11/15/2016 | 230,000 | 243,225 | ||||||
998,440 | ||||||||
Diversified Financial Services – 4.54% | ||||||||
American International Group, Inc. | ||||||||
6.400%, 12/15/2020 | 400,000 | 471,365 | ||||||
Bank of America Corp. | ||||||||
3.750%, 07/12/2016 | 245,000 | 259,623 | ||||||
Ford Motor Credit Co. LLC | ||||||||
7.000%, 10/01/2013 | 250,000 | 250,000 | ||||||
International Lease Finance Corp. | ||||||||
6.625%, 11/15/2013 | 285,000 | 286,425 | ||||||
SLM Corp. | ||||||||
5.000%, 10/01/2013 | 200,000 | 200,000 | ||||||
1,467,413 |
The accompanying notes are an integral part of these Schedules of Investments.
58
Brandes Core Plus Fixed Income Fund
SCHEDULE OF INVESTMENTS — September 30, 2013 (continued)
Principal | ||||||||
Amount | Value | |||||||
Electric Utilities – 9.21% | ||||||||
Ameren Corp. | ||||||||
8.875%, 05/15/2014 | $ | 300,000 | $ | 314,399 | ||||
Arizona Public Service Co. | ||||||||
8.750%, 03/01/2019 | 340,000 | 439,531 | ||||||
Commonwealth Edison Co. | ||||||||
5.900%, 03/15/2036 | 175,000 | 202,543 | ||||||
EDP Finance BV | ||||||||
4.900%, 10/01/2019(b) | 400,000 | 395,000 | ||||||
FirstEnergy Corp. | ||||||||
7.375%, 11/15/2031 | 430,000 | 434,374 | ||||||
Israel Electric Corporation Ltd. | ||||||||
7.250%, 01/15/2019(b) | 420,000 | 459,374 | ||||||
Nisource Finance Corp. | ||||||||
5.250%, 09/15/2017 | 285,000 | 317,372 | ||||||
Oncor Electric Delivery Co. LLC | ||||||||
6.375%, 01/15/2015 | 30,000 | 32,041 | ||||||
7.000%, 09/01/2022 | 215,000 | 265,720 | ||||||
PPL Energy Supply LLC | ||||||||
6.500%, 05/01/2018 | 100,000 | 113,083 | ||||||
2,973,437 | ||||||||
Energy – 0.68% | ||||||||
Valero Energy Corp. | ||||||||
9.375%, 03/15/2019 | 170,000 | 220,241 | ||||||
Energy Equipment & Services – 1.05% | ||||||||
Transocean, Inc. | ||||||||
4.950%, 11/15/2015 | 315,000 | 337,932 | ||||||
Equipment – 0.12% | ||||||||
Continental Airlines 2007-1 Class A Pass Through Trust | ||||||||
Series 2007-1, 5.983%, 04/19/2022 | 35,090 | 37,546 | ||||||
Food, Beverage & Tobacco – 1.32% | ||||||||
Altria Group, Inc. | ||||||||
9.700%, 11/10/2018 | 51,000 | 67,423 | ||||||
Pilgrims Pride Corp. | ||||||||
7.875%, 12/15/2018 | 130,000 | 141,375 | ||||||
Tyson Foods, Inc. | ||||||||
6.600%, 04/01/2016 | 195,000 | 218,627 | ||||||
427,425 | ||||||||
Forest Products & Paper – 0.76% | ||||||||
Sappi Papier Holding GmbH | ||||||||
7.750%, 07/15/2017(b) | 235,000 | 244,400 | ||||||
Healthcare Providers & Services – 0.50% | ||||||||
Laboratory Corp. of America Holdings | ||||||||
3.750%, 08/23/2022 | 165,000 | 160,762 |
The accompanying notes are an integral part of these Schedules of Investments.
59
Brandes Core Plus Fixed Income Fund
SCHEDULE OF INVESTMENTS — September 30, 2013 (continued)
Principal | ||||||||
Amount | Value | |||||||
Homebuilders – 2.67% | ||||||||
Centex Corp. | ||||||||
6.500%, 05/01/2016 | $ | 80,000 | $ | 88,400 | ||||
Lennar Corp. | ||||||||
5.600%, 05/31/2015 | 320,000 | 337,600 | ||||||
Toll Brothers Finance Corp. | ||||||||
5.150%, 05/15/2015 | 270,000 | 284,175 | ||||||
Urbi Desarrollos Urbanos SA | ||||||||
9.500%, 01/21/2020(b)(d) | 900,000 | 153,000 | ||||||
863,175 | ||||||||
Insurance – 2.49% | ||||||||
CNA Financial Corp. | ||||||||
7.350%, 11/15/2019 | 160,000 | 194,732 | ||||||
5.875%, 08/15/2020 | 110,000 | 126,854 | ||||||
ING US, Inc. | ||||||||
5.500%, 07/15/2022 | 235,000 | 252,986 | ||||||
Marsh & McLennan Cos, Inc. | ||||||||
5.750%, 09/15/2015 | 210,000 | 228,639 | ||||||
803,211 | ||||||||
Media – 0.05% | ||||||||
The McGraw Hill Cos, Inc. | ||||||||
5.900%, 11/15/2017 | 15,000 | 16,226 | ||||||
Oil & Gas – 3.06% | ||||||||
Anadarko Petroleum Corp. | ||||||||
5.950%, 09/15/2016 | 435,000 | 488,453 | ||||||
Chesapeake Energy Corp. | ||||||||
6.625%, 08/15/2020 | 370,000 | 397,750 | ||||||
El Paso Corp. | ||||||||
7.000%, 06/15/2017 | 90,000 | 100,375 | ||||||
986,578 | ||||||||
Pharmaceutical – 0.58% | ||||||||
Valeant Pharmaceuticals International | ||||||||
6.750%, 08/15/2018(b) | 175,000 | 187,250 | ||||||
Retail – 0.90% | ||||||||
Marks & Spencer Plc | ||||||||
7.125%, 12/01/2037(b) | 285,000 | 290,563 | ||||||
Technology Hardware & Equipment – 0.43% | ||||||||
ArcelorMittal SA | ||||||||
6.000%, 03/01/2021 | 135,000 | 138,375 | ||||||
Telecommunications – 0.72% | ||||||||
Telecom Italia Capital SA | ||||||||
6.999%, 06/04/2018 | 85,000 | 93,326 |
The accompanying notes are an integral part of these Schedules of Investments.
60
Brandes Core Plus Fixed Income Fund
SCHEDULE OF INVESTMENTS — September 30, 2013 (continued)
Principal | ||||||||
Amount | Value | |||||||
Telefonica Emisiones SAU | ||||||||
5.462%, 02/16/2021 | $ | 135,000 | $ | 138,235 | ||||
231,561 | ||||||||
Utilities – 0.43% | ||||||||
Edison Mission Energy | ||||||||
7.000%, 05/15/2017(d) | 210,000 | 139,125 | ||||||
TOTAL CORPORATE BONDS | ||||||||
(Cost $12,613,694) | $ | 13,755,463 | ||||||
Contracts | Value | |||||||
WARRANTS – 0.00% | ||||||||
Semiconductors – 0.00% | ||||||||
MagnaChip Semiconductor Corp. | ||||||||
Expiration Date: November 2014, Exercise Price: 1.97(a)(c) | 870 | $ | 627 | |||||
TOTAL WARRANTS | ||||||||
(Cost $8,748) | $ | 627 | ||||||
Principal | ||||||||
Amount | Value | |||||||
REPURCHASE AGREEMENTS – 4.14% | ||||||||
Repurchase Agreement – 4.14% | ||||||||
State Street Bank and Trust Repurchase Agreement, | ||||||||
(Dated 09/30/13), due 10/1/13, 0.00% [Collateralized | ||||||||
by $1,510,000 Fannie Mae Bond, 2.08%, 11/02/22, 0.00% | ||||||||
(Market Value $1,403,056)] (proceeds $1,335,956) | $ | 1,335,956 | $ | 1,335,956 | ||||
TOTAL REPURCHASE AGREEMENTS (Cost $1,335,956) | $ | 1,335,956 | ||||||
Total Investments (Cost $31,513,947) – 101.19% | $ | 32,664,582 | ||||||
Liabilities in Excess of Other Assets – (1.19%) | (383,006 | ) | ||||||
TOTAL NET ASSETS – 100.00% | $ | 32,281,576 |
__________
Percentages are stated as a percent of net assets.
(a) | Non-income producing security. | |
(b) | Security was purchased exempt from registration in the U.S. pursuant to Rule 144A of the Securities Act of 1933 (the “Act”) or was acquired in a private placement, and, unless registered under the Act, may only be sold to “qualified institutional buyers” (as defined in the Act) or pursuant to another exemption from registration. The market values of these securities total $1,898,588 which represents 5.88% of total net assets. | |
(c) | The price for this security was derived from an estimate of fair market value using methods approved by the Fund’s Board of Trustees. This security is deemed illiquid and represents $627 or 0.00% of the Fund’s net assets and is classified as a Level 2 security. See Note 2 in the Notes to Financial Statements. | |
(d) | In default. |
The accompanying notes are an integral part of these Schedules of Investments.
61
Brandes Credit Focus Yield Fund
SCHEDULE OF INVESTMENTS — September 30, 2013
Principal | ||||||||
Amount | Value | |||||||
FEDERAL AND FEDERALLY SPONSORED CREDITS – 0.04% | ||||||||
Fannie Mae Interest Only Strip – 0.04% | ||||||||
Fannie Mae Interest Only Strip | ||||||||
6.000%, 06/01/2036 | $ | 71,598 | $ | 12,149 | ||||
TOTAL FEDERAL AND FEDERALLY SPONSORED CREDITS | ||||||||
(Cost $13,300) | $ | 12,149 | ||||||
OTHER MORTGAGE RELATED SECURITIES – 0.98% | ||||||||
Near Prime Mortgage – 0.86% | ||||||||
Bear Stearns Adjustable Rate Mortgage Trust | ||||||||
Series 2005-10, 2.674%, 10/25/2035 | $ | 261,829 | $ | 253,791 | ||||
Sub-Prime Mortgages – 0.12% | ||||||||
Structured Asset Investment Loan Trust | ||||||||
Series A3, 0.564%, 07/25/2035 | 37,102 | 36,056 | ||||||
TOTAL OTHER MORTGAGE RELATED SECURITIES | ||||||||
(Cost $257,318) | $ | 289,847 | ||||||
US GOVERNMENTS – 34.88% | ||||||||
Sovereign – 34.88% | ||||||||
United States Treasury Note | ||||||||
4.250%, 08/15/2014 | $ | 60,000 | $ | 62,156 | ||||
4.500%, 02/15/2016 | 4,145,000 | 4,543,633 | ||||||
3.375%, 11/15/2019 | 3,395,000 | 3,723,891 | ||||||
2.000%, 11/15/2021 | 1,590,000 | 1,554,225 | ||||||
2.000%, 02/15/2023 | 400,000 | 380,969 | ||||||
TOTAL US GOVERNMENTS | ||||||||
(Cost $10,434,053) | $ | 10,264,874 | ||||||
Shares | Value | |||||||
COMMON STOCKS – 0.09% | ||||||||
Paper & Forest Products – 0.08% | ||||||||
Resolute Forest Products, Inc.(a) | 1,772 | $ | 23,426 | |||||
Semiconductors – 0.01% | ||||||||
MagnaChip Semiconductor Corp.(a) | 97 | 2,088 | ||||||
TOTAL COMMON STOCKS | ||||||||
(Cost $24,407) | $ | 25,514 | ||||||
PREFERRED STOCKS – 1.62% | ||||||||
Banks & Thrifts – 0.89% | ||||||||
Ally Financial, Inc., 8.500% | 9,800 | $ | 262,444 | |||||
Technology Hardware & Equipment – 0.73% | ||||||||
Pitney Bowes International Holdings, Inc., 6.125%(b) | 215 | 213,737 | ||||||
TOTAL PREFERRED STOCKS | ||||||||
(Cost $446,565) | $ | 476,181 |
The accompanying notes are an integral part of these Schedules of Investments.
62
Brandes Credit Focus Yield Fund
SCHEDULE OF INVESTMENTS — September 30, 2013 (continued)
Principal | ||||||||
Amount | Value | |||||||
ASSET BACKED SECURITIES – 1.35% | ||||||||
Student Loan – 1.35% | ||||||||
National Collegiate Student Loan Trust | ||||||||
Series A-4, 0.484%, 10/25/2033 | $ | 400,000 | $ | 187,000 | ||||
SLM Student Loan Trust | ||||||||
Series 2007-A, 0.494%, 12/15/2041 | 300,000 | 209,647 | ||||||
TOTAL ASSET BACKED SECURITIES | ||||||||
(Cost $423,846) | $ | 396,647 | ||||||
�� | ||||||||
CORPORATE BONDS – 57.18% | ||||||||
Advertising – 0.69% | ||||||||
The Interpublic Group of Companies, Inc. | ||||||||
6.250%, 11/15/2014 | 195,000 | 204,263 | ||||||
Banks & Thrifts – 12.75% | ||||||||
Ally Financial, Inc. | ||||||||
6.750%, 12/01/2014 | 350,000 | 367,500 | ||||||
Citigroup, Inc. | ||||||||
6.125%, 11/21/2017 | 500,000 | 574,990 | ||||||
Fifth Third Bancorp | ||||||||
8.250%, 03/01/2038 | 65,000 | 84,096 | ||||||
First Horizon National Corp. | ||||||||
5.375%, 12/15/2015 | 230,000 | 248,562 | ||||||
JP Morgan Chase & Co. | ||||||||
7.900%, Perpetual | 1,025,000 | 1,112,125 | ||||||
National City Corp. | ||||||||
4.900%, 01/15/2015 | 245,000 | 257,595 | ||||||
Regions Financial Corp. | ||||||||
5.750%, 06/15/2015 | 510,000 | 546,470 | ||||||
The Goldman Sachs Group, Inc. | ||||||||
7.500%, 02/15/2019 | 245,000 | 296,026 | ||||||
USB Capital IX | ||||||||
3.500%, Perpetual | 350,000 | 266,000 | ||||||
3,753,364 | ||||||||
Building Materials – 2.97% | ||||||||
CRH America, Inc. | ||||||||
6.000%, 09/30/2016 | 90,000 | 101,259 | ||||||
Masco Corp. | ||||||||
6.125%, 10/03/2016 | 390,000 | 431,438 | ||||||
Mohawk Industries, Inc. | ||||||||
6.375%, 01/15/2016 | 75,000 | 82,500 | ||||||
Owens Corning | ||||||||
6.500%, 12/01/2016 | 100,000 | 111,616 | ||||||
USG Corp. | ||||||||
6.300%, 11/15/2016 | 140,000 | 148,050 | ||||||
874,863 |
The accompanying notes are an integral part of these Schedules of Investments.
63
Brandes Credit Focus Yield Fund
SCHEDULE OF INVESTMENTS — September 30, 2013 (continued)
Principal | ||||||||
Amount | Value | |||||||
Computers & Peripherals – 1.77% | ||||||||
Apple, Inc. | ||||||||
2.400%, 05/03/2023 | $ | 575,000 | $ | 520,479 | ||||
Diversified Financial Services – 9.19% | ||||||||
Ally Financial, Inc. | ||||||||
6.750%, 12/01/2014 | 325,000 | 340,844 | ||||||
American International Group, Inc. | ||||||||
6.400%, 12/15/2020 | 485,000 | 571,530 | ||||||
Bank of America Corp. | ||||||||
3.750%, 07/12/2016 | 415,000 | 439,769 | ||||||
Ford Motor Credit Co. LLC | ||||||||
7.000%, 10/01/2013 | 345,000 | 345,000 | ||||||
International Lease Finance Corp. | ||||||||
6.625%, 11/15/2013 | 565,000 | 567,825 | ||||||
SLM Corp. | ||||||||
5.000%, 10/01/2013 | 440,000 | 440,000 | ||||||
2,704,968 | ||||||||
Electric Utilities – 8.91% | ||||||||
Ameren Corp. | ||||||||
8.875%, 05/15/2014 | 120,000 | 125,760 | ||||||
Arizona Public Service Co. | ||||||||
8.750%, 03/01/2019 | 435,000 | 562,340 | ||||||
Commonwealth Edison Co. | ||||||||
Series 104, 5.950%, 08/15/2016 | 110,000 | 124,466 | ||||||
FirstEnergy Corp. | ||||||||
7.375%, 11/15/2031 | 350,000 | 353,560 | ||||||
Israel Electric Corporation Ltd. | ||||||||
7.250%, 01/15/2019(b) | 505,000 | 552,343 | ||||||
Nisource Finance Corp. | ||||||||
5.250%, 09/15/2017 | 65,000 | 72,383 | ||||||
Oncor Electric Delivery Co. LLC | ||||||||
6.375%, 01/15/2015 | 465,000 | 496,630 | ||||||
7.000%, 09/01/2022 | 120,000 | 148,309 | ||||||
PPL Energy Supply LLC | ||||||||
6.500%, 05/01/2018 | 165,000 | 186,587 | ||||||
2,622,378 | ||||||||
Energy – 0.84% | ||||||||
Valero Energy Corp. | ||||||||
9.375%, 03/15/2019 | 190,000 | 246,152 | ||||||
Energy Equipment & Services – 2.33% | ||||||||
Transocean, Inc. | ||||||||
4.950%, 11/15/2015 | 640,000 | 686,592 |
The accompanying notes are an integral part of these Schedules of Investments.
64
Brandes Credit Focus Yield Fund
SCHEDULE OF INVESTMENTS — September 30, 2013 (continued)
Principal | ||||||||
Amount | Value | |||||||
Equipment – 0.32% | ||||||||
Continental Airlines 2007-1 Class A Pass Through Trust | ||||||||
Series 2007-1, 5.983%, 10/19/2023 | $ | 87,725 | $ | 93,865 | ||||
Food, Beverage & Tobacco – 1.47% | ||||||||
Altria Group, Inc. | ||||||||
9.700%, 11/10/2018 | 43,000 | 56,847 | ||||||
Pilgrims Pride Corp. | ||||||||
7.875%, 12/15/2018 | 140,000 | 152,250 | ||||||
Tyson Foods, Inc. | ||||||||
6.600%, 04/01/2016 | 200,000 | 224,233 | ||||||
433,330 | ||||||||
Forest Products & Paper – 1.06% | ||||||||
Sappi Papier Holding GmbH | ||||||||
7.750%, 07/15/2017(b) | 300,000 | 312,000 | ||||||
Healthcare Providers & Services – 0.79% | ||||||||
Laboratory Corp. of America Holdings | ||||||||
3.750%, 08/23/2022 | 240,000 | 233,836 | ||||||
Homebuilders – 3.63% | ||||||||
Centex Corp. | ||||||||
6.500%, 05/01/2016 | 155,000 | 171,275 | ||||||
Lennar Corp. | ||||||||
5.600%, 05/31/2015 | 505,000 | 532,774 | ||||||
Toll Brothers Finance Corp. | ||||||||
5.150%, 05/15/2015 | 160,000 | 168,400 | ||||||
Urbi Desarrollos Urbanos SA | ||||||||
9.500%, 01/21/2020(b)(d) | 1,160,000 | 197,200 | ||||||
1,069,649 | ||||||||
Insurance – 3.66% | ||||||||
CNA Financial Corp. | ||||||||
7.350%, 11/15/2019 | 125,000 | 152,134 | ||||||
5.875%, 08/15/2020 | 235,000 | 271,006 | ||||||
ING US, Inc. | ||||||||
5.500%, 07/15/2022 | 355,000 | 382,172 | ||||||
Marsh & McLennan Cos, Inc. | ||||||||
5.750%, 09/15/2015 | 250,000 | 272,189 | ||||||
1,077,501 | ||||||||
Media – 0.15% | ||||||||
The McGraw Hill Cos, Inc. | ||||||||
5.900%, 11/15/2017 | 40,000 | 43,270 |
The accompanying notes are an integral part of these Schedules of Investments.
65
Brandes Credit Focus Yield Fund
SCHEDULE OF INVESTMENTS — September 30, 2013 (continued)
Principal | ||||||||
Amount | Value | |||||||
Oil & Gas – 4.13% | ||||||||
Anadarko Petroleum Corp. | ||||||||
5.950%, 09/15/2016 | $ | 510,000 | $ | 572,669 | ||||
Chesapeake Energy Corp. | ||||||||
6.625%, 08/15/2020 | 545,000 | 585,874 | ||||||
El Paso Corp. | ||||||||
7.000%, 06/15/2017 | 50,000 | 55,764 | ||||||
1,214,307 | ||||||||
Pharmaceutical – 0.75% | ||||||||
Valeant Pharmaceuticals International | ||||||||
6.750%, 08/15/2018(b) | 205,000 | 219,350 | ||||||
Technology Hardware & Equipment – 0.68% | ||||||||
ArcelorMittal SA | ||||||||
6.000%, 03/01/2021 | 195,000 | 199,875 | ||||||
Telecommunications – 0.81% | ||||||||
Telecom Italia Capital SA | ||||||||
6.999%, 06/04/2018 | 140,000 | 153,713 | ||||||
Telefonica Emisiones SAU | ||||||||
5.462%, 02/16/2021 | 80,000 | 81,917 | ||||||
235,630 | ||||||||
Utilities – 0.28% | ||||||||
Edison Mission Energy | ||||||||
7.000%, 05/15/2017(d) | 125,000 | 82,813 | ||||||
TOTAL CORPORATE BONDS | ||||||||
(Cost $16,775,197) | $ | 16,828,485 | ||||||
Contracts | Value | |||||||
WARRANTS – 0.01% | ||||||||
Semiconductors – 0.01% | ||||||||
MagnaChip Semiconductor Corp. | ||||||||
Expiration Date: November 2014, Exercise Price: 1.97(a)(c) | 3,900 | $ | 2,813 | |||||
TOTAL WARRANTS | ||||||||
(Cost $0) | $ | 2,813 |
The accompanying notes are an integral part of these Schedules of Investments.
66
Brandes Credit Focus Yield Fund
SCHEDULE OF INVESTMENTS — September 30, 2013 (continued)
Principal | ||||||||
Amount | Value | |||||||
REPURCHASE AGREEMENTS – 3.21% | ||||||||
Repurchase Agreement – 3.21% | ||||||||
State Street Bank and Trust Repurchase Agreement, | ||||||||
(Dated 09/30/13), due 10/1/13, 0.00% [Collateralized by | ||||||||
$1,070,000 Fannie Mae Bond, 2.08%, 11/02/22, | ||||||||
(Market Value $994,218)] (proceeds $943,558) | $ | 943,558 | $ | 943,558 | ||||
TOTAL REPURCHASE AGREEMENTS (Cost $943,558) | $ | 943,558 | ||||||
Total Investments (Cost $29,318,244) – 99.36% | $ | 29,240,068 | ||||||
Other Assets in Excess of Liabilities – 0.64% | 186,990 | |||||||
TOTAL NET ASSETS – 100.00% | $ | 29,427,058 |
__________
Percentages are stated as a percent of net assets.
(a) | Non-income producing security. | |
(b) | Security was purchased exempt from registration in the U.S. pursuant to Rule 144A of the Securities Act of 1933 (the “Act”) or was acquired in a private placement, and, unless registered under the Act, may only be sold to “qualified institutional buyers” (as defined in the Act) or pursuant to another exemption from registration. The market values of these securities total $1,494,630 which represents 5.08% of total net assets. | |
(c) | The price for this security was derived from an estimate of fair market value using methods approved by the Fund’s Board of Trustees. This security is deemed illiquid and represents $2,813 or 0.01% of the Fund’s net assets and is classified as a Level 2 security. See Note 2 in the Notes to Schedule of Investments. | |
(d) | In default. |
The accompanying notes are an integral part of these Schedules of Investments.
67
Brandes Investment Trust
STATEMENT OF ASSETS AND LIABILITIES — September 30, 2013
Brandes | |||||
International | |||||
Equity Fund | |||||
ASSETS | |||||
Investments in securities, at value(1) | $ | 433,004,379 | |||
Foreign currency(1) | 467,231 | ||||
Receivables: | |||||
Securities sold | 1,625,183 | ||||
Fund shares sold | 877,731 | ||||
Dividends and interest | 1,442,244 | ||||
Currency | 4,933 | ||||
Tax reclaims | 983,856 | ||||
Due from Advisor | — | ||||
Prepaid expenses and other assets | 30,321 | ||||
Total Assets | 438,435,878 | ||||
LIABILITIES | |||||
Payables: | |||||
Securities purchased | — | ||||
Fund shares redeemed | 10,573,040 | ||||
Due to advisor | 271,513 | ||||
12b-1 fee | 779 | ||||
Trustee fees | 11,657 | ||||
Distributions payable | 144,538 | ||||
Foreign tax withholding | 101,062 | ||||
Foreign currency spot trade payable | — | ||||
Accrued expenses | 162,883 | ||||
Total Liabilities | 11,265,472 | ||||
NET ASSETS | $ | 427,170,406 | |||
COMPONENTS OF NET ASSETS | |||||
Paid-in capital | $ | 534,694,396 | |||
Undistributed net investment income | (1,429,328 | ) | |||
Accumulated net realized gain (loss) on investments and foreign currency | (119,824,028 | ) | |||
Net unrealized appreciation (depreciation) on: | |||||
Investments | 13,624,876 | ||||
Foreign currency | 104,490 | ||||
Total Net Assets | $ | 427,170,406 | |||
Net asset value, offering price and redemption proceeds per share | |||||
Class A Shares | |||||
Net Assets | $ | 699,611 | |||
Shares outstanding (unlimited shares authorized without par value) | 43,644 | ||||
Offering and redemption price | $ | 16.03 | |||
Maximum offering price per share* | $ | 17.01 | |||
Class C Shares | |||||
Net Assets | $ | 422,769 | |||
Shares outstanding (unlimited shares authorized without par value) | 26,461 | ||||
Offering and redemption price | $ | 15.98 | |||
Class E Shares | |||||
Net Assets | $ | 21,976,877 | |||
Shares outstanding (unlimited shares authorized without par value) | 1,373,085 | ||||
Offering and redemption price | $ | 16.01 | |||
Class I Shares | |||||
Net Assets | $ | 404,071,149 | |||
Shares outstanding (unlimited shares authorized without par value) | 25,176,055 | ||||
Offering and redemption price | $ | 16.05 | |||
(1) Cost of: | |||||
Investments in securities | $ | 419,380,795 | |||
Foreign currency | 465,939 |
__________
* | Includes a sales load of 5.75% for the International, Global, Emerging Markets, and International Small Cap Funds and 3.75% for the Core Plus Fixed Income and Credit Focus Yield Funds. (see Note 7 of the Notes to Financial Statements) |
The accompanying notes to financial statements are an integral part of this statement.
68
Brandes Investment Trust
STATEMENT OF ASSETS AND LIABILITIES — September 30, 2013 (continued)
Brandes | ||||||||||||||||||
Brandes | Brandes | International | Brandes | Brandes | ||||||||||||||
Global | Emerging | Small Cap | Core Plus Fixed | Credit Focus | ||||||||||||||
Equity Fund | Markets Fund | Equity Fund | Income Fund | Yield Fund | ||||||||||||||
$ | 40,247,458 | $ | 424,126,503 | $ | 113,789,890 | $ | 32,664,582 | $ | 29,240,068 | |||||||||
54,581 | 2,044,363 | 271,380 | — | — | ||||||||||||||
— | 1,177,891 | 192,597 | — | — | ||||||||||||||
15,433 | 3,849,256 | 904,500 | 87,023 | 129 | ||||||||||||||
99,867 | 242,829 | 247,428 | 326,986 | 352,454 | ||||||||||||||
— | 1,015 | 2,465 | — | — | ||||||||||||||
17,631 | 16,429 | 11,337 | — | — | ||||||||||||||
3,626 | — | — | 14,781 | 1,537 | ||||||||||||||
24,690 | 38,229 | 15,345 | 14,630 | 8,624 | ||||||||||||||
40,463,286 | 431,496,515 | 115,434,942 | 33,108,002 | 29,602,812 | ||||||||||||||
394,190 | 5,632,983 | 998,037 | 246,199 | 104,966 | ||||||||||||||
11,198 | 499,898 | 19,246 | 511,312 | 1,416 | ||||||||||||||
— | 269,918 | 57,545 | — | — | ||||||||||||||
352 | 58,316 | 14,142 | 554 | 1,819 | ||||||||||||||
12,594 | 11,936 | 13,047 | 12,548 | 13,181 | ||||||||||||||
2,994 | 128,092 | 41,518 | 2,255 | — | ||||||||||||||
6,989 | 31,110 | 17,882 | — | — | ||||||||||||||
21,476 | — | — | — | — | ||||||||||||||
62,115 | 152,386 | 75,690 | 53,558 | 54,372 | ||||||||||||||
511,908 | 6,784,639 | 1,237,107 | 826,426 | 175,754 | ||||||||||||||
$ | 39,951,378 | $ | 424,711,876 | $ | 114,197,835 | $ | 32,281,576 | $ | 29,427,058 | |||||||||
$ | 32,702,408 | $ | 423,329,145 | $ | 91,140,052 | $ | 31,082,178 | $ | 29,062,308 | |||||||||
(23,826 | ) | 591,494 | (128,500 | ) | — | (4,974 | ) | |||||||||||
1,227,176 | 11,327,340 | 6,635,090 | 48,763 | 447,900 | ||||||||||||||
6,045,630 | (10,539,951 | ) | 16,549,159 | 1,150,635 | (78,176 | ) | ||||||||||||
(10 | ) | 3,848 | 2,034 | — | — | |||||||||||||
$ | 39,951,378 | $ | 424,711,876 | $ | 114,197,835 | $ | 32,281,576 | $ | 29,427,058 | |||||||||
$ | 271,838 | $ | 131,664,252 | $ | 31,235,578 | $ | 1,443,098 | $ | 4,208,966 | |||||||||
11,234 | 14,270,310 | 2,276,472 | 157,626 | 414,677 | ||||||||||||||
$ | 24.20 | $ | 9.23 | $ | 13.72 | $ | 9.16 | $ | 10.15 | |||||||||
$ | 25.68 | $ | 9.79 | $ | 14.56 | $ | 9.52 | $ | 10.55 | |||||||||
$ | 123,313 | $ | 5,254,566 | $ | 1,536,271 | N/A | N/A | |||||||||||
5,109 | 571,868 | 112,303 | — | — | ||||||||||||||
$ | 24.14 | $ | 9.19 | $ | 13.68 | N/A | N/A | |||||||||||
$ | 243,003 | N/A | N/A | $ | 1,154,759 | N/A | ||||||||||||
10,124 | — | — | 125,440 | — | ||||||||||||||
$ | 24.00 | N/A | N/A | $ | 9.21 | N/A | ||||||||||||
$ | 39,313,224 | $ | 287,793,058 | $ | 81,425,986 | $ | 29,683,719 | $ | 25,218,092 | |||||||||
1,620,605 | 31,145,910 | 5,926,525 | 3,231,425 | 2,484,638 | ||||||||||||||
$ | 24.26 | $ | 9.24 | $ | 13.74 | $ | 9.19 | $ | 10.15 | |||||||||
$ | 34,201,836 | $ | 434,666,480 | $ | 97,241,098 | $ | 31,513,947 | $ | 29,318,244 | |||||||||
54,573 | 2,044,337 | 271,012 | — | — |
The accompanying notes to financial statements are an integral part of this statement.
69
Brandes Investment Trust
STATEMENT OF OPERATIONS — For the Year Ended September 30, 2013
Brandes | ||||
International | ||||
Equity Fund | ||||
INVESTMENT INCOME | ||||
Income | ||||
Dividend income | $ | 14,775,044 | ||
Less: Foreign taxes withheld & issuance fees | (1,556,394 | ) | ||
Interest income | 454 | |||
Less: Foreign taxes withheld | — | |||
Income from securities lending | 299,082 | |||
Miscellaneous income | — | |||
Total income | 13,518,186 | |||
Expenses | ||||
Advisory fees (Note 3) | 3,560,287 | |||
Custody fees | 42,143 | |||
Administration fees (Note 3) | 141,538 | |||
Insurance expense | 33,817 | |||
Legal fees | 12,818 | |||
Printing fees | 42,826 | |||
Miscellaneous | 80,348 | |||
Registration expense | 60,745 | |||
Trustee fees | 40,840 | |||
Transfer agent fees | 140,610 | |||
12b-1 Fees – Class A (Note 3) | 433 | |||
12b-1 Fees – Class C (Note 3) | 658 | |||
Shareholder Service Fees – Class C (Note 3) | 220 | |||
Shareholder Service Fees – Class E (Note 3) | 20,915 | |||
Shareholder Service Fees – Class I (Note 3) | 187,315 | |||
Accounting fees | 67,087 | |||
Auditing fees | 47,837 | |||
Organizational costs | — | |||
Total expenses | 4,480,437 | |||
Less reimbursement / waiver | (458,927 | ) | ||
Total expenses net of reimbursement / waiver | 4,021,510 | |||
Net investment income | 9,496,676 | |||
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS | ||||
Net realized gain (loss) on: | ||||
Investments | (1,599,281 | ) | ||
Less: Foreign taxes withheld | — | |||
Foreign currency transactions | (139,146 | ) | ||
vNet realized gain (loss) | (1,738,427 | ) | ||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | 83,500,849 | |||
vForeign currency transactions | 58,622 | |||
Net unrealized appreciation (depreciation) | 83,559,471 | |||
Net realized and unrealized gain (loss) on investments | ||||
and foreign currency transactions | 81,821,044 | |||
Net increase in net assets resulting from operations | $ | 91,317,720 |
The accompanying notes to financial statements are an integral part of this statement.
70
Brandes Investment Trust
STATEMENT OF OPERATIONS — For the Year Ended September 30, 2013 (continued)
Brandes | ||||||||||||||||||
Brandes | Brandes | International | Brandes | Brandes | ||||||||||||||
Global | Emerging | Small Cap | Core Plus Fixed | Credit Focus | ||||||||||||||
Equity Fund | Markets Fund | Equity Fund | Income Fund | Yield Fund | ||||||||||||||
$ | 1,087,308 | $ | 7,710,451 | $ | 1,493,132 | $ | 24,069 | $ | 30,449 | |||||||||
(85,911 | ) | (755,397 | ) | (128,726 | ) | — | — | |||||||||||
91 | 3,983 | 65,116 | 1,240,458 | 730,927 | ||||||||||||||
— | (680 | ) | — | — | — | |||||||||||||
4,433 | — | — | — | — | ||||||||||||||
— | 148 | 248 | 20,671 | 13,469 | ||||||||||||||
1,005,921 | 6,958,505 | 1,429,770 | 1,285,198 | 774,845 | ||||||||||||||
271,345 | 2,612,163 | 719,368 | 114,576 | 138,726 | ||||||||||||||
4,986 | 111,516 | 23,221 | 4,592 | 4,170 | ||||||||||||||
12,377 | 97,654 | 26,971 | 12,002 | 10,318 | ||||||||||||||
2,912 | 14,903 | 3,012 | 3,298 | 1,373 | ||||||||||||||
12,298 | 13,613 | 13,287 | 12,588 | 14,232 | ||||||||||||||
6,400 | 44,256 | 14,713 | 6,036 | 5,060 | ||||||||||||||
10,513 | 51,607 | 15,383 | 7,966 | 6,845 | ||||||||||||||
51,371 | 68,524 | 52,185 | 38,910 | 35,865 | ||||||||||||||
39,990 | 40,284 | 39,977 | 39,940 | 39,767 | ||||||||||||||
61,048 | 164,340 | 66,561 | 46,539 | 34,853 | ||||||||||||||
306 | 236,060 | 43,767 | 1,654 | 6,317 | ||||||||||||||
306 | 8,495 | 2,744 | N/A | N/A | ||||||||||||||
102 | 2,832 | 915 | N/A | N/A | ||||||||||||||
122 | N/A | N/A | 10,817 | N/A | ||||||||||||||
16,773 | 89,891 | 22,382 | 13,874 | 4,340 | ||||||||||||||
59,890 | 58,827 | 59,147 | 52,356 | 43,065 | ||||||||||||||
44,719 | 46,596 | 44,336 | 45,535 | 46,416 | ||||||||||||||
— | — | 8,983 | — | 7,744 | ||||||||||||||
595,458 | 3,661,561 | 1,156,952 | 410,683 | 399,091 | ||||||||||||||
(255,029 | ) | (334,348 | ) | (238,680 | ) | (237,047 | ) | (198,558 | ) | |||||||||
340,429 | 3,327,213 | 918,272 | 173,636 | 200,533 | ||||||||||||||
665,492 | 3,631,292 | 511,498 | 1,111,562 | 574,312 | ||||||||||||||
1,291,119 | 11,775,682 | 6,719,939 | 264,047 | 14,692 | ||||||||||||||
— | (7,305 | ) | — | — | — | |||||||||||||
(4,139 | ) | (197,501 | ) | (27,045 | ) | — | — | |||||||||||
1,286,980 | 11,570,876 | 6,692,894 | 264,047 | 14,692 | ||||||||||||||
6,188,336 | 6,780,613 | 14,867,448 | (1,214,389 | ) | (536,907 | ) | ||||||||||||
646 | 14,091 | 1,815 | — | — | ||||||||||||||
6,188,982 | 6,794,704 | 14,869,263 | (1,214,389 | ) | (536,907 | ) | ||||||||||||
7,475,962 | 18,365,580 | 21,562,157 | (950,342 | ) | (522,215 | ) | ||||||||||||
$ | 8,141,454 | $ | 21,996,872 | $ | 22,073,655 | $ | 161,220 | $ | 52,097 |
The accompanying notes to financial statements are an integral part of this statement.
71
Brandes Investment Trust
STATEMENTS OF CHANGES IN NET ASSETS
Brandes International | Brandes Global | Brandes Emerging | ||||||||||||||||||||||
Equity Fund | Equity Trust | Markets Fund | ||||||||||||||||||||||
Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||||||
September 30, | September 30, | September 30, | September 30, | September 30, | September 30, | |||||||||||||||||||
2013 | 2012 | 2013 | 2012 | 2013 | 2012 | |||||||||||||||||||
INCREASE | ||||||||||||||||||||||||
(DECREASE) IN | ||||||||||||||||||||||||
NET ASSETS FROM: | ||||||||||||||||||||||||
OPERATIONS | ||||||||||||||||||||||||
Net investment | ||||||||||||||||||||||||
income | $ | 9,496,676 | $ | 12,918,224 | $ | 665,492 | $ | 833,016 | $ | 3,631,292 | $ | 3,539,094 | ||||||||||||
Net realized gain | ||||||||||||||||||||||||
(loss) on: | ||||||||||||||||||||||||
Investments | (1,599,281 | ) | (32,118,611 | ) | 1,291,119 | 543,036 | 11,768,377 | 4,139,759 | ||||||||||||||||
Foreign currency | ||||||||||||||||||||||||
transactions | (139,146 | ) | (69,469 | ) | (4,139 | ) | (17,226 | ) | (197,501 | ) | (94,710 | ) | ||||||||||||
Net change in unrealized | ||||||||||||||||||||||||
appreciation | ||||||||||||||||||||||||
(depreciation) on: | ||||||||||||||||||||||||
Investments | 83,500,849 | 55,898,588 | 6,188,336 | 3,479,351 | 6,780,613 | 12,500,123 | ||||||||||||||||||
Foreign currency | ||||||||||||||||||||||||
transactions | 58,622 | (6,563 | ) | 646 | (148 | ) | 14,091 | 23,761 | ||||||||||||||||
Net increase | ||||||||||||||||||||||||
in net assets | ||||||||||||||||||||||||
resulting from | ||||||||||||||||||||||||
operations | 91,317,720 | 36,622,169 | 8,141,454 | 4,838,029 | 21,996,872 | 20,108,027 | ||||||||||||||||||
DISTRIBUTIONS TO | ||||||||||||||||||||||||
SHAREHOLDERS | ||||||||||||||||||||||||
From net investment | ||||||||||||||||||||||||
income | ||||||||||||||||||||||||
Class A | (7,058 | ) | (4 | ) | (4,965 | ) | (249 | ) | (2,110,259 | ) | (407,118 | ) | ||||||||||||
Class C | (3,900 | ) | N/A | (1,612 | ) | N/A | (25,399 | ) | N/A | |||||||||||||||
Class E | (678,654 | ) | (208,815 | ) | (9,392 | ) | (4,752 | ) | N/A | N/A | ||||||||||||||
Class I | (21,820,503 | ) | (21,348,284 | ) | (1,466,752 | ) | (884,851 | ) | (4,840,178 | ) | (1,004,514 | ) | ||||||||||||
From net realized gains | ||||||||||||||||||||||||
Class A | — | — | (1,515 | ) | (634 | ) | (1,665,022 | ) | (415,797 | ) | ||||||||||||||
Class C | — | N/A | — | N/A | — | N/A | ||||||||||||||||||
Class E | — | — | (3,242 | ) | (11,450 | ) | N/A | N/A | ||||||||||||||||
Class I | — | — | (489,837 | ) | (2,132,185 | ) | (3,312,472 | ) | (901,535 | ) | ||||||||||||||
Decrease in net | ||||||||||||||||||||||||
assets from | ||||||||||||||||||||||||
distributions | (22,510,115 | ) | (21,557,103 | ) | (1,977,315 | ) | (3,034,121 | ) | (11,953,330 | ) | (2,728,964 | ) | ||||||||||||
CAPITAL SHARE | ||||||||||||||||||||||||
TRANSACTIONS | ||||||||||||||||||||||||
Proceeds from | ||||||||||||||||||||||||
shares sold | 137,245,545 | 91,548,588 | 6,499,248 | 5,971,637 | 266,629,812 | 104,998,425 | ||||||||||||||||||
Net asset value of share | ||||||||||||||||||||||||
issued on reinvestment | ||||||||||||||||||||||||
of distributions | 20,426,954 | 19,458,718 | 1,111,307 | 2,952,953 | 11,542,833 | 2,608,174 | ||||||||||||||||||
Cost of shares | ||||||||||||||||||||||||
redeemed | (158,699,984 | ) | (225,737,344 | ) | (4,240,206 | ) | (16,923,436 | ) | (66,090,176 | ) | (32,678,995 | ) | ||||||||||||
Net increase (decrease) | ||||||||||||||||||||||||
in net assets from | ||||||||||||||||||||||||
capital share | ||||||||||||||||||||||||
transactions | (1,027,485 | ) | (114,730,038 | ) | 3,370,349 | (7,998,846 | ) | 212,082,469 | 74,927,604 | |||||||||||||||
Total Increase | ||||||||||||||||||||||||
(Decrease) in | ||||||||||||||||||||||||
net assets | 67,780,120 | (99,664,972 | ) | 9,534,488 | (6,194,938 | ) | 222,126,011 | 92,306,667 | ||||||||||||||||
NET ASSETS | ||||||||||||||||||||||||
Beginning of | ||||||||||||||||||||||||
the Period | 359,390,286 | 459,055,258 | 30,416,890 | 36,611,828 | 202,585,865 | 110,279,198 | ||||||||||||||||||
End of the Period | $ | 427,170,406 | $ | 359,390,286 | $ | 39,951,378 | $ | 30,416,890 | $ | 424,711,876 | $ | 202,585,865 | ||||||||||||
Undistributed net | ||||||||||||||||||||||||
investment | ||||||||||||||||||||||||
income | $ | (1,429,328 | ) | $ | 11,088,878 | $ | (23,826 | ) | $ | 787,198 | $ | 591,494 | $ | 2,947,049 |
The accompanying notes to financial statements are an integral part of this statement.
72
Brandes Investment Trust
STATEMENTS OF CHANGES IN NET ASSETS (continued)
Brandes International | Brandes Core Plus | Brandes Credit | ||||||||||||||||||||||
Small Cap Equity Fund | Fixed Income Fund | Focus Yield Fund | ||||||||||||||||||||||
Year Ended | Period Ended | Year Ended | Year Ended | Year Ended | Period Ended | |||||||||||||||||||
September 30, | September 30, | September 30, | September 30, | September 30, | September 30, | |||||||||||||||||||
2013 | 2012* | 2013 | 2012 | 2013 | 2012* | |||||||||||||||||||
INCREASE | ||||||||||||||||||||||||
(DECREASE) IN | ||||||||||||||||||||||||
NET ASSETS FROM: | ||||||||||||||||||||||||
OPERATIONS | ||||||||||||||||||||||||
Net investment | ||||||||||||||||||||||||
income | $ | 511,498 | $ | 290,760 | $ | 1,111,562 | $ | 1,258,168 | $ | 574,312 | $ | 306,294 | ||||||||||||
Net realized gain | ||||||||||||||||||||||||
(loss) on: | ||||||||||||||||||||||||
Investments | 6,719,939 | 510,475 | 264,047 | 427,921 | 14,692 | 65,484 | ||||||||||||||||||
Foreign currency | ||||||||||||||||||||||||
transactions | (27,045 | ) | (16,405 | ) | — | — | — | — | ||||||||||||||||
Net change in unrealized | ||||||||||||||||||||||||
appreciation | ||||||||||||||||||||||||
(depreciation) on: | ||||||||||||||||||||||||
Investments | 14,867,448 | 1,681,711 | (1,214,389 | ) | 1,155,584 | (536,907 | ) | 458,731 | ||||||||||||||||
Foreign currency | ||||||||||||||||||||||||
transactions | 1,815 | 219 | — | — | — | — | ||||||||||||||||||
Net increase | ||||||||||||||||||||||||
in net assets | ||||||||||||||||||||||||
resulting from | ||||||||||||||||||||||||
operations | 22,073,655 | 2,466,760 | 161,220 | 2,841,673 | 52,097 | 830,509 | ||||||||||||||||||
DISTRIBUTIONS TO | ||||||||||||||||||||||||
SHAREHOLDERS | ||||||||||||||||||||||||
From net investment | ||||||||||||||||||||||||
income | ||||||||||||||||||||||||
Class A | (166,193 | ) | — | (19,362 | ) | N/A | (46,034 | ) | (2 | ) | ||||||||||||||
Class C | (2,388 | ) | N/A | N/A | N/A | N/A | N/A | |||||||||||||||||
Class E | N/A | — | (191,022 | ) | (244,744 | ) | N/A | N/A | ||||||||||||||||
Class I | (765,007 | ) | N/A | (1,060,910 | ) | (1,179,368 | ) | (546,949 | ) | (297,633 | ) | |||||||||||||
From net realized gains | ||||||||||||||||||||||||
Class A | (90,469 | ) | — | — | N/A | (5,802 | ) | — | ||||||||||||||||
Class C | — | N/A | N/A | N/A | N/A | N/A | ||||||||||||||||||
Class E | — | — | (93,234 | ) | (93,990 | ) | N/A | N/A | ||||||||||||||||
Class I | (533,046 | ) | N/A | (286,860 | ) | (480,064 | ) | (143,186 | ) | — | ||||||||||||||
Decrease in net | ||||||||||||||||||||||||
assets from | ||||||||||||||||||||||||
distributions | (1,557,103 | ) | — | (1,651,388 | ) | (1,998,166 | ) | (741,971 | ) | (297,635 | ) | |||||||||||||
CAPITAL SHARE | ||||||||||||||||||||||||
TRANSACTIONS | ||||||||||||||||||||||||
Proceeds from | ||||||||||||||||||||||||
shares sold | 58,169,343 | 41,885,389 | 21,074,938 | 7,548,731 | 10,104,427 | 18,477,543 | ||||||||||||||||||
Net asset value of share | ||||||||||||||||||||||||
issued on reinvestment | ||||||||||||||||||||||||
of distributions | 1,315,774 | — | 1,471,758 | 1,691,449 | 744,456 | 295,151 | ||||||||||||||||||
Cost of shares | ||||||||||||||||||||||||
redeemed | (10,096,132 | ) | (59,851 | ) | (20,914,985 | ) | (5,048,630 | ) | (37,519 | ) | — | |||||||||||||
Net increase (decrease) | ||||||||||||||||||||||||
in net assets from | ||||||||||||||||||||||||
capital share | ||||||||||||||||||||||||
transactions | 49,388,985 | 41,825,538 | 1,631,711 | 4,191,550 | 10,811,364 | 18,772,694 | ||||||||||||||||||
Total Increase | ||||||||||||||||||||||||
(Decrease) in | ||||||||||||||||||||||||
net assets | 69,905,537 | 44,292,298 | 141,543 | 5,035,057 | 10,121,490 | 19,305,568 | ||||||||||||||||||
NET ASSETS | ||||||||||||||||||||||||
Beginning of | ||||||||||||||||||||||||
the Period | 44,292,298 | — | 32,140,033 | 27,104,976 | 19,305,568 | — | ||||||||||||||||||
End of the Period | $ | 114,197,835 | $ | 44,292,298 | $ | 32,281,576 | $ | 32,140,033 | $ | 29,427,058 | $ | 19,305,568 | ||||||||||||
Undistributed net | ||||||||||||||||||||||||
�� investment | ||||||||||||||||||||||||
income | $ | (128,500 | ) | $ | 285,646 | $ | — | $ | 44,040 | $ | (4,974 | ) | $ | 13,701 |
__________
* Commenced operations on January 31, 2012.
The accompanying notes to financial statements are an integral part of this statement.
73
Brandes Investment Trust
FINANCIAL HIGHLIGHTS For a capital share outstanding for the period ended:
Net | ||||||||||||||||||||||||
Net asset | realized and | Dividends | Dividends | |||||||||||||||||||||
value, | Net | unrealized | Total from | from net | from net | |||||||||||||||||||
beginning | investment | gain/(loss) on | investment | investment | realized | |||||||||||||||||||
of period | income | investments | operations | income | gains | |||||||||||||||||||
Brandes International Equity Fund | ||||||||||||||||||||||||
Class A(8) | ||||||||||||||||||||||||
9/30/13 | $ | 13.50 | 0.34 | (5) | 3.02 | 3.36 | (0.83 | ) | — | |||||||||||||||
9/30/12 | $ | 13.00 | 0.38 | (5) | 0.76 | 1.14 | (0.64 | ) | — | |||||||||||||||
1/31/2011(3) – 9/30/2011 | $ | 15.74 | 0.26 | (5) | (3.00 | ) | (2.74 | ) | — | — | ||||||||||||||
Class C | ||||||||||||||||||||||||
1/31/2013(3) – 9/30/2013 | $ | 14.30 | 0.15 | (5) | 1.84 | 1.99 | (0.31 | ) | — | |||||||||||||||
Class E | ||||||||||||||||||||||||
9/30/13 | $ | 13.48 | 0.33 | (5) | 3.03 | 3.36 | (0.84 | ) | — | |||||||||||||||
9/30/12 | $ | 12.97 | 0.41 | (5) | 0.74 | 1.15 | (0.64 | ) | — | |||||||||||||||
9/30/11 | $ | 14.91 | 0.37 | (5) | (1.96 | ) | (1.59 | ) | (0.35 | ) | — | |||||||||||||
9/30/10 | $ | 15.24 | 0.33 | (5) | (0.40 | ) | (0.07 | ) | (0.26 | ) | — | |||||||||||||
10/6/2008(3) – 9/30/2009 | $ | 16.03 | 0.32 | 0.54 | 0.86 | (0.47 | ) | (1.18 | ) | |||||||||||||||
Class I | ||||||||||||||||||||||||
9/30/13 | $ | 13.50 | 0.35 | (5) | 3.04 | 3.39 | (0.84 | ) | — | |||||||||||||||
9/30/12 | $ | 12.99 | 0.41 | (5) | 0.76 | 1.17 | (0.66 | ) | — | |||||||||||||||
9/30/11 | $ | 14.92 | 0.40 | (5) | (1.98 | ) | (1.58 | ) | (0.35 | ) | — | |||||||||||||
9/30/10 | $ | 15.24 | 0.32 | (5) | (0.38 | ) | (0.06 | ) | (0.26 | ) | — | |||||||||||||
9/30/09 | $ | 17.43 | 0.26 | (0.80 | ) | (0.54 | ) | (0.47 | ) | (1.18 | ) |
__________
(1) | Not annualized. | |
(2) | Annualized. | |
(3) | Commencement of operations. | |
(4) | After fees waived and expenses absorbed or recouped by the Advisor, where applicable. | |
(5) | Net investment income (loss) per share has been calculated based on average shares outstanding during the period. | |
(6) | The total return calculation does not reflect the sales loads that may be imposed on Class A or C shares (see Note 7 of the Notes to Financial Statements). | |
(7) | The Total return figure is the since inception return for the class which commenced operations on January 31, 2013. | |
(8) | Prior to January 31, 2013, Class A shares were known as Class S shares. |
The accompanying notes to financial statements are an integral part of this statement.
74
Brandes Investment Trust
FINANCIAL HIGHLIGHTS For a capital share outstanding for the period ended:
Ratio of net | ||||||||||||||||||||||||||||||
investment | ||||||||||||||||||||||||||||||
Ratio of | income | |||||||||||||||||||||||||||||
Ratio of net | expenses (prior | (prior to | ||||||||||||||||||||||||||||
Net assets, | Ratio of | investment | to reimburse- | reimburse- | ||||||||||||||||||||||||||
Net asset | end of | net expenses | income | ments) | ments) to | Portfolio | ||||||||||||||||||||||||
value, end | Total | period | to average | to average | to average | average | turnover | |||||||||||||||||||||||
of period | return(6) | (millions) | net assets(4) | net assets(4) | net assets | net assets | rate | |||||||||||||||||||||||
$ | 16.03 | 26.06 | % | $ | 0.7 | 1.23 | % | 2.25 | % | 1.31 | % | 2.17 | % | 19.43 | % | |||||||||||||||
$ | 13.50 | 8.94 | % | $ | — | 1.40 | % | 2.86 | % | 1.45 | % | 2.81 | % | 13.47 | % | |||||||||||||||
$ | 13.00 | (17.41 | )%(1) | $ | — | 1.30 | %(2) | 2.54 | %(2) | 1.30 | %(2) | 2.54 | %(2) | 4.99 | %(1) | |||||||||||||||
$ | 15.98 | 14.17 | %(7) | $ | 0.1 | 1.95 | %(2) | 1.53 | %(2) | 1.97 | %(2) | 1.51 | %(2) | 19.43 | % | |||||||||||||||
$ | 16.01 | 26.15 | % | $ | 22.0 | 1.22 | % | 2.26 | % | 1.23 | % | 2.25 | % | 19.43 | % | |||||||||||||||
$ | 13.48 | 9.05 | % | $ | 6.6 | 1.18 | % | 3.09 | % | 1.23 | % | 3.04 | % | 13.47 | % | |||||||||||||||
$ | 12.97 | (11.04 | )% | $ | 4.4 | 1.32 | % | 2.40 | % | 1.32 | % | 2.40 | % | 4.99 | % | |||||||||||||||
$ | 14.91 | (0.44 | )% | $ | 0.9 | 1.19 | % | 2.36 | % | 1.19 | % | 2.36 | % | 29.15 | % | |||||||||||||||
$ | 15.24 | 7.78 | %(1) | $ | 0.1 | 1.16 | %(2) | 2.21 | %(2) | 1.16 | %(2) | 2.21 | %(2) | 19.88 | %(1) | |||||||||||||||
$ | 16.05 | 26.43 | % | $ | 404.4 | 1.03 | % | 2.45 | % | 1.15 | % | 2.33 | % | 19.43 | % | |||||||||||||||
$ | 13.50 | 9.09 | % | $ | 352.7 | 1.16 | % | 3.11 | % | 1.21 | % | 3.06 | % | 13.47 | % | |||||||||||||||
$ | 12.99 | (10.95 | )% | $ | 454.7 | 1.14 | % | 2.58 | % | 1.14 | % | 2.58 | % | 4.99 | % | |||||||||||||||
$ | 14.92 | (0.37 | )% | $ | 771.7 | 1.13 | % | 2.19 | % | 1.13 | % | 2.19 | % | 29.15 | % | |||||||||||||||
$ | 15.24 | (0.88 | )% | $ | 867.0 | 1.16 | % | 2.27 | % | 1.16 | % | 2.27 | % | 19.86 | % |
The accompanying notes to financial statements are an integral part of this statement.
75
Brandes Investment Trust
FINANCIAL HIGHLIGHTS For a capital share outstanding for the period ended:
Net | ||||||||||||||||||||||||
Net asset | realized and | Dividends | Dividends | |||||||||||||||||||||
value, | Net | unrealized | Total from | from net | from net | |||||||||||||||||||
beginning | investment | gain/(loss) on | investment | investment | realized | |||||||||||||||||||
of period | income | investments | operations | income | gains | |||||||||||||||||||
Brandes Global Equity Fund | ||||||||||||||||||||||||
Class A(8) | ||||||||||||||||||||||||
9/30/13 | $ | 20.27 | 0.38 | (5) | 4.80 | 5.18 | (0.91 | ) | (0.34 | ) | ||||||||||||||
9/30/12 | $ | 19.19 | 0.43 | (5) | 2.22 | 2.65 | (0.44 | ) | (1.13 | ) | ||||||||||||||
1/31/2011(3) – 9/30/2011 | $ | 22.34 | 0.29 | (5) | (3.44 | ) | (3.15 | ) | — | — | ||||||||||||||
Class C | ||||||||||||||||||||||||
1/31/2013(3) – 9/30/2013 | $ | 21.21 | 0.15 | (5) | 3.12 | 3.27 | (0.34 | ) | — | |||||||||||||||
Class E | ||||||||||||||||||||||||
9/30/13 | $ | 20.17 | 0.37 | (5) | 4.77 | 5.14 | (0.97 | ) | (0.34 | ) | ||||||||||||||
9/30/12 | $ | 19.13 | 0.44 | (5) | 2.20 | 2.64 | (0.47 | ) | (1.13 | ) | ||||||||||||||
9/30/11 | $ | 21.73 | 0.51 | (5) | (1.59 | ) | (1.08 | ) | (0.44 | ) | (1.08 | ) | ||||||||||||
9/30/10 | $ | 21.25 | 0.37 | (5) | 0.50 | 0.87 | (0.39 | ) | — | |||||||||||||||
10/6/2008(3) – 9/30/2009 | $ | 20.00 | 0.40 | 0.94 | 1.34 | (0.09 | ) | — | ||||||||||||||||
Class I | ||||||||||||||||||||||||
9/30/13 | $ | 20.33 | 0.43 | (5) | 4.81 | 5.24 | (0.98 | ) | (0.34 | ) | ||||||||||||||
9/30/12 | $ | 19.22 | 0.49 | (5) | 2.22 | 2.71 | (0.47 | ) | (1.13 | ) | ||||||||||||||
9/30/11 | $ | 21.76 | 0.51 | (5) | (1.53 | ) | (1.02 | ) | (0.44 | ) | (1.08 | ) | ||||||||||||
9/30/10 | $ | 21.24 | 0.42 | (5) | 0.48 | 0.90 | (0.38 | ) | — | |||||||||||||||
10/6/2008(3) – 9/30/2009 | $ | 20.00 | 0.39 | 0.94 | 1.33 | (0.09 | ) | — |
__________
(1) | Not annualized. | |
(2) | Annualized. | |
(3) | Commencement of operations. | |
(4) | After fees waived and expenses absorbed or recouped by the Advisor, where applicable. | |
(5) | Net investment income (loss) per share has been calculated based on average shares outstanding during the period. | |
(6) | The total return calculation does not reflect the sales loads that may be imposed on Class A or C shares (see Note 7 of the Notes to Financial Statements). | |
(7) | The Total return figure is the since inception return for the class which commenced operations on January 31, 2013. | |
(8) | Prior to January 31, 2013, Class A shares were known as Class S shares. |
The accompanying notes to financial statements are an integral part of this statement.
76
Brandes Investment Trust
FINANCIAL HIGHLIGHTS For a capital share outstanding for the period ended:
Ratio of net | ||||||||||||||||||||||||||||||
investment | ||||||||||||||||||||||||||||||
Ratio of | income | |||||||||||||||||||||||||||||
Ratio of net | expenses (prior | (prior to | ||||||||||||||||||||||||||||
Net assets, | Ratio of | investment | to reimburse- | reimburse- | ||||||||||||||||||||||||||
Net asset | end of | net expenses | income | ments) | ments) to | Portfolio | ||||||||||||||||||||||||
value, end | Total | period | to average | to average | to average | average | turnover | |||||||||||||||||||||||
of period | return(6) | (millions) | net assets(4) | net assets(4) | net assets | net assets | rate | |||||||||||||||||||||||
$ | 24.20 | 26.81 | % | $ | 0.3 | 1.25 | % | 1.72 | % | 1.97 | % | 1.00 | % | 24.37 | % | |||||||||||||||
$ | 20.27 | 14.38 | % | $ | 0.1 | 1.25 | % | 2.23 | % | 2.00 | % | 1.47 | % | 18.00 | % | |||||||||||||||
$ | 19.19 | (14.10 | )%(1) | $ | — | 1.25 | %(2) | 2.05 | %(2) | 1.74 | %(2) | 1.56 | %(2) | 23.94 | %(1) | |||||||||||||||
$ | 24.14 | 15.55 | %(7) | $ | 0.1 | 2.00 | %(2) | 0.97 | %(2) | 2.71 | %(2) | 0.26 | %(2) | 24.37 | % | |||||||||||||||
$ | 24.00 | 26.80 | % | $ | 0.2 | 1.25 | % | 1.71 | % | 1.76 | % | 1.20 | % | 24.37 | % | |||||||||||||||
$ | 20.17 | 14.35 | % | $ | 0.2 | 1.25 | % | 2.23 | % | 1.69 | % | 1.78 | % | 18.00 | % | |||||||||||||||
$ | 19.13 | (5.80 | )% | $ | 0.2 | 1.25 | % | 2.05 | % | 1.69 | % | 1.62 | % | 23.94 | % | |||||||||||||||
$ | 21.73 | 4.08 | % | $ | 0.1 | 1.20 | % | 1.78 | % | 1.41 | % | 1.57 | % | 16.87 | % | |||||||||||||||
$ | 21.25 | 6.77 | %(1) | $ | 0.1 | 1.20 | %(2) | 2.30 | %(2) | 1.83 | %(2) | 1.67 | %(2) | 4.06 | %(1) | |||||||||||||||
$ | 24.26 | 27.12 | % | $ | 39.4 | 1.00 | % | 1.96 | % | 1.75 | % | 1.21 | % | 24.37 | % | |||||||||||||||
$ | 20.33 | 14.67 | % | $ | 30.1 | 1.00 | % | 2.47 | % | 1.68 | % | 1.79 | % | 18.00 | % | |||||||||||||||
$ | 19.22 | (5.51 | )% | $ | 36.4 | 1.00 | % | 2.30 | % | 1.44 | % | 1.86 | % | 23.94 | % | |||||||||||||||
$ | 21.76 | 4.28 | % | $ | 41.0 | 1.00 | % | 2.00 | % | 1.41 | % | 1.59 | % | 16.87 | % | |||||||||||||||
$ | 21.24 | 6.72 | %(1) | $ | 37.4 | 1.00 | %(2) | 2.45 | %(2) | 1.80 | %(2) | 1.66 | %(2) | 4.06 | %(1) |
The accompanying notes to financial statements are an integral part of this statement.
77
Brandes Investment Trust
FINANCIAL HIGHLIGHTS For a capital share outstanding for the period ended:
Net | Net | |||||||||||||||||||||||||||
Net asset | realized and | increase | Dividends | Dividends | ||||||||||||||||||||||||
value, | Net | unrealized | from | Total from | from net | from net | ||||||||||||||||||||||
beginning | investment | gain/(loss) on | payments | investment | investment | realized | ||||||||||||||||||||||
of period | income(5) | investments | by affiliates | operations | income | gains | ||||||||||||||||||||||
Brandes Emerging Markets Fund | ||||||||||||||||||||||||||||
Class A(9) | ||||||||||||||||||||||||||||
9/30/13 | $ | 8.96 | 0.11 | 0.59 | — | 0.70 | (0.22 | ) | (0.21 | ) | ||||||||||||||||||
9/30/12 | $ | 7.85 | 0.17 | 1.10 | — | 1.27 | (0.08 | ) | (0.08 | ) | ||||||||||||||||||
1/31/2011(3) – 9/30/2011 | $ | 10.00 | 0.14 | (2.29 | ) | — | (8) | (2.15 | ) | — | — | |||||||||||||||||
Class C | ||||||||||||||||||||||||||||
1/31/2013(3) – 9/30/2013 | $ | 9.54 | 0.02 | (0.30 | ) | — | (0.28 | ) | (0.07 | ) | — | |||||||||||||||||
Class I | ||||||||||||||||||||||||||||
9/30/13 | $ | 8.99 | 0.13 | 0.56 | — | 0.69 | (0.23 | ) | (0.21 | ) | ||||||||||||||||||
9/30/12 | $ | 7.86 | 0.20 | 1.10 | — | 1.30 | (0.09 | ) | (0.08 | ) | ||||||||||||||||||
1/31/2011(3) – 9/30/2011 | $ | 10.00 | 0.15 | (2.29 | ) | — | (8) | (2.14 | ) | — | — | |||||||||||||||||
Brandes International Small Cap Equity Fund | ||||||||||||||||||||||||||||
Class A(9) | ||||||||||||||||||||||||||||
9/30/13 | $ | 10.56 | 0.06 | 3.36 | — | 3.42 | (0.14 | ) | (0.12 | ) | ||||||||||||||||||
1/31/2012(3) – 9/30/2012 | $ | 10.00 | 0.10 | 0.46 | — | 0.56 | — | — | ||||||||||||||||||||
Class C | ||||||||||||||||||||||||||||
1/31/2013(3) – 9/30/2013 | $ | 11.90 | (0.02 | ) | 1.83 | — | 1.81 | (0.03 | ) | — | ||||||||||||||||||
Class I | ||||||||||||||||||||||||||||
9/30/13 | $ | 10.56 | 0.09 | 3.37 | — | 3.46 | (0.16 | ) | (0.12 | ) | ||||||||||||||||||
1/31/2012(3) – 9/30/2012 | $ | 10.00 | 0.10 | 0.46 | — | 0.56 | — | — |
__________
(1) | Not annualized. | |
(2) | Annualized. | |
(3) | Commencement of operations. | |
(4) | After fees waived and expenses absorbed or recouped by the Advisor, where applicable. | |
(5) | Net investment income (loss) per share has been calculated based on average shares outstanding during the period. | |
(6) | The total return calculation does not reflect the sales loads that may be imposed on Class A or C shares (see Note 7 of the Notes to Financial Statements). | |
(7) | The Total return figure is the since inception return for the class which commenced operations on January 31, 2013. | |
(8) | Amount is less than $0.01 per share. | |
(9) | Prior to January 31, 2013, Class A shares were known as Class S shares. |
The accompanying notes to financial statements are an integral part of this statement.
78
Brandes Investment Trust
FINANCIAL HIGHLIGHTS For a capital share outstanding for the period ended:
Ratio of net | ||||||||||||||||||||||||||||||
investment | ||||||||||||||||||||||||||||||
Ratio of | income | |||||||||||||||||||||||||||||
Ratio of net | expenses (prior | (prior to | ||||||||||||||||||||||||||||
Net assets, | Ratio of | investment | to reimburse- | reimburse- | ||||||||||||||||||||||||||
Net asset | end of | net expenses | income | ments) | ments) to | Portfolio | ||||||||||||||||||||||||
value, end | Total | period | to average | to average | to average | average | turnover | |||||||||||||||||||||||
of period | return(6) | (millions) | net assets(4) | net assets(4) | net assets | net assets | rate | |||||||||||||||||||||||
$ | 9.23 | 8.09 | % | $ | 131.7 | 1.37 | % | 1.16 | % | 1.46 | % | 1.07 | % | 21.74 | % | |||||||||||||||
$ | 8.96 | 16.40 | % | $ | 68.1 | 1.37 | % | 2.03 | % | 1.60 | % | 1.79 | % | 28.59 | % | |||||||||||||||
$ | 7.85 | (21.50 | )%(1) | $ | 38.4 | 1.37 | %(2) | 2.12 | %(2) | 1.64 | %(2) | 1.85 | %(2) | 94.70 | %(1) | |||||||||||||||
$ | 9.19 | (2.84 | )%(7) | $ | 5.3 | 2.12 | %(2) | 0.42 | %(2) | 2.20 | %(2) | 0.34 | %(2) | 21.74 | % | |||||||||||||||
$ | 9.24 | 8.20 | % | $ | 287.7 | 1.12 | % | 1.41 | % | 1.26 | % | 1.27 | % | 21.74 | % | |||||||||||||||
$ | 8.99 | 16.79 | % | $ | 134.5 | 1.12 | % | 2.26 | % | 1.35 | % | 2.03 | % | 28.59 | % | |||||||||||||||
$ | 7.86 | (21.40 | )%(1) | $ | 71.9 | 1.11 | %(2) | 2.38 | %(2) | 1.35 | %(2) | 2.14 | %(2) | 94.70 | %(1) | |||||||||||||||
$ | 13.72 | 32.98 | % | $ | 31.2 | 1.40 | % | 0.49 | % | 1.68 | % | 0.21 | % | 24.45 | % | |||||||||||||||
$ | 10.56 | 5.60 | %(1) | $ | 38.4 | 1.40 | %(2) | 1.19 | %(2) | 2.16 | %(2) | 0.43 | %(2) | 13.55 | %(1) | |||||||||||||||
$ | 13.68 | 15.23 | %(7) | $ | 1.5 | 2.15 | %(2) | (0.25 | )%(2) | 2.40 | %(2) | (0.50 | )%(2) | 24.45 | % | |||||||||||||||
$ | 13.74 | 33.41 | % | $ | 81.5 | 1.15 | % | 0.74 | % | 1.48 | % | 0.41 | % | 24.45 | % | |||||||||||||||
$ | 10.56 | 5.60 | %(1) | $ | 38.4 | 1.15 | %(2) | 1.44 | %(2) | 1.91 | %(2) | 0.68 | %(2) | 13.55 | %(1) |
The accompanying notes to financial statements are an integral part of this statement.
79
Brandes Investment Trust
FINANCIAL HIGHLIGHTS For a capital share outstanding for the period ended:
Net | ||||||||||||||||||||||||
Net asset | realized and | Dividends | Dividends | |||||||||||||||||||||
value, | Net | unrealized | Total from | from net | from net | |||||||||||||||||||
beginning | investment | gain/(loss) on | investment | investment | realized | |||||||||||||||||||
of period | income | investments | operations | income | gains | |||||||||||||||||||
Brandes Core Plus Fixed Income Fund | ||||||||||||||||||||||||
Class A | ||||||||||||||||||||||||
1/31/2013(3) – 9/30/2013 | $ | 9.43 | 0.20 | (5) | (0.28 | ) | (0.08 | ) | (0.19 | ) | — | |||||||||||||
Class E | ||||||||||||||||||||||||
9/30/13 | $ | 9.61 | 0.30 | (5) | (0.22 | ) | 0.08 | (0.36 | ) | (0.12 | ) | |||||||||||||
9/30/12 | $ | 9.36 | 0.38 | (5) | 0.50 | 0.88 | (0.44 | ) | (0.19 | ) | ||||||||||||||
9/30/11 | $ | 9.66 | 0.47 | (5) | (0.12 | ) | 0.35 | (0.48 | ) | (0.17 | ) | |||||||||||||
9/30/10 | $ | 8.96 | 0.54 | (5) | 0.64 | 1.18 | (0.48 | ) | — | |||||||||||||||
9/30/09 | $ | 8.70 | 0.47 | 0.25 | 0.72 | (0.46 | ) | — | ||||||||||||||||
Class I | ||||||||||||||||||||||||
9/30/13 | $ | 9.60 | 0.32 | (5) | (0.23 | ) | 0.09 | (0.38 | ) | (0.12 | ) | |||||||||||||
9/30/12 | $ | 9.35 | 0.40 | (5) | 0.50 | 0.90 | (0.46 | ) | (0.19 | ) | ||||||||||||||
9/30/11 | $ | 9.65 | 0.49 | (5) | (0.12 | ) | 0.37 | (0.50 | ) | (0.17 | ) | |||||||||||||
9/30/10 | $ | 8.95 | 0.56 | (5) | 0.64 | 1.20 | (0.50 | ) | — | |||||||||||||||
9/30/09 | $ | 8.69 | 0.49 | 0.25 | 0.74 | (0.48 | ) | — | ||||||||||||||||
Brandes Credit Focus Yield Fund | ||||||||||||||||||||||||
Class A(8) | ||||||||||||||||||||||||
9/30/13 | $ | 10.39 | 0.19 | (5) | (0.17 | ) | 0.02 | (0.20 | ) | (0.06 | ) | |||||||||||||
3/2/2012(3) – 9/30/2012 | $ | 10.10 | 0.16 | (5) | 0.29 | 0.45 | (0.16 | ) | — | |||||||||||||||
Class I | ||||||||||||||||||||||||
9/30/13 | $ | 10.39 | 0.22 | (5) | (0.18 | ) | 0.04 | (0.22 | ) | (0.06 | ) | |||||||||||||
1/31/2012(3) – 9/30/2012 | $ | 10.00 | 0.23 | (5) | 0.38 | 0.61 | (0.22 | ) | — |
__________
(1) | Not annualized. | |
(2) | Annualized. | |
(3) | Commencement of operations. | |
(4) | After fees waived and expenses absorbed or recouped by the Advisor, where applicable. | |
(5) | Net investment income (loss) per share has been calculated based on average shares outstanding during the period. | |
(6) | The total return calculation does not reflect the sales loads that may be imposed on Class A or C shares (see Note 7 of the Notes to Financial Statements). | |
(7) | The Total return figure is the since inception return for the class which commenced operations on January 31, 2013. | |
(8) | Prior to January 31, 2013, Class A shares were known as Class S shares. |
The accompanying notes to financial statements are an integral part of this statement.
80
Brandes Investment Trust
FINANCIAL HIGHLIGHTS For a capital share outstanding for the period ended:
Ratio of net | ||||||||||||||||||||||||||||||
investment | ||||||||||||||||||||||||||||||
Ratio of | income | |||||||||||||||||||||||||||||
Ratio of net | expenses (prior | (prior to | ||||||||||||||||||||||||||||
Net assets, | Ratio of | investment | to reimburse- | reimburse- | ||||||||||||||||||||||||||
Net asset | end of | net expenses | income | ments) | ments) to | Portfolio | ||||||||||||||||||||||||
value, end | Total | period | to average | to average | to average | average | turnover | |||||||||||||||||||||||
of period | return(6) | (millions) | net assets(4) | net assets(4) | net assets | net assets | rate | |||||||||||||||||||||||
$ | 9.16 | (0.88 | )%(7) | $ | 1.4 | 0.70 | %(2) | 3.23 | % | 1.45 | %(2) | 2.48 | %(2) | 33.91 | % | |||||||||||||||
$ | 9.21 | 0.79 | % | $ | 1.2 | 0.70 | % | 3.22 | % | 1.40 | % | 2.52 | % | 33.91 | % | |||||||||||||||
$ | 9.61 | 9.85 | % | $ | 6.9 | 0.70 | % | 4.06 | % | 1.45 | % | 3.33 | % | 31.59 | % | |||||||||||||||
$ | 9.36 | 3.72 | % | $ | 3.8 | 0.70 | % | 4.90 | % | 1.48 | % | 4.13 | % | 91.18 | % | |||||||||||||||
$ | 9.66 | 13.47 | % | $ | 2.7 | 0.70 | % | 5.80 | % | 1.48 | % | 5.02 | % | 150.89 | % | |||||||||||||||
$ | 8.96 | 8.86 | % | $ | 1.0 | 0.70 | % | 5.95 | % | 1.84 | % | 4.81 | % | 22.06 | % | |||||||||||||||
$ | 9.19 | 0.89 | % | $ | 29.7 | 0.50 | % | 3.43 | % | 1.23 | % | 2.70 | % | 33.91 | % | |||||||||||||||
$ | 9.60 | 10.06 | % | $ | 25.3 | 0.50 | % | 4.28 | % | 1.23 | % | 3.55 | % | 31.59 | % | |||||||||||||||
$ | 9.35 | 3.94 | % | $ | 23.2 | 0.50 | % | 5.11 | % | 1.25 | % | 4.36 | % | 91.18 | % | |||||||||||||||
$ | 9.65 | 13.73 | % | $ | 24.8 | 0.50 | % | 6.00 | % | 1.25 | % | 5.25 | % | 150.89 | % | |||||||||||||||
$ | 8.95 | 9.07 | % | $ | 23.9 | 0.50 | % | 5.97 | % | 2.20 | % | 4.27 | % | 22.06 | % | |||||||||||||||
$ | 10.15 | 0.13 | % | $ | 4.2 | 0.95 | % | 1.84 | % | 1.61 | % | 1.18 | % | 23.05 | % | |||||||||||||||
$ | 10.39 | 4.51 | % | $ | — | 0.95 | %(2) | 2.69 | %(2) | 1.05 | %(2) | 2.06 | %(2) | 162.73 | %(1) | |||||||||||||||
$ | 10.15 | 0.40 | % | $ | 25.2 | 0.70 | % | 2.09 | % | 1.42 | % | 1.37 | % | 23.05 | % | |||||||||||||||
$ | 10.39 | 6.23 | % | $ | 19.3 | 0.70 | %(2) | 3.39 | %(2) | 2.35 | %(2) | 1.74 | %(2) | 162.73 | %(1) |
The accompanying notes to financial statements are an integral part of this statement.
81
Brandes Investment Trust
NOTES TO FINANCIAL STATEMENTS
NOTE 1 − ORGANIZATION
The Brandes International Equity Fund (the “International Fund”), the Brandes Global Equity Fund (the “Global Fund”), the Brandes Emerging Markets Fund (the “Emerging Markets Fund”), the Brandes International Small Cap Equity Fund (the “International Small Cap Fund”), the Brandes Core Plus Fixed Income Fund (the “Core Plus Fund”) and the Brandes Credit Focus Yield Fund (the “Credit Focus Yield Fund”) (each a “Fund” and collectively the “Funds”) are series of Brandes Investment Trust (the “Trust”). The Trust is registered under the Investment Company Act of 1940 (the “1940 Act”) as a diversified, open-end management investment company.
The International Fund, Global Fund, Emerging Markets Fund, Credit Focus Yield Fund and International Small Cap Fund began operations on January 2, 1997, October 6, 2008, January 31, 2011, January 31, 2012 and January 31, 2012, respectively. Prior to January 31, 2011 for the Emerging Markets Fund and January 31, 2012 for the International Small Cap and Credit Focus Yield Funds, these Funds’ portfolios were managed as private investment funds with investment objectives, investment policies and strategies that were, in all material respects, equivalent to those of the Emerging Markets Fund, International Small Cap Fund and Credit Focus Yield Fund, respectively. The Core Plus Fund began operations on December 28, 2007.
The International Fund and Global Fund have four classes of shares: Class A, Class C, Class E and Class I. The Emerging Markets Fund and International Small Cap Fund have three classes of shares: Class A, Class C and Class I. The Core Plus Fund has three classes of shares: Class A, Class E and Class I. The Credit Focus Yield Fund has two classes of shares: Class A and Class I. Prior to January 31, 2013, Class A shares were known as Class S shares for the International, Global, Emerging, International Small Cap and Credit Focus Yield Funds (Class A shares have the same operating expenses as Class S shares). The International Fund and Global Fund invest their assets primarily in equity securities of issuers with market capitalizations greater than $1 billion. The International, International Small Cap and Emerging Markets Funds invest their assets in securities of foreign companies, while the Global Fund invests its assets in securities of foreign and domestic companies. The Core Plus Fund and Credit Focus Yield Fund invest predominantly in debt securities issued by U.S. and foreign companies and debt obligations issued or guaranteed by the U.S. Government and foreign governments and their agencies and instrumentalities.
NOTE 2 − SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently followed by the Funds. These policies are in conformity with accounting principles generally accepted in the United States of America.
82
Brandes Investment Trust
NOTES TO FINANCIAL STATEMENTS (continued)
A. | Repurchase Agreements. Each Fund may enter into repurchase agreements with government securities dealers recognized by the Federal Reserve Board, with member banks of the Federal Reserve System or with other brokers or dealers that meet the credit guidelines established by the Board of Trustees. Each Fund will always receive and maintain, as collateral, U.S. Government securities whose market value, including accrued interest (which is recorded in the Schedules of Investments), will be at least equal to 100% of the dollar amount invested by the Fund in each agreement, and the Fund will make payment for such securities only upon physical delivery or upon evidence of book entry transfer to the account of the Fund’s custodian. To the extent that the term of any repurchase transaction exceeds one business day, the value of the collateral is marked-to-market on a daily basis to ensure the adequacy of the collateral. Before causing a Fund to enter into a repurchase agreement with any other party, the investment advisor will determine that such party does not have any apparent risk of becoming involved in bankruptcy proceedings within the time frame contemplated by the repurchase agreement. If the seller defaults and the value of the collateral declines, or if bankruptcy proceedings are commenced with respect to the seller of the security, realization of the collateral by the Fund may be delayed or limited. | |
B. | Foreign Currency Translation and Transactions. Values of investments denominated in foreign currencies are converted into U.S. dollars using the spot market rates of exchange at the time of valuation. Purchases and sales of investments and dividend and interest income are translated into U.S. dollars using the spot market rates of exchange prevailing on the respective dates of such translations. The gain or loss resulting from changes in foreign exchange rates is included with net realized and unrealized gain or loss from investments, as appropriate. Foreign securities and currency transactions may involve certain considerations and risks not typically associated with those of domestic origin. | |
Foreign securities are recorded in the financial statements after translation to U.S. dollars based on the applicable exchange rate at the end of the period. The Funds report certain foreign currency-related transactions as components of realized gains or losses for financial reporting purposes, whereas such components are treated as ordinary income for federal income tax purposes. | ||
C. | Delayed Delivery Securities. The Funds may purchase securities on a when issued or delayed delivery basis. “When-issued” or delayed delivery refers to securities whose terms are available and for which a market exists, but that have not been issued. For a when-issued or delayed delivery transaction, no payment is made until delivery date, which is typically longer |
83
Brandes Investment Trust
NOTES TO FINANCIAL STATEMENTS (continued)
than the normal course of settlement. When a Fund enters into an agreement to purchase securities on a when-issued or delayed delivery basis, the Fund segregates cash or liquid securities, of any type or maturity, equal in value to the Fund’s commitment. Losses may arise if the market value of the underlying securities change, if the counterparty does not perform under the contract, or if the issuer does not issue the securities due to political, economic, or other factors. The Funds did not hold any delayed delivery securities as of September 30, 2013. | ||
D. | Participatory Notes. The International, Global, Emerging Markets and International Small Cap Funds may invest in participatory notes. Participatory notes are derivative securities which are designed to provide synthetic exposure to one or more underlying security or securities, subject to the credit risk of the issuing financial institution. | |
Investments in participatory notes involve risks normally associated with a direct investment in the underlying securities. In addition, participatory notes are subject to counterparty risk, which is the risk that the broker-dealer or bank that issues the notes will not fulfill its contractual obligation to complete the transaction with the Trust. Participatory notes constitute general unsecured, unsubordinated contractual obligations of the banks or broker-dealers that issue them. The Trust is relying on the creditworthiness of such banks or broker-dealers and has no rights under a participatory note against the issuer of the securities underlying such participatory note. The investment advisor has established guidelines for monitoring participatory note exposure for the Funds. Prior to investment in a participatory note, the investment advisor will complete an analysis of the prospective counterparties and once purchased, will continue to monitor creditworthiness on a quarterly basis. The investment advisor requires a minimum credit rating for such counterparties (as determined by rating agencies such as Moody’s, Fitch and S&P) of A. | ||
The Funds record counterparty credit risk valuation adjustments, if material, on the participatory notes in order to appropriately reflect the credit quality of the counterparty. During the period ended September 30, 2013, the Funds did not make any counterparty credit risk valuation adjustments. | ||
The International, Global and International Small Cap Funds did not invest in any participatory notes at September 30, 2013. The Emerging Markets Fund invested in two participatory notes with HSBC Bank Plc in which HSBC Bank Plc is an investment vehicle used to purchase the underlying securities: Etihad Etisalat Co. and Saudi Basic Industries Corp. The average monthly market value of these securities was |
84
Brandes Investment Trust
NOTES TO FINANCIAL STATEMENTS (continued)
$6,337,885 and $4,742,741 during the year ended September 30, 2013, respectively. As a result of the investments in the participation notes, the Emerging Markets Fund recognized a net unrealized gain of $2,464,789 and no realized gain (loss). The combined market value of these securities on September 30, 2013 was $12,993,863 and can be found in the Emerging Market Fund’s Schedule of Investments. | ||
E. | Security Transactions, Dividends and Distributions. Security transactions are accounted for on the trade dates. Realized gains and losses are evaluated on the bases of identified costs. Dividend income and distributions to shareholders are recorded on the ex-dividend dates. Interest is recorded on an accrual basis. Withholding taxes on foreign dividends and capital gains, which are included as a component of net investment income and realized gain (loss) on investments, respectively, have been provided for in accordance with the Trust’s understanding of the applicable country’s tax rules and rates. Each Fund’s investment income, expenses, other than class specific expenses, and realized and unrealized gains and losses are allocated daily to each class of the Fund’s shares based upon the relative net asset values of outstanding shares of each class of shares at the beginning of the day (after adjusting for the current capital shares activity of the respective class). Expenses common to the Funds’ portfolios are allocated among the Funds based upon their relative net asset values or other appropriate allocation methods. The Funds amortize premiums and accrete discounts using the constant yield method. | |
F. | Concentration of Risk. As of September 30, 2013, the International, Global, Emerging Markets and International Small Cap Funds held a significant portion of their assets in foreign securities. Certain price and foreign exchange fluctuations as well as economic and political situations in the foreign jurisdictions could have an impact on the International, Global, Emerging Markets and International Small Cap Funds’ net assets. The investment advisor monitors these off-balance sheet risks. | |
G. | Use of Estimates. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and revenue and expenses and disclosure of contingent assets and liabilities and revenue and expenses at the date of the financial statements. Actual results could differ from those estimates. | |
H. | Securities Lending. The Funds may lend their portfolio securities to banks, brokers and dealers. Lending Fund securities exposes the Fund to risks such as the following: (i) the borrower may fail to return the loaned |
85
Brandes Investment Trust
NOTES TO FINANCIAL STATEMENTS (continued)
securities, (ii) the borrower may not be able to provide additional collateral, or (iii) the Fund may experience delays in recovery of the loaned securities or loss of rights in the collateral if the borrower fails financially. To minimize these risks, the borrower must agree to maintain collateral with the Fund’s custodian, marked to market daily, in the form of cash and/or U.S. Government obligations, in an amount at least equal to 102% (105% in the case of loans of foreign securities not denominated in U.S. dollars) of the market value of the loaned securities. As of September 30, 2013, the Funds did not have any securities on loan. | ||
I. | Indemnification Obligations. Under the Trust’s organizational documents, its current and former 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 that contain a variety of representations and warranties and provide general indemnifications. The Funds’ maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Funds that have not yet occurred or that would be covered by other parties. | |
J. | Accounting for Uncertainty in Income Taxes. Each Fund has elected to be taxed as a “regulated investment company” and intends to distribute substantially all taxable income to its shareholders and otherwise comply with the provisions of the Internal Revenue Code applicable to regulated investment companies. The Funds may be subject to a nondeductible excise tax calculated as a percentage of certain undistributed amounts of net investment income and net capital gains. The Funds intend to distribute their net investment income and capital gains as necessary to avoid this excise tax. Therefore, no provision for federal income taxes or excise taxes has been made. | |
The Trust has adopted financial reporting rules that require the Funds to analyze all open tax years, as defined by the applicable statute of limitations, for all major jurisdictions. Open tax years for the Funds are those that are open for exam by taxing authorities (2010 through 2013). As of September 30, 2013 the Trust has no examinations in progress. | ||
Management has analyzed the Trust’s tax positions, and has concluded that no liability should be recorded related to uncertain tax positions expected to be taken on the tax return for the fiscal year-end September 30, 2013. The Trust identifies its major tax jurisdictions as the U.S. Government and the State of California. 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. |
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Brandes Investment Trust
NOTES TO FINANCIAL STATEMENTS (continued)
K. | Payment by Affiliate. During the fiscal year ended September 30, 2011, Brandes Investment Partners, L.P. voluntarily reimbursed the Emerging Markets Fund $5,862 relating to commissions paid by the Emerging Markets Fund to brokers for execution of certain securities transactions in relation to a redemption in kind during that period. These reimbursements have been classified on the Financial Highlights as “Net increase from payments by affiliates”. | |
L. | Fair Value Measurements. The Trust has adopted accounting principles generally accepted in the United States of America (“US GAAP”) related to fair value accounting standards which establish a definition of fair value and set out a hierarchy for measuring fair value. These standards require additional disclosures about the various inputs and valuation techniques used to develop the measurements of fair value and a discussion of changes in valuation techniques and related inputs during the period. These inputs are summarized in the three broad levels listed below: |
Level 1 — Quoted unadjusted prices for identical instruments in active markets to which the Trust has access at the date of measurement. | |
Level 2 — Other significant observable market inputs including quoted prices for similar instruments in active markets; quoted adjusted prices in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets. Level 2 inputs are those in markets for which there are few transactions, the prices are not current, little public information exists or instances where prices vary substantially over time or among broker market makers. | |
Level 3 — Significant unobservable inputs including model derived valuations in which one or more significant inputs or significant value drivers are unobservable. Unobservable inputs are those inputs that reflect the Trust’s own assumptions that market participants would use to price the asset or liability based on the best available information. |
M. | Security Valuation. Common and preferred stocks, exchange-traded funds and financial derivative instruments, such as futures contracts and options contracts that are traded on a national securities or commodities exchange, are valued at the last reported sales price at the close of regular trading on each day the exchange is open for trading, in the case of common stocks and exchange-traded funds, or, in the case of futures contracts or options contracts, the settlement price determined by the relevant exchange. Securities listed on the NASDAQ National Market System for which market quotations are readily available are valued using the NASDAQ Official Closing Price. To the extent these securities are |
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Brandes Investment Trust
NOTES TO FINANCIAL STATEMENTS (continued)
actively traded and valuation adjustments are not applied, they are categorized as Level 1 of the fair value hierarchy. | |
Equity securities traded on an exchange for which there have been no sales on the valuation date, are generally valued at the mean between last bid and ask price on such day and are categorized as Level 2 on the fair value hierarchy, or are fair valued by the Valuation Committee. | |
Investments in registered open-end management investment companies will be valued based upon the Net Asset Values (“NAVs”) of such investments and are categorized as Level 1 of the fair value hierarchy. Investments in privately held investment funds will be valued based upon the NAVs of such investments and are categorized as Level 2 of the fair value hierarchy if significant observable inputs are used. | |
Valuation adjustments may be applied to certain common and preferred stocks that are solely traded on a foreign exchange to account for the market movement between the close of the foreign market and the close of the New York Stock Exchange (“NYSE”). These securities are generally valued using pricing service providers that consider the correlation of the trading patterns of the foreign securities to the intraday trading in the U.S. markets for investments. Securities using these valuation adjustments are categorized as Level 2 of the fair value hierarchy. As of September 30, 2013, the International Fund, Global Fund, Emerging Markets Fund, International Small Cap Fund, Core Plus Fund and Credit Focus Yield Fund had securities with market values of $373,498,715, $23,837,040, $196,721,641, $57,109,130, $0 and $0, that represents 87.44%, 59.67%, 46.32%, 50.01%, 0.00% and 0.00% of each Fund’s net assets, respectively, that were fair valued using these valuation adjustments. | |
Fixed income securities (other than short-term investments) including corporate, convertible and municipal bonds and notes, U.S. government agencies, U.S. Treasury obligations, sovereign issues, bank loans, convertible preferred securities, fixed income securities purchased on a delayed delivery basis and non-U.S. bonds are normally valued on the basis of bid prices obtained from brokers and dealers or independent pricing services or sources. Independent pricing services typically use information provided by market makers or estimates of market values obtained from yield data relating to investments or securities with similar characteristics. The service providers’ internal models use inputs that are observable such as, among other things, issuer details, interest rates, yield curves, prepayment speeds, credit risks/spreads, default rates and quoted prices for similar assets. Securities that use similar valuation techniques and inputs as described above are categorized as Level 2 of the fair value hierarchy. |
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Brandes Investment Trust
NOTES TO FINANCIAL STATEMENTS (continued)
Rights that are traded on a national securities exchange are valued at the last reported sales price at the close of regular trading on each day the exchange is open. A right is a privilege offered by a corporation to its shareholders pro rata to subscribe to a certain security at a specified price, often for a short period. Rights may or may not be transferable. | |
The Funds may enter into mortgage dollar roll transactions in which the Funds sell a mortgage-backed security to a counterparty and simultaneously enter into an agreement with the same counterparty to buy back a similar security on a specific future date at a predetermined price. Risks may arise due to the delayed payment date and the potential inability of counterparties to complete the transaction. Mortgage dollar rolls are accounted for as purchase and sale transactions, which may increase a Fund’s portfolio turnover rate. | |
Mortgage and asset-backed securities are usually issued as separate tranches, or classes, of securities within each package of underlying securities. These securities are also normally valued by pricing service providers that use broker dealer quotations or valuation estimates from their internal pricing models. The pricing models for these securities usually consider tranche level attributes, estimated cash flows and market-based yield spreads for each tranche, and current market data and incorporate packaged, collateral performance, as available. Mortgage and asset-backed securities that use such valuation techniques and inputs are categorized as Level 2 of the fair value hierarchy. | |
Short-term investments having a maturity of 60 days or less are generally valued at amortized cost which approximates fair market value. These investments are categorized as Level 2 of the fair value hierarchy. | |
Certain securities may be fair valued in accordance with the fair valuation procedures approved by the Board of Trustees. The Valuation Committee is generally responsible for overseeing the day-to-day valuation processes and reports periodically to the Board. The Valuation Committee is authorized to make all necessary determinations of the fair value of portfolio securities and other assets for which market quotations are not readily available or if it is deemed that the prices obtained from brokers and dealers or independent pricing services are unreliable. Valuation methodologies used to fair value such securities in the Funds’ portfolios as of September 30, 2013 include conversion value and correlation to similar securities. Additionally, warrants and rights are fair valued by the Valuation Committee based on intrinsic value, which is derived by calculating the difference between the underlying equity security’s price and the strike price of the warrant or right, including the affect of any |
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NOTES TO FINANCIAL STATEMENTS (continued)
relevant conversion ratios. The securities fair valued by the Valuation Committee are indicated in the Schedules of Investments and are categorized as Level 2 or Level 3 of the fair value hierarchy. Certain vendor priced securities may also be considered Level 3 if significant unobservable inputs are used by the vendors. | |
In using fair value pricing, each Fund attempts to establish the price that it might reasonably have expected to receive upon a sale of the security at 4:00 p.m. Eastern time. Valuing securities at fair value involves greater reliance on judgment than valuation of securities based on readily available market quotations. A Fund using fair value to price securities may value those securities higher or lower than another fund using market quotations or fair value to price the same securities. Further, there can be no assurance that the Fund could obtain the fair value assigned to a security if it were to sell the security at approximately the time at which the Fund determines its net asset value. |
The following is a summary of the level inputs used, as of September 30, 2013, involving the Funds’ assets carried at fair value. The inputs used for valuing securities may not be an indication of the risk associated with investing in those securities.
Description | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Investments in Securities | ||||||||||||||||
International Fund | ||||||||||||||||
Equities | ||||||||||||||||
Consumer Discretionary | $ | — | $ | 42,740,750 | $ | — | $ | 42,740,750 | ||||||||
Consumer Staples | — | 39,159,353 | — | 39,159,353 | ||||||||||||
Energy | 6,737,551 | 36,884,315 | — | 43,621,866 | ||||||||||||
Financials | 6,236,038 | 79,272,667 | — | 85,508,705 | ||||||||||||
Health Care | — | 44,365,958 | — | 44,365,958 | ||||||||||||
Industrials | — | 12,639,349 | — | 12,639,349 | ||||||||||||
Information Technology | 9,154,272 | 26,636,924 | — | 35,791,196 | ||||||||||||
Materials | 4,023,995 | 18,896,151 | — | 22,920,146 | ||||||||||||
Telecommunication Services | 12,927,412 | 49,980,692 | — | 62,908,104 | ||||||||||||
Utilities | 964,195 | 22,922,556 | — | 23,886,751 | ||||||||||||
Total Equities | 40,043,463 | 373,498,715 | — | 413,542,178 | ||||||||||||
Preferred Stocks | ||||||||||||||||
Energy | 7,651,465 | — | — | 7,651,465 | ||||||||||||
Telecommunication Services | 2,759,290 | — | — | 2,759,290 | ||||||||||||
Total Preferred Stocks | 10,410,755 | — | — | 10,410,755 | ||||||||||||
Rights | ||||||||||||||||
Financials | 282,867 | — | — | 282,867 | ||||||||||||
Total Rights | 282,867 | — | — | 282,867 | ||||||||||||
Repurchase Agreements | — | 8,768,579 | — | 8,768,579 | ||||||||||||
Total Investments in Securities | $ | 50,737,085 | $ | 382,267,294 | $ | — | $ | 433,004,379 |
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NOTES TO FINANCIAL STATEMENTS (continued)
Description | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Global Fund | ||||||||||||||||
Equities | ||||||||||||||||
Consumer Discretionary | $ | — | $ | 3,527,105 | $ | — | $ | 3,527,105 | ||||||||
Consumer Staples | 778,305 | 3,686,073 | — | 4,464,378 | ||||||||||||
Energy | 1,341,557 | 2,639,593 | — | 3,981,150 | ||||||||||||
Financials | 4,227,261 | 3,397,263 | — | 7,624,524 | ||||||||||||
Health Care | 1,894,805 | 3,694,984 | — | 5,589,789 | ||||||||||||
Industrials | 363,888 | — | — | 363,888 | ||||||||||||
Information Technology | 3,796,624 | 1,759,697 | — | 5,556,321 | ||||||||||||
Materials | — | 876,785 | — | 876,785 | ||||||||||||
Telecommunication Services | 1,172,461 | 3,072,835 | — | 4,245,296 | ||||||||||||
Utilities | — | 1,182,705 | — | 1,182,705 | ||||||||||||
Total Equities | 13,574,901 | 23,837,040 | — | 37,411,941 | ||||||||||||
Preferred Stocks | ||||||||||||||||
Energy | 668,196 | — | — | 668,196 | ||||||||||||
Total Preferred Stocks | 668,196 | — | — | 668,196 | ||||||||||||
Repurchase Agreements | — | 2,167,321 | — | 2,167,321 | ||||||||||||
Total Investments in Securities | $ | 14,243,097 | $ | 26,004,361 | $ | — | $ | 40,247,458 | ||||||||
Emerging Markets Fund | ||||||||||||||||
Equities | ||||||||||||||||
Consumer Discretionary | $ | 6,641,866 | $ | 36,146,478 | $ | — | $ | 42,788,344 | ||||||||
Consumer Staples | 16,845,405 | 7,496,332 | — | 24,341,737 | ||||||||||||
Energy | 20,523,448 | 7,355,193 | — | 27,878,641 | ||||||||||||
Financials | 31,202,914 | 51,141,504 | — | 82,344,418 | ||||||||||||
Health Care | 345,231 | 3,841,330 | — | 4,186,561 | ||||||||||||
Industrials | 8,627,805 | 3,204,493 | — | 11,832,298 | ||||||||||||
Information Technology | 8,253,914 | 17,516,353 | — | 25,770,267 | ||||||||||||
Materials | 19,357,826 | 34,482,661 | — | 53,840,487 | ||||||||||||
Telecommunication Services | 35,503,296 | 15,336,991 | — | 50,840,287 | ||||||||||||
Utilities | 7,996,117 | 12,512,683 | — | 20,508,800 | ||||||||||||
Total Equities | 155,297,822 | 189,034,018 | — | 344,331,840 | ||||||||||||
Participatory Notes | ||||||||||||||||
Materials | — | 6,019,212 | — | 6,019,212 | ||||||||||||
Telecommunication Services | — | 6,974,651 | — | 6,974,651 | ||||||||||||
Total Participatory Notes | — | 12,993,863 | — | 12,993,863 | ||||||||||||
Preferred Stocks | ||||||||||||||||
Consumer Discretionary | — | 9,351,136 | — | 9,351,136 | ||||||||||||
Energy | 10,314,078 | — | — | 10,314,078 | ||||||||||||
Telecommunication Services | 8,768,613 | — | — | 8,768,613 | ||||||||||||
Utilities | 3,753,146 | — | — | 3,753,146 | ||||||||||||
Total Preferred Stocks | 22,835,837 | 9,351,136 | — | 32,186,973 | ||||||||||||
Real Estate Investment Trusts | 4,268,977 | — | — | 4,268,977 | ||||||||||||
Convertible Bonds | — | 1,488,955 | — | 1,488,955 | ||||||||||||
Repurchase Agreements | — | 28,535,664 | — | 28,535,664 | ||||||||||||
Short Term Investments | 320,231 | — | — | 320,231 | ||||||||||||
Total Investments in Securities | $ | 182,722,867 | $ | 241,403,636 | $ | — | $ | 424,126,503 |
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NOTES TO FINANCIAL STATEMENTS (continued)
Description | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
International Small Cap Fund | ||||||||||||||||
Equities | ||||||||||||||||
Consumer Discretionary | $ | 12,364,914 | $ | 12,906,135 | $ | — | $ | 25,271,049 | ||||||||
Consumer Staples | 8,120,710 | 5,595,670 | — | 13,716,380 | ||||||||||||
Financials | 5,122,079 | 1,655,300 | — | 6,777,379 | ||||||||||||
Health Care | 3,148,839 | 8,342,527 | — | 11,491,366 | ||||||||||||
Industrials | 5,747,486 | 12,979,169 | — | 18,726,655 | ||||||||||||
Information Technology | 7,024,792 | 3,468,029 | — | 10,492,821 | ||||||||||||
Materials | 2,142,443 | 4,324,764 | — | 6,467,207 | ||||||||||||
Telecommunication Services | — | 1,617,205 | — | 1,617,205 | ||||||||||||
Utilities | — | 5,464,253 | — | 5,464,253 | ||||||||||||
Total Equities | 43,671,263 | 56,353,052 | — | 100,024,315 | ||||||||||||
Preferred Stocks | ||||||||||||||||
Telecommunication Services | 439,240 | — | — | 439,240 | ||||||||||||
Materials | — | 1,320,453 | — | 1,320,453 | ||||||||||||
Total Preferred Stocks | 439,240 | 1,320,453 | — | 1,759,693 | ||||||||||||
Convertible Bonds | — | 512,591 | — | 512,591 | ||||||||||||
Corporate Bonds | — | 990,250 | — | 990,250 | ||||||||||||
Repurchase Agreements | — | 10,503,041 | — | 10,503,041 | ||||||||||||
Total Investments in Securities | $ | 44,110,503 | $ | 69,679,387 | $ | — | $ | 113,789,890 | ||||||||
Core Plus Fund | ||||||||||||||||
Equities* | $ | 9,609 | $ | — | $ | — | $ | 9,609 | ||||||||
Preferred Stocks | 208,884 | 169,001 | — | 377,885 | ||||||||||||
Asset Backed Securities | — | — | 1,192,868 | 1,192,868 | ||||||||||||
Corporate Bonds | — | 13,755,463 | — | 13,755,463 | ||||||||||||
Government Securities | — | 11,567,952 | — | 11,567,952 | ||||||||||||
Mortgage Backed Securities | — | 4,331,388 | 92,834 | 4,424,222 | ||||||||||||
Warrants | — | 627 | — | 627 | ||||||||||||
Repurchase Agreements | — | 1,335,956 | — | 1,335,956 | ||||||||||||
Total Investments in Securities | $ | 218,493 | $ | 31,160,387 | $ | 1,285,702 | $ | 32,664,582 | ||||||||
Credit Focus Yield Fund | ||||||||||||||||
Equities* | $ | 25,514 | $ | — | $ | — | $ | 25,514 | ||||||||
Preferred Stocks | 262,444 | 213,737 | — | 476,181 | ||||||||||||
Asset Backed Securities | — | — | 396,647 | 396,647 | ||||||||||||
Corporate Bonds | — | 16,828,485 | — | 16,828,485 | ||||||||||||
Government Securities | — | 10,264,874 | — | 10,264,874 | ||||||||||||
Mortgage Backed Securities | — | 289,847 | 12,149 | 301,996 | ||||||||||||
Warrants | — | 2,813 | — | 2,813 | ||||||||||||
Repurchase Agreements | — | 943,558 | — | 943,558 | ||||||||||||
Total Investments in Securities | $ | 287,958 | $ | 28,543,314 | $ | 408,796 | $ | 29,240,068 |
* Please refer to the Schedule of Investments for additional information regarding the composition of the amounts listed above. |
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NOTES TO FINANCIAL STATEMENTS (continued)
Below are the transfers into or out of Levels 1 and 2 for the Funds using market values measured at the end of the reporting periods:
Emerging | International | Credit | ||||||||||||||||||||||
International | Global | Markets | Small Cap | Core Plus | Focus | |||||||||||||||||||
Fund | Fund | Fund | Fund | Fund | Yield Fund | |||||||||||||||||||
Transfers into Level 1 | $ | — | $ | — | $ | 8,606,708 | $ | 4,884,624 | $ | — | $ | — | ||||||||||||
Transfers out of Level 1 | — | — | 14,456,623 | 6,549,793 | — | — | ||||||||||||||||||
Net Transfers | ||||||||||||||||||||||||
in/(out) of Level 1 | $ | — | $ | — | $ | (5,849,915 | ) | $ | (1,665,169 | ) | $ | — | $ | — | ||||||||||
Transfers into Level 2 | $ | — | $ | — | $ | 14,456,623 | $ | 6,549,793 | $ | 627 | $ | 2,813 | ||||||||||||
Transfers out of Level 2 | — | — | 8,606,708 | 4,884,624 | — | — | ||||||||||||||||||
Net Transfers | ||||||||||||||||||||||||
in/(out) of Level 2 | $ | — | $ | — | $ | 5,849,915 | $ | 1,665,169 | $ | 627 | $ | 2,813 |
The transfers from Level 1 to Level 2 are due to the securities being fair valued as a result of market movements following the close of local trading and/or due to the lack of trading volume on September 30, 2013. The transfers from Level 2 to Level 1 are due to the securities no longer being fair valued as a result of trading on a stock exchange on September 30, 2013.
There were no Level 3 securities in the International Equity, Global Equity, Emerging Markets or International Small Cap Funds at the beginning or during the periods presented.
Below is a reconciliation that details the activity of securities in Level 3 in the Core Plus and Credit Focus Yield Funds during the period ended September 30, 2013:
Credit | ||||||||
Core Plus | Focus Yield | |||||||
Fund | Fund | |||||||
Beginning Balance – October 1, 2012 | $ | 1,165,074 | $ | 371,834 | ||||
Purchases | — | — | ||||||
Sales | (23,578 | ) | — | |||||
Transfers in to level 3 | — | — | ||||||
Transfers out of level 3 | (627 | ) | (2,813 | ) | ||||
Realized gains (losses), net | (45,588 | ) | — | |||||
Change in unrealized gains (losses) | 190,421 | 39,775 | ||||||
Ending Balance – September 30, 2013 | $ | 1,285,702 | $ | 408,796 |
The realized and unrealized gains and losses from Level 3 transactions are included with the net realized gains and losses on investments on the Statement of Assets and Liabilities. As of September 30, 2013 the Core Plus and Credit Focus Yield Funds had $172,046 and $28,349 of unrealized losses from Level 3 securities, respectively.
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Brandes Investment Trust
NOTES TO FINANCIAL STATEMENTS (continued)
The following table presents information about unobservable inputs related to the Trust’s categories of Level 3 investments as of September 30, 2013.
Fair Value | Valuation | |||
at 9/30/13 | Techniques | Unobservable Inputs | Ranges | |
Student Loans | $1,589,515 | Consensus | Third party inputs | N/A |
pricing | ||||
Prepayment speeds | 2 – 4% | |||
Federal & Federally | $104,983 | Consensus | Third party inputs | N/A |
Sponsored Credits | pricing |
The following provides a general description of the impact of a change in an unobservable input on the fair value measurement and the interrelationship of unobservable inputs, where relevant and significant. Interrelationships may also exist between observable and unobservable inputs (for example, as interest rates rise, prepayment rates decline).
Student Loans & Federal & Federally Sponsored Credits
At regular intervals the above unobservable inputs are reviewed and compared to publicly available information for reasonableness. Values are compared to historical averages and general sector trends are taken into account. In general, an increase in the discount rate, default rates, loss severity and delinquencies, in isolation, would result in a decrease in the fair value measurement. In addition, an increase in default rates would generally be accompanied by a decrease in recovery rates, slower prepayment rates and an increase in liquidity spreads. For each of the individual relationships described above, the inverse relationship would also generally apply.
NOTE 3 − INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
A. Advisor Fee. Brandes Investment Partners, L.P. (the “Advisor”) provides the Funds with investment management services under an Investment Advisory Agreement. The Advisor furnishes all investment advice, office space and certain administrative services, and provides certain personnel, needed by the Funds. As compensation for its services, the Advisor is entitled to a monthly fee. From October 1, 2012 to May 13, 2013, the Advisor received a monthly fee at the annual rate of 1.00% of the first $2.5 billion of average daily net assets, 0.90% of the next $2.5 billion of average daily net assets, and 0.80% of the amount of average daily net assets greater than $5 billion of the International Fund. Effective May 14, 2013, the Advisor received a monthly fee at the annual rate of 0.80% of the first $5 billion of average daily net assets, and 0.70% of the amount of average daily net assets greater than $5 billion of the International Fund. The Global Fund, Emerging Markets Fund, International Small Cap Fund, Core Plus Fund and Credit Focus Yield Fund received a monthly fee at the annual rate of 0.80%, 0.95%, 0.95%, 0.35% and 0.50%
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Brandes Investment Trust
NOTES TO FINANCIAL STATEMENTS (continued)
based upon their average daily net assets, respectively. For the periods ended September 30, 2013, the International Fund, the Global Fund, the Emerging Markets Fund, the International Small Cap Fund, The Core Plus Fund and the Credit Focus Yield Fund incurred $3,560,287, $271,345, $2,612,163, $719,368, $114,576 and $138,726 in advisory fees, respectively.
The Funds are responsible for their own operating expenses. The Advisor has contractually agreed to limit each Fund’s annual operating expenses, including repayment of previous waivers, to the following percentages of the Funds’ average daily net assets attributable to the specific classes through January 30, 2014 (the “Expense Cap Agreement”):
Fund | Class A | Class C | Class E | Class I | ||||||||||||
International Fund | 1.20 | % | 1.95 | % | 1.20 | % | 1.00 | % | ||||||||
Global Fund | 1.25 | % | 2.00 | % | 1.25 | % | 1.00 | % | ||||||||
Emerging Markets Fund | 1.37 | % | 2.12 | % | N/A | 1.12 | % | |||||||||
International Small Cap Fund | 1.40 | % | 2.15 | % | N/A | 1.15 | % | |||||||||
Core Plus Fund | 0.70 | % | N/A | 0.70 | % | 0.50 | % | |||||||||
Credit Focus Yield Fund | 0.95 | % | N/A | N/A | 0.70 | % |
Prior to May 14, 2013, the expense cap rates for the International Fund were as follows: Class A: 1.30%, Class C: 2.05%, Class E: 1.30%, Class I: 1.05%. Any reimbursements or fee waivers made by the Advisor to a Fund are subject to repayment by the Fund, to the extent that the Fund is able to make the repayment within its Expense Cap Agreement. Under the Expense Cap Agreement, any such repayment must be made before the end of the third full fiscal year after the fiscal year in which the related reimbursement or waiver occurred. For the periods ended September 30, 2013, the Advisor waived expenses and/or reimbursed the Funds $458,927, $255,029, $334,348, $238,680, $237,047 and $198,558 for the International Fund, Global Fund, Emerging Markets Fund, International Small Cap Fund, Core Plus Fund and Credit Focus Yield Fund, respectively.
Recovery | Recovery | Recovery | ||||||||||
Expiring | Expiring | Expiring | ||||||||||
September 30, | September 30, | September 30, | ||||||||||
Fund | 2014 | 2015 | 2016 | |||||||||
International Fund | $ | — | $ | 208,594 | $ | 458,927 | ||||||
Global Fund | 187,218 | 229,270 | 255,029 | |||||||||
Emerging Markets Fund | 163,603 | 378,305 | 334,348 | |||||||||
International Small Cap Fund | N/A | 218,903 | 238,680 | |||||||||
Core Plus Fund | 204,045 | 156,102 | 237,047 | |||||||||
Credit Focus Yield Fund | N/A | 149,098 | 198,558 |
For the period ended September 30, 2013, the Advisor did not recoup any fees previously waived or reimbursed.
Certain officers and trustees of the Trust are also officers of the Advisor.
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Brandes Investment Trust
NOTES TO FINANCIAL STATEMENTS (continued)
B. Administration Fee. U.S. Bancorp Fund Services, LLC (the “Administrator”) acts as administrator for the Funds. The Administrator prepares various federal and state regulatory filings; prepares reports and materials to be supplied to the Trustees; monitors the activities of the Funds’ custodian, transfer agent and accountant; coordinates the preparation and payment of Fund expenses; and reviews the Funds’ expense accruals. For its services, the Administrator receives an annual fee at the rate of 0.03% of the first $1 billion of the Trust’s average daily net assets and 0.02% in excess of $1 billion of the Trust’s average daily net assets, subject to a minimum of $50,000 per Fund per annum which is allocated among Funds based on their average net assets. For the period ended September 30, 2013, the International Fund, Global Fund, Emerging Markets Fund, International Small Cap Fund, Core Plus Fund and Credit Focus Yield Fund incurred $141,538, $12,377, $97,654, $26,971, $12,002 and $10,318 in such fees, respectively.
C. Distribution and Servicing Fees. Quasar Distributors, LLC (the “Distributor”), a registered broker-dealer, acts as the Funds’ principal underwriter in a continuous public offering of the Funds’ shares. The Distributor is an affiliate of the Administrator. A portion of the Funds’ distribution fees is paid by the Advisor.
The Trust has adopted a Distribution Plan (the “Plan”) pursuant to Rule 12b-1 under the Investment Company Act of 1940 for the Funds’ Class A and C shares. The Plan is designed to reimburse the Distributor or dealers for certain promotional and other sales related costs associated with sales of such Fund shares. Unreimbursed amounts may be carried forward and paid in a subsequent year, to the extent that total expenses under the Plan do not exceed 0.25% and 0.75% of the average daily net assets of each Fund’s Class A and C shares, respectively. During the period ended September 30, 2013, the Funds paid to the Distributor and each dealer a monthly fee at the annual rate of 0.25% of the average daily net assets of Class A shares and 0.75% of the average daily net assets of Class C shares beneficially owned by the Distributor’s and each dealer’s existing brokerage clients. The 12b-1 Agreement may be continued in effect from year to year if such continuance is approved annually by the Board of Trustees of the Trust, including the vote of a majority of the Independent Trustees. For the period ended September 30, 2013, the following Funds incurred expenses pursuant to the Plan:
Class A | Class C | |||||||
International Fund | $ | 433 | $ | 658 | ||||
Global Fund | 306 | 306 | ||||||
Emerging Markets Fund | 236,060 | 8,495 | ||||||
International Small Cap Fund | 43,767 | 2,744 | ||||||
Core Plus Fund | 1,654 | N/A | ||||||
Credit Focus Yield Fund | 6,317 | N/A |
96
Brandes Investment Trust
NOTES TO FINANCIAL STATEMENTS (continued)
Classes C, E and I of the Funds are permitted to pay to securities broker-dealers, retirement plan sponsors and administrators, banks and their affiliates, and other institutions and service professionals with a written contract as shareholder servicing agent of the Funds, an annual fee for non-distribution sub-transfer agent and/or subaccounting services up to 0.25%, 0.25% and 0.05% of annual net assets attributable to Class C, Class E and Class I, respectively (the “Service Fee”). For the period ended September 30, 2013, the Funds incurred the following Service Fees:
Fund | Class C | Class E | Class I | |||||||||
International Fund | $ | 220 | $ | 20,915 | $ | 187,315 | ||||||
Global Fund | 102 | 122 | 16,773 | |||||||||
Emerging Markets Fund | 2,832 | N/A | 89,891 | |||||||||
International Small Cap Fund | 915 | N/A | 22,382 | |||||||||
Core Plus Fund | N/A | 10,817 | 13,874 | |||||||||
Credit Focus Yield Fund | N/A | N/A | 4,340 |
NOTE 4 − PURCHASES AND SALES OF SECURITIES
The cost of purchases and the proceeds from sales of securities, excluding short term investments, were as follows for the period ended September 30, 2013:
U.S. Government | Other | |||||||||||||||
Fund | Purchases | Sales | Purchases | Sales | ||||||||||||
International Fund | $ | — | $ | — | $ | 73,345,089 | $ | 85,856,155 | ||||||||
Global Fund | $ | — | $ | — | $ | 9,602,515 | $ | 7,929,695 | ||||||||
Emerging Markets Fund | $ | — | $ | — | $ | 235,146,568 | $ | 57,931,289 | ||||||||
International Small Cap Fund | $ | — | $ | — | $ | 57,770,273 | $ | 17,235,110 | ||||||||
Core Plus Fund | $ | 10,936,974 | $ | 8,321,453 | $ | 2,603,526 | $ | 2,293,190 | ||||||||
Credit Focus Yield Fund | $ | 8,981,017 | $ | 4,527,935 | $ | 7,663,587 | $ | 1,551,208 |
97
Brandes Investment Trust
NOTES TO FINANCIAL STATEMENTS (continued)
NOTE 5 – CAPITAL STOCK TRANSACTIONS
Capital stock activity for each class of shares was as follows (shares and dollar amounts in thousands):
International Fund | Global Fund | |||||||||||||||||||||||||||||||
Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||||||||||||||||
9/30/13 | 9/30/12 | 9/30/13 | 9/30/12 | |||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | |||||||||||||||||||||||||
Shares Sold | ||||||||||||||||||||||||||||||||
Class A | 45 | $ | 684 | — | $ | — | 7 | $ | 158 | 5 | $ | 110 | ||||||||||||||||||||
Class C | 28 | 420 | N/A | N/A | 5 | 117 | N/A | N/A | ||||||||||||||||||||||||
Class E | 999 | 14,506 | 292 | 3,889 | — | 11 | 2 | 39 | ||||||||||||||||||||||||
Class I | 8,351 | 121,636 | 6,652 | 87,660 | 287 | 6,213 | 297 | 5,822 | ||||||||||||||||||||||||
Issued on | ||||||||||||||||||||||||||||||||
Reinvestment | ||||||||||||||||||||||||||||||||
of Distributions | ||||||||||||||||||||||||||||||||
Class A | — | 7 | — | — | — | 2 | — | 1 | ||||||||||||||||||||||||
Class C | — | 4 | N/A | N/A | — | 2 | N/A | N/A | ||||||||||||||||||||||||
Class E | 49 | 676 | 10 | 131 | — | 10 | 1 | 16 | ||||||||||||||||||||||||
Class I | 1,440 | 19,740 | 1,483 | 19,328 | 52 | 1,097 | 154 | 2,936 | ||||||||||||||||||||||||
Shares Redeemed | ||||||||||||||||||||||||||||||||
Class A | (2 | ) | (31 | ) | — | — | — | (1 | ) | (2 | ) | (31 | ) | |||||||||||||||||||
Class C | (1 | ) | (20 | ) | N/A | N/A | — | — | N/A | N/A | ||||||||||||||||||||||
Class E | (168 | ) | (2,410 | ) | (145 | ) | (1,904 | ) | — | (9 | ) | (3 | ) | (66 | ) | |||||||||||||||||
Class I | (10,745 | ) | (156,239 | ) | (16,999 | ) | (223,834 | ) | (201 | ) | (4,230 | ) | (863 | ) | (16,826 | ) | ||||||||||||||||
Net Increase/ | ||||||||||||||||||||||||||||||||
(Decrease) | ||||||||||||||||||||||||||||||||
Resulting from | ||||||||||||||||||||||||||||||||
Fund Share | ||||||||||||||||||||||||||||||||
Transactions | (4 | ) | $ | (1,027 | ) | (8,707 | ) | $ | (114,730 | ) | 150 | $ | 3,370 | (409 | ) | $ | (7,999 | ) |
98
Brandes Investment Trust
NOTES TO FINANCIAL STATEMENTS (continued)
Emerging Markets Fund | International Small Cap Fund | |||||||||||||||||||||||||||||||
Year Ended | Year Ended | Year Ended | Period Ended | |||||||||||||||||||||||||||||
9/30/13 | 9/30/12 | 9/30/13 | 930/12 | |||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | |||||||||||||||||||||||||
Shares Sold | ||||||||||||||||||||||||||||||||
Class A | 9,423 | $ | 85,287 | 4,535 | $ | 40,023 | 2,208 | $ | 26,831 | 560 | $ | 5,485 | ||||||||||||||||||||
Class C | 585 | 5,233 | N/A | N/A | 112 | 1,409 | N/A | N/A | ||||||||||||||||||||||||
Class E | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | ||||||||||||||||||||||||
Class I | 19,420 | 176,110 | 7,453 | 64,976 | 2,512 | 29,929 | 3,640 | 36,401 | ||||||||||||||||||||||||
Issued on | ||||||||||||||||||||||||||||||||
Reinvestment | ||||||||||||||||||||||||||||||||
of Distributions | ||||||||||||||||||||||||||||||||
Class A | 431 | 3,763 | 96 | 795 | 22 | 257 | — | — | ||||||||||||||||||||||||
Class C | 3 | 25 | N/A | N/A | — | 2 | N/A | N/A | ||||||||||||||||||||||||
Class E | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | ||||||||||||||||||||||||
Class I | 887 | 7,755 | 218 | 1,813 | 93 | 1,057 | — | — | ||||||||||||||||||||||||
Shares Redeemed | ||||||||||||||||||||||||||||||||
Class A | (3,182 | ) | (28,458 | ) | (1,922 | ) | (16,169 | ) | (508 | ) | (6,445 | ) | (6 | ) | (60 | ) | ||||||||||||||||
Class C | (16 | ) | (135 | ) | N/A | N/A | — | (3 | ) | N/A | N/A | |||||||||||||||||||||
Class E | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | ||||||||||||||||||||||||
Class I | (4,126 | ) | (37,498 | ) | (1,851 | ) | (16,510 | ) | (319 | ) | (3,648 | ) | — | — | ||||||||||||||||||
Net Increase | ||||||||||||||||||||||||||||||||
Resulting from | ||||||||||||||||||||||||||||||||
Fund Share | �� | |||||||||||||||||||||||||||||||
Transactions | 23,425 | $ | 212,082 | 8,529 | $ | 74,928 | 4,120 | $ | 49,389 | 4,194 | $ | 41,826 | ||||||||||||||||||||
Core Plus Fund | Credit Focus Yield Fund | |||||||||||||||||||||||||||||||
Year Ended | Year Ended | Year Ended | Period Ended | |||||||||||||||||||||||||||||
9/30/13 | 9/30/12 | 9/30/13 | 9/30/12 | |||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | |||||||||||||||||||||||||
Shares Sold | ||||||||||||||||||||||||||||||||
Class A | 167 | $ | 1,568 | N/A | $ | N/A | 413 | $ | 4,286 | — | $ | — | ||||||||||||||||||||
Class E | 198 | 1,874 | 437 | 4,103 | N/A | N/A | N/A | N/A | ||||||||||||||||||||||||
Class I | 1,880 | 17,634 | 367 | 3,447 | 559 | 5,818 | 1,830 | 18,478 | ||||||||||||||||||||||||
Issued on | ||||||||||||||||||||||||||||||||
Reinvestment | ||||||||||||||||||||||||||||||||
of Distributions | ||||||||||||||||||||||||||||||||
Class A | 2 | 19 | N/A | N/A | 5 | 52 | — | — | ||||||||||||||||||||||||
Class E | 29 | 271 | 29 | 269 | N/A | N/A | N/A | N/A | ||||||||||||||||||||||||
Class I | 126 | 1,181 | 153 | 1,422 | 67 | 693 | 29 | 295 | ||||||||||||||||||||||||
Shares Redeemed | ||||||||||||||||||||||||||||||||
Class A | (11 | ) | (108 | ) | N/A | N/A | (4 | ) | (36 | ) | — | — | ||||||||||||||||||||
Class E | (816 | ) | (7,693 | ) | (162 | ) | (1,524 | ) | N/A | N/A | N/A | N/A | ||||||||||||||||||||
Class I | (1,407 | ) | (13,114 | ) | (375 | ) | (3,525 | ) | — | (2 | ) | — | — | |||||||||||||||||||
Net Increase | ||||||||||||||||||||||||||||||||
Resulting from | ||||||||||||||||||||||||||||||||
Fund Share | ||||||||||||||||||||||||||||||||
Transactions | 168 | $ | 1,632 | 449 | $ | 4,192 | 1,040 | $ | 10,811 | 1,859 | $ | 18,773 |
99
Brandes Investment Trust
NOTES TO FINANCIAL STATEMENTS (continued)
NOTE 6 − FEDERAL INCOME TAX MATTERS
As of September 30, 2013, the components of distributable earnings on a tax basis were as follows:
Emerging | ||||||||||||
International | Global | Markets | ||||||||||
Fund | Fund | Fund | ||||||||||
Cost of investments for tax purposes | $ | 423,996,795 | $ | 34,246,188 | $ | 434,597,542 | ||||||
Gross tax unrealized appreciation | 69,489,591 | 7,368,118 | 40,785,980 | |||||||||
Gross tax unrealized depreciation | (60,482,007 | ) | (1,366,848 | ) | (51,257,019 | ) | ||||||
Net tax unrealized appreciation (depreciation) on | ||||||||||||
investments and foreign currency | 9,007,584 | 6,001,270 | (10,471,039 | ) | ||||||||
Distributable ordinary income | — | 158,299 | 3,281,972 | |||||||||
Distributable long-term capital gains | — | 1,113,230 | 8,755,523 | |||||||||
Total distributable earnings | — | 1,271,529 | 12,037,495 | |||||||||
Other accumulated gains/(losses) | (116,531,574 | ) | (23,829 | ) | (183,725 | ) | ||||||
Total accumulated earnings | $ | (107,523,990 | ) | $ | 7,248,970 | $ | 1,382,731 | |||||
International | ||||||||||||
Small Cap | Core Plus | Credit Focus | ||||||||||
Fund | Fund | Yield Fund | ||||||||||
Cost of investments for tax purposes | $ | 99,768,870 | $ | 31,514,184 | $ | 28,905,556 | ||||||
Gross tax unrealized appreciation | 22,258,140 | 1,794,029 | 846,136 | |||||||||
Gross tax unrealized depreciation | (8,237,120 | ) | (643,631 | ) | (511,624 | ) | ||||||
Net tax unrealized appreciation (depreciation) on | ||||||||||||
investments and foreign currency | 14,021,020 | 1,150,398 | 334,512 | |||||||||
Distributable ordinary income | 5,013,168 | — | 4,437 | |||||||||
Distributable long-term capital gains | 4,075,183 | 49,797 | 35,212 | |||||||||
Total distributable earnings | 9,088,351 | 49,797 | 39,649 | |||||||||
Other accumulated gains/(losses) | (53,712 | ) | (797 | ) | (9,411 | ) | ||||||
Total accumulated earnings | $ | 23,057,783 | $ | 1,199,398 | $ | 364,750 |
The differences between book and tax basis distributable earnings are primarily related to foreign currency adjustments and the differences in classification of paydown gains and losses for tax purposes compared to book purposes. These differences are temporary.
100
Brandes Investment Trust
NOTES TO FINANCIAL STATEMENTS (continued)
The tax composition of dividends for the periods ended September 30, 2013 for the Fund, were as follows:
Ordinary | Long Term Capital | Return of | ||||||||||
Income Total | Gains Total | Capital Total | ||||||||||
International Fund | $ | 22,510,115 | $ | — | $ | 251,542 | ||||||
Global Fund | $ | 1,506,408 | $ | 470,907 | $ | — | ||||||
Emerging Markets Fund | $ | 9,388,621 | $ | 2,564,709 | $ | — | ||||||
International Small Cap Fund | $ | 1,497,320 | $ | 59,783 | $ | — | ||||||
Core Plus Fund | $ | 1,307,835 | $ | 343,555 | $ | — | ||||||
Credit Focus Yield Fund | $ | 678,771 | $ | 63,200 | $ | — |
Pursuant to Internal Revenue Code Section 852(b)(3), the International Fund designated the amount necessary to reduce the earnings and profits related to net capital gains to zero for the tax year ended September 30, 2013.
At September 30, 2013, the International Fund had net realized losses on investment and foreign currencies between November 1, 2012 and September 30, 2013 of $282,819, which were deferred for tax purposes and recognized on October 1, 2013.
As of September 30, 2013 the Funds had capital losses expiring as indicated below:
Fund | 2018 | Indefinite | ||||||
International Fund | $ | 29,067,216 | $ | 87,287,322 | ||||
Global Fund | — | — | ||||||
Emerging Markets Fund | — | — | ||||||
International Small Cap Fund | — | — | ||||||
Core Plus Fund | — | — | ||||||
Credit Focus Yield Fund | — | — |
Reclassification of Capital Accounts. Accounting principles generally accepted in the United States of America require that certain components of net assets be reclassified between financial and tax reporting. These reclassifications have no effect on net assets or net asset value per share. For the periods ended September 30, 2013, the International Fund increased undistributed net investment income/loss by $495,233, decreased accumulated net realized gain/loss by $243,691 and decreased paid in capital by $251,542, due to certain permanent book and tax differences. The Global Fund increased undistributed net investment income/loss by $6,205 and decreased accumulated net realized gain/loss by $6,205. The Emerging Markets Fund increased undistributed net investment income/loss by $988,989, decreased accumulated net realized gain/loss by $989,007 and increased paid in capital by $18. The International Small Cap Fund increased undistributed net investment income/loss by $7,944 and decreased accumulated net realized gain/loss by $7,944. The Core Plus Fund increased undistributed net investment income/loss by $115,692 and decreased accumulated net realized
101
Brandes Investment Trust
NOTES TO FINANCIAL STATEMENTS (continued)
gain/loss by $115,692. The Credit Focus Yield Fund decreased undistributed net investment income/loss by $4 and increased accumulated net realized gain/loss by $4. The permanent book and tax differences relate to a reclassification of foreign currency gain/loss.
In preparing these financial statements, the Trust has evaluated events and transactions for potential recognition or disclosure through the date the financial statements were available to be issued.
NOTE 7 − OFFERING PRICE PER SHARE
The public offering price for Class A shares is the net asset value per share plus a sales charge, which varies in accordance with the amount of the purchase up to a maximum of 5.75% for the International, Global, Emerging Markets and International Small Cap Funds, and 3.75% for the Core Plus and Credit Focus Yield Funds. A contingent deferred sales charge (“CDSC”) of 1.00% will be deducted with respect to Class A Shares purchased without a sales load and redeemed within 12 months of purchase, unless waived, as discussed in the Prospectus. Any applicable CDSC will be 1.00% of the lesser of the original purchase price or the redemption value of the Class A Shares redeemed. Class C Shares include a 1.00% CDSC paid by redeeming shareholders within 12 months of purchase. As a result the redemption price may differ from the net asset value per share. The public offering prices for Class E and I shares are the respective net asset values. Sales charges are not an expense of the Funds and are not reflected in the financial statements of the Funds.
NOTE 8 − OWNERSHIP BY AFFILIATED PARTIES
As of September 30, 2013, the Advisor or affiliates of the Advisor beneficially owned shares of the Funds as follows:
International Fund | Global Fund | |||||||||||||||||||||||||||
Class A | Class C | Class E | Class A | Class C | Class E | Class I | ||||||||||||||||||||||
Shares | 7 | 71 | 8,171 | 5 | 48 | 6,305 | 938,760 | |||||||||||||||||||||
Percent of total | ||||||||||||||||||||||||||||
outstanding shares | 0.02 | % | 0.30 | % | 0.60 | % | 0.05 | % | 0.94 | % | 63.10 | % | 58.12 | % | ||||||||||||||
Credit | ||||||||||||||||||||||||||||
International | Focus | |||||||||||||||||||||||||||
Small Cap | Yield | |||||||||||||||||||||||||||
Fund | Core Plus Fund | Fund | ||||||||||||||||||||||||||
Class C | Class I | Class A | Class E | Class I | Class I | |||||||||||||||||||||||
Shares | 84 | 2,249,138 | 104 | 686 | 609,545 | 2,446,676 | ||||||||||||||||||||||
Percent of total | ||||||||||||||||||||||||||||
outstanding shares | 0.08 | % | 41.51 | % | 0.07 | % | 0.55 | % | 18.94 | % | 98.64 | % |
102
Brandes Investment Trust
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Trustees and Shareholders
of Brandes Investment Trust
In our opinion, the accompanying statements of assets and liabilities, including the schedules of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Brandes International Equity Fund, Brandes Global Equity Fund, Brandes Emerging Markets Fund, Brandes International Small Cap Equity Fund, Brandes Core Plus Fixed Income Fund, and Brandes Credit Focus Yield Fund (hereinafter collectively referred to as the “Funds”) at September 30, 2013, the results of each of their operations for the year then ended, the changes in their net assets and the financial highlights for each of the periods presented, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Funds’ management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at September 30, 2013 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion. The financial highlights of Brandes International Equity Fund and Brandes Core Plus Fixed Income Fund for each of the two years in the period ended September 30, 2010, and the financial highlights for Brandes Global Equity Fund for the period ended September 30, 2010, were audited by other auditors whose report dated November 24, 2010 expressed an unqualified opinion on those statements.
PricewaterhouseCoopers LLP
Los Angeles, California
November 26, 2013
103
Brandes Investment Trust
ADDITIONAL INFORMATION — (Unaudited)
PROXY VOTING PROCEDURES
The Advisor votes proxies relating to the Funds’ portfolio securities in accordance with procedures adopted by the Advisor. You may obtain a description of these procedures, free of charge, by calling toll-free 1-800-331-2979. This information is also available through the Securities and Exchange Commission’s website at http://www.sec.gov.
Information regarding how the Trust voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available without charge, upon request, by calling 1-800-331-2979. This information is also available through the Securities and Exchange Commission’s website at http://www.sec.gov.
FORM N-Q DISCLOSURE
The Trust files the Fund’s complete schedule of portfolio holdings with the Securities and Exchange Commission for the first and third quarters of each fiscal year on Form N-Q. The Trust’s Form N-Q filings are available on the Securities and Exchange Commission’s website at http://www.sec.gov. The Trust’s Form N-Q filings may be reviewed and copied at the Commission’s Public Reference Room in Washington, D.C., and information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. Information regarding the Trust’s Form N-Q filings is also available, without charge, by calling toll-free, 1-800-331-2979.
TAX NOTICE
For the periods ended September 30, 2013, 0.00%, 0.00%, 0.01%, 0.00%, 99.84% and 100.00% of the ordinary distributions paid by the International, Global, Emerging, International Small Cap, Core Plus and Credit Focus Yield Funds, respectively, qualify as interest related dividends under Internal Revenue Code Section 87(k)(1)(c). For the periods ended September 30, 2013, 0.00%, 1.57%, 25.70%, 37.65%, 2.79% and 12.64% of the ordinary distributions paid by the International, Global, Emerging, International Small Cap, Core Plus and Credit Focus Yield Funds, respectively, were designated as short-term gain distributions under Internal Revenue Code Section 871(k)(2)(c).
The percentage of dividend income distributed for the year ended September 30, 2013, which is designated as qualified dividend income under the Jobs and Growth Tax Relief Reconciliation Act of 2003, is 100.00%, 100.00%, 72.32%, 8.07%, 1.96% and 4.48% for the International, Global, Emerging, International Small Cap, Core Plus, and Credit Focus Yield Funds, respectively. Of the dividends paid by the International, Global, Emerging, International Small Cap, Core Plus, and Credit Focus Yield Funds, 0.00%, 34.00%, 0.00%, 0.00%, 1.96% and 4.48%, respectively, qualify for the corporate dividends received deduction.
104
Brandes Investment Trust
ADDITIONAL INFORMATION — (Unaudited) (continued)
For the Year Ended September 30, 2013, the International Fund, Global Fund, Emerging Markets, and International Small Cap Fund earned foreign source income from dividends earned and paid foreign taxes, as noted below, which they intend to pass through to their shareholders pursuant to Section 853 of the Internal Revenue Code, with the exception of the foreign taxes paid in Malaysia, the Czech Republic, and the United Kingdom. The Malaysia, Czech Republic, and United Kingdom foreign taxes paid by the Funds do not qualify to be passed through to the Funds’ shareholders.
Gross Foreign Income | ||||||||||||||||
International | ||||||||||||||||
International | Global | Emerging | Small Cap | |||||||||||||
Fund | Fund | Markets | Fund | |||||||||||||
Australia | $ | — | $ | — | $ | — | $ | 2,747 | ||||||||
Austria | — | — | 127,913 | — | ||||||||||||
Bermuda | — | — | 85,176 | 48,739 | ||||||||||||
Brazil | 973,172 | 24,789 | 1,981,248 | 752 | ||||||||||||
Canada | — | — | — | 79,255 | ||||||||||||
Cayman Islands | — | — | 491,815 | — | ||||||||||||
Czech Republic | — | — | — | — | ||||||||||||
Denmark | — | — | — | 14,318 | ||||||||||||
France | 3,001,172 | 135,430 | — | 100,090 | ||||||||||||
Germany | 751,769 | 38,790 | — | — | ||||||||||||
Hong Kong | — | — | 763,278 | 116,553 | ||||||||||||
Hungary | — | — | 345,822 | — | ||||||||||||
India | — | — | 602,359 | 54,708 | ||||||||||||
Ireland | 406,612 | 26,850 | — | 13,699 | ||||||||||||
Israel | — | — | 11,118 | — | ||||||||||||
Italy | 1,388,602 | 99,489 | — | 119,676 | ||||||||||||
Japan | 2,705,765 | 171,875 | — | 478,753 | ||||||||||||
Luxembourg | — | — | 129,188 | — | ||||||||||||
Malaysia | — | 12,621 | 102,628 | — | ||||||||||||
Mexico | 89,089 | 6,285 | 164,237 | 21,186 | ||||||||||||
Netherlands | 1,145,229 | 62,091 | — | — | ||||||||||||
Pakistan | — | — | 35,249 | — | ||||||||||||
Panama | — | — | 239,361 | 52,496 | ||||||||||||
Russia | 286,736 | 18,834 | 736,125 | — | ||||||||||||
Singapore | — | — | 53,396 | 67,403 | ||||||||||||
South Africa | — | — | 193,909 | — | ||||||||||||
South Korea | 111,960 | — | 634,807 | 20,575 | ||||||||||||
Sweden | 233,104 | 18,702 | — | — | ||||||||||||
Switzerland | 558,279 | 48,178 | — | 52,981 | ||||||||||||
Taiwan | — | — | 229,237 | — | ||||||||||||
Turkey | — | — | 90,622 | 28,064 | ||||||||||||
United Arab Emirates | — | — | 235,558 | 1,794 | ||||||||||||
United Kingdom | 3,123,370 | 165,897 | 70,994 | 219,339 | ||||||||||||
$ | 14,774,859 | $ | 829,831 | $ | 7,324,040 | $ | 1,493,128 |
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Brandes Investment Trust
ADDITIONAL INFORMATION — (Unaudited) (continued)
Foreign Tax Paid | ||||||||||||||||
International | ||||||||||||||||
International | Global | Emerging | Small Cap | |||||||||||||
Fund | Fund | Markets | Fund | |||||||||||||
Australia | $ | — | $ | — | $ | — | $ | — | ||||||||
Austria | — | — | 19,187 | — | ||||||||||||
Bermuda | — | — | — | — | ||||||||||||
Brazil | 63,497 | 1,206 | 170,710 | — | ||||||||||||
Canada | — | — | — | 11,888 | ||||||||||||
Cayman Islands | — | — | — | — | ||||||||||||
Czech Republic | — | — | 6,739 | — | ||||||||||||
Denmark | — | — | — | 2,148 | ||||||||||||
France | 448,408 | 20,536 | — | 15,014 | ||||||||||||
Germany | 37,044 | — | — | — | ||||||||||||
Hong Kong | — | — | 60,329 | 3,776 | ||||||||||||
Hungary | — | — | — | — | ||||||||||||
India | — | — | — | — | ||||||||||||
Ireland | — | — | — | (33 | ) | |||||||||||
Israel | — | — | 2,780 | — | ||||||||||||
Italy | 189,100 | 14,855 | — | 16,402 | ||||||||||||
Japan | 193,367 | 12,281 | — | 34,217 | ||||||||||||
Luxembourg | — | — | — | — | ||||||||||||
Malaysia | — | 3,155 | 25,657 | — | ||||||||||||
Mexico | — | — | 26,994 | 6,793 | ||||||||||||
Netherlands | 171,784 | 9,322 | — | — | ||||||||||||
Pakistan | — | — | 3,525 | — | ||||||||||||
Panama | — | — | — | — | ||||||||||||
Russia | 45,050 | 2,825 | 110,046 | — | ||||||||||||
Singapore | — | — | — | — | ||||||||||||
South Africa | — | — | 29,086 | — | ||||||||||||
South Korea | 22,790 | — | 134,317 | 4,394 | ||||||||||||
Sweden | 34,966 | 2,805 | — | — | ||||||||||||
Switzerland | — | — | — | 7,947 | ||||||||||||
Taiwan | — | — | 45,847 | — | ||||||||||||
Turkey | — | — | 13,593 | 4,210 | ||||||||||||
United Arab Emirates | — | — | — | — | ||||||||||||
United Kingdom | 312,337 | 16,590 | — | 21,934 | ||||||||||||
$ | 1,518,343 | $ | 83,575 | $ | 648,810 | $ | 128,690 |
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Brandes Investment Trust
TRUSTEES AND OFFICERS INFORMATION — (Unaudited)
The Board of Trustees is responsible for the overall management of the Trust’s business. The Board approves all significant agreements between the Trust and persons or companies furnishing services to the Trust, including the Trust’s agreements with the Advisor, Administrator, Custodian and Transfer Agent. The Board of Trustees delegates the day-to-day operations of the Trust to its officers, subject to the Funds investment objectives and policies and to general supervision by the Board. The Trust’s Statement of Additional Information includes additional information about the Trustees and is available, without charge, by calling 1-800-331-2979.
The Trustees and officers of the Trust, their business addresses and principal occupations during the past five years are:
Term of | |||||
Office | Number | Other | |||
and | Principal | of Trust | Directorships/ | ||
Position(s) | Length | Occupation | Series | Trusteeships | |
Name, Address | Held with | of Time | During Past | Overseen | Held by |
and Age | Trust | Served(1) | 5 Years | by Trustee | Trustee |
Independent Trustees(2) | |||||
J. Michael Gaffney, CFA | Trustee | Since | Independent | 7 | None |
11988 El Camino Real, | June | Consultant, | |||
Suite 600 | 2004 | NATIXIS Global | |||
San Diego, CA 92130 | Asset Management, | ||||
(Age 72) | North America from | ||||
2004 to 2011. | |||||
Jean E. Carter | Trustee | Since | Retired since 2005; | 7 | Bridge Builder |
11988 El Camino Real, | and | April | Director, Investment | Trust | |
Suite 600 | Chairman | 2008 | Management and | ||
San Diego, CA 92130 | other positions of | ||||
(Age 56) | Russell Investment | ||||
Group from 1982 | |||||
to 2005. | |||||
Robert M. Fitzgerald, CPA | Trustee | Since | Retired from | 7 | Hotchkis and |
11988 El Camino Real, | April | 2002 − 2005 and | Wiley Mutual | ||
Suite 600 | 2008 | since 2007; Chief | Funds. | ||
San Diego, CA 92130 | Financial Officer, | ||||
(Age 61) | National Retirement | ||||
Partners from 2005 | |||||
to 2007. |
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Brandes Investment Trust
INFORMATION ABOUT TRUSTEES AND OFFICERS — (Unaudited) (continued)
Term of | |||||
Office | Number | Other | |||
and | Principal | of Trust | Directorships/ | ||
Position(s) | Length | Occupation | Series | Trusteeships | |
Name, Address | Held with | of Time | During Past | Overseen | Held by |
and Age | Trust | Served(1) | 5 Years | by Trustee | Trustee |
Craig Wainscott | Trustee | Since | Retired since 2006; | 7 | None |
11988 El Camino Real, | February | Managing Director | |||
Suite 600 | 2012 | and other positions, | |||
San Diego, CA 92130 | US Mutual Funds, | ||||
(Age 52) | Russell Investments, | ||||
from 1982 to 2006; | |||||
currently Partner | |||||
with The Paradigm | |||||
Project and advisor to | |||||
early-stage companies. | |||||
“Interested” Trustees(3) | |||||
Oliver Murray | Trustee | Since | Chief Executive | 7 | None |
11988 El Camino Real, | February | Officer, Brandes | |||
Suite 600 | 2012 | Investment Partners | |||
San Diego, CA 92130 | & Co.; Managing | ||||
(Age 50) | Director − PMCS of | ||||
Brandes Investment | |||||
Partners, L.P., the | |||||
investment advisor | |||||
to the Funds | |||||
(the “Advisor”). | |||||
Jeff Busby | Trustee | Since | Executive Director | 7 | None |
11988 El Camino Real, | and | July | of the Advisor. | ||
Suite 600 | President | 2006 | |||
San Diego, CA 92130 | |||||
(Age 52) | |||||
Officers of the Trust | |||||
Thomas M. Quinlan | Secretary | Since | Associate General | N/A | N/A |
11988 El Camino Real, | June | Counsel to the | |||
Suite 600 | 2003 | Advisor since | |||
San Diego, CA 92130 | January 2006; | ||||
(Age 42) | Counsel to the | ||||
Advisor from | |||||
July 2000 to | |||||
January 2006. |
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Brandes Investment Trust
INFORMATION ABOUT TRUSTEES AND OFFICERS — (Unaudited) (continued)
Term of | |||||
Office | Number | Other | |||
and | Principal | of Trust | Directorships/ | ||
Position(s) | Length | Occupation | Series | Trusteeships | |
Name, Address | Held with | of Time | During Past | Overseen | Held by |
and Age | Trust | Served(1) | 5 Years | by Trustee | Trustee |
Gary Iwamura | Treasurer | Since | Finance Director | N/A | N/A |
11988 El Camino Real, | September | of the Advisor. | |||
Suite 600 | 1997 | ||||
San Diego, CA 92130 | |||||
(Age 56) | |||||
George Stevens | Chief | Since | Director, Beacon | N/A | N/A |
11988 El Camino Real, | Compliance | January | Hill Fund Services, | ||
Suite 600 | Officer | 2010 | Inc., March 2008 | ||
San Diego, CA 92130 | to present; Vice | ||||
(Age 62) | President, Citi | ||||
Fund Services, | |||||
September 1996 to | |||||
March 2008. |
__________
(1) | Trustees and officers of the Fund serve until their resignation, removal or retirement. | |
(2) | Not “interested persons” of the Trust as defined in the 1940 Act. | |
(3) | “Interested persons” of the Trust as defined in the 1940 Act by virtue of their positions with the Advisor. |
109
ADVISOR
Brandes Investment Partners, L.P.
11988 El Camino Real, Suite 600
San Diego, CA 92130
800.331.2979
DISTRIBUTOR
Quasar Distributors, LLC
615 E. Michigan Street, 4th Floor
Milwaukee, WI 53202
TRANSFER AGENT
U.S. Bancorp Fund Services, LLC
615 E. Michigan Street, 3rd Floor
Milwaukee, WI 53202
INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
PricewaterhouseCoopers LLP
601 South Figueroa Street
Los Angeles, CA 90017
LEGAL COUNSEL
Bingham McCutchen LLP
355 South Grand Avenue, Suite 4400
Los Angeles, CA 90071
This report is intended for shareholders of the Brandes International Equity Fund, the Brandes Global Equity Fund, the Brandes Emerging Markets Fund, the Brandes International Small Cap Equity Fund, the Brandes Core Plus Fixed Income Fund and the Brandes Credit Focus Yield Fund and may not be used as sales literature unless preceded or accompanied by a current prospectus.
Statements and other information herein are dated and are subject to change.
Separately Managed
Account Reserve Trust
ANNUAL REPORT
For the year ended
September 30, 2013
Brandes Separately Managed Account Reserve Trust
Dear Shareholder:
The Separately Managed Account Reserve Trust (SMART) Fund gained 4.42% for the 12 months ended September 30, 2013, while its benchmark, the Barclays U.S. Aggregate Bond Index, returned -1.68% and the Barclays U.S. Intermediate Credit Bond Index rose 0.09%.
In this letter, I will examine the sector- and security-specific factors that affected the Fund’s performance and describe changes in its composition during the fiscal year. I will also discuss how the Fund is positioned for the future.
The Markets
Fixed-income markets recorded gains early in the Fund’s fiscal year, boosted by stimulative central-bank policies globally, a U.S. economy that continued to outperform its developed-country peers despite lackluster performance on an absolute basis, declining euro zone tail risk, strong corporate fundamentals and robust supply/demand technicals.
The positive momentum shifted, however, in the first quarter of 2013 with the markets moving mostly sideways. It is interesting to note that the quarter marked the first negative quarterly return for the Barclays U.S. Aggregate Bond Index since the fourth quarter of 2010, and the first negative first-quarter performance since 2006. Market declines continued into the second quarter of 2013. In May, Federal Reserve Chairman Ben Bernanke mentioned the possibility of tapering the Fed’s unprecedented bond-purchase program if the economic data continues to improve. Virtually all markets globally reacted as if the punch bowl was being taken away prematurely from a rollicking party.
Nonetheless, major fixed-income indices recovered some lost ground in the third quarter of 2013, boosted by the Fed’s decision to keep the “easy-money” party going for the indefinite future, which in turn delivered a surprise to the markets.
After the June 2013 meeting of the Federal Open Market Committee, the Fed Chairman indicated that tapering the Fed’s quantitative easing program, designed to stimulate economic growth, could begin relatively soon, and certainly before year end. However, at a scheduled meeting in September, the Fed decided to postpone dialing down its highly accommodative monetary policy. By then, the markets had long since moved on from discounting the onset of the taper, and trained their sights more on its actual dollar amount — with the estimated reduction of the Fed’s purchases of Treasury and mortgage- backed securities (MBS) of $10 billion to $15 billion per month fully discounted by the markets.
The Fund
During the fiscal year, the Fund’s positive performance relative to the benchmark was led by select corporate bond holdings that included banks, life insurance firms
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Brandes Separately Managed Account Reserve Trust
and independent energy companies. The Fund’s excess yield compared to the benchmark also helped relative returns.
Additionally, the Fund’s allocation to asset-backed securities (ABS) backed by pools of private student loans aided performance. Toward the close of the fiscal year, we started to see stabilization in the performance of the underlying student loan collateral, a trend that is beginning to flow through to the market prices for these securities. Corporate bond holdings in the building products and insurance industries also contributed positively to performance.
Relative returns during the period were hurt by a Mexican homebuilding bond and corporate holdings in money-center banks.
Fund activity during the period included initiating positions in the following: Preferred stock in business-services firm Pitney Bowes International; financial services company ING U.S.; integrated steel and mining firm ArcelorMittal; medical laboratory services firm Laboratory Corp; U.S.-dollar denominated issues of Israel Electric Corp; Canadian pharmaceutical company Valeant Pharmaceuticals; and Mexican homebuilder Urbi Desarrollos Urbanos. Selling activity was limited to a pare-back of Mohawk Industries, a buildings product company that approached our estimate of its fair value, and the full sale of a subprime ABS originally issued by Countrywide. Toward the close of the Fund’s fiscal year, we added to our holding in energy firm Chesapeake Energy, financial company J.P. Morgan and US Bancorp. We sold our entire position in electric house-ware manufacturer Spectrum Brands as it traded through our estimate of its fair value.
The duration of the Fund at the end of the quarter remained shorter than that of the benchmark. The Fund’s excess yield compared to the benchmark helped relative returns. The largest overweight was to the corporate sector, where overweight positions relative to the benchmark were in the financial, utility and homebuilding/building products industries. The Fund remained underweight agency mortgage-backed pass-through securities in favor of MBS that, in our view, offer a more compelling value proposition than agency pass throughs: non-agency MBS, trust Interest Only MBS, and private student loan ABS.
Our Outlook
We believe the Brandes SMART Fund remains defensively positioned both with respect to interest-rate sensitivity and allocation to value credit opportunities.
We endeavored to create a bottom-up fixed-income investment philosophy and process 14 years ago based upon the value principles of Benjamin Graham. Then, and now, we believed that by focusing on fundamentals and attempting to ignore the noise in the market we could pursue value for our clients’ fixed-income portfolios over the long term. One of the distinguishing features of our value
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Brandes Separately Managed Account Reserve Trust
process is our willingness to accept short-term price volatility that, in our view, is unrelated to underlying credit fundamentals.
We firmly believe in the continued efficacy of the value investing process. We feel strongly that the markets going forward will regularly offer patient long-term investors additional mispriced opportunities. We remain singularly focused on pursuing value over the long term and are thankful for the patience and trust that you have placed in us to implement this philosophy and process on your behalf.
Sincerely yours,
Jeffrey A. Busby, CFA
President
Brandes Investment Trust
Duration: The weighted maturity of a fixed-income investment’s cash flows, used in the estimation of the price sensitivity of fixed-income securities for a given change in interest rates.
Yield: Annual income from the investment (dividend, interest, etc.) divided by the current market price of the investment.
Past performance does not guarantee future results.
Market conditions may impact performance. The performance results presented were achieved in particular market conditions which may not be repeated. Moreover, the current market volatility and uncertain regulatory environment may have a negative impact on future performance.
The Fund invests in foreign securities, which involve additional risks, including currency fluctuations, political instability, differences in financial reporting standards and less stringent regulation of securities markets.
International and emerging markets investing is subject to certain risks such as currency fluctuations and social and political changes; such risks may result in greater share price volatility. Emerging market countries involve greater risks, such as immature economic structures, national policies restricting investments by foreigners, and different legal systems. Below investment grade debt securities are speculative and involve a greater risk of default and price change due to changes in the issuer’s creditworthiness. The Fund’s use of derivative instruments, such as options
3
Brandes Separately Managed Account Reserve Trust
contracts, futures contracts or swap agreements, involves risks different from, or possibly greater than, the risks associated with investing directly in securities and other more traditional investments.
Unlike bonds issued or guaranteed by the U.S. government or its agencies, stocks and other bonds are not backed by the full faith and credit of the United States. Stock and bond prices will experience market fluctuations. Please note that the value of government securities and bonds in general have an inverse relationship to interest rates. Bonds carry the risk of default, or the risk than an issuer will be unable to make income or principal payment. There is no assurance that private guarantors or insurers will meet their obligations. The credit quality of the investments in the portfolio is no guarantee of the safety or stability of the portfolio. Investments in asset-backed and mortgage-backed securities include additional risks that investors should be aware of such as credit risk, prepayment risk, possible illiquidity and default, as well as increased susceptibility to adverse economic developments.
Please refer to the Schedule of Investments in the report for complete holdings information. Fund holdings, geographic allocations and/or sector allocations are subject to change at any time and are not a recommendation to buy or sell any security.
Investment performance reflects fee waivers and/or reimbursement of expenses. In the absence of such waivers/reimbursements, total return would be reduced.
The foregoing reflects the thoughts and opinions of Brandes Investment Partners® exclusively and is subject to change without notice.
Brandes Investment Partners® is a registered trademark of Brandes Investment Partners, L.P. in the United States and Canada.
Must be preceded or accompanied by a prospectus.
Index Guide
The Barclays U.S. Aggregate Bond Index is an unmanaged index consisting of U.S. dollar-denominated, fixed-rate, taxable bonds. The U.S. Aggregate Bond Index is a broad-based benchmark that measures the investment grade, U.S. dollar-denominated, fixed-rate taxable bond market, including Treasuries, government-related and corporate securities, MBS (agency fixed-rate and hybrid ARM passthroughs), ABS, and CMBS. The U.S. Aggregate rolls up into other Barclays Capital flagship indices such as the multi-currency Global Aggregate Index and the U.S. Universal Index, which includes high yield and emerging markets debt. The U.S. Aggregate Index was created in 1986, with index history backfilled to January 1, 1976. The index is a total return index which reflects the price changes and interest of each bond in the index.
4
Brandes Separately Managed Account Reserve Trust
The Barclays U.S. Intermediate Credit Bond Index is an unmanaged index consisting of U.S. dollar-denominated, publicly issued, fixed-rate corporate securities. Issues must have at least $250 million par amount outstanding and have a maturity from one up to (but not including) ten years. Securities must be rated investment grade (Baa3/BBB-/BBB- or above) by Moody’s, S&P, and Fitch, respectively. When all three agencies rate an issue, a median or “two out of three” rating is used to determine Index eligibility by dropping the highest and lowest rating. When a rating from only two agencies is available, the lower (“most conservative”) of the two is used. When a rating from only one agency is available, that rating is used to determine Index eligibility. The index is a total return index which reflects the price changes and interest of each bond in the index.
One cannot invest directly in an index.
The Brandes Separately Managed Account Reserve Trust (“SMART”) Fund is distributed by Quasar Distributors, LLC.
5
Brandes Separately Managed Account Reserve Trust
The following chart compares the value of a hypothetical $10,000 investment in the Separately Managed Account Reserve Trust from its inception (October 3, 2005) to September 30, 2013 as compared with the Barclays Capital U.S. Aggregate Index and Barclays Capital U.S. Intermediate Credit Index.
Cumulative Performance of $10,000 Since Inception
Average Annual Total Return | |||||
Periods Ended September 30, 2013 | |||||
Since | |||||
One | Three | Five | Inception | ||
Year | Year | Year | (10/3/05) | ||
Separately Managed Account | |||||
Reserve Trust | 4.42% | 7.94% | 12.65% | 6.04% | |
Barclays Capital | |||||
U.S. Aggregate Index | -1.68% | 2.86% | 5.41% | 4.97% | |
Barclays Capital | |||||
U.S. Intermediate Credit Index | 0.09% | 3.71% | 7.70% | 5.40% |
Performance data quoted represents past performance; past performance does not guarantee future results. The investment return 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 of the Fund may be lower or higher than the performance quoted. Performance data current to the most recent month end may be obtained by calling 800-331-2979.
6
Brandes Separately Managed Account Reserve Trust
The returns shown do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. The Advisor has a fee waiver arrangement in place to limit the Fund’s annual operating expenses.
Sector Allocation as a Percentage of Total Investments as of
September 30, 2013
7
Brandes Separately Managed Account Reserve Trust
Expense Example (Unaudited)
As a shareholder of the Fund, you incur ongoing costs, including investment advisory and administrative fees and other Fund expenses. The examples below 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 period and held for the entire period from April 1, 2013 to September 30, 2013 (the “Period”).
Actual Expenses
This section provides information about actual account values and actual expenses. The “Ending Account Value” shown is derived from the Fund’s actual returns. You may use the information in this section, 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 given for the Fund under the heading “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Expenses | ||||
Beginning | Ending | Annual | Paid | |
Account | Account | Expense | During | |
Fund | Value | Value | Ratio | the Period* |
Separately Managed Account | ||||
Reserve Trust** | $1,000.00 | $996.50 | 0.00% | $0.00 |
8
Brandes Separately Managed Account Reserve Trust
Hypothetical Example for Comparison Purposes
This section 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 mutual funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other mutual funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the last column 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.
Expenses | ||||
Beginning | Ending | Annual | Paid | |
Account | Account | Expense | During | |
Fund | Value | Value | Ratio | the Period* |
Separately Managed Account | ||||
Reserve Trust** | $1,000.00 | $1,025.07 | 0.00% | $0.00 |
* | The Fund’s expenses are equal to the Fund’s expense ratio for the period, multiplied by the average account value over the period, multiplied by 183/365 (to reflect the one half-year period). | ||
** | No expenses have been charged to the SMART Fund over the period, as the SMART Fund participates in a wrap-fee program sponsored by investment advisors unaffiliated with the SMART Fund. See Note 3 to the Financial Statements. |
9
Brandes Separately Managed Account Reserve Trust
SCHEDULE OF INVESTMENTS — September 30, 2013
Principal | ||||||||
Amount | Value | |||||||
FEDERAL AND FEDERALLY SPONSORED CREDITS – 0.67% | ||||||||
Fannie Mae Interest Only Strip – 0.67% | ||||||||
5.500%, 01/01/2036 | $ | 2,271,890 | $ | 357,651 | ||||
6.000%, 06/01/2036 | 2,906,290 | 493,165 | ||||||
TOTAL FEDERAL AND FEDERALLY SPONSORED CREDITS | ||||||||
(Cost $1,136,479) | $ | 850,816 | ||||||
OTHER MORTGAGE RELATED SECURITIES – 5.45% | ||||||||
Collateralized Mortgage Obligations – 0.01% | ||||||||
Wells Fargo Mortgage Backed Securities Trust | ||||||||
Series 2006-AR14, 5.782%, 10/25/2036 | $ | 18,617 | $ | 17,924 | ||||
Near Prime Mortgage – 3.32% | ||||||||
Bear Stearns Adjustable Rate Mortgage Trust | ||||||||
Series 2005-10, 2.674%, 10/25/2035 | 3,414,163 | 3,309,348 | ||||||
Countrywide Home Loan Mortgage Pass Through Trust | ||||||||
Series 2006-HYB1, 2.636%, 03/20/2036 | 1,127,776 | 878,124 | ||||||
4,187,472 | ||||||||
Sub-Prime Mortgages – 2.12% | ||||||||
JP Morgan Mortgage Acquisition Corp. | ||||||||
Series 2006-NC1, 0.349%, 04/25/2036 | 1,851,866 | 1,715,233 | ||||||
Structured Asset Investment Loan Trust | ||||||||
Series A3, 0.564%, 07/25/2035 | 986,690 | 958,891 | ||||||
2,674,124 | ||||||||
TOTAL OTHER MORTGAGE RELATED SECURITIES | ||||||||
(Cost $6,652,478) | $ | 6,879,520 | ||||||
US GOVERNMENTS – 2.97% | ||||||||
Sovereign – 2.97% | ||||||||
United States Treasury Bond | ||||||||
4.750%, 02/15/2037 | 1,535,000 | $ | 1,834,325 | |||||
United States Treasury Note | ||||||||
2.000%, 02/15/2023 | 2,005,000 | 1,909,606 | ||||||
TOTAL US GOVERNMENTS | ||||||||
(Cost $3,463,719) | $ | 3,743,931 | ||||||
Shares | Value | |||||||
COMMON STOCKS – 0.39% | ||||||||
Paper & Forest Products – 0.36% | ||||||||
Resolute Forest Products, Inc. (a) | 34,174 | $ | 451,781 | |||||
Semiconductors – 0.03% | ||||||||
MagnaChip Semiconductor Corp. (a) | 2,010 | 43,275 | ||||||
TOTAL COMMON STOCKS | ||||||||
(Cost $3,375,523) | $ | 495,056 |
The accompanying notes are an integral part of this Schedule of Investments.
10
Brandes Separately Managed Account Reserve Trust
SCHEDULE OF INVESTMENTS — September 30, 2013 (continued)
Shares | Value | |||||||
PREFERRED STOCKS – 4.03% | ||||||||
Banks & Thrifts – 2.68% | ||||||||
Ally Financial, Inc., 8.500% | 126,200 | $ | 3,379,636 | |||||
Technology Hardware & Equipment – 1.35% | ||||||||
Pitney Bowes International Holdings, Inc., 6.125% (b) | 1,720 | 1,709,895 | ||||||
TOTAL PREFERRED STOCKS | ||||||||
(Cost $4,597,410) | $ | 5,089,531 | ||||||
Principal | ||||||||
Amount | Value | |||||||
ASSET BACKED SECURITIES – 4.01% | ||||||||
Student Loan – 4.01% | ||||||||
National Collegiate Student Loan Trust | ||||||||
Series A-4, 0.484%, 10/25/2033 | $ | 1,500,000 | $ | 701,250 | ||||
SLM Student Loan Trust | ||||||||
Series 2004-B, 0.684%, 09/15/2033 | 1,500,000 | 1,160,243 | ||||||
Series 2005-A, 0.564%, 12/15/2038 | 1,865,000 | 1,393,612 | ||||||
Series 2006-A, 0.544%, 06/15/2039 | 2,200,000 | 1,805,267 | ||||||
TOTAL ASSET BACKED SECURITIES | ||||||||
(Cost $5,600,875) | $ | 5,060,372 | ||||||
CORPORATE BONDS – 80.32% | ||||||||
Advertising – 3.25% | ||||||||
The Interpublic Group of Companies, Inc. | ||||||||
6.250%, 11/15/2014 | 3,920,000 | $ | 4,106,200 | |||||
Banks & Thrifts – 13.62% | ||||||||
Ally Financial, Inc. | ||||||||
6.750%, 12/01/2014 | 3,041,000 | 3,193,050 | ||||||
First Horizon National Corp. | ||||||||
5.375%, 12/15/2015 | 1,780,000 | 1,923,653 | ||||||
JP Morgan Chase & Co. | ||||||||
7.900%, Perpetual | 5,620,000 | 6,097,699 | ||||||
Regions Financial Corp. | ||||||||
5.750%, 06/15/2015 | 3,890,000 | 4,168,174 | ||||||
The Goldman Sachs Group, Inc. | ||||||||
7.500%, 02/15/2019 | 1,500,000 | 1,812,404 | ||||||
17,194,980 | ||||||||
Building Materials – 9.61% | ||||||||
CRH America, Inc. | ||||||||
6.000%, 09/30/2016 | 1,915,000 | 2,154,564 | ||||||
Masco Corp. | ||||||||
6.125%, 10/03/2016 | 4,040,000 | 4,469,250 | ||||||
Mohawk Industries, Inc. | ||||||||
6.375%, 01/15/2016 | 1,570,000 | 1,727,000 |
The accompanying notes are an integral part of this Schedule of Investments.
11
Brandes Separately Managed Account Reserve Trust
SCHEDULE OF INVESTMENTS — September 30, 2013 (continued)
Principal | ||||||||
Amount | Value | |||||||
Owens Corning | ||||||||
6.500%, 12/01/2016 | $ | 750,000 | $ | 837,121 | ||||
USG Corp. | ||||||||
6.300%, 11/15/2016 | 2,790,000 | 2,950,425 | ||||||
12,138,360 | ||||||||
Diversified Financial Services – 5.99% | ||||||||
American International Group, Inc. | ||||||||
6.400%, 12/15/2020 | 2,785,000 | 3,281,880 | ||||||
International Lease Finance Corp. | ||||||||
6.625%, 11/15/2013 | 1,350,000 | 1,356,750 | ||||||
SLM Corp. | ||||||||
5.000%, 10/01/2013 | 2,920,000 | 2,920,000 | ||||||
7,558,630 | ||||||||
Electric Utilities – 9.48% | ||||||||
EDP Finance BV | ||||||||
4.900%, 10/01/2019 (b) | 4,450,000 | 4,394,376 | ||||||
FirstEnergy Corp. | ||||||||
7.375%, 11/15/2031 | 3,950,000 | 3,990,175 | ||||||
Israel Electric Corporation Ltd. (b) | ||||||||
7.250%, 01/15/2019 | 3,275,000 | 3,582,031 | ||||||
11,966,582 | ||||||||
Energy – 1.37% | ||||||||
Valero Energy Corp. | ||||||||
9.375%, 03/15/2019 | 1,340,000 | 1,736,020 | ||||||
Food, Beverage & Tobacco – 5.64% | ||||||||
Pilgrims Pride Corp. | ||||||||
7.875%, 12/15/2018 | 1,790,000 | 1,946,625 | ||||||
Tyson Foods, Inc. | ||||||||
6.600%, 04/01/2016 | 4,615,000 | 5,174,172 | ||||||
7,120,797 | ||||||||
Forest Products & Paper – 1.50% | ||||||||
Sappi Papier Holding GmbH (b) | ||||||||
7.750%, 07/15/2017 | 1,825,000 | 1,898,000 | ||||||
Healthcare Providers & Services – 0.96% | ||||||||
Laboratory Corp. of America Holdings | ||||||||
3.750%, 08/23/2022 | 1,250,000 | 1,217,894 | ||||||
Homebuilders – 10.54% | ||||||||
Centex Corp. | ||||||||
6.500%, 05/01/2016 | 2,695,000 | 2,977,975 | ||||||
Lennar Corp. | ||||||||
5.600%, 05/31/2015 | 4,275,000 | 4,510,125 |
The accompanying notes are an integral part of this Schedule of Investments.
12
Brandes Separately Managed Account Reserve Trust
SCHEDULE OF INVESTMENTS — September 30, 2013 (continued)
Principal | ||||||||
Amount | Value | |||||||
Toll Brothers Finance Corp. | ||||||||
5.150%, 05/15/2015 | $ | 4,235,000 | $ | 4,457,338 | ||||
Urbi Desarrollos Urbanos SA | ||||||||
9.500%, 01/21/2020 (b)(d) | 8,000,000 | 1,360,000 | ||||||
13,305,438 | ||||||||
Insurance – 5.96% | ||||||||
CNA Financial Corp. | ||||||||
7.350%, 11/15/2019 | 1,700,000 | 2,069,026 | ||||||
5.875%, 08/15/2020 | 1,250,000 | 1,441,523 | ||||||
ING US, Inc. | ||||||||
5.500%, 07/15/2022 | 2,220,000 | 2,389,916 | ||||||
Marsh & McLennan Cos, Inc. | ||||||||
5.750%, 09/15/2015 | 1,490,000 | 1,622,246 | ||||||
7,522,711 | ||||||||
Media – 0.92% | ||||||||
The McGraw Hill Cos, Inc. | ||||||||
5.900%, 11/15/2017 | 1,075,000 | 1,162,869 | ||||||
Oil & Gas – 3.94% | ||||||||
Chesapeake Energy Corp. | ||||||||
6.625%, 08/15/2020 | 3,555,000 | 3,821,624 | ||||||
El Paso Corp. | ||||||||
7.000%, 06/15/2017 | 1,035,000 | 1,154,308 | ||||||
4,975,932 | ||||||||
Pharmaceutical – 1.10% | ||||||||
Valeant Pharmaceuticals International | ||||||||
6.750%, 08/15/2018 (b) | 1,300,000 | 1,391,000 | ||||||
Retail – 2.40% | ||||||||
Marks & Spencer Plc | ||||||||
7.125%, 12/01/2037 (b) | 2,975,000 | 3,033,066 | ||||||
Technology Hardware & Equipment – 1.02% | ||||||||
ArcelorMittal SA | ||||||||
6.000%, 03/01/2021 | 1,255,000 | 1,286,375 | ||||||
Telecommunications – 1.85% | ||||||||
Telecom Italia Capital SA | ||||||||
6.999%, 06/04/2018 | 840,000 | 922,277 | ||||||
Telefonica Emisiones SAU | ||||||||
5.462%, 02/16/2021 | 1,390,000 | 1,423,307 | ||||||
2,345,584 | ||||||||
Utilities – 1.17% | ||||||||
Edison Mission Energy | ||||||||
7.000%, 05/15/2017 (d) | 2,230,000 | 1,477,375 | ||||||
TOTAL CORPORATE BONDS | ||||||||
(Cost $93,725,251) | $ | 101,437,813 |
The accompanying notes are an integral part of this Schedule of Investments.
13
Brandes Separately Managed Account Reserve Trust
SCHEDULE OF INVESTMENTS — September 30, 2013 (continued)
Contracts | Value | |||||||
WARRANTS – 0.05% | ||||||||
Semiconductors – 0.05% | ||||||||
MagnaChip Semiconductor Corp. | ||||||||
Expiration Date: November 2014, Exercise Price: 1.97 (a)(c) | 80,400 | $ | 57,989 | |||||
TOTAL WARRANTS | ||||||||
(Cost $863,486) | $ | 57,989 | ||||||
Principal | ||||||||
Amount | Value | |||||||
REPURCHASE AGREEMENTS – 0.66% | ||||||||
Repurchase Agreement – 0.66% | ||||||||
State Street Bank and Trust Repurchase Agreement, | ||||||||
(Dated 09/30/13), due 10/1/13, 0.00% [Collateralized | ||||||||
by $940,000 Fannie Mae Bond, 2.08%, 11/02/22, | ||||||||
(Market Value $873,426)] (proceeds $828,965) | $ | 828,965 | $ | 828,965 | ||||
TOTAL REPURCHASE AGREEMENTS (Cost $828,965) | $ | 828,965 | ||||||
Total Investments (Cost $120,244,186) – 98.55% | $ | 124,443,993 | ||||||
Other Assets in Excess of Liabilities – 1.45% | 1,825,300 | |||||||
TOTAL NET ASSETS – 100.00% | $ | 126,269,293 |
__________
Percentages are stated as a percent of net assets.
(a) | Non-income producing security. | |
(b) | Security was purchased exempt from registration in the U.S. pursuant to Rule 144A of the Securities Act of 1933 (the “Act”) or was acquired in a private placement, and, unless registered under the Act, may only be sold to “qualified institutional buyers” (as defined in the Act) or pursuant to another exemption from registration. The market values of these securities total $17,368,368 which represents 13.76% of total net assets. | |
(c) | The price for this security was derived from an estimate of fair market value using methods approved by the Fund’s Board of Trustees. This security is deemed illiquid and represents $57,989 or 0.05% of the Fund’s net assets and is classified as a Level 2 security. See Note 2 in the Notes to Financial Statements. | |
(d) | In default. |
The accompanying notes are an integral part of this Schedule of Investments.
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Brandes Separately Managed Account Reserve Trust
STATEMENT OF ASSETS AND LIABILITIES — September 30, 2013
ASSETS | ||||
Investments in securities, at cost | $ | 120,244,186 | ||
Investments in securities, at value | $ | 124,443,993 | ||
Receivables: | ||||
Fund shares sold | 525,227 | |||
Dividends and interest | 1,923,540 | |||
Total Assets | 126,892,760 | |||
LIABILITIES | ||||
Payables: | ||||
Fund shares redeemed | 610,450 | |||
Distributions payable | 13,017 | |||
Total Liabilities | 623,467 | |||
NET ASSETS | $ | 126,269,293 | ||
COMPONENTS OF NET ASSETS | ||||
Paid-in capital | $ | 149,800,953 | ||
Undistributed net investment income | 202,052 | |||
Accumulated net realized loss on investments | (27,933,519 | ) | ||
Net unrealized appreciation on: | ||||
Investments | 4,199,807 | |||
Total Net Assets | $ | 126,269,293 | ||
Net asset value, offering price and redemption proceeds per share | ||||
Net Assets | $ | 126,269,293 | ||
Shares outstanding (unlimited shares authorized without par value) | 14,208,867 | |||
Offering and redemption price | $ | 8.89 |
The accompanying notes to financial statements are an integral part of this statement.
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Brandes Separately Managed Account Reserve Trust
STATEMENT OF OPERATIONS — For the Year Ended September 30, 2013
INVESTMENT INCOME | ||||
Income | ||||
Dividend income | $ | 377,450 | ||
Interest income | 6,846,494 | |||
Miscellaneous income | 151,620 | |||
Total income | 7,375,564 | |||
Expenses (Note 3) | ||||
Total expenses | — | |||
Less reimbursement / waiver | — | |||
Total expenses net of reimbursement / waiver | — | |||
Net investment income | 7,375,564 | |||
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS | ||||
Net realized loss on Investments | (1,917,766 | ) | ||
Net unrealized appreciation on: | ||||
Investments | 275,348 | |||
Net realized and unrealized loss on investments | (1,642,418 | ) | ||
Net increase in net assets resulting from operations | $ | 5,733,146 |
The accompanying notes to financial statements are an integral part of this statement.
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Brandes Separately Managed Account Reserve Trust
STATEMENT OF CHANGES IN NET ASSETS
Year Ended | Year Ended | |||||||
September 30, | September 30, | |||||||
2013 | 2012 | |||||||
INCREASE (DECREASE) IN NET ASSETS FROM: | ||||||||
OPERATIONS | ||||||||
Net investment income | $ | 7,375,564 | $ | 8,112,112 | ||||
Net realized gain (loss) on: | ||||||||
Investments | (1,917,766 | ) | 421,276 | |||||
Net change in unrealized appreciation on: | ||||||||
Investments | 275,348 | 11,507,728 | ||||||
Net increase in net assets | ||||||||
resulting from operations | 5,733,146 | 20,041,116 | ||||||
DISTRIBUTIONS TO SHAREHOLDERS | ||||||||
From net investment income | (7,462,478 | ) | (8,827,035 | ) | ||||
Decrease in net assets from distributions | (7,462,478 | ) | (8,827,035 | ) | ||||
CAPITAL SHARE TRANSACTIONS | ||||||||
Proceeds from shares sold | 28,518,289 | 21,773,905 | ||||||
Net asset value of share issued | ||||||||
on reinvestment of distributions | 6,645,826 | 2,132,311 | ||||||
Cost of shares redeemed | (48,751,533 | ) | (35,956,687 | ) | ||||
Net decrease in net assets | ||||||||
from capital share transactions | (13,587,418 | ) | (12,050,471 | ) | ||||
Total Decrease in net assets | (15,316,750 | ) | (836,390 | ) | ||||
NET ASSETS | ||||||||
Beginning of the Period | 141,586,043 | 142,422,433 | ||||||
End of the Period | $ | 126,269,293 | $ | 141,586,043 | ||||
Undistributed net investment income | $ | 202,052 | $ | 127,993 |
The accompanying notes to financial statements are an integral part of this statement.
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Brandes Separately Managed Account Reserve Trust
FINANCIAL HIGHLIGHTS
Year Ended September 30, | ||||||||||||||||||||
2013 | 2012 | 2011 | 2010 | 2009 | ||||||||||||||||
Net asset value, | ||||||||||||||||||||
beginning of period | $ | 9.01 | $ | 8.32 | $ | 8.46 | $ | 7.46 | $ | 6.97 | ||||||||||
Income from | ||||||||||||||||||||
investment operations: | ||||||||||||||||||||
Net investment income | 0.51 | (2) | 0.49 | (2) | 0.52 | (2) | 0.60 | (2) | 0.64 | |||||||||||
Net realized and unrealized | ||||||||||||||||||||
gain/(loss) on investments | (0.12 | ) | 0.73 | (0.12 | ) | 0.97 | 0.47 | |||||||||||||
Total from investment operations | 0.39 | 1.22 | 0.40 | 1.57 | 1.11 | |||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||
Dividends from net | ||||||||||||||||||||
investment income | (0.51 | ) | (0.53 | ) | (0.54 | ) | (0.57 | ) | (0.62 | ) | ||||||||||
Total dividends and distributions | (0.51 | ) | (0.53 | ) | (0.54 | ) | (0.57 | ) | (0.62 | ) | ||||||||||
Net asset value, end of period | $ | 8.89 | $ | 9.01 | $ | 8.32 | $ | 8.46 | $ | 7.46 | ||||||||||
Total return | 4.42 | % | 15.13 | % | 4.61 | % | 21.81 | % | 18.25 | % | ||||||||||
Net assets, end of period (millions) | $ | 126.3 | $ | 141.6 | $ | 142.4 | $ | 158.5 | $ | 157.5 | ||||||||||
Ratio of net expenses | ||||||||||||||||||||
to average net assets(1) | 0.00 | % | 0.00 | % | 0.00 | % | 0.00 | % | 0.00 | % | ||||||||||
Ratio of net investment income | ||||||||||||||||||||
to average net assets(1) | 5.61 | % | 5.66 | % | 5.98 | % | 7.53 | % | 10.15 | % | ||||||||||
Portfolio turnover rate | 28.88 | % | 27.44 | % | 56.16 | % | 36.90 | % | 40.53 | % |
__________
(1) | Reflects the fact that no fees or expenses are incurred by the Fund. The Fund is an integral part of “wrap-fee” programs sponsored by investment advisers and/or broker-dealers unaffiliated with the Fund or the Advisor. Participants in these programs pay a “wrap” fee to the sponsor of the program. |
(2) | Net investment income per share has been calculated based on average shares outstanding during the period. |
The accompanying notes to financial statements are an integral part of this statement.
18
Brandes Separately Managed Account Reserve Trust
NOTES TO FINANCIAL STATEMENTS
NOTE 1 − ORGANIZATION
The Separately Managed Account Reserve Trust (the “Fund”) is a series of Brandes Investment Trust (the “Trust”). The Trust is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as a diversified, open-end management investment company. The Fund began operations on October 3, 2005. The Fund invests its assets primarily in debt securities and seeks to maximize total return.
NOTE 2 − SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently followed by the Fund. These policies are in conformity with accounting principles generally accepted in the United States of America.
A. | Repurchase Agreements. The Fund may enter into repurchase agreements with government securities dealers recognized by the Federal Reserve Board, with member banks of the Federal Reserve System or with other brokers or dealers that meet the credit guidelines established by the Board of Trustees. The Fund will always receive and maintain, as collateral, securities whose market value, including accrued interest (which is recorded in the Schedule of Investments), will be at least equal to 100% of the dollar amount invested by the Fund in each agreement, and the Fund will make payment for such securities only upon physical delivery or upon evidence of book entry transfer to the account of the Fund’s custodian. To the extent that the term of any repurchase transaction exceeds one business day, the value of the Fund’s collateral is marked-to-market on a daily basis to ensure the adequacy of the collateral. Before causing a Fund to enter into a repurchase agreement with any other party, the investment advisor will determine that such party does not have any apparent risk of becoming involved in bankruptcy proceedings within the time frame contemplated by the repurchase agreement. If the seller defaults and the value of the collateral declines, or if bankruptcy proceedings are commenced with respect to the seller of the security, realization of the collateral by the Fund may be delayed or limited. | |
B. | Foreign Currency Translation and Transactions. Values of investments denominated in foreign currencies are converted into U.S. dollars using the spot market rates of exchange at the time of valuation. Purchases and sales of investments and dividend and interest income are translated into U.S. dollars using the spot market rates of exchange prevailing on the respective dates of such translations. The gain or loss resulting from changes in foreign exchange rates is included with net realized and unrealized gain or loss from investments, as appropriate. Foreign |
19
Brandes Separately Managed Account Reserve Trust
NOTES TO FINANCIAL STATEMENTS (continued)
securities and currency transactions may involve certain considerations and risks not typically associated with those of domestic origin. | ||
C. | Delayed Delivery Securities. The Fund may purchase securities on a when-issued or delayed delivery basis. “When-issued” or delayed delivery refers to securities whose terms are available and for which a market exists, but that have not been issued. For a when-issued or delayed delivery transaction, no payment is made until delivery date, which is typically longer than the normal course of settlement. When the Fund enters into an agreement to purchase securities on a when-issued or delayed delivery basis, the Fund segregates cash or liquid securities, of any type or maturity, equal in value to the Fund’s commitment. Losses may arise if the market values of the underlying securities change, if the counterparty does not perform under the contract, or if the issuer does not issue the securities due to political, economic or other factors. | |
D. | Security Transactions, Dividends and Distributions. Security transactions are accounted for on the trade dates. Realized gains and losses are evaluated on the bases of identified costs. Distributions from net investment income are declared daily and paid monthly. Distributions of net realized gains, if any, are declared at least annually. Dividend income and distributions to shareholders are recorded on the ex-dividend dates. Interest is recorded on an accrual basis. The Fund amortizes premiums and accretes discounts using the constant yield method. | |
E. | Use of Estimates. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and revenue and expenses and disclosure of contingent assets and liabilities and revenue and expenses at the date of the financial statements. Actual results could differ from those estimates. | |
F. | Indemnification Obligations. Under the Trust’s organizational documents, its current and former 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 that contain a variety of representations and warranties and provide general indemnifications. The Fund’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred or that would be covered by other parties. | |
G. | Accounting for Uncertainty in Income Taxes. The Fund has elected to be taxed as a “regulated investment company” and intends to distribute |
20
Brandes Separately Managed Account Reserve Trust
NOTES TO FINANCIAL STATEMENTS (continued)
substantially all taxable income to its shareholders and otherwise comply with the provisions of the Internal Revenue Code applicable to regulated investment companies. The Fund may be subject to a nondeductible excise tax calculated as a percentage of certain undistributed amounts of net investment income and net capital gains. The Fund intends to distribute its net investment income and capital gains as necessary to avoid this excise tax. Therefore, no provision for federal income taxes or excise taxes has been made. | ||
The Trust has adopted financial reporting rules that require the Trust to analyze all open tax years, as defined by the applicable statute of limitations, for all major jurisdictions. Open tax years for the Fund are those that are open for exam by taxing authorities (2010 through 2013). As of September 30, 2013, the Trust has no examinations in progress. | ||
Management has analyzed the Trust’s tax positions, and has concluded that no liability should be recorded related to uncertain tax positions expected to be taken on the tax return for the fiscal year-end September 30, 2013. The Trust identifies its major tax jurisdictions as the U.S. Government and the State of California. The Trust is 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. | ||
H. | Fair Value Measurements. The Trust has adopted accounting principles generally accepted in the United States of America (“US GAAP”) related to fair value accounting standards which establish a definition of fair value and set out a hierarchy for measuring fair value. These standards require additional disclosures about the various inputs and valuation techniques used to develop the measurements of fair value and a discussion of changes in valuation techniques and related inputs during the period. These inputs are summarized in the three broad levels listed below: |
Level 1 — Quoted unadjusted prices for identical instruments in active markets to which the Trust has access at the date of measurement. | ||
Level 2 — Other significant observable market inputs including quoted prices for similar instruments in active markets; quoted adjusted prices in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets. Level 2 inputs are those in markets for which there are few transactions, the prices are not current, little public information exists or instances where prices vary substantially over time or among broker market makers. |
21
Brandes Separately Managed Account Reserve Trust
NOTES TO FINANCIAL STATEMENTS (continued)
Level 3 — Significant unobservable inputs including model derived valuations in which one or more significant inputs or significant value drivers are unobservable. Unobservable inputs are those inputs that reflect the Trust’s own assumptions that market participants would use to price the asset or liability based on the best available information. |
I. | Security Valuation. Bonds and other fixed-income securities (other than short-term securities) are valued using the bid price on the day of the valuation provided by an independent pricing service. | |
Securities traded on a national securities exchange are valued at the last reported sale price at the close of regular trading on each day the exchange is open for trading. Securities listed on the NASDAQ National Market System for which market quotations are readily available are valued using the NASDAQ Official Closing Price. Securities traded on an exchange for which there have been no sales are valued at the mean between last bid and ask price on such day. Securities for which quotations are not readily available are valued at their respective fair values as determined in good faith pursuant to procedures adopted by the Board of Trustees. U.S. Government securities with less than 60 days remaining to maturity when acquired by the Fund are valued on an amortized cost basis. | ||
Short-term securities, including U.S. Government and other fixed income securities, with more than 60 days remaining to maturity are valued at the current market value as provided by an independent pricing service on the day of valuation until the 60th day prior to maturity, and are then valued at amortized cost based upon the value on such date unless the Board determines during such 60-day period that this amortized cost basis does not represent fair value. | ||
The Trust has adopted valuation procedures that allow for fair value pricing for use in appropriate circumstances. For example, such circumstances may arise when trading in a security has been halted or suspended or a security has been delisted from a national exchange, a security has not been traded for an extended period of time, or a significant event with respect to a security occurs after the close of the market or exchange on which the security principally trades and before the time the Fund calculates its own share price. If no price, or in the Advisor’s determination no price representing fair value, is provided for a security held by the Fund by an independent pricing agent, then the security will be fair valued. Thinly traded securities and certain foreign securities may be impacted more by the use of fair valuations than other securities. |
22
Brandes Separately Managed Account Reserve Trust
NOTES TO FINANCIAL STATEMENTS (continued)
Valuation adjustments may be applied to certain common and preferred stocks that are solely traded on a foreign exchange to account for the market movement between the close of the foreign market and the close of the New York Stock Exchange (“NYSE”). These securities are generally valued using pricing service providers that consider the correlation of the trading patterns of the foreign security to the intraday trading in the U.S. markets for investments. None of the Fund’s securities were fair valued utilizing this method as of September 30, 2013. | |
In using fair value pricing, the Fund attempts to establish the price that it might reasonably have expected to receive upon a sale of the security at 4:00 p.m. Eastern time. Valuing securities at fair value involves greater reliance on judgment than valuation of securities based on readily available market quotations. When using fair value to price securities, the Fund may value those securities higher or lower than another fund using market quotations or fair value to price the same securities. Further, there can be no assurance that the Fund could obtain the fair value assigned to a security if it were to sell the security at approximately the time at which the Fund determines its net asset value. | |
Foreign securities are recorded in the financial statements after translation to U.S. dollars based on the applicable exchange rate at the end of the period. The Fund reports certain foreign currency-related transactions as components of realized gains or losses for financial reporting purposes, whereas such components are treated as ordinary income for federal income tax purposes. | |
Fixed income securities including corporate, convertible and municipal bonds and notes, U.S. government agencies, U.S. Treasury obligations, sovereign issues, bank loans, convertible preferred securities and non-U.S. bonds are normally valued on the basis of quotes obtained from brokers and dealers or independent pricing services or sources. Independent pricing services typically use information provided by market makers or estimates of market values obtained from yield data relating to investments or securities with similar characteristics. The service providers’ internal models use inputs that are observable such as, among other things, issuer details, interest rates, yield curves, prepayment speeds, credit risks/spreads, default rates and quoted prices for similar assets. Securities that use similar valuation techniques and inputs as described above are categorized as Level 2 of the fair value hierarchy. | |
Fixed income securities purchased on a delayed-delivery basis are typically marked to market daily until settlement at the forward settlement date. |
23
Brandes Separately Managed Account Reserve Trust
NOTES TO FINANCIAL STATEMENTS (continued)
The Fund may enter into mortgage dollar roll transactions in which the Fund sells a mortgage-backed security to a counterparty and simultaneously enters into an agreement with the same counterparty to buy back a similar security on a specific future date at a predetermined price. Risks may arise due to the delayed payment date and the potential inability of counterparties to complete the transaction. Mortgage dollar rolls are accounted for as purchase and sale transactions, which may increase the Fund’s portfolio turnover rate. | |
Mortgage and asset-backed securities are usually issued as separate tranches, or classes, of securities within each package of underlying securities. These securities are also normally valued by pricing service providers that use broker dealer quotations or valuation estimates from their internal pricing models. The pricing models for these securities usually consider tranche level attributes, estimated cash flows and market-based yield spreads for each tranche, current market data and incorporate packaged collateral performance, as available. Mortgage and asset-backed securities that use such valuation techniques and inputs are categorized as Level 2 of the fair value hierarchy only if there are significant observable inputs used. | |
Common stocks, exchange-traded fund shares and financial derivative instruments, such as futures contracts or options contracts that are traded on a national securities or commodities exchange, are valued at the last reported sales price, in the case of common stocks and exchange-traded fund shares, or, in the case of futures contracts or options contracts, the settlement price determined by the relevant exchange. To the extent these securities are actively traded and valuation adjustments are not applied, they are categorized as Level 1 of the fair value hierarchy. | |
Valuation adjustments may be applied to certain securities that are solely traded on a foreign exchange to account for the market movement between the close of the foreign market and the close of the New York Stock Exchange (“NYSE.”) These securities are generally valued using pricing service providers that consider the correlation of the trading patterns of the foreign security to the intraday trading in the U.S. markets for investments. Securities using these valuation adjustments are categorized as Level 2 of the fair value hierarchy. | |
Investments in registered open-end management investment companies will be valued based upon the Net Asset Values (“NAVs”) of such investments and are categorized as Level 1 of the fair value hierarchy. Investments in privately held investment funds are valued based upon the NAVs of such investments and are categorized as Level 2 of the fair value hierarchy. |
24
Brandes Separately Managed Account Reserve Trust
NOTES TO FINANCIAL STATEMENTS (continued)
Short-term investments having a maturity of 60 days or less are generally valued at amortized cost which approximates fair market value. These investments are categorized as Level 2 of the fair value hierarchy. | |
Certain securities may be fair valued in accordance with the fair valuation procedures approved by the Board of Trustees. The Valuation Committee is generally responsible for overseeing the day to day valuation processes and reports periodically to the Board. The Valuation Committee is authorized to make all necessary determinations of the fair value of portfolio securities and other assets for which market quotations are not readily available or if it is deemed that the prices obtained from brokers and dealers or independent pricing services are unreliable. Warrants are fair valued by the Valuation Committee based on intrinsic value, which is derived by calculating the difference between the underlying equity security’s price and the strike price of the warrant, including the affect of any relevant conversion ratios. The securities fair valued by the Valuation Committee are indicated on the Schedule of Investments. These securities are classified as Level 2 or Level 3 of the fair value hierarchy. Certain vendor priced securities may also be considered Level 3 if significant unobservable inputs are used by the vendors. |
The following is a summary of the inputs used, as of September 30, 2013, involving the Fund’s assets carried at value. The inputs of methodology used for valuing securities may not be an indication of the risk associated with investing in those securities.
Description | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Investment in Securities | ||||||||||||||||
SMART Fund | ||||||||||||||||
Equities* | $ | 495,056 | $ | — | $ | — | $ | 495,056 | ||||||||
Preferred Stocks | 3,379,636 | 1,709,895 | — | 5,089,531 | ||||||||||||
Asset Backed Securities | — | — | 5,060,372 | 5,060,372 | ||||||||||||
Corporate Bonds | — | 101,437,813 | — | 101,437,813 | ||||||||||||
Government Securities | — | 3,743,931 | — | 3,743,931 | ||||||||||||
Mortgage Backed Securities | — | 6,879,520 | 850,816 | 7,730,336 | ||||||||||||
Warrants | — | 57,989 | — | 57,989 | ||||||||||||
Repurchase Agreements | — | 828,965 | — | 828,965 | ||||||||||||
Total Investments in Securities | $ | 3,874,692 | $ | 114,658,113 | $ | 5,911,188 | $ | 124,443,993 |
* | Please refer to the Schedule of Investments for additional information regarding the composition of the amounts listed above. |
25
Brandes Separately Managed Account Reserve Trust
NOTES TO FINANCIAL STATEMENTS (continued)
Below are the transfers into or out of levels 1 and 2 for the Funds using market values measured at the end of the reporting periods:
SMART Fund | ||||
Transfers into Level 1 | $ | — | ||
Transfers out of Level 1 | — | |||
Net Transfers in/(out) of Level 1 | $ | — | ||
Transfers into Level 2 | $ | 57,989 | ||
Transfers out of Level 2 | — | |||
Net Transfers in/(out) of Level 2 | $ | 57,989 |
Below is a reconciliation that details the activity of securities in Level 3 during the year ended September 30, 2013:
Beginning Balance − October 1, 2012 | $ | 5,754,365 | ||
Purchases | — | |||
Sales | (690,351 | ) | ||
Transfers into level 3 | — | |||
Transfers out of level 3 | (57,989 | ) | ||
Realized losses | (2,223,255 | ) | ||
Change in unrealized gains | 3,128,418 | |||
Ending Balance − September 30, 2013 | $ | 5,911,188 |
The realized and unrealized gains and losses from Level 3 transactions is included with the net realized gains and losses on investments on the Statement of Assets & Liabilities. As of September 30, 2013, the Fund had $826,166 of unrealized losses from Level 3 securities.
The following table presents information about unobservable inputs related to the Trust’s categories of Level 3 investments as of September 30, 2013:
Fair value | Valuation | |||
at 9/30/13 | Techniques | Unobservable Inputs | Ranges | |
Student Loans | $5,060,372 | Consensus | Third party inputs | N/A |
pricing | ||||
Prepayment speeds | 2 − 4% | |||
Federal & Federally | $850,816 | Consensus | Third party inputs | N/A |
Sponsored Credits | pricing |
The following provides a general description of the impact of a change in an unobservable input on the fair value measurement and the interrelationship of unobservable inputs, where relevant and significant. Interrelationships may also exist between observable and unobservable inputs (for example, as interest rates rise, prepayment rates decline).
26
Brandes Separately Managed Account Reserve Trust
NOTES TO FINANCIAL STATEMENTS (continued)
Student Loans & Federal & Federally Sponsored Credits
At regular intervals the above unobservable inputs are reviewed and compared to publicly available information for reasonableness. Values are compared to historical averages and general sector trends are taken into account. In general, an increase in the discount rate, default rates, loss severity and delinquencies, in isolation, would result in a decrease in the fair value measurement. In addition, an increase in default rates would generally be accompanied by a decrease in recovery rates, slower prepayment rates and an increase in liquidity spreads. For each of the individual relationships described above, the inverse relationship would also generally apply.
NOTE 3 − INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
A. | Advisor Fee. Brandes Investment Partners, L.P. (the “Advisor”) provides the Fund with investment management services under an Investment Advisory Agreement. The Advisor receives no advisory fee or other fee from the Fund. The financial statements of the Fund reflect the fact that no fees or expenses are incurred by the Fund. It should be understood, however, that the Fund is an integral part of “wrap-fee” programs sponsored by investment advisors unaffiliated with the Fund and the Advisor. Typically, participants in these programs pay a “wrap-fee” to their investment advisors. Although the Fund does not compensate the Advisor directly for its service under the Investment Advisory Agreement, the Advisor benefits from its relationships with the sponsors of wrap-fee programs for which the Fund is an investment option. | |
B. | Administration Fee. U.S. Bancorp Fund Services, LLC, (the “Administrator”) acts as administrator for the Fund. The Administrator prepares various federal and state regulatory filings; prepares reports and materials to be supplied to the Trustees; monitors the activities of the Fund’s custodian, transfer agent and accountant; coordinates the preparation and payment of Fund expenses; and prepares several Fund reports. For its services, the Administrator receives an annual fee at the rate of 0.03% of the Trust’s average daily net assets for the first $1 billion in net assets and 0.02% in excess of $1 billion of the Trust’s average daily net assets, subject to a minimum of $50,000 per series of the Trust per annum which is allocated among the series based on their average net assets. The Advisor compensates the Administrator on behalf of the Fund for the services the Administrator performs for the Fund. | |
C. | Distribution and Service Fees. Quasar Distributors, LLC (the “Distributor”), a registered broker-dealer, acts as the Fund’s principal underwriter in a continuous public offering of the Fund’s shares. The |
27
Brandes Separately Managed Account Reserve Trust
NOTES TO FINANCIAL STATEMENTS (continued)
Distributor is an affiliate of the Administrator. All of the Fund’s distribution fees are paid by the Advisor.
Certain officers and Trustees of the Trust are also officers of the Advisor.
NOTE 4 − PURCHASES AND SALES OF SECURITIES
The cost of purchases and the proceeds from sales of securities of the Fund, excluding short-term investments, were as follows for the year ended September 30, 2013:
U.S. Government | Other | |||||||||||||
Purchases | Sales | Purchases | Sales | |||||||||||
$ | 21,056,975 | $ | 33,331,173 | $ | 16,177,693 | $ | 14,590,218 |
NOTE 5 − CAPITAL STOCK TRANSACTIONS
The Fund’s capital stock activity in shares and dollars during the years ended September 30, 2013 and 2012, was as follows (shares and dollar amounts in thousands):
September 30, 2013 | September 30, 2012 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Shares Sold | 3,149 | $ | 28,518 | 2,514 | $ | 21,774 | ||||||||||
Issued on Reinvestment of Distributions | 734 | 6,646 | 247 | 2,132 | ||||||||||||
Shares Redeemed | (5,395 | ) | (48,751 | ) | (4,155 | ) | (35,956 | ) | ||||||||
Net (Decrease) Resulting from | ||||||||||||||||
Fund Share Transactions | (1,512 | ) | $ | (13,587 | ) | (1,394 | ) | $ | (12,050 | ) |
NOTE 6 − FEDERAL INCOME TAX MATTERS
As of September 30, 2013, the Fund’s components of distributable earnings on a tax basis were as follows:
Cost of investments for tax purposes | $ | 120,348,004 | ||
Gross tax unrealized appreciation | 10,362,242 | |||
Gross tax unrealized depreciation | (6,266,253 | ) | ||
Net unrealized appreciation on investments | 4,095,989 | |||
Distributable ordinary income | 202,052 | |||
Distributable long-term capital gains | — | |||
Total distributable earnings | 202,052 | |||
Other accumulated losses | (27,829,701 | |||
Total accumulated losses | $ | (23,531,660 | ) |
The differences between book and tax basis distributable earnings are primarily related to the differences in classification of paydown gains and losses for tax purposes compared to book purposes. The difference between book and tax
28
Brandes Separately Managed Account Reserve Trust
NOTES TO FINANCIAL STATEMENTS (continued)
basis unrealized depreciation on investments and foreign currency is due primarily to timing differences resulting from wash sale transactions. These differences are temporary.
As of September 30, 2013, the Fund had capital losses expiring on September 30, 2017, 2018 and 2019 in the amounts of $12,139,741, $6,084,748 and $6,501,831, respectively. As of September 30, 2013, the Fund had a capital loss with an indefinite expiration in the amount of $890,642.
The tax composition of dividends for the period ended September 30, 2013 for the Fund was as follows:
Ordinary | Long Term | Return |
Income Total | Capital Gains Total | of Capital |
$7,462,478 | $ — | $ — |
At September 30, 2013, the Fund had net realized losses on investments and foreign currencies of $2,212,739 which are deferred for tax purposes and were recognized on October 1, 2013.
Reclassification of Capital Accounts. Accounting principles generally accepted in the United States of America require that certain components of net assets be reclassified between financial and tax reporting. These reclassifications have no effect on net assets or net asset value per share. For the year ended September 30, 2013, as a result of its reclassifications the Fund’s undistributed net investment income was increased by $160,973 and accumulated net realized loss was decreased by $160,973.
In preparing these financial statements, the Trust has evaluated events and transactions for potential recognition or disclosure through the date the financial statements were available to be issued.
NOTE 7 − OWNERSHIP BY AFFILIATED PARTIES
As of September 30, 2013, the Advisor or an affiliate of the Advisor beneficially owned 724,402 shares of the Fund which comprised 5.11% of the total outstanding shares.
29
Brandes Separately Managed Account Reserve Trust
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Trustees and Shareholders
of Brandes Investment Trust
In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statement of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Brandes Separately Managed Account Reserve Trust (hereinafter referred to as the “Fund”) at September 30, 2013, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the three years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit, which included confirmation of securities at September 30, 2013 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion. The financial highlights of the Fund for each of the two years in the period ended September 30, 2010, were audited by other auditors whose report dated November 24, 2010 expressed an unqualified opinion on those statements.
PricewaterhouseCoopers LLP
Los Angeles, California
November 26, 2013
30
Brandes Separately Managed Account Reserve Trust
ADDITIONAL INFORMATION — (Unaudited)
PROXY VOTING PROCEDURES
The Advisor votes proxies relating to the Funds’ portfolio securities in accordance with procedures adopted by the Advisor. You may obtain a description of these procedures, free of charge, by calling toll-free 1-800-331-2979. This information is also available through the Securities and Exchange Commission’s website at http:// www.sec.gov.
Information regarding how the Trust voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available without charge, upon request, by calling 1-800-331-2979. This information is also available through the Securities and Exchange Commission’s website at http://www.sec.gov.
FORM N-Q DISCLOSURE
The Trust files the Fund’s complete schedule of portfolio holdings with the Securities and Exchange Commission for the first and third quarters of each fiscal year on Form N-Q. The Trust’s Form N-Q filings are available on the Securities and Exchange Commission’s website at http://www.sec.gov. The Trust’s Form N-Q filings may be reviewed and copied at the Commission’s Public Reference Room in Washington, D.C., and information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. Information regarding the Trust’s Form N-Q filings is also available, without charge, by calling toll-free, 1-800-331-2979.
TAX NOTICE
For the periods ended September 30, 2013, 98.34% of the ordinary distributions paid by the SMART Fund qualify as interest related dividends under Internal Revenue Code Section 87(k)(1)(c). For the periods ended September 30, 2013, none of the ordinary distributions paid by SMART Fund, were designated as short-term gain distributions under Internal Revenue Code Section 871(k)(2)(c).
The percentage of dividend income distributed for the year ended September 30, 2013, which is designated as qualified dividend income under the Jobs and Growth Tax Relief Reconciliation Act of 2003 is 4.94% for the SMART Fund. Of the dividends paid by the SMART Fund, 4.94% qualify for the corporate dividends received deduction.
31
Brandes Separately Managed Account Reserve Trust
TRUSTEES AND OFFICERS INFORMATION — (Unaudited)
The Board of Trustees is responsible for the overall management of the Trust’s business. The Board approves all significant agreements between the Trust and persons or companies furnishing services to the Trust, including the Trust’s agreements with the Advisor, Administrator, Custodian and Transfer Agent. The Board of Trustees delegates the day-to-day operations of the Trust to its officers, subject to the Fund’s investment objective and policies and to general supervision by the Board. The Trust’s Statement of Additional Information includes additional information about the Trustees and is available, without charge, by calling 1-800-331-2979.
The Trustees and officers of the Trust, their business addresses and principal occupations during the past five years are:
Term of | |||||
Office | Number | Other | |||
and | Principal | of Trust | Directorships/ | ||
Position(s) | Length | Occupation | Series | Trusteeships | |
Name, Address | Held with | of Time | During Past | Overseen | Held by |
and Age | Trust | Served(1) | 5 Years | by Trustee | Trustee |
Independent Trustees(2) | |||||
J. Michael Gaffney, CFA | Trustee | Since | Independent | 7 | None |
11988 El Camino Real, | June | Consultant, | |||
Suite 600 | 2004 | NATIXIS Global | |||
San Diego, CA 92130 | Asset Management, | ||||
(Age 72) | North America from | ||||
2004 to 2011. | |||||
Jean E. Carter | Trustee | Since | Retired since 2005; | 7 | Bridge Builder |
11988 El Camino Real, | and | April | Director, Investment | Trust | |
Suite 600 | Chairman | 2008 | Management and | ||
San Diego, CA 92130 | other positions of | ||||
(Age 56) | Russell Investment | ||||
Group from 1982 | |||||
to 2005. | |||||
Robert M. Fitzgerald, CPA | Trustee | Since | Retired from | 7 | Hotchkis and |
11988 El Camino Real, | April | 2002 − 2005 and | Wiley Mutual | ||
Suite 600 | 2008 | since 2007; Chief | Funds. | ||
San Diego, CA 92130 | Financial Officer, | ||||
(Age 61) | National Retirement | ||||
Partners from 2005 | |||||
to 2007. |
32
Brandes Separately Managed Account Reserve Trust
TRUSTEES AND OFFICERS INFORMATION — (Unaudited) (continued)
Term of | |||||
Office | Number | Other | |||
and | Principal | of Trust | Directorships/ | ||
Position(s) | Length | Occupation | Series | Trusteeships | |
Name, Address | Held with | of Time | During Past | Overseen | Held by |
and Age | Trust | Served(1) | 5 Years | by Trustee | Trustee |
Craig Wainscott | Trustee | Since | Retired since 2006; | 7 | None |
11988 El Camino Real, | February | Managing Director | |||
Suite 600 | 2012 | and other positions, | |||
San Diego, CA 92130 | US Mutual Funds, | ||||
(Age 52) | Russell Investments, | ||||
from 1982 to 2006; | |||||
currently Partner | |||||
with The Paradigm | |||||
Project and advisor to | |||||
early-stage companies. | |||||
“Interested” Trustees(3) | |||||
Oliver Murray | Trustee | Since | Chief Executive | 7 | None |
11988 El Camino Real, | February | Officer, Brandes | |||
Suite 600 | 2012 | Investment Partners | |||
San Diego, CA 92130 | & Co.; Managing | ||||
(Age 50) | Director − PMCS of | ||||
Brandes Investment | |||||
Partners, L.P., the | |||||
investment advisor | |||||
to the Funds | |||||
(the “Advisor”). | |||||
Jeff Busby | Trustee | Since | Executive Director | 7 | None |
11988 El Camino Real, | and | July | of the Advisor. | ||
Suite 600 | President | 2006 | |||
San Diego, CA 92130 | |||||
(Age 52) | |||||
Officers of the Trust | |||||
Thomas M. Quinlan | Secretary | Since | Associate General | N/A | N/A |
11988 El Camino Real, | June | Counsel to the | |||
Suite 600 | 2003 | Advisor since | |||
San Diego, CA 92130 | January 2006; | ||||
(Age 42) | Counsel to the | ||||
Advisor from | |||||
July 2000 to | |||||
January 2006. |
33
Brandes Separately Managed Account Reserve Trust
TRUSTEES AND OFFICERS INFORMATION — (Unaudited) (continued)
Term of | |||||
Office | Number | Other | |||
and | Principal | of Trust | Directorships/ | ||
Position(s) | Length | Occupation | Series | Trusteeships | |
Name, Address | Held with | of Time | During Past | Overseen | Held by |
and Age | Trust | Served(1) | 5 Years | by Trustee | Trustee |
Gary Iwamura | Treasurer | Since | Finance Director | N/A | N/A |
11988 El Camino Real, | September | of the Advisor. | |||
Suite 600 | 1997 | ||||
San Diego, CA 92130 | |||||
(Age 56) | |||||
George Stevens | Chief | Since | Director, Beacon | N/A | N/A |
11988 El Camino Real, | Compliance | January | Hill Fund Services, | ||
Suite 600 | Officer | 2010 | Inc., March 2008 | ||
San Diego, CA 92130 | to present; Vice | ||||
(Age 62) | President, Citi | ||||
Fund Services, | |||||
September 1996 | |||||
to March 2008. |
__________
(1) | Trustees and officers of the Fund serve until their resignation, removal or retirement. | |
(2) | Not “interested persons” of the Trust as defined in the 1940 Act. | |
(3) | “Interested persons” of the Trust as defined in the 1940 Act by virtue of their positions with the Advisor. |
34
(This Page Intentionally Left Blank.)
ADVISOR
Brandes Investment Partners, L.P.
11988 El Camino Real, Suite 600
San Diego, CA 92130
800.331.2979
DISTRIBUTOR
Quasar Distributors, LLC
615 E. Michigan Street, 4th Floor
Milwaukee, WI 53202
TRANSFER AGENT
U.S. Bancorp Fund Services, LLC
615 E. Michigan Street, 3rd Floor
Milwaukee, WI 53202
INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
PricewaterhouseCoopers LLP
601 South Figueroa Street
Los Angeles, CA 90017
LEGAL COUNSEL
Bingham McCutchen LLP
355 South Grand Avenue, Suite 4400
Los Angeles, CA 90071
This report is intended for shareholders of the Brandes Separately Managed Account Reserve Trust and may not be used as sales literature unless preceded or accompanied by a current prospectus.
Statements and other information herein are dated and are subject to change.
Item 2. Code of Ethics.
The registrant has adopted a code of ethics that applies to the registrant’s principal executive officer and principal financial officer. The registrant has not made any amendments to its code of ethics during the period covered by this report. The registrant has not granted any waivers from any provisions of the code of ethics during the period covered by this report. The registrant undertakes to provide to any person without charge, upon request, a copy of such code of ethics by mail when they call the registrant at 1-800-331-2979.
Item 3. Audit Committee Financial Expert.
The registrant’s board of trustees has determined that there is at least one audit committee financial expert serving on its audit committee. Robert Fitzgerald is the “audit committee financial expert” and is considered to be “independent” as each term is defined in Item 3 of Form N-CSR.
Item 4. Principal Accountant Fees and Services.
The registrant has engaged its principal accountant to perform audit services, audit-related services, tax services and other services during the past two fiscal years. “Audit services” refers to performing an audit of the registrant's annual financial statements or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for those fiscal years. “Audit-related services” refers to the assurance and related services by the principal accountant that are reasonably related to the performance of the audit. “Tax services” refers to professional services rendered by the principal accountant for tax compliance, tax advice, and tax planning. The following table details the aggregate fees billed or expected to be billed for each of the last two fiscal years for audit services, audit-related services, tax services and other services by the principal accountant.
FYE 9/30/2013 | FYE 9/30/2012 | |
Audit Fees | $229,300 | $221,000 |
Audit-Related Fees | None | None |
Tax Fees | $46,382 | $44,982 |
All Other Fees | None | None |
The registrant’s audit committee has adopted pre-approval policies and procedures that require the audit committee to pre-approve all audit and non-audit services of the registrant, including services provided to any entity affiliated with the registrant.
All of the principal accountant’s hours spent on auditing the registrant’s financial statements were attributed to work performed by full-time permanent employees of the principal accountant.
The following table indicates the non-audit fees billed or expected to be billed by the registrant’s accountant for services to the registrant and to the registrant’s investment adviser (and any entity controlling, controlled by, or under common control with the investment adviser for the last two years.
Non-Audit Related Fees | FYE 9/30/2013 | FYE 9/30/2012 |
Registrant | None | None |
Registrant’s Investment Adviser | None | None |
Item 5. Audit Committee of Listed Registrants.
Not applicable to registrants who are not listed issuers (as defined in Rule 10A-3 under the Securities Exchange Act of 1934).
Item 6. Investments.
(a) | Schedule of Investments is included as part of the report to shareholders filed under Item 1 of this Form. |
(b) | Not Applicable |
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.
Not applicable to open-end investment companies.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
Not applicable to open-end investment companies.
Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers.
Not applicable to open-end investment companies.
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 President and Treasurer have reviewed the Registrant's disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940 (the “Act”)) as of a date within 90 days of the filing of this report, as required by Rule 30a-3(b) under the Act and Rules 13a-15(b) or 15d-15(b) under the Securities Exchange Act of 1934. Based on their review, such officers have concluded that the disclosure controls and procedures are effective in ensuring that information required to be disclosed in this report is appropriately recorded, processed, summarized and reported and made known to them by others within the Registrant and by the Registrant’s service provider. |
(b) | No changes in the registrant's internal control over financial reporting (as defined in Rule 30a-3(d) under the Act) occurred during the second fiscal quarter of the period covered by this report that materially affected, or are reasonably likely to materially affect, the registrant's internal control over financial reporting. |
Item 12. Exhibits.
(a) | (1) Any code of ethics or amendment thereto, that is the subject of the disclosure required by Item 2, to the extent that the registrant intends to satisfy Item 2 requirements through filing an exhibit. 1) Incorporated by reference to the registrant’s Form N-CSR filed January 7, 2005. |
(2) A separate certification for each principal executive and principal financial officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Filed herewith.
(3) Any written solicitation to purchase securities under Rule 23c-1 under the Act sent or given during the period covered by the report by or on behalf of the registrant to 10 or more persons. Not applicable to open-end investment companies.
(b) | Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Furnished 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.
(Registrant) Brandes Investment Trust
By (Signature and Title)* /s/ Jeff Busby
Jeff Busby, President
Date December 3, 2013
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By (Signature and Title)* /s/ Jeff Busby
Jeff Busby, President
Date December 3, 2013
By (Signature and Title)* /s/ Gary Iwamura
Gary Iwamura, Treasurer
Date December 3, 2013
* Print the name and title of each signing officer under his or her signature.