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, 2014
Date of reporting period: March 31, 2014
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
SEMI-ANNUAL REPORT
For the six months ended
March 31, 2014
Brandes International Equity Fund
Dear Shareholder:
The Brandes International Equity Fund I shares (“the Fund”) gained 8.10% during the six months ended March 31, 2014, outperforming its benchmark, the MSCI EAFE Index, which rose 6.41% during the same period.
In this letter, I will examine the sector-, country- and stock-specific factors that affected the Fund’s performance and describe changes in the Fund’s composition for the period. In addition, I will discuss the current outlook for the Fund.
The Markets
International equities delivered positive performance in the six months ended March 31, 2014. In the last three months of 2013, renewed investor confidence in the U.S. economy and the Federal Reserve’s decision on a measured reduction of its quantitative easing program contributed to investors’ optimism. In Europe, the European Central Bank announced that further monetary easing measures weren’t imminent; this was seen as a sign that the region remains on course toward economic recovery. Furthermore, investors welcomed positive news from Japan, including rising consumer prices, improving exports and better business sentiment.
The strong gains from 2013 were somewhat offset by a number of investor concerns in early 2014. In March, newly appointed U.S. Federal Reserve Chair Janet Yellen said the Fed could raise interest rates six months after its bond-buying program ends, which is expected by year end 2014. In Japan, the government’s plan to raise the sales tax from 5% to 8% gave way to concerns that the move may undo the positive effects of last year’s massive economic stimulus program. European equity markets were generally up slightly despite geopolitical tensions in Ukraine and Russia, which overshadowed signs of economic improvement in Europe. Meanwhile, worries over slowing economic growth in Latin America and China also contributed to investor worry.
The Fund
Proving once more that markets tend to cycle, the Fund’s large overweight to and stock selection in telecom services—which detracted most from relative returns in the six-month period ended September 30, 2013—served as a major contributor to performance over the past six months. News around potential consolidation and recovery of the European telecom services sector has led to strong performance of our telecom holdings there, most notably Telecom Italia and France-based Orange. While France has been a challenging telecom market for some time due to low-priced competition and maturation, Orange has been attractively priced, with some exposure to growing emerging markets as well as improved cost-cutting initiatives. Reports of potential regulatory improvements, which would allow European consolidation, also may have resulted in increased investor enthusiasm for Orange.
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Brandes International Equity Fund
Telecom Italia and Orange were not the only European holdings that performed notably well. During the period, all of the Fund’s top 10 contributors to performance—absolute and relative—happen to be based in Europe. These included companies in the financials sector (Italian Intesa Sanpaolo and Dutch AEGON), the construction materials industry (Ireland-domiciled CRH and Italy’s Italcementi), and multi utilities (Suez Environnement and GDF Suez, both based in France).
During the period, the Fund’s holdings in consumer staples largely underperformed those of the benchmark, mainly due to positions in U.K.-based food & staples retailers Wm Morrison Supermarkets and J Sainsbury. While these companies face increased competition in a mature industry, we believe they remain attractive businesses trading at significant discounts to our estimates of their true worth, with strong balance sheets and value in their property holdings. In addition, they are working on improving their online presence amid a growing market.
Other relative performance detractors included oil & gas companies Brazil’s Petrobras and Russian LukOil, Japanese MS&AD Insurance Group, and British multiline retailer Marks and Spencer.
During the period, we exited the Fund’s positions in a number of companies as their prices appreciated toward our estimates of their intrinsic value. These included Suez Environnement, Intesa Sanpaolo, Japanese Fujifilm Holdings and Dutch media company Wolters Kluwer. Other large holdings that were sold off during the period were German automaker Daimler and Swiss electronic equipment manufacturer TE Connectivity.
New purchases in the last six months included U.K.-based Imperial Tobacco and grocer Tesco, Japanese pharmaceutical firm Mitsubishi Tanabe Pharma Corp, as well as Brazil’s regional jet manufacturer Embraer.
Outlook
As we highlighted earlier with the performance of the Fund’s telecom services allocation, there is a tendency for equity markets to cycle. An asset class that delivers positive returns one quarter may not be able to repeat the same performance three months later. For Brandes, this emphasizes the importance of bottom-up stock selection. Regardless of the market cycle, our process remains consistent: we keep focused on individual company fundamentals. We believe purchasing companies at significant discounts to our estimates of their true worth is the best way to add value to our client portfolios.
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Brandes International Equity Fund
As always, thank you for your business and the continued trust you have placed in us.
Sincerely yours,
Jeffrey A. Busby, CFA
President, Brandes Investment Trust
On behalf of the Brandes International Investment Team
Amelia Morris, CFA, Luiz Sauerbronn, Jeff Germain, CFA, Brent Woods, CFA, Shingo Omura, CFA
Past performance does not guarantee future results.
Because the values of the Fund’s investments will fluctuate with market conditions, so will the value of your investment in the Fund. You could lose money on your investment in the Fund, or the Fund could underperform other investments. 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.
Please refer to the Schedule of Investments in the report for complete holdings information. Fund holdings, geographic allocations and/or sector allocations are
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Brandes International Equity Fund
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 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. One cannot invest directly in an index.
The MSCI information may only be used for your internal use, may not be reproduced or redisseminated in any form and may not be used as a basis for or a component of any financial instruments or products or indices. None of the MSCI information is intended to constitute investment advice or a recommendation to make (or refrain from making) any kind of investment decision and may not be relied on as such. Historical data and analysis should not be taken as an indication or guarantee of any future performance analysis, forecast or prediction. The MSCI information is provided on an “as is” basis and the user of this information assumes the entire risk of any use made of this information. MSCI, each of its affiliates and each other person involved in or related to compiling, computing or creating any MSCI information (collectively, the “MSCI Parties”) expressly disclaims all warranties (including, without limitation, any warranties of originality, accuracy, completeness, timeliness, non-infringement, merchantability and fitness for a particular purpose) with respect to this information. Without limiting any of the foregoing, in no event shall any MSCI Party have any liability for any direct, indirect, special, incidental, punitive, consequential (including, without limitation, lost profits) or any other damages. (www.msci.com)
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 March 31, 2004 to March 31, 2014 and in the Morgan Stanley Capital International EAFE Index.
Value of $10,000 Investment vs Morgan Stanley Capital International
EAFE (Europe, Australasia and Far East) Index (Unaudited)
Average Annual Total Return | ||||
Periods Ended March 31, 2014 | ||||
One | Five | Ten | Since | |
Year | Years | Years | Inception(1) | |
Brandes International Equity Fund | ||||
Class A* | 24.27% | 13.70% | 5.73% | 9.02% |
Class A* (with maximum sales charge) | 17.12% | 12.36% | 5.10% | 8.65% |
Class C* | 23.45% | 12.78% | 4.91% | 8.19% |
Class E* | 24.32% | 13.77% | 5.77% | 9.05% |
Class I | 24.59% | 13.89% | 5.95% | 9.27% |
Morgan Stanley Capital International | ||||
EAFE Index | 17.56% | 16.02% | 6.53% | 5.19% |
(1) | The inception date is 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 indicate 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
March 31, 2014 (Unaudited)
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.
6
Brandes Global Equity Fund
Dear Shareholder:
The Brandes Global Equity Fund I shares (the “Fund”) gained 9.56% during the six-month period ended March 31, 2014, outperforming the MSCI World Index, which returned 9.36% in the same period.
In this letter, I will examine the country-, sector- and security-specific factors that affected the Fund’s performance and describe changes in the Fund’s composition for the six-month period. I will also discuss the current outlook for the Fund.
The Markets
Global equity markets delivered solid gains in the six months ended March 31, 2014. Investor confidence on the strength of the U.S. economy and expectations of a measured reduction of the U.S. Federal Reserve’s quantitative easing program helped send markets higher in the last three months of 2013. In Europe, the European Central Bank announced that further monetary easing measures weren’t imminent; this was seen as a sign that the region remained on course toward economic recovery. Additionally, investors welcomed positive news from Japan, including increased exports and an improvement in business sentiment.
In the first three months of 2014, a number of investor concerns caused markets to fluctuate for much of the period, with key market indices finishing the first quarter with modest gains. In March, newly appointed U.S. Federal Reserve Chair Janet Yellen said the Fed could raise interest rates six months after its bond-buying program ends, which is expected by year end 2014. In Japan, the government’s plan to raise the sales tax from 5% to 8% gave way to concerns that the move may undo the positive effects of last year’s massive economic stimulus program. European equity markets were generally up slightly despite geopolitical tensions in Ukraine and Russia, which overshadowed signs of economic improvement in Europe. Meanwhile, worries over slowing economic growth in Latin America and China also weighed on global markets in the first quarter of 2014.
The Fund
The Fund’s performance during the six-month period was driven mainly by investments in the United States and Europe, and those in the information technology, financials and telecommunication services sectors, areas where the Fund’s holdings performed better than the benchmark.
Many of the Fund’s European holdings rebounded strongly during the period, especially in markets where we have been overweight: Italy and France. News around potential consolidation and regulatory reform in the European telecommunication services sector contributed to the strong performance of many of our telecom holdings, such as Telecom Italia and France-based Orange. While France has been a challenging telecom market for some time due to low-priced
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Brandes Global Equity Fund
competition and maturation, Orange has been attractively priced, with the potential to unlock value through its exposure to growing emerging markets as well as improved cost-cutting initiatives. In addition, European building materials company CRH, which has exposure to the European and U.S. housing markets, has been a leading contributor to performance as housing potentially continues its recovery. CRH has a very strong balance sheet, a history of value-generative acquisitions and strong cash flow generation even during downturns. These factors helped CRH to weather the economic downturn in its key geographic regions and continue to distribute dividends for each of the last 20 years.
The Fund’s U.S. technology holdings continued to generate favorable results and rewarded our discipline of holding potentially undervalued investments for the long term. These include Corning, Western Digital and Microsoft, which performed well during the six-month period. The market appears to be more optimistic on the prospects for these “boring technology” companies, which continue to operate well and beat the market’s low expectations. Other positive contributors during the period included U.K. pharmaceutical firm AstraZeneca, as well as Italy-based Telecom Italia and financial services firm Intesa Sanpaolo.
The worst performing areas for the Fund were emerging markets, Japan and U.K. grocers. Among emerging-market holdings, Brazil’s Petrobras, an energy company and Russia’s LukOil detracted from returns during the period. Among Japanese holdings, automakers Nissan Motor and Toyota Motor also declined. Since mid 2013, Nissan’s shares have underperformed certain peers and the wider market, given concerns about the company’s product cycle and a perceived below-expectation benefit from the yen’s weakening in 2013. Nonetheless, we hold the view that these are short-term issues and should not affect the company’s long-term competitiveness. We believe despite its share-price decline, Nissan remains attractively valued.
Share prices of U.K. grocers Wm Morrison Supermarkets and J Sainsbury plc fell in the period as the continued pressure of low-priced competition hurt the revenue growth of the established food retail companies in the United Kingdom. While these companies undoubtedly face increased competition in a mature industry, we believe they remain attractive businesses trading at significant discounts to our estimates of their true worth, with strong balance sheets, value in their property holdings, and capacity to improve their cost positions. In addition, both are working on improving their online presence amid a growing market for this emerging retail channel.
Volatility in emerging markets has continued to lead to more attractive valuations and a resulting increased allocation to these regions within the Fund. We believe current volatility provides attractive valuations for well-positioned emerging-
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Brandes Global Equity Fund
market companies with strong prospects for long-term growth. Additionally, this volatility has led to opportunities in a number of developed market-based companies that have meaningful exposure to emerging markets as part of their business mix.
At the close of the six-month period, the Fund remained significantly underweight the benchmark in the United States. The U.S. market has recovered extraordinarily well over the last five years and it has become harder for us to find value in that market. To illustrate this point, valuations in the U.S. market have continued to expand. As of 3/31/2014, the S&P 500 Index traded at over 25x 10-year P/E (based on cyclically adjusted price-to-earnings ratio), the highest level since 2007.1 While we continue to find select opportunities in technology and financials, we pared back on our overall U.S. exposure, reducing our allocation to financials over the recent quarter.
During the six-month period, the Fund added a number of companies offering what we believe are attractive discounts to our estimates of intrinsic value. These include: U.S.-based energy services provider Exelon; U.K.-based British Sky Broadcasting; China Mobile; Turkey-based bank Turkiye Garanti; U.K. grocer Tesco; and HSBC Holdings plc, a U.K.-based bank with significant exposure to emerging markets. The Fund divested its positions in Intesa Sanpaolo and Japan’s Takeda Pharmaceuticals
Our Outlook
The volatility in global equities once again shows there is a tendency for markets to cycle. An asset class that delivers positive returns one quarter may not be able to repeat the same performance three months later. For Brandes, this highlights the importance of bottom-up stock selection. Regardless of the market cycle, our process remains consistent: we keep focused on individual company fundamentals. We believe purchasing companies at significant discounts to our estimates of their true worth is the best way to add value to our client portfolios.
1 Prof. Robert Shiller, Yale University: http://www.econ.yale.edu/~shiller/data.htm
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Brandes Global Equity Fund
As always, thank you for your business and the continued trust you have placed in us.
Sincerely yours,
Jeffrey A. Busby, CFA
President, Brandes Investment Trust
On behalf of the Brandes Global Investment Team
Brent Fredberg, Kenneth Little, CFA, Brian Matthews, CFA, Ted Kim, CFA, James Brown, CFA
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.
The MSCI information may only be used for your internal use, may not be reproduced or redisseminated in any form and may not be used as a basis for or a component of any financial instruments or products or indices. None of the MSCI information is intended to constitute investment advice or a recommendation to make (or refrain from making) any kind of investment decision and may not be relied on as such. Historical data and analysis should not be taken as an indication or guarantee of any future performance analysis, forecast or prediction. The MSCI information is provided on an “as is” basis and the user of this information assumes the entire risk of any use made of this information. MSCI, each of its affiliates and each other person involved in or related to compiling, computing or creating any MSCI information (collectively, the “MSCI Parties”) expressly disclaims all warranties (including, without limitation, any warranties of originality, accuracy,
10
Brandes Global Equity Fund
completeness, timeliness, non-infringement, merchantability and fitness for a particular purpose) with respect to this information. Without limiting any of the foregoing, in no event shall any MSCI Party have any liability for any direct, indirect, special, incidental, punitive, consequential (including, without limitation, lost profits) or any other damages. (www.msci.com)
The S&P 500 Index with gross dividends is an unmanaged, market capitalization weighted index that measures the equity performance of 500 leading companies in leading industries of the U.S. economy. The index includes 500 leading companies in leading industries of the U.S. economy, capturing 80% coverage of U.S. equities. This index includes dividends and distributions, but does not reflect fees, brokerage commissions, withholding taxes, or other expenses of investing.
One cannot invest directly in an index.
Price/Earnings: Price per share divided by earnings per share.
The declaration and payment of shareholder dividends are solely at the discretion of the issuer and are subject to change at any time.
Past performance does not guarantee future results.
Because the values of the Fund’s investments will fluctuate with market conditions, so will the value of your investment in the Fund. You could lose money on your investment in the Fund, or the Fund could underperform other investments. 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.
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.
Must be preceded or accompanied by a prospectus.
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.
The Brandes Global Equity Fund is distributed by Quasar Distributors, LLC.
11
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 March 31, 2014 and in the Morgan Stanley Capital International World Index.
Value of $10,000 Investment vs Morgan Stanley
Capital International World Index (Unaudited)
Average Annual Total Return | ||||
Periods Ended March 31, 2014 | ||||
One | Three | Five | Since | |
Year | Years | Years | Inception(1) | |
Brandes Global Equity Fund | ||||
Class A* | 23.66% | 10.04% | 16.46% | 9.70% |
Class A* (with maximum sales charge) | 16.54% | 7.89% | 15.10% | 8.52% |
Class C* | 22.76% | 9.23% | 15.54% | 8.84% |
Class E | 23.63% | 10.01% | 16.46% | 9.71% |
Class I | 23.97% | 10.31% | 16.69% | 9.92% |
Morgan Stanley Capital | ||||
International World Index | 19.07% | 10.23% | 18.28% | 10.83% |
(1) | The inception date is 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 indicate 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
March 31, 2014 (Unaudited)
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.
13
Brandes Emerging Markets Fund
Dear Shareholder:
The Brandes Emerging Markets Fund I shares (“the Fund”) gained 2.56% during the six months ended March 31, 2014 and outperformed its benchmark, the MSCI Emerging Markets Index, which rose 1.49% for the period.
In this letter, I will examine the sector-, country- and stock-specific factors that affected the Fund’s performance and describe changes in the Fund’s composition for the six-month period. In addition, I will discuss the current outlook for the Fund.
The Markets
In another rollercoaster period for the asset class, emerging markets were faced with various challenges in the last six months. In late 2013, anti-government protests in several countries such as Egypt, Brazil and Turkey stirred up negative market sentiment. As we began 2014, a number of events added fuel to the fire. Default of a major trust product loan in China, steep currency devaluation in Argentina, and increased interest rates in India and Turkey all contributed to heightened investor concerns. Additionally, Russia and Ukraine were at a precarious standoff—causing unfavorable market outlook on the companies in those countries.
Despite the number and the magnitude of these concerns, the MSCI Emerging Markets Index performed better than many might have expected, delivering positive performance over the last six months.
The Fund
Our stock selections in the materials, consumer staples and industrials sectors served as major contributors to relative returns during the period, as the Fund’s holdings in each of these sectors significantly outperformed those of the benchmark.
Notable individual performers included Egypt’s Eastern Tobacco, which gained over 90% over the six-month period, and Chinese air freight & logistics company Sinotrans Ltd, which was up over 60%.
In our opinion, Sinotrans highlights our willingness to uncover and understand small companies that the general market may have overlooked. When we first purchased it in late 2008, Sinotrans was only covered by two sell-side firms. The company had recently started new businesses while divesting others and had undergone accounting changes. The global financial crisis was underway and the future of the Chinese export growth was in question. Moreover, Sinotrans had persistent losses in its marine division, and returns on equity had been tempered due to excess cash on its balance sheet.
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Brandes Emerging Markets Fund
With our long-term focus, however, we saw a company trading at attractive valuations (less than book value and 10x earnings) that was well positioned to benefit from the development of the Chinese economy, especially strong domestic and international transportation growth. Moreover, even though it had depressed returns on equity, Sinotrans’ high net cash balance provided us with some comfort that the company could weather the economic sensitivity of its business. In 2013 and early 2014, the company’s share price appreciated significantly on minimal news flow and we took the opportunity to exit the position.
Apart from Eastern Tobacco and Sinotrans, the Fund’s India-based holdings within the materials sector, i.e., chemicals manufacturers UPL Limited and Tata Chemicals, performed well—likely due to that country’s continued economic improvement.
The Fund’s allocation to the information technology sector delivered an overall positive absolute return. However, our significant underweight to this best-performing sector within the benchmark detracted most from relative performance. From a country perspective, the Fund’s allocation to China hurt returns the most, mainly due to holdings in down clothing company Bosideng and telecom services provider China Mobile.
Given the recent tension between Ukraine and Russia, it was little surprise that the Fund’s Russia-based holdings—the Fund has no Ukraine-based holdings—were also among the main performance detractors. These included Sberbank, LukOil and Gazprom. Commercial bank TCS Group Holding, which is actually domiciled in Cyprus but derives a significant portion of its profit from Russia, weighed on returns as well.
We executed a number of transactions for the Fund during the period. Divested investments included Sinotrans Ltd, Saudi Basic Industries Corp., Titan Cement and Grupo Televisa. The Fund also no longer owns AsiaInfo-Linkage, a leading provider of telecom software and services in China, as the company was acquired by Citic Capital Holdings in early 2014. In the last six months, we initiated positions across several countries and sectors, including Turkish financial services company Haci Omer Sabanci Holding, Chinese automobile manufacturer Dongfeng Motor Group, Russia’s Surgutneftegas, and Hong Kong specialty retailer Luk Fook Holdings.
Outlook
Amid the current fears in emerging markets, we have been monitoring the situation closely and also reviewing our existing holdings in the affected regions. In some cases, we have added to our positions in companies where our bottom-up analysis showed potential rewards outweigh potential risks. We do not take potential macro risk factors lightly, but we hold the view that the current environment provides fertile ground for a patient, long-term, value-minded
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Brandes Emerging Markets Fund
investor. If we had to single out the most important lesson from our experience investing in emerging markets for more than 30 years, it would be: The asset class is not a homogenous group and should not be treated as such.
Thank you for the trust you have placed in us.
Sincerely yours,
Jeffrey A. Busby, CFA
President, Brandes Investment Trust
On behalf of the Brandes Emerging Markets Investment Team
Gerardo Zamorano, CFA, Christopher Garrett, CFA, Louis Lau, CFA, Douglas Edman, CFA, Greg Rippel, CFA
Past performance does not guarantee future results.
Because the values of the Fund’s investments will fluctuate with market conditions, so will the value of your investment in the Fund. You could lose money on your investment in the Fund, or the Fund could underperform other investments. 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. Investments in small and medium capitalization companies tend to have limited liquidity and greater price volatility than large capitalization companies.
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Brandes Emerging Markets 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 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.
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.
Index Guide
The MSCI Emerging Markets Index with gross dividends is an unmanaged, free float-adjusted market capitalization index that is 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. One cannot invest directly in an index.
The MSCI information may only be used for your internal use, may not be reproduced or redisseminated in any form and may not be used as a basis for or a component of any financial instruments or products or indices. None of the MSCI information is intended to constitute investment advice or a recommendation to make (or refrain from making) any kind of investment decision and may not be relied on as such. Historical data and analysis should not be taken as an indication or guarantee of any future performance analysis, forecast or prediction. The MSCI information is provided on an “as is” basis and the user of this information assumes the entire risk of any use made of this information. MSCI, each of its affiliates and each other person involved in or related to compiling, computing or creating any MSCI information (collectively, the “MSCI Parties”) expressly disclaims all warranties (including, without limitation, any warranties of originality, accuracy, completeness, timeliness, non-infringement, merchantability and fitness for a particular purpose) with respect to this information. Without limiting any of the foregoing, in no event shall any MSCI Party have any liability for any direct, indirect, special, incidental, punitive, consequential (including, without limitation, lost profits) or any other damages. (www.msci.com)
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 March 31, 2004 to March 31, 2014 and in the Morgan Stanley Emerging Markets Index.
Value of $10,000 Investment vs Morgan Stanley
Capital Emerging Markets Index (Unaudited)
Average Annual Total Return | ||||
Periods Ended March 31, 2014** | ||||
One | Five | Ten | Since | |
Year | Years | Years | Inception(1) | |
Brandes Emerging Markets Fund | ||||
Class A | 2.53% | 20.79% | 11.47% | 8.83% |
Class A (with maximum sales charge) | -3.37% | 19.37% | 10.81% | 8.47% |
Class C* | 1.76% | 19.89% | 10.60% | 8.02% |
Class I | 2.68% | 21.05% | 11.69% | 9.09% |
Morgan Stanley Capital International | ||||
Emerging Markets Index | -1.07% | 14.83% | 10.45% | 7.08% |
(1) | The inception date is August 20, 1996. |
* | 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 a calculation method that is different from the standardized calculation method prescribed 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 |
18
Brandes Emerging Markets Fund
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 indicate 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
March 31, 2014 (Unaudited)
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.
19
Brandes International Small Cap Equity Fund
Dear Shareholder:
The Brandes International Small Cap Equity Fund I shares (“the Fund”) gained 10.33% during the six months ended March 31, 2014. For the same period, the Fund’s benchmark, the S&P Developed Ex-U.S. Small Cap Index, rose 9.70%.
In this letter, I will examine the sector-, country- and stock-specific factors that affected the Fund’s performance and describe changes in the Fund’s composition during the period. In addition, I will discuss the current outlook for the Fund.
The Markets
International small-cap equities delivered solid gains in the six months ended March 31, 2014. In the last three months of 2013, renewed investor confidence in the U.S. economy and the Federal Reserve’s decision on a measured reduction of its quantitative easing program contributed to investors’ optimism. In Europe, the European Central Bank announced that further monetary easing measures weren’t imminent; this was seen as a sign that the region remains on course toward economic recovery. Furthermore, investors welcomed positive news from Japan, including rising consumer prices, improving exports and better business sentiment.
The strong gains from 2013 were somewhat offset by a number of investor concerns in early 2014. In March, newly appointed U.S. Federal Reserve Chair Janet Yellen said the Fed could raise interest rates six months after its bond-buying program ends, which is expected by year end 2014. In Japan, the government’s plan to raise the sales tax from 5% to 8% gave way to concerns that the move may undo the positive effects of last year’s massive economic stimulus program. European equity markets were generally up slightly despite geopolitical tensions in Ukraine and Russia, which overshadowed signs of economic improvement in Europe. Meanwhile, worries over slowing economic growth in Latin America and China also contributed to investor worry.
The Fund
Our stock selections in the materials, health care and utilities sectors served as major contributors to relative returns during the period, as the Fund’s holdings in each of these sectors significantly outperformed those of the benchmark.
Within materials, positive performance was driven by interrelated cement companies Italcementi, Ciments Francais and Italmobiliare. In early March 2014, Italcementi’s board announced the approval of rights issues worth up to €450 million (about US$623 million) as part of a wider plan to boost the company’s capital base and streamline its structure. The plan also calls for a mandatory conversion of saving shares into ordinary shares and the launch of a tender bid for its French unit, Ciments Francais. Italcementi currently owns 83% of Ciments Francais’ equity and will launch its bid for the company at €78 (about US$108) per
20
Brandes International Small Cap Equity Fund
share, which reflects a 19% premium to the company’s closing share price prior to the announcement.
Other notable performers included Egypt’s Eastern Tobacco, Canadian communication equipment company Sierra Wireless and Italian multi-utilities company Iren.
Although all sectors delivered overall positive absolute returns, the Fund’s allocations to consumer discretionary, financials and telecommunication services weighed on relative returns. On an individual security basis, Japan-based Fuji Machine Manufacturing, South Korea’s leading beverage company Lotte Chilsung, and Canadian consumer products manufacturer Dorel Industries (Dorel) detracted most from relative returns. In February, Dorel issued a profit warning stating that its recreational/leisure segment, which covers bicycle brands Schwinn, Cannondale, and Mongoose, would be “substantially below prior-year levels due to top-line weakness and a poorer product mix.” Holiday sales were lower than expected and “industry discounting continued to be a market reality.” In addition, sales volume of Dorel’s 2013-model bicycles, which carried lower margins, was higher than anticipated.
During the period, we executed a number of transactions within the Fund. Among them, we exited the Fund’s positions in Sierra Wireless, Swiss life-science ingredients manufacturer Lonza Group, and Swiss air freight & logistics company Panalpina Welttransport as their shares appreciated toward our estimates of their true worth. We used some of the proceeds from these sales to initiate positions in companies offering what we see as compelling margin of safety. These included India-based auto component manufacturer Exide Industries, Hungarian Magyar Telekom and Brazil’s electric utility provider Copel.
Outlook
As of March 31, 2014, the Fund remained overweight construction materials and household durables industries. From a country standpoint, the Fund’s largest allocation was to Japan—although the weighting has decreased over the last six months.
Equity market volatility once again shows there is a tendency for markets to cycle. An asset class that delivers positive returns one quarter may not be able to repeat the same performance three months later. For Brandes, this highlights the importance of bottom-up stock selection. Regardless of the market cycle, our process remains consistent: we keep focused on individual company fundamentals. We believe purchasing companies at significant discounts to our estimates of their true worth is the best way to add value to our client portfolios.
21
Brandes International Small Cap Equity Fund
As always, thank you for your business and the continued trust you have placed in us.
Sincerely yours,
Jeffrey A. Busby, CFA
President, Brandes Investment Trust
On behalf of the Brandes Small Cap Investment Team
Mark Costa, CFA, Robert Gallagher, CFA, Yingbin Chen, CFA, Ralph Birchmeier, CFA, Luiz Sauerbronn
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. The values of the Fund’s convertible securities are also affected by interest rates; if rates rise, the values of convertible securities may fall. Investments in small and medium capitalization companies tend to have limited liquidity and greater price
22
Brandes International Small Cap Equity Fund
volatility than investments in large capitalization companies. The Fund may invest in ETFs which are subject to additional risks that do not apply to conventional mutual funds, including the risks that the market price of an ETF’s shares may trade at a discount to its net asset value, an active secondary trading market may not develop or be maintained, or trading may be halted by the exchange on which they trade, which may impact the Fund’s ability to sell its shares.
Current and future portfolio holdings are subject to risk.
Margin of Safety: The difference between our estimate of a business’ intrinsic value and its market price.
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. One cannot invest directly in an index.
The Brandes International Small Cap Equity Fund is distributed by Quasar Distributors, LLC.
23
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 March 31, 2004 to March 31, 2014 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 Investment vs S&P Developed
Small Cap — Ex. U.S. Index (Unaudited)
Average Annual Total Return | ||||
Periods Ended March 31, 2014** | ||||
One | Five | Ten | Since | |
Year | Years | Years | Inception(1) | |
Brandes International Small Cap Fund | ||||
Class A | 26.60% | 30.17% | 9.03% | 11.05% |
Class A (with maximum sales charge) | 19.32% | 28.63% | 8.39% | 10.68% |
Class C* | 25.76% | 29.20% | 8.22% | 10.22% |
Class I | 26.95% | 30.48% | 9.30% | 11.33% |
S&P Developed Small Cap – | ||||
Ex. U.S. Index | 22.36% | 21.29% | 9.37% | 7.57% |
(1) | The inception date is August 19, 1996. |
* | 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 a calculation method that is different from the standardized calculation method prescribed 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 |
24
Brandes International Small Cap Equity Fund
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 indicate 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
March 31, 2014 (Unaudited)
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.
25
Brandes Core Plus Fixed Income Fund
Dear Shareholder,
The Brandes Core Plus Fixed Income Fund I shares (“the Fund”) gained 2.55% during the six-month period ended March 31, 2014, outperforming the Barclays U.S. Aggregate Bond Index, which returned 1.70% in the same period.
In this letter, I will examine the sector- and security-specific factors that affected the Fund’s performance and describe changes in the Fund’s composition for the six-month period. I will also discuss how the Fund is positioned for the future.
The Markets
For much of the period, fixed-income market participants remained focused on U.S. monetary policy and macroeconomic themes. With data surprising to the upside in the weeks leading up to the U.S. Federal Reserve’s December meeting, all eyes were on the Fed, especially given its decision in September 2013 to hold off tapering its quantitative easing program designed to stimulate growth. Toward the close of 2013, the Fed decided that economic data was sufficiently positive to begin a modest reduction of $10 billion per month (off of $85 billion), with the hopes of increasing the amount of the taper in 2014.
The credit markets largely shrugged off the volatility in emerging market equities in the first quarter of 2014, which stemmed from signs of slowing economic growth in China, the Russian annexation of Crimea and the first public meeting of the new Fed Chair Janet Yellen.
The Fund
During the period, the Fund’s outperformance was primarily driven by corporate-bond holdings in the banking, utilities and energy sectors, as well as in student loan asset backed securities (ABS) backed by pools of private student loans. We started to see stabilization in the performance of the underlying student loan collateral in 2013, a trend that is beginning to flow through to market prices for these securities.
We also saw a modest positive contribution from the non-agency mortgage backed securities (MBS) sector. Non-agency MBS bonds have been standout performers over the last few years as the economy and the general housing market have slowly recovered and investors look for bonds offering any kind of yield. Several of the securities that we own in this sector reached our estimate of their fair values during the quarter; and thus, we decided to pare our exposure to the sector. Non-agency MBS now represents approximately 1% of the Fund’s value and the securities we continue to own receive monthly principal payments, so we expect our weighting to continue to decline over the course of the year.
Performance was adversely affected during the period by holdings in the home building sector, largely attributable to a bond holding in Mexican homebuilder Urbi Desarrollos Urbanos. There were rumors of financial shenanigans in the Mexican homebuilding industry involving overstating equity, understating debt and overstating cash flow. Given the number of unknowns, we trimmed our position in
26
Brandes Core Plus Fixed Income Fund
the credit and now hold a small amount that we view as largely option value.1 If there is additional downside in the industry the impact on the Fund should be minimal, but there remains potential upside if the homebuilders present credible restructuring plans to investors or if the government decides to follow through on its stated intent to help this struggling industry.
Additionally, the Fund’s duration positioning proved to be the largest detractor from performance during the period. We pursue a duration-controlled strategy, managed in a range of 20% above or below the respective benchmark. We have biased the Fund within our range for higher interest rates in the long term by maintaining a relatively shorter Fund duration in the range of 80-85% of the benchmark. This position negatively affected returns, as the 10-year U.S. Treasury rate dropped by approximately 0.3% in the first quarter of 2014.
During the period, we added three notable new positions. The first was a bond issued by ADT (rated Ba2/BB-/BBB-). The company is an industry leader in home security, which is a growing industry with defensive characteristics. ADT has a national footprint, with 25% market share, which is about six times the size of its next largest competitor.
The Fund’s second purchase was a utility bond issued by Dayton Power & Light DPL (rated Ba2/BB). DPL operates as an electric energy and utility company and engages in generation, transmission and distribution of electricity in West Central Ohio.
The Fund also added a bond issued by Chrysler Corp. (rated B1/B). This is a secured, second-lien operating company bond at Chrysler, a subsidiary of Fiat. Chrysler recently became 100% owned by Fiat, removing the risks of losing the Fiat platform sharing and cost-savings as well as management oversight expertise at the Chrysler operating company. Chrysler currently has the best-performing brands within the Fiat portfolio (particularly Jeep) and is strategically important to Fiat for its free cash flow generation, growth and North American presence, factors which help offset weakness in Fiat’s core European markets. We view the asset coverage of the bonds as attractive.
In addition to paring back exposure to the non-agency MBS sector, the Fund had one notable corporate sale – Edison Mission Energy. The company is the unregulated merchant generation subsidiary of Edison International. We purchased Edison Mission Energy bonds in January 2012 at a distressed price. The bonds traded down to distressed levels based on historically low wholesale electricity prices caused by low natural gas prices and sluggish electricity demand. Additionally, Edison Mission was facing elevated capital expenditures to comply with stricter environmental regulations at its coal facilities. We viewed the company as a bankruptcy candidate and valued the bonds based on our assessment of tangible asset coverage in a more normalized pricing and demand environment.
1 | Option value: The value placed on an individual’s willingness to pay for maintaining or preserving a public asset or service even if there is little or no likelihood of the individual actually ever using it. |
27
Brandes Core Plus Fixed Income Fund
As we expected, Edison Mission filed for bankruptcy in December 2012. NRG Energy offered to purchase Edison Mission in October 2013 for a total consideration of $71 to bondholders. Edison Mission bonds ultimately traded above the offer price due primarily to the market’s view of the value of a tax-sharing agreement with its parent, Edison International. We exited our position after the security traded above our estimate of fair value.
Our Outlook
We are as cautious today on the market as we have been over the last decade. Corporate credit spreads, approaching pre-credit crisis levels, continue to grind tighter as investors gravitate to any instrument offering an attractive yield. Balance sheets remain in good shape, but we are seeing signs that aggregate credit quality may have peaked and more companies are actively considering or implementing shareholder enhancement actions that are often detrimental to underlying credit quality. Finally, there is an enormous amount of private equity cash on the sidelines that is often used to fund leveraged buyouts.
Due to these concerns, we have positioned the Fund with a defensive posture. As mentioned earlier, the duration of the Fund is near the bottom end of our duration range as we anticipate higher interest rates over the longer term. Our high-yield weighting is at the lowest level in 10 years. Within the corporate bonds we hold, we have favored shorter-to-intermediate maturities. Finally, the securities that we have added recently fit the theme of offering, in our view, an attractive yield for strong asset coverage and steady and predictable cash flows.
As always, thank you for your business and the trust you have placed in us.
Sincerely yours,
Jeffrey A. Busby, CFA
President, Brandes Investment Trust
On behalf of the Brandes Fixed Income Investment Team
Timothy Doyle, CFA, Chuck Gramling, CFA, David Gilson, CFA
28
Brandes Core Plus Fixed Income 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.
International and emerging markets investing is subject to certain risks such as currency fluctuations and social and political changes, political instability, differences in financial reporting standards and less stringent regulation of securities markets; 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.
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 that 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 Fund may hold illiquid securities which may reduce the return of the Fund because it may be unable to sell such illiquid securities at an advantageous time or price. Illiquid securities may also be difficult to value. The Fund is actively managed, and may frequently buy and sell securities. Frequent trading increases a Fund’s portfolio turnover rate and may increase transaction costs, such as brokerage commissions and taxes, which in turn could detract from the Fund’s performance.
29
Brandes Core Plus Fixed Income Fund
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.
Cash flow: Movement of money out of or into a business.
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.
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.
Credit distribution is determined from the highest available credit rating from any Nationally Recognized Statistical Rating Organization (S&P, Moody’s and Fitch), who assign a rating based on their analysis of the issuer’s credit worthiness. The highest rating given is AAA and the lowest is C.
Yield: The annual income from the investment (dividend, interest, etc.) divided by the current market price of the investment.
The Brandes Core Plus Fixed Income Fund is distributed by Quasar Distributors, LLC.
30
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 March 31, 2014 and in the Barclays Capital U.S. Aggregate Index.
Value of $10,000 Investment vs Barclays Capital
U.S. Aggregate Index (Unaudited)
Average Annual Total Return | ||||
Periods Ended March 31, 2014 | ||||
One | Three | Five | Since | |
Year | Years | Years | Inception(1) | |
Brandes Core Plus Fixed Income Fund | ||||
Class A* | 0.74% | 4.49% | 8.56% | 4.42% |
Class A* (with maximum sales charge) | -3.06% | 3.16% | 7.72% | 3.79% |
Class E* | 0.97% | 4.77% | 8.75% | 4.56% |
Class I | 1.20% | 4.92% | 8.91% | 4.74% |
Barclays Capital U.S. Aggregate Index | -0.10% | 3.75% | 4.80% | 4.74% |
(1) | The inception date is 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 indicate 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.
31
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
March 31, 2014 (Unaudited)
32
Brandes Credit Focus Yield Fund
Dear Shareholder,
The Brandes Credit Focus Yield Fund I shares (“the Fund”) gained 2.27% during the six-month period ended March 31, 2014, slightly underperforming the Barclays U.S. Intermediate Credit Bond Index, which returned 2.33% in the same period.
In this letter, I will examine the sector- and security-specific factors that affected the Fund’s performance and describe changes in the Fund’s composition for the six-month period. I will also discuss how the Fund is positioned for the future.
The Markets
For much of the period, fixed-income market participants remained focused on U.S. monetary policy and macroeconomic themes. With data surprising to the upside in the weeks leading up to the U.S. Federal Reserve’s December meeting, all eyes were on the Fed, especially given its decision in September 2013 to hold off tapering its quantitative easing program designed to stimulate growth. Toward the close of 2013, the Fed decided that economic data was sufficiently positive to begin a modest reduction of $10 billion per month (off of $85 billion), with the hopes of increasing the amount of the taper in 2014.
The credit markets largely shrugged off the volatility in emerging market equities in the first quarter of 2014, which stemmed from signs of slowing economic growth in China, the Russian annexation of Crimea and the first public meeting of the new Fed Chair Janet Yellen.
The Fund
During the period, the Fund’s performance was primarily driven by corporate-bond holdings in banking, utilities and energy sectors, as well as in student loan asset backed securities (ABS), backed by pools of private student loans. We started to see stabilization in the performance of the underlying student loan collateral in 2013, a trend that is beginning to flow through to market prices for these securities.
We also saw a modest positive contribution from the non-agency mortgage backed securities (MBS) sector. Non-agency MBS bonds have been standout performers over the last few years as the economy and the general housing market have slowly recovered and investors look for bonds offering any kind of yield. Several of the securities that we own in this sector reached our estimate of their fair values during the quarter; and thus, we decided to pare our exposure to the sector. Non-agency MBS now represents approximately 1% of the Fund’s value and the securities we continue to own receive monthly principal payments, so we expect our weighting to continue to decline over the course of the year.
Performance was adversely affected during the quarter by holdings in the home building sector, largely attributable to a bond holding in Mexican homebuilder Urbi Desarrollos Urbanos. There were rumors of financial shenanigans in the Mexican homebuilding industry involving overstating equity, understating debt and overstating cash flow. Given the number of unknowns, we trimmed our position in
33
Brandes Credit Focus Yield Fund
the credit and now hold a small amount that we view as largely option value.1 If there is additional downside in the industry the impact on the Fund should be minimal, but there remains potential upside if the homebuilders present credible restructuring plans to investors or if the government decides to follow through on its stated intent to help this struggling industry.
Additionally, the Fund’s duration positioning proved to be the largest detractor from performance during the period. We pursue a duration-controlled strategy, managed in a range of 20% above or below the respective benchmark. We have biased the Fund within our range for higher interest rates in the long term by maintaining a relatively shorter Fund duration in the range of 80-85% of the benchmark. This position negatively affected returns, as the 10-year U.S. Treasury rate dropped by approximately 0.3% in the first quarter of 2014.
During the period, we added three notable new positions. The first was a bond issued by ADT (rated Ba2/BB-/BBB-). The company is an industry leader in home security, which is a growing industry with defensive characteristics. ADT has a national footprint, with 25% market share, which is about six times the size of its next largest competitor. The Fund’s second purchase was a utility bond issued by Dayton Power & Light DPL (rated Ba2/BB). DPL operates as an electric energy and utility company and engages in generation, transmission and distribution of electricity in West Central Ohio.
The Fund also added a bond issued by Chrysler Corp. (rated B1/B). This is a secured, second-lien operating company bond at Chrysler, a subsidiary of Fiat. Chrysler recently became 100% owned by Fiat, removing the risks of losing the Fiat platform sharing and cost-savings as well as management oversight expertise at the Chrysler operating company. Chrysler currently has the best-performing brands within the Fiat portfolio (particularly Jeep) and is strategically important to Fiat for its free cash flow generation, growth and North American presence, factors which help offset weakness in Fiat’s core European markets. We view the asset coverage of the bonds as attractive.
In addition to paring back exposure to the non-agency MBS sector, the Fund had one notable corporate sale – Edison Mission Energy. The company is the unregulated merchant generation subsidiary of Edison International. We purchased Edison Mission Energy bonds in January 2012 at a distressed price. The bonds traded down to distressed levels based on historically low wholesale electricity prices caused by low natural gas prices and sluggish electricity demand. Additionally, Edison Mission was facing elevated capital expenditures to comply with stricter environmental regulations at its coal facilities. We viewed the company as a bankruptcy candidate and valued the bonds based on our assessment of tangible asset coverage in a more normalized pricing and demand environment.
1 | Option value: The value placed on an individual’s willingness to pay for maintaining or preserving a public asset or service even if there is little or no likelihood of the individual actually ever using it. |
34
Brandes Credit Focus Yield Fund
As we expected, Edison Mission filed for bankruptcy in December 2012. NRG Energy offered to purchase Edison Mission in October 2013 for a total consideration of $71 to bondholders. Edison Mission bonds ultimately traded above the offer price due primarily to the market’s view of the value of a tax-sharing agreement with its parent, Edison International. We exited our position after the security traded above our estimate of fair value.
Our Outlook
We are as cautious today on the market as we have been over the last decade. Corporate credit spreads, approaching pre-credit crisis levels, continue to grind tighter as investors gravitate to any instrument offering an attractive yield. Balance sheets remain in good shape, but we are seeing signs that aggregate credit quality may have peaked and more companies are actively considering or implementing shareholder enhancement actions that are often detrimental to underlying credit quality. Finally, there is an enormous amount of private equity cash on the sidelines that is often used to fund leveraged buyouts.
Due to these concerns, we have positioned the Fund with a defensive posture. The duration of the Fund is near the bottom end of our duration range as we anticipate higher interest rates over the longer term. Our high-yield weighting is at the lowest level in 10 years. Within the corporate bonds we hold, we have favored shorter-to-intermediate maturities. Finally, the securities that we have added recently fit the theme of offering, in our view, an attractive yield for strong asset coverage and steady and predictable cash flows.
As always, thank you for your business and the trust you have placed in us.
Sincerely yours,
Jeffrey A. Busby, CFA
President, Brandes Investment Trust
On behalf of the Brandes Fixed Income Investment Team
Timothy Doyle, CFA, Chuck Gramling, CFA, David Gilson, CFA
35
Brandes Credit Focus Yield 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.
International and emerging markets investing is subject to certain risks such as currency fluctuations and social and political changes, political instability, differences in financial reporting standards and less stringent regulation of securities markets; 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.
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 that 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 Fund may hold illiquid securities which may reduce the return of the Fund because it may be unable to sell such illiquid securities at an advantageous time or price. Illiquid securities may also be difficult to value. The Fund is actively managed, and may frequently buy and sell securities. Frequent trading increases a Fund’s portfolio turnover rate and may increase transaction costs, such as
36
Brandes Credit Focus Yield Fund
brokerage commissions and taxes, which in turn could detract from the Fund’s performance.
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. 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.
Cash flow: Movement of money out of or into a business.
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.
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.
Credit distribution is determined from the highest available credit rating from any Nationally Recognized Statistical Rating Organization (S&P, Moody’s and Fitch), who assign a rating based on their analysis of the issuer’s credit worthiness. The highest rating given is AAA and the lowest is C.
Yield: The annual income from the investment (dividend, interest, etc.) divided by the current market price of the investment.
The Brandes Credit Focus Yield Fund is distributed by Quasar Distributors, LLC.
37
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 March 31, 2004 to March 31, 2014 as compared with the Barclays Capital U.S. Intermediate Credit Index.
Value of $10,000 Investment vs Barclays Capital
U.S. Intermediate Credit Index (Unaudited)
Average Annual Total Return | ||||
Periods Ended March 31, 2014* | ||||
One | Five | Ten | Since | |
Year | Years | Years | Inception(1) | |
Brandes Credit Focus Yield Fund | ||||
Class A* | 0.39% | 12.38% | 4.75% | 6.08% |
Class A* (with maximum sales charge) | -3.41% | 11.52% | 4.35% | 5.79% |
Class I | 0.73% | 12.70% | 5.03% | 6.36% |
Barclays Capital U.S. Intermediate | ||||
Credit Index** | 0.98% | 7.63% | 4.75% | 6.10% |
(1) | The inception date is June 29, 2000. |
* | 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 a calculation method that is different from the standardized calculation method prescribed 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 |
38
Brandes Credit Focus Yield Fund
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 indicate 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
March 31, 2014 (Unaudited)
39
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 October 1, 2013 to March 31, 2014 (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 | $1,079.90 | 1.20% | $6.22 |
Global Equity Fund | $1,000.00 | $1,094.30 | 1.25% | $6.53 |
Emerging Markets Fund | $1,000.00 | $1,024.70 | 1.37% | $6.92 |
International Small Cap Fund | $1,000.00 | $1,101.50 | 1.40% | $7.34 |
Core Plus Fixed Income Fund | $1,000.00 | $1,022.00 | 0.70% | $3.53 |
Credit Focus Yield Fund | $1,000.00 | $1,021.40 | 0.95% | $4.79 |
Class C | ||||
Expenses | ||||
Beginning | Ending | Annual | Paid | |
Account | Account | Expense | During | |
Fund | Value | Value | Ratio | the Period* |
International Equity Fund | $1,000.00 | $1,076.00 | 1.95% | $10.09 |
Global Equity Fund | $1,000.00 | $1,090.40 | 2.00% | $10.42 |
Emerging Markets Fund | $1,000.00 | $1,021.00 | 2.12% | $10.68 |
International Small Cap Fund | $1,000.00 | $1,097.80 | 2.15% | $11.24 |
40
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 | $1,079.70 | 1.20% | $6.22 |
Global Equity Fund | $1,000.00 | $1,094.40 | 1.25% | $6.53 |
Core Plus Fixed Income Fund | $1,000.00 | $1,025.30 | 0.70% | $3.53 |
Class I | ||||
Expenses | ||||
Beginning | Ending | Annual | Paid | |
Account | Account | Expense | During | |
Fund | Value | Value | Ratio | the Period* |
International Equity Fund | $1,000.00 | $1,081.00 | 1.00% | $5.19 |
Global Equity Fund | $1,000.00 | $1,095.60 | 1.00% | $5.22 |
Emerging Markets Fund | $1,000.00 | $1,025.60 | 1.12% | $5.66 |
International Small Cap Fund | $1,000.00 | $1,103.30 | 1.15% | $6.03 |
Core Plus Fixed Income Fund | $1,000.00 | $1,025.50 | 0.50% | $2.52 |
Credit Focus Yield Fund | $1,000.00 | $1,022.70 | 0.70% | $3.53 |
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.
41
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 | 1.20% | $6.04 |
Global Equity Fund | $1,000.00 | $1,018.70 | 1.25% | $6.29 |
Emerging Markets Fund | $1,000.00 | $1,018.10 | 1.37% | $6.89 |
International Small Cap Fund | $1,000.00 | $1,017.95 | 1.40% | $7.04 |
Core Plus Fixed Income Fund | $1,000.00 | $1,021.44 | 0.70% | $3.53 |
Credit Focus Yield Fund | $1,000.00 | $1,020.19 | 0.95% | $4.78 |
Class C | ||||
Expenses | ||||
Beginning | Ending | Annual | Paid | |
Account | Account | Expense | During | |
Fund | Value | Value | Ratio | the Period* |
International Equity Fund | $1,000.00 | $1,015.21 | 1.95% | $9.80 |
Global Equity Fund | $1,000.00 | $1,014.96 | 2.00% | $10.05 |
Emerging Markets Fund | $1,000.00 | $1,014.36 | 2.12% | $10.65 |
International Small Cap Fund | $1,000.00 | $1,014.21 | 2.15% | $10.80 |
Class E | ||||
Expenses | ||||
Beginning | Ending | Annual | Paid | |
Account | Account | Expense | During | |
Fund | Value | Value | Ratio | the Period* |
International Equity Fund | $1,000.00 | $1,018.95 | 1.20% | $6.04 |
Global Equity Fund | $1,000.00 | $1,018.70 | 1.25% | $6.29 |
Core Plus Fixed Income Fund | $1,000.00 | $1,021.44 | 0.70% | $3.53 |
Class I | ||||
Expenses | ||||
Beginning | Ending | Annual | Paid | |
Account | Account | Expense | During | |
Fund | Value | Value | Ratio | the Period* |
International Equity Fund | $1,000.00 | $1,019.95 | 1.00% | $5.04 |
Global Equity Fund | $1,000.00 | $1,019.95 | 1.00% | $5.04 |
Emerging Markets Fund | $1,000.00 | $1,019.35 | 1.12% | $5.64 |
International Small Cap Fund | $1,000.00 | $1,019.20 | 1.15% | $5.79 |
Core Plus Fixed Income Fund | $1,000.00 | $1,022.44 | 0.50% | $2.52 |
Credit Focus Yield Fund | $1,000.00 | $1,021.44 | 0.70% | $3.53 |
* | Expenses are equal to the Funds’ expense ratio for the period, multiplied by the average account value over the period, multiplied by 182/365 (to reflect the one-half year period). |
42
Brandes International Equity Fund
SCHEDULE OF INVESTMENTS — March 31, 2014 (Unaudited)
Shares | Value | ||||||
COMMON STOCKS – 95.09% | |||||||
Brazil – 4.38% | |||||||
436,454 | Banco do Brasil SA | $ | 4,364,540 | ||||
667,800 | Banco Santander | ||||||
Brasil SA – ADR | 3,719,646 | ||||||
1,223,030 | Centrais Electricas | ||||||
Brasileiras SA – ADR | 3,473,405 | ||||||
142,210 | Embraer SA – ADR | 5,047,033 | |||||
162,634 | Tim Participacoes | ||||||
SA – ADR | 4,221,979 | ||||||
20,826,603 | |||||||
China – 1.05% | |||||||
542,000 | China Mobile Ltd | 4,976,336 | |||||
France – 14.58% | |||||||
256,961 | Carrefour SA | 9,940,422 | |||||
84,886 | Compagnie | ||||||
De Saint – Gobain | 5,124,952 | ||||||
656,857 | GDF Suez | 17,968,417 | |||||
823,887 | Orange SA | 12,170,319 | |||||
67,600 | Renault SA | 6,566,287 | |||||
87,235 | Sanofi | 9,116,032 | |||||
129,064 | Total SA(b) | 8,495,630 | |||||
69,382,059 | |||||||
Germany – 0.94% | |||||||
276,000 | Deutsche Telekom AG | 4,478,283 | |||||
Hong Kong – 0.99% | |||||||
4,736,000 | First Pacific Co. Ltd. | 4,720,512 | |||||
Ireland – 2.46% | |||||||
417,838 | CRH Plc | 11,699,535 | |||||
Italy – 7.70% | |||||||
436,215 | ENI SpA | 10,938,756 | |||||
3,400,512 | Intesa Sanpaolo SpA | ||||||
Savings Shares | 9,664,449 | ||||||
422,400 | Italcementi SpA | ||||||
Savings Shares | 3,320,583 | ||||||
4,166,774 | Telecom Italia SpA | 4,924,924 | |||||
8,304,250 | Telecom Italia SpA | ||||||
Savings Shares | 7,792,784 | ||||||
36,641,496 | |||||||
Japan – 24.62% | |||||||
279,500 | Astellas Pharma, Inc. | 3,318,384 | |||||
356,500 | Canon, Inc. | 11,064,273 | |||||
359,400 | Dai Nippon | ||||||
Printing Co. Ltd. | 3,436,943 | ||||||
646,202 | Daiichi Sankyo | ||||||
Co. Ltd. | 10,888,800 | ||||||
204,000 | Honda Motor Co. Ltd. | 7,178,078 | |||||
500,300 | Mitsubishi Tanabe | ||||||
Pharma Corp. | 7,000,727 | ||||||
1,064,300 | Mitsubishi UFJ | ||||||
Financial Group, Inc. | 5,860,872 | ||||||
323,899 | MS&AD Insurance | ||||||
Group Holdings | 7,414,442 | ||||||
194,400 | Nippon Telegraph & | ||||||
Telephone Corp. | 10,564,013 | ||||||
1,376,200 | Nissan Motor Co. Ltd. | 12,266,520 | |||||
396,000 | NKSJ Holdings, Inc. | 10,167,070 | |||||
1,334,000 | Sumitomo Mitsui | ||||||
Trust Holdings, Inc. | 6,035,749 | ||||||
94,900 | Taisho Pharmaceutical | ||||||
Co. Ltd. | 7,643,132 | ||||||
104,800 | Takeda Pharmaceutical | ||||||
Co. Ltd. | 4,960,413 | ||||||
165,800 | Tokio Marine | ||||||
Holdings, Inc. | 4,972,407 | ||||||
77,500 | Toyota Motor Corp. | 4,370,523 | |||||
117,142,346 | |||||||
Mexico – 2.33% | |||||||
329,498 | America Movil | ||||||
SAB de CV – ADR | 6,550,420 | ||||||
359,928 | Cemex SAB de | ||||||
CV – ADR(a) | 4,545,891 | ||||||
11,096,311 | |||||||
Netherlands – 4.94% | |||||||
534,041 | Aegon NV | 4,919,139 | |||||
451,433 | Royal Ahold NV | 9,066,496 | |||||
231,604 | Unilever NV | 9,526,989 | |||||
23,512,624 | |||||||
Portugal – 0.71% | |||||||
793,200 | Portugal | ||||||
Telecom SGPS SA | 3,376,144 | ||||||
Russia – 1.69% | |||||||
143,403 | Lukoil Co. – ADR | 8,019,813 | |||||
Singapore – 1.19% | |||||||
610,800 | Flextronics | ||||||
International Ltd.(a) | 5,643,792 |
The accompanying notes are an integral part of these Schedules of Investments.
43
Brandes International Equity Fund
SCHEDULE OF INVESTMENTS — March 31, 2014 (Unaudited) (continued)
Shares | Value | ||||||
South Korea – 3.27% | |||||||
26,790 | Hyundai Mobis | ||||||
Co. Ltd. | $ | 7,948,560 | |||||
27,305 | POSCO | 7,623,288 | |||||
15,571,848 | |||||||
Spain – 1.00% | |||||||
300,677 | Telefonica SA | 4,764,776 | |||||
Sweden – 1.63% | |||||||
582,600 | LM Ericsson | ||||||
Telefon AB Class B | 7,770,335 | ||||||
Switzerland – 2.60% | |||||||
64,220 | Swiss Re AG | 5,960,526 | |||||
310,037 | UBS AG | 6,415,706 | |||||
12,376,232 | |||||||
United Kingdom – 19.01% | |||||||
146,255 | AstraZeneca Plc | 9,481,213 | |||||
1,881,936 | Barclays Plc | 7,323,474 | |||||
1,795,974 | BP Plc | 14,430,654 | |||||
337,220 | GlaxoSmithKline Plc | 8,992,023 | |||||
692,715 | HSBC Holdings Plc | 7,013,983 | |||||
195,320 | Imperial Tobacco | ||||||
Group Plc | 7,898,223 | ||||||
1,183,500 | J. Sainsbury Plc | 6,241,056 | |||||
955,919 | Marks & Spencer | ||||||
Group Plc | 7,196,030 | ||||||
1,874,060 | Tesco Plc | 9,243,028 | |||||
3,541,211 | WM. Morrison | ||||||
Supermarkets Plc | 12,591,546 | ||||||
90,411,230 | |||||||
TOTAL COMMON STOCKS | |||||||
(Cost $424,305,355) | $ | 452,410,275 | |||||
PREFERRED STOCKS – 2.85% | |||||||
Brazil – 2.85% | |||||||
668,370 | Petroleo Brasileiro | ||||||
SA – ADR | $ | 9,270,292 | |||||
201,463 | Telefonica Brasil | ||||||
SA – ADR | 4,279,074 | ||||||
TOTAL PREFERRED STOCKS | |||||||
(Cost $18,155,369) | $ | 13,549,366 |
Principal | ||||||||
Amount | Value | |||||||
Time Deposit – 5.83% | ||||||||
State Street Euro Dollar Time Deposit, 0.010%, due 04/01/14 | $ | 27,738,504 | $ | 27,738,504 | ||||
TOTAL TIME DEPOSIT (Cost $27,738,504) | $ | 27,738,504 | ||||||
Total Investments (Cost $470,199,228) – 103.77% | $ | 493,698,145 | ||||||
Liabilities in Excess of Other Assets – (3.77%) | (17,953,128 | ) | ||||||
TOTAL NET ASSETS – 100.00% | $ | 475,745,017 |
Percentages are stated as a percent of net assets.
ADR American Depository Receipt
(a) | Non-income producing security. |
(b) | All or a portion of the security is out on loan. See Note 2H in the Notes to Financial Statements. |
The accompanying notes are an integral part of these Schedules of Investments.
44
Brandes International Equity Fund
SCHEDULE OF INVESTMENTS BY INDUSTRY — March 31, 2014 (Unaudited)
COMMON STOCKS | ||||
Aerospace & Defense | 1.06 | % | ||
Auto Components | 1.67 | % | ||
Automobiles | 6.39 | % | ||
Banks | 9.25 | % | ||
Building Products | 1.08 | % | ||
Capital Markets | 1.35 | % | ||
Commercial Services & Supplies | 0.72 | % | ||
Communications Equipment | 1.63 | % | ||
Construction Materials | 4.11 | % | ||
Diversified Financial Services | 0.99 | % | ||
Diversified Telecommunication Services | 10.10 | % | ||
Electric Utilities | 0.73 | % | ||
Electronic Equipment, Instruments & Components | 1.19 | % | ||
Food & Staples Retailing | 9.90 | % | ||
Food Products | 2.00 | % | ||
Insurance | 7.03 | % | ||
Metals & Mining | 1.60 | % | ||
Multiline Retail | 1.51 | % | ||
Multi-Utilities | 3.78 | % | ||
Oil, Gas & Consumable Fuels | 8.80 | % | ||
Pharmaceuticals | 12.91 | % | ||
Technology Hardware, Storage & Peripherals | 2.33 | % | ||
Tobacco | 1.65 | % | ||
Wireless Telecommunication Services | 3.31 | % | ||
TOTAL COMMON STOCKS | 95.09 | % | ||
PREFERRED STOCKS | ||||
Diversified Telecommunication Services | 0.90 | % | ||
Oil, Gas & Consumable Fuels | 1.95 | % | ||
TOTAL PREFERRED STOCKS | 2.85 | % | ||
TIME DEPOSIT | 5.83 | % | ||
TOTAL INVESTMENTS | 103.77 | % | ||
Liabilities in Excess of Other Assets | (3.77 | %) | ||
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.
45
Brandes Global Equity Fund
SCHEDULE OF INVESTMENTS — March 31, 2014 (Unaudited)
Shares | Value | ||||||
COMMON STOCKS – 91.39% | |||||||
Auto Components – 2.17% | |||||||
3,390 | Hyundai Mobis | ||||||
Co. Ltd. | $ | 1,005,809 | |||||
Automobiles – 4.61% | |||||||
19,600 | Honda Motor Co. Ltd. | 689,658 | |||||
103,400 | Nissan Motor Co. Ltd. | 921,638 | |||||
9,300 | Toyota Motor Corp. | 524,463 | |||||
2,135,759 | |||||||
Banks – 9.86% | |||||||
92,385 | Banco Santander | ||||||
Brasil SA – ADR | 514,584 | ||||||
25,732 | Bank of America Corp. | 442,590 | |||||
20,986 | Citigroup, Inc. | 998,934 | |||||
44,520 | HSBC Holdings Plc | 450,781 | |||||
80,400 | Mitsubishi UFJ | ||||||
Financial Group, Inc. | 442,746 | ||||||
5,530 | PNC Financial Services | ||||||
Group, Inc. | 481,110 | ||||||
160,480 | Turkiye Garanti | ||||||
Bankasi AS | 548,533 | ||||||
13,869 | Wells Fargo & Co. | 689,844 | |||||
4,569,122 | |||||||
Beverages – 1.76% | |||||||
9,790 | Pepsico, Inc. | 817,465 | |||||
Building Products – 1.01% | |||||||
21,000 | Masco Corp. | 466,410 | |||||
Capital Markets – 2.88% | |||||||
19,600 | Bank Of New York | ||||||
Mellon Corp. | 691,684 | ||||||
9,248 | State Street Corp. | 643,199 | |||||
1,334,883 | |||||||
Communications Equipment – 1.50% | |||||||
52,300 | LM Ericsson Telefon | ||||||
AB Class B | 697,543 | ||||||
Construction Materials – 2.23% | |||||||
36,932 | CRH Plc | 1,034,102 | |||||
Diversified Telecommunication | |||||||
Services – 5.86% | |||||||
25,300 | Deutsche Telekom AG | 410,509 | |||||
13,700 | Nippon Telegraph | ||||||
& Telephone Corp. | 744,480 | ||||||
30,263 | Orange SA | 447,040 | |||||
875,400 | Telecom Italia SpA | ||||||
Savings Shares | 821,483 | ||||||
18,452 | Telefonica SA | 292,406 | |||||
2,715,918 | |||||||
Electric Utilities – 1.13% | |||||||
15,620 | Exelon Corp. | 524,207 | |||||
Electronic Equipment, Instruments | |||||||
& Components – 3.05% | |||||||
45,840 | Corning, Inc. | 954,389 | |||||
7,600 | TE Connectivity Ltd. | 457,596 | |||||
1,411,985 | |||||||
Food & Staples Retailing – 5.94% | |||||||
11,192 | Carrefour SA | 432,958 | |||||
80,000 | J. Sainsbury Plc | 421,871 | |||||
33,785 | Royal Ahold NV | 678,524 | |||||
83,580 | Tesco Plc | 412,224 | |||||
227,200 | WM. Morrison | ||||||
Supermarkets Plc | 807,859 | ||||||
2,753,436 | |||||||
Food Products – 2.00% | |||||||
22,500 | Unilever NV | 925,534 | |||||
Hotels, Restaurants & Leisure – 1.25% | |||||||
450,200 | Genting | ||||||
Malaysia Berhad | 579,257 | ||||||
Insurance – 5.37% | |||||||
51,739 | Aegon NV | 476,576 | |||||
19,800 | MS&AD Insurance | ||||||
Group Holdings | 453,246 | ||||||
17,700 | NKSJ Holdings, Inc. | 454,437 | |||||
7,100 | Swiss Re AG | 658,981 | |||||
14,900 | Tokio Marine | ||||||
Holdings, Inc. | 446,857 | ||||||
2,490,097 | |||||||
Media – 1.61% | |||||||
49,040 | British Sky | ||||||
Broadcasting Group Plc | 746,437 | ||||||
Multiline Retail – 0.90% | |||||||
55,200 | Marks & Spencer | ||||||
Group Plc | 415,538 |
The accompanying notes are an integral part of these Schedules of Investments.
46
Brandes Global Equity Fund
SCHEDULE OF INVESTMENTS — March 31, 2014 (Unaudited) (continued)
Shares | Value | ||||||
Multi-Utilities – 2.93% | |||||||
49,684 | GDF Suez | $ | 1,359,113 | ||||
Oil, Gas & Consumable Fuels – 9.26% | |||||||
139,425 | BP Plc | 1,120,280 | |||||
30,170 | Chesapeake | ||||||
Energy Corp. | 772,955 | ||||||
36,500 | ENI SpA | 915,293 | |||||
10,500 | Lukoil Co. – ADR | 587,213 | |||||
13,578 | Total SA | 893,771 | |||||
4,289,512 | |||||||
Pharmaceuticals – 11.13% | |||||||
36,500 | Astellas Pharma, Inc. | 433,349 | |||||
6,500 | AstraZeneca Plc | 421,373 | |||||
39,000 | Daiichi Sankyo Co. Ltd. | 657,168 | |||||
12,600 | Eli Lilly & Co. | 741,636 | |||||
24,000 | GlaxoSmithKline Plc | 639,964 | |||||
13,599 | Merck & Co., Inc. | 772,015 | |||||
25,054 | Pfizer, Inc. | 804,734 | |||||
6,600 | Sanofi | 689,698 | |||||
5,159,937 | |||||||
Semiconductors & Semiconductor | |||||||
Equipment – 3.04% | |||||||
26,164 | Intel Corp. | 675,293 | |||||
580 | Samsung Electronics | ||||||
Co. Ltd. | 733,220 | ||||||
1,408,513 | |||||||
Software – 2.69% | |||||||
30,400 | Microsoft Corp. | 1,246,096 | |||||
Technology Hardware, Storage | |||||||
& Peripherals – 3.28% | |||||||
15,900 | Canon, Inc. | 493,470 | |||||
11,210 | Western Digital Corp. | 1,029,302 | |||||
1,522,772 | |||||||
Tobacco – 2.16% | |||||||
24,790 | Imperial Tobacco | ||||||
Group Plc | 1,002,442 | ||||||
Wireless Telecommunication Services – 3.77% | |||||||
29,500 | America Movil | ||||||
SAB de CV – ADR | 586,460 | ||||||
73,500 | China Mobile Ltd | 674,835 | |||||
18,700 | Tim Participacoes | ||||||
SA – ADR | 485,452 | ||||||
1,746,747 | |||||||
TOTAL COMMON STOCKS | |||||||
(Cost $33,623,246) | $ | 42,358,634 | |||||
PREFERRED STOCKS – 2.12% | |||||||
Oil, Gas & Consumable Fuels – 2.12% | |||||||
70,870 | Petroleo Brasileiro | ||||||
SA – ADR | $ | 982,967 | |||||
TOTAL PREFERRED STOCKS | |||||||
(Cost $950,300) | $ | 982,967 |
Principal | |||||||
Amount | Value | ||||||
REPURCHASE AGREEMENTS – 5.32% | |||||||
State Street Bank and Trust Repurchase Agreement, (Dated 03/31/14), | |||||||
due 04/01/2014, 0.00% [Collateralized by $2,680,000 Fannie Mae Bond, | |||||||
2.08%, 11/02/22, (Market Value $2,518,822)] (proceeds $2,467,003) | $ | 2,467,003 | $ | 2,467,003 | |||
TOTAL REPURCHASE AGREEMENTS (Cost $2,467,003) | $ | 2,467,003 | |||||
Total Investments (Cost $37,040,549) – 98.83% | $ | 45,808,604 | |||||
Other Assets in Excess of Liabilities – 1.17% | 541,967 | ||||||
TOTAL NET ASSETS – 100.00% | $ | 46,350,571 |
ADR American Depository Receipt
The accompanying notes are an integral part of these Schedules of Investments.
47
Brandes Global Equity Fund
SCHEDULE OF INVESTMENTS BY COUNTRY — March 31, 2014 (Unaudited)
COMMON STOCKS | ||||
Brazil | 2.16 | % | ||
China | 1.46 | % | ||
France | 8.25 | % | ||
Germany | 0.89 | % | ||
Ireland | 2.23 | % | ||
Italy | 3.74 | % | ||
Japan | 13.51 | % | ||
Malaysia | 1.25 | % | ||
Mexico | 1.27 | % | ||
Netherlands | 4.49 | % | ||
Russia | 1.27 | % | ||
South Korea | 3.75 | % | ||
Spain | 0.63 | % | ||
Sweden | 1.50 | % | ||
Switzerland | 2.41 | % | ||
Turkey | 1.18 | % | ||
United Kingdom | 13.89 | % | ||
United States | 27.51 | % | ||
TOTAL COMMON STOCKS | 91.39 | % | ||
PREFERRED STOCKS | ||||
Brazil | 2.12 | % | ||
TOTAL PREFERRED STOCKS | 2.12 | % | ||
REPURCHASE AGREEMENTS | 5.32 | % | ||
TOTAL INVESTMENTS | 98.83 | % | ||
Other Assets in Excess of Liabilities | 1.17 | % | ||
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.
48
Brandes Emerging Markets Fund
SCHEDULE OF INVESTMENTS — March 31, 2014 (Unaudited)
Shares | Value | ||||||
COMMON STOCKS – 83.21% | |||||||
Austria – 1.93% | |||||||
415,698 | Erste Group | ||||||
Bank AG | $ | 14,220,899 | |||||
Brazil – 12.10% | |||||||
542,330 | Banco Bradesco SA | 7,973,613 | |||||
1,213,550 | Banco do Brasil SA | 12,135,500 | |||||
2,761,926 | Banco Santander | ||||||
Brasil SA – ADR | 15,383,927 | ||||||
2,441,785 | Centrais Electricas | ||||||
Brasileiras SA – ADR | 6,934,669 | ||||||
58,940 | Companhia Paranaense | ||||||
de Energia | 564,463 | ||||||
560,954 | Embraer SA – ADR | 19,908,257 | |||||
7,992,242 | Marfrig Global | ||||||
Foods SA(a) | 15,568,845 | ||||||
407,088 | Tim Participacoes | ||||||
SA – ADR | 10,568,004 | ||||||
89,037,278 | |||||||
China – 9.64% | |||||||
87,002,000 | Bosideng International | ||||||
Holdings Ltd. | 13,156,835 | ||||||
3,433,934 | Chaoda Modern | ||||||
Agriculture Holdings | |||||||
Ltd.(a)(c) | 274,715 | ||||||
2,412,000 | China Mobile Ltd. | 22,145,614 | |||||
159,770 | China Yuchai | ||||||
International Ltd. | 3,383,929 | ||||||
5,150,000 | Dongfeng Motor | ||||||
Group Co. Ltd. | 7,304,895 | ||||||
8,331,877 | Weiqiao Textile Co. | 4,606,607 | |||||
2,202,750 | Xinhua Winshare | ||||||
Publishing and Media | |||||||
Co. Ltd. | 1,256,878 | ||||||
19,759,500 | Yingde Gases | ||||||
Group Co. Ltd. | 18,850,477 | ||||||
70,979,950 | |||||||
Cyprus – 0.62% | |||||||
562,390 | TCS Group | ||||||
Holding – GDR(a) | 4,555,359 | ||||||
Czech Republic – 1.51% | |||||||
739,600 | Telefonica Czech | ||||||
Republic AS | 11,097,916 | ||||||
Egypt – 1.11% | |||||||
335,895 | Eastern Tobacco Co. | 8,195,559 | |||||
Hong Kong – 4.86% | |||||||
208,228 | Dickson Concepts | ||||||
International Ltd. | 120,537 | ||||||
19,123,899 | First Pacific Co. Ltd. | 19,061,358 | |||||
3,306,000 | Luk Fook Holdings | ||||||
International Ltd. | 10,449,294 | ||||||
1,895,500 | Yue Yuen Industrial | ||||||
Holdings Ltd. | 6,176,674 | ||||||
35,807,863 | |||||||
Hungary – 1.69% | |||||||
315,903 | Chemical Works of | ||||||
Gedeon Richter Plc | 5,510,432 | ||||||
5,080,304 | Magyar Telekom | ||||||
Telecommunications | |||||||
Plc | 6,896,233 | ||||||
12,406,665 | |||||||
India – 8.23% | |||||||
331,260 | Axis Bank Ltd. | 8,126,549 | |||||
442,822 | Exide Industries Ltd. | 899,656 | |||||
3,100,200 | Indian Oil Corp. Ltd. | 14,652,854 | |||||
2,204,918 | Reliance | ||||||
Infrastructure Ltd. | 16,051,359 | ||||||
2,122,440 | Tata Chemicals Ltd. | 10,223,560 | |||||
3,425,532 | United Phosphorus | ||||||
Ltd. | 10,607,009 | ||||||
60,560,987 | |||||||
Indonesia – 1.54% | |||||||
29,207,740 | PT XL Axiata Tbk | 11,353,551 | |||||
Luxembourg – 1.69% | |||||||
871,111 | Adecoagro SA(a) | 7,108,266 | |||||
179,756 | Ternium SA – ADR | 5,317,182 | |||||
12,425,448 | |||||||
Malaysia – 0.80% | |||||||
4,583,100 | Genting Malaysia | ||||||
Berhad | 5,896,921 | ||||||
Mexico – 3.67% | |||||||
647,230 | America Movil | ||||||
SAB de CV – ADR | 12,866,932 | ||||||
957,139 | Cemex SAB de | ||||||
CV – ADR(a) | 12,088,666 |
The accompanying notes are an integral part of these Schedules of Investments.
49
Brandes Emerging Markets Fund
SCHEDULE OF INVESTMENTS — March 31, 2014 (Unaudited) (continued)
Shares | Value | ||||||
4,615,026 | Desarrolladora Homex | ||||||
S.A.B. de C.V.(a)(c) | $ | 1,083,908 | |||||
13,687,865 | Urbi Desarrollos | ||||||
Urbanos SA | |||||||
de CV(a)(c) | 886,599 | ||||||
1,419,243 | Viver Incorporadora e | ||||||
Construtora SA(a) | 112,589 | ||||||
27,038,694 | |||||||
Pakistan – 0.88% | |||||||
5,436,360 | Nishat Mills Ltd. | 6,445,654 | |||||
Panama – 1.13% | |||||||
314,457 | Banco Latinoamericano | ||||||
de Comercio | |||||||
Exterior SA | 8,304,809 | ||||||
Russia – 7.66% | |||||||
2,525,478 | Gazprom OAO – | ||||||
ADR(a) | 19,622,964 | ||||||
324,520 | Lukoil Co. – ADR | 18,148,781 | |||||
4,684,860 | RusHydro OJSC – | ||||||
ADR(a) | 7,172,521 | ||||||
1,171,570 | Sberbank of Russia – | ||||||
ADR(a) | 11,446,239 | ||||||
56,390,505 | |||||||
Singapore – 0.91% | |||||||
373,918 | Flextronics | ||||||
International Ltd.(a) | 3,455,002 | ||||||
490,410 | Haw Par Corp. Ltd. | 3,255,365 | |||||
6,710,367 | |||||||
South Korea – 15.95% | |||||||
286,640 | Hana Financial | ||||||
Group, Inc. | 10,507,589 | ||||||
47,350 | Hyundai Mobis | ||||||
Co. Ltd. | 14,048,685 | ||||||
280,930 | KB Financial | ||||||
Group, Inc. | 9,857,010 | ||||||
25,337 | KB Financial Group, | ||||||
Inc. – ADR(a) | 890,596 | ||||||
252,950 | KIA Motors Corp. | 14,135,352 | |||||
5,220 | Lotte Chilsung | ||||||
Beverage Co. Ltd. | 7,316,680 | ||||||
3,510 | Lotte Confectionery | ||||||
Co. Ltd. | 6,011,302 | ||||||
18,868 | POSCO – ADR | 1,309,628 | |||||
71,710 | POSCO | 20,020,729 | |||||
17,745 | Samsung Electronics | ||||||
Co. Ltd. | 22,432,754 | ||||||
232,070 | Shinhan Financial | ||||||
Group Co. Ltd. | 10,268,223 | ||||||
14,558 | Shinhan Financial | ||||||
Group Co. Ltd. – | |||||||
ADR(a) | 639,824 | ||||||
117,438,372 | |||||||
Taiwan – 1.02% | |||||||
10,556,000 | Compal | ||||||
Electronics, Inc. | 7,489,773 | ||||||
Turkey – 6.27% | |||||||
2,769,820 | Aygaz AS | 10,901,868 | |||||
1,930,330 | Haci Omer Sabanci | ||||||
Holding AS | 7,492,115 | ||||||
3,193,634 | Selcuk Ecza Deposu | ||||||
Ticaret ve Sanayi A.S. | 3,030,136 | ||||||
3,564,230 | Turkiye Garanti | ||||||
Bankasi AS | 12,182,807 | ||||||
6,654,700 | Turkiye Vakiflar | ||||||
Bankasi Tao | 12,563,431 | ||||||
46,170,357 | |||||||
TOTAL COMMON STOCKS | |||||||
(Cost $625,845,872) | $ | 612,526,927 | |||||
PARTICIPATORY NOTES – 1.12% | |||||||
Saudi Arabia – 1.12% | |||||||
332,486 | Etihad Etisalat | ||||||
Co.(a)(b)(c) | $ | 8,227,401 | |||||
TOTAL PARTICIPATORY | |||||||
NOTES | |||||||
(Cost $5,277,604) | $ | 8,227,401 | |||||
PREFERRED STOCKS – 9.49% | |||||||
Argentina – 0.04% | |||||||
16,356 | Nortel Inversora | ||||||
SA – ADR | $ | 290,483 | |||||
Brazil – 6.45% | |||||||
553,570 | Companhia Paranaense | ||||||
de Energia | 7,257,303 | ||||||
1,825,269 | Petroleo Brasileiro | ||||||
SA – ADR | 25,316,481 | ||||||
704,181 | Telefonica Brasil | ||||||
SA – ADR | 14,956,804 | ||||||
47,530,588 |
The accompanying notes are an integral part of these Schedules of Investments.
50
Brandes Emerging Markets Fund
SCHEDULE OF INVESTMENTS — March 31, 2014 (Unaudited) (continued)
Shares | Value | ||||||
Russia – 1.38% | |||||||
1,399,140 | Surgutneftegas | ||||||
OJSC – ADR(a) | $ | 10,143,765 | |||||
South Korea – 1.62% | |||||||
93,060 | Hyundai Motor Co. | 11,902,985 | |||||
TOTAL PREFERRED STOCKS | |||||||
(Cost $68,797,903) | $ | 69,867,821 | |||||
REAL ESTATE INVESTMENT | |||||||
TRUSTS – 2.20% | |||||||
Mexico – 2.20% | |||||||
538,162 | Fibra Uno | ||||||
Administracion | |||||||
SA de CV | $ | 1,741,179 | |||||
7,666,190 | Macquarie Mexico | ||||||
Real Estate | |||||||
Management SA de CV | 14,456,865 | ||||||
TOTAL REAL ESTATE | |||||||
INVESTMENT TRUSTS | |||||||
(Cost $14,406,823) | $ | 16,198,044 |
Principal | ||||||||
Amount | Value | |||||||
CONVERTIBLE BONDS – 0.13% | ||||||||
Brazil – 0.13% | ||||||||
Viver Incorporadora e Construtora SA 2.000%, 08/06/2016(c)(d) | $ | 3,299,971 | $ | 988,973 | ||||
TOTAL CONVERTIBLE BONDS | ||||||||
(Cost $1,488,955) | $ | 988,973 | ||||||
REPURCHASE AGREEMENTS – 3.63% | ||||||||
State Street Bank and Trust Repurchase Agreement, | ||||||||
(Dated 03/31/14), due 04/01/14, 0.00% [Collateralized | ||||||||
by $28,830,000 Freddie Mac Bond, 2.06%, 10/17/22, | ||||||||
(Market Value $27,261,200)] (proceeds $26,724,334) | $ | 26,724,334 | $ | 26,724,334 | ||||
TOTAL REPURCHASE AGREEMENTS | ||||||||
(Cost $26,724,334) | $ | 26,724,334 |
The accompanying notes are an integral part of these Schedules of Investments.
51
Brandes Emerging Markets Fund
SCHEDULE OF INVESTMENTS — March 31, 2014 (Unaudited) (continued)
Shares | Value | ||||||
SHORT TERM INVESTMENTS – 0.00% | |||||||
Money Market Funds – 0.00% | |||||||
2 | Northern Institutional Treasury Portfolio, 0.010% | $ | 2 | ||||
TOTAL MONEY MARKET FUNDS (Cost $2) | $ | 2 | |||||
Total Investments (Cost $742,541,493) – 99.78% | $ | 734,533,502 | |||||
Other Assets in Excess of Liabilities – 0.22% | 1,597,127 | ||||||
TOTAL NET ASSETS – 100.00% | $ | 736,130,629 |
Percentages are stated as a percent of net assets.
ADR American Depository Receipt
GDR Global Depository Receipt
(a) | Non-income producing security. |
(b) | Represents the underlying security of a participatory note with HSBC Bank Plc. Etihad Etisalat Co. has a maturity date of March 30, 2015. 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 $11,461,596 or 1.56% 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 $988,973 which represents 0.13% of total net assets. |
The accompanying notes are an integral part of these Schedules of Investments.
52
Brandes Emerging Markets Fund
SCHEDULE OF INVESTMENTS BY INDUSTRY — March 31, 2014 (Unaudited)
COMMON STOCKS | ||||
Aerospace & Defense | 2.70 | % | ||
Auto Components | 2.03 | % | ||
Automobiles | 2.91 | % | ||
Banks | 18.89 | % | ||
Beverages | 0.99 | % | ||
Chemicals | 5.39 | % | ||
Construction Materials | 1.64 | % | ||
Distributors | 0.17 | % | ||
Diversified Financial Services | 3.61 | % | ||
Diversified Telecommunication Services | 3.99 | % | ||
Electric Utilities | 4.17 | % | ||
Electronic Equipment, Instruments & Components | 0.47 | % | ||
Food Products | 3.93 | % | ||
Gas Utilities | 1.48 | % | ||
Health Care Providers & Services | 0.41 | % | ||
Hotels, Restaurants & Leisure | 0.80 | % | ||
Household Durables | 0.28 | % | ||
Machinery | 0.46 | % | ||
Metals & Mining | 3.62 | % | ||
Oil, Gas & Consumable Fuels | 7.12 | % | ||
Pharmaceuticals | 1.19 | % | ||
Semiconductors & Semiconductor Equipment | 3.05 | % | ||
Specialty Retail | 1.44 | % | ||
Technology Hardware, Storage & Peripherals | 1.02 | % | ||
Textiles, Apparel & Luxury Goods | 4.13 | % | ||
Tobacco | 1.12 | % | ||
Wireless Telecommunication Services | 6.20 | % | ||
TOTAL COMMON STOCKS | 83.21 | % | ||
PARTICIPATORY NOTES | ||||
Wireless Telecommunication Services | �� | 1.12 | % | |
TOTAL PARTICIPATORY NOTES | 1.12 | % | ||
PREFERRED STOCKS | ||||
Automobiles | 1.62 | % | ||
Diversified Telecommunication Services | 2.07 | % | ||
Electric Utilities | 0.98 | % | ||
Oil, Gas & Consumable Fuels | 4.82 | % | ||
TOTAL PREFERRED STOCKS | 9.49 | % | ||
REAL ESTATE INVESTMENT TRUSTS | 2.20 | % | ||
CONVERTIBLE BONDS | ||||
Household Durables | 0.13 | % | ||
TOTAL CONVERTIBLE BONDS | 0.13 | % |
The accompanying notes are an integral part of these Schedules of Investments.
53
Brandes Emerging Markets Fund
SCHEDULE OF INVESTMENTS BY INDUSTRY — March 31, 2014 (Unaudited) (continued)
REPURCHASE AGREEMENTS | 3.63 | % | ||
TOTAL INVESTMENTS | 99.78 | % | ||
Other Assets in Excess of Liabilities | 0.22 | % | ||
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.
54
Brandes International Small Cap Equity Fund
SCHEDULE OF INVESTMENTS — March 31, 2014 (Unaudited)
Shares | Value | ||||||
COMMON STOCKS – 75.95% | |||||||
Belgium – 2.82% | |||||||
207,470 | D’Ieteren SA | $ | 9,737,947 | ||||
Brazil – 2.05% | |||||||
365,380 | Companhia Paranaense | ||||||
de Energia | 3,499,210 | ||||||
1,765,200 | Marfrig Global | ||||||
Foods SA(a) | 3,438,600 | ||||||
1,815,154 | Viver Incorporadora e | ||||||
Construtora SA(a) | 143,997 | ||||||
7,081,807 | |||||||
Canada – 5.80% | |||||||
470,400 | Celestica, Inc.(a) | 5,150,880 | |||||
345,500 | Dorel Industries, | ||||||
Inc.(a) | 11,560,421 | ||||||
4,984 | E-L Financial | ||||||
Corp. Ltd.(a) | 3,268,566 | ||||||
19,979,867 | |||||||
China – 1.78% | |||||||
69,390 | China Yuchai | ||||||
International Ltd. | 1,469,680 | ||||||
8,436,000 | Weiqiao Textile Co. | 4,664,176 | |||||
6,133,856 | |||||||
Denmark – 0.86% | |||||||
95,750 | H. Lundbeck A/S(e) | 2,949,667 | |||||
Egypt – 0.77% | |||||||
108,645 | Eastern Tobacco Co. | 2,650,848 | |||||
France – 2.84% | |||||||
67,477 | Bongrain SA | 5,854,631 | |||||
36,300 | Ciments Francais SA | 3,935,705 | |||||
9,790,336 | |||||||
Greece – 1.40% | |||||||
450,886 | Sarantis SA | 4,845,097 | |||||
Hong Kong – 3.26% | |||||||
3,143,500 | APT Satellite | ||||||
Holdings Ltd. | 3,712,301 | ||||||
1,262,000 | COSCO International | ||||||
Holdings Ltd. | 506,747 | ||||||
5,154,000 | Dickson Concepts | ||||||
International Ltd. | 2,983,493 | ||||||
4,047,600 | First Pacific Co. Ltd. | 4,034,363 | |||||
11,236,904 | |||||||
Hungary – 1.43% | |||||||
3,623,390 | Magyar Telekom | ||||||
Telecommunications | |||||||
Plc | 4,918,553 | ||||||
India – 4.61% | |||||||
2,429,739 | Exide Industries Ltd. | 4,936,362 | |||||
170,370 | Nava Bharat | ||||||
Ventures Ltd. | 451,102 | ||||||
417,798 | NIIT Technologies Ltd. | 2,822,509 | |||||
1,053,630 | Reliance | ||||||
Infrastructure Ltd. | 7,670,214 | ||||||
15,880,187 | |||||||
Israel – 1.51% | |||||||
418,500 | Syneron | ||||||
Medical Ltd.(a) | 5,210,325 | ||||||
Italy – 4.55% | |||||||
2,271,448 | Iren Spa | 4,100,782 | |||||
623,380 | Italcementi SpA | ||||||
Savings Shares | 4,900,533 | ||||||
4,366 | Italmobiliare SpA | 175,209 | |||||
187,964 | Italmobiliare SpA | 5,230,273 | |||||
459,736 | Natuzzi SpA – ADR(a) | 1,282,663 | |||||
15,689,460 | |||||||
Japan – 21.66% | |||||||
249,300 | Alpine Electronics, Inc. | 3,261,030 | |||||
141,400 | Chudenko Corp. | 2,442,662 | |||||
1,124,200 | Fuji Machine | ||||||
Manufacturing Co. Ltd. | 9,896,092 | ||||||
187,600 | Futaba Corp. | 3,234,862 | |||||
347,100 | Hibiya Engineering Ltd. | 5,009,507 | |||||
608,400 | Hitachi Koki Co. Ltd. | 4,753,962 | |||||
645,750 | Hosiden Corp. | 3,172,886 | |||||
621,400 | Noritsu Koki Co. Ltd. | 4,371,472 | |||||
130,700 | Okinawa Cellular | ||||||
Telephone Co. | 3,335,360 | ||||||
178,700 | Otsuka Kagu Ltd. | 1,581,817 | |||||
110,800 | San-A Co. Ltd. | 3,268,471 | |||||
598,000 | Sanki Engineering | ||||||
Co. Ltd. | 3,781,432 | ||||||
472,000 | Tachi-s Co. Ltd. | 7,757,168 | |||||
252,100 | Tenma Corporation | 3,488,352 | |||||
75,700 | Torii Pharmaceutical | ||||||
Co. Ltd. | 2,452,517 | ||||||
483,500 | TSI Holdings Co. Ltd. | 3,195,688 |
The accompanying notes are an integral part of these Schedules of Investments.
55
Brandes International Small Cap Equity Fund
SCHEDULE OF INVESTMENTS — March 31, 2014 (Unaudited) (continued)
Shares | Value | ||||||
137,900 | Tsutsumi Jewelry | ||||||
Co. Ltd. | $ | 3,309,253 | |||||
251,700 | Yamaha Corp. | 3,237,308 | |||||
753,000 | Yodogawa Steel | ||||||
Works Ltd. | 3,118,832 | ||||||
74,668,671 | |||||||
Mexico – 2.97% | |||||||
21,187,541 | Consorcio ARA | ||||||
S.A.B. de C.V.(a) | 9,461,404 | ||||||
1,671,404 | Desarrolladora Homex | ||||||
S.A.B. de C.V.(a)(b) | 392,554 | ||||||
6,089,400 | Urbi Desarrollos | ||||||
Urbanos SA de CV(a)(b) | 394,427 | ||||||
10,248,385 | |||||||
Panama – 0.10% | |||||||
12,937 | Banco Latinoamericano | ||||||
de Comercio | |||||||
Exterior SA | 341,666 | ||||||
Philippines – 0.91% | |||||||
1,942,930 | First Philippine | ||||||
Holdings Corp. | 3,143,812 | ||||||
Singapore – 2.23% | |||||||
346,300 | Flextronics | ||||||
International Ltd.(a) | 3,199,812 | ||||||
631,100 | Haw Par Corp. Ltd. | 4,189,272 | |||||
1,293,000 | HTL International | ||||||
Holdings Ltd. | 287,813 | ||||||
7,676,897 | |||||||
South Korea – 3.26% | |||||||
4,640 | Lotte Chilsung | ||||||
Beverage Co. Ltd. | 6,503,716 | ||||||
35,977 | Samchully Co. Ltd. | 4,732,795 | |||||
11,236,511 | |||||||
Sweden – 0.94% | |||||||
466,530 | Husqvarna AB | 3,257,392 | |||||
Switzerland – 1.82% | |||||||
791,519 | Micronas | ||||||
Semiconductor | |||||||
Holding AG | 6,267,622 | ||||||
Turkey – 0.95% | |||||||
3,439,153 | Selcuk Ecza Deposu | ||||||
Ticaret ve Sanayi A.S. | 3,263,085 | ||||||
United Kingdom – 7.43% | |||||||
565,483 | Chime | ||||||
Communications Plc | 3,224,167 | ||||||
80,320 | Clarkson Plc | 3,282,980 | |||||
4,366,257 | Debenhams Plc | 5,821,048 | |||||
435,948 | LSL Property | ||||||
Services Plc | 3,159,702 | ||||||
3,091,960 | McBride Plc(a) | 5,464,011 | |||||
2,833,650 | Spirent | ||||||
Communications Plc | 4,669,761 | ||||||
25,621,669 | |||||||
TOTAL COMMON STOCKS | |||||||
(Cost $235,290,690) | $ | 261,830,564 | |||||
PREFERRED STOCKS – 0.50% | |||||||
Argentina – 0.08% | |||||||
14,785 | Nortel Inversora | ||||||
SA – ADR | $ | 262,581 | |||||
Brazil – 0.42% | |||||||
111,500 | Companhia Paranaense | ||||||
de Energia | 1,464,390 | ||||||
TOTAL PREFERRED STOCKS | |||||||
(Cost $1,387,868) | $ | 1,726,971 | |||||
REAL ESTATE | |||||||
INVESTMENT TRUSTS – 2.04% | |||||||
Mexico – 2.04% | |||||||
3,720,000 | Macquarie Mexico | ||||||
Real Estate | |||||||
Management | |||||||
SA de CV | $ | 7,015,158 | |||||
TOTAL REAL ESTATE | |||||||
INVESTMENT TRUSTS | |||||||
(Cost $6,649,016) | $ | 7,015,158 |
The accompanying notes are an integral part of these Schedules of Investments.
56
Brandes International Small Cap Equity Fund
SCHEDULE OF INVESTMENTS — March 31, 2014 (Unaudited) (continued)
Principal | ||||||||
Amount | Value | |||||||
CONVERTIBLE BONDS – 0.10% | ||||||||
Brazil – 0.10% | ||||||||
Viver Incorporadora e Construtora SA 2.000%, 08/06/2016(b)(c) | $ | 1,136,056 | $ | 340,466 | ||||
TOTAL CONVERTIBLE BONDS | ||||||||
(Cost $512,591) | $ | 340,466 | ||||||
CORPORATE BONDS – 0.52% | ||||||||
Mexico – 0.52% | ||||||||
Urbi Desarrollos Urbanos SA de CV 8.500%, 04/19/2016(d) | $ | 8,195,000 | $ | 911,694 | ||||
Desarrolladora Homex S.A.B. de C.V. 7.500%, 09/28/2015(d) | 8,014,000 | 881,540 | ||||||
TOTAL CORPORATE BONDS | ||||||||
(Cost $3,334,909) | $ | 1,793,234 | ||||||
REPURCHASE AGREEMENTS – 25.03% | ||||||||
State Street Bank and Trust Repurchase Agreement, | ||||||||
(Dated 03/31/14), due 04/01/14, 0.00% [Collateralized | ||||||||
by $89,585,000 U.S. Treasury, 2.00%, 02/28/21, | ||||||||
(Market Value $88,035,250)] (proceeds $86,288,121) | $ | 86,288,121 | $ | 86,288,121 | ||||
TOTAL REPURCHASE AGREEMENTS (Cost $86,288,121) | $ | 86,288,121 | ||||||
Total Investments (Cost $333,463,195) – 104.14% | $ | 358,994,514 | ||||||
Liabilities in Excess of Other Assets – (4.14)% | (14,291,644 | ) | ||||||
TOTAL NET ASSETS – 100.00% | $ | 344,702,870 |
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 $1,127,447 or 0.33% 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 $340,466 which represents 0.10% of total net assets. |
(d) | In Default. |
(e) | All or a portion of the security is out on loan. See Note 2H in the Notes to Financial Statements. |
The accompanying notes are an integral part of these Schedules of Investments.
57
Brandes International Small Cap Equity Fund
SCHEDULE OF INVESTMENTS BY INDUSTRY — March 31, 2014 (Unaudited)
COMMON STOCKS | ||||
Auto Components | 3.68 | % | ||
Banks | 0.10 | % | ||
Beverages | 1.89 | % | ||
Chemicals | 1.01 | % | ||
Communications Equipment | 1.35 | % | ||
Construction & Engineering | 3.41 | % | ||
Construction Materials | 4.13 | % | ||
Distributors | 2.82 | % | ||
Diversified Financial Services | 1.17 | % | ||
Diversified Telecommunication Services | 2.51 | % | ||
Electric Utilities | 4.15 | % | ||
Electrical Equipment | 0.94 | % | ||
Electronic Equipment, Instruments & Components | 3.34 | % | ||
Food & Staples Retailing | 0.95 | % | ||
Food Products | 2.70 | % | ||
Gas Utilities | 1.37 | % | ||
Health Care Equipment & Supplies | 1.51 | % | ||
Health Care Providers & Services | 0.95 | % | ||
Household Durables | 8.71 | % | ||
Household Products | 1.59 | % | ||
Industrial Conglomerates | 0.13 | % | ||
Insurance | 0.95 | % | ||
Leisure Equipment & Products | 0.94 | % | ||
Machinery | 4.68 | % | ||
Marine | 0.95 | % | ||
Media | 0.94 | % | ||
Metals & Mining | 0.90 | % | ||
Multiline Retail | 1.69 | % | ||
Multi-Utilities | 1.19 | % | ||
Personal Products | 1.41 | % | ||
Pharmaceuticals | 2.78 | % | ||
Real Estate Management & Development | 0.92 | % | ||
Semiconductors & Semiconductor Equipment | 1.82 | % | ||
Software | 0.82 | % | ||
Specialty Retail | 2.28 | % | ||
Technology Hardware, Storage & Peripherals | 1.27 | % | ||
Textiles, Apparel & Luxury Goods | 2.28 | % | ||
Tobacco | 0.76 | % | ||
Wireless Telecommunication Services | 0.96 | % | ||
TOTAL COMMON STOCKS | 75.95 | % | ||
PREFERRED STOCKS | ||||
Electric Utilities | 0.42 | % | ||
Diversified Telecommunication Services | 0.08 | % | ||
TOTAL PREFERRED STOCKS | 0.50 | % |
The accompanying notes are an integral part of these Schedules of Investments.
58
Brandes International Small Cap Equity Fund
SCHEDULE OF INVESTMENTS BY INDUSTRY — March 31, 2014 (Unaudited) (continued)
REAL ESTATE INVESTMENT TRUSTS | 2.04 | % | ||
CONVERTIBLE BONDS | ||||
Household Durables | 0.10 | % | ||
TOTAL CONVERTIBLE BONDS | 0.10 | % | ||
CORPORATE BONDS | ||||
Household Durables | 0.52 | % | ||
TOTAL CORPORATE BONDS | 0.52 | % | ||
REPURCHASE AGREEMENTS | 25.03 | % | ||
TOTAL INVESTMENTS | 104.14 | % | ||
Liabilities in Excess of Other Assets | (4.14 | )% | ||
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.
59
Brandes Core Plus Fixed Income Fund
SCHEDULE OF INVESTMENTS — March 31, 2014 (Unaudited)
Principal | ||||||||
Amount | Value | |||||||
FEDERAL AND FEDERALLY SPONSORED CREDITS – 4.45% | ||||||||
Fannie Mae Interest Only Strip – 0.23% | ||||||||
5.500%, 01/1/2036 | $ | 228,741 | $ | 44,218 | ||||
6.000%, 06/1/2036 | 232,423 | 41,341 | ||||||
85,559 | ||||||||
Federal National Mortgage Association – 2.83% | ||||||||
Pool MA0918, 4.000%, 12/1/2041 | 674,455 | 701,176 | ||||||
Pool 934124, 5.500%, 07/1/2038 | 135,755 | 149,644 | ||||||
Pool 254631, 5.000%, 02/1/2018 | 190,172 | 202,246 | ||||||
1,053,066 | ||||||||
Freddie Mac Mortgage – 1.39% | ||||||||
Pool G0-6018, 6.500%, 04/1/2039 | 100,956 | 113,027 | ||||||
Pool A9-3505, 4.500%, 08/1/2040 | 377,884 | 403,083 | ||||||
516,110 | ||||||||
TOTAL FEDERAL AND FEDERALLY SPONSORED CREDITS | ||||||||
(Cost $1,600,414) | $ | 1,654,735 | ||||||
OTHER MORTGAGE RELATED SECURITIES – 0.79% | ||||||||
Collateralized Mortgage Obligations – 0.00% | ||||||||
Wells Fargo Mortgage Backed Securities Trust | ||||||||
Series 2006-AR14, 5.822%, 10/25/2036 | $ | 1,864 | $ | 1,821 | ||||
Near Prime Mortgage – 0.79% | ||||||||
Bear Stearns Alt-A Trust | ||||||||
Series 2004-11, 0.834%, 11/25/2034 | 300,724 | 292,663 | ||||||
TOTAL OTHER MORTGAGE RELATED SECURITIES | ||||||||
(Cost $265,738) | $ | 294,484 | ||||||
US GOVERNMENTS – 48.67% | ||||||||
Sovereign – 48.67% | ||||||||
United States Treasury Bond | ||||||||
4.750%, 02/15/2037 | $ | 475,000 | $ | 577,273 | ||||
United States Treasury Note | ||||||||
4.250%, 08/15/2014 | 405,000 | 411,344 | ||||||
4.500%, 02/15/2016 | 3,315,000 | 3,570,878 | ||||||
3.375%, 11/15/2019 | 6,990,000 | 7,537,729 | ||||||
2.000%, 11/15/2021 | 5,670,000 | 5,501,669 | ||||||
2.000%, 02/15/2023 | 530,000 | 504,039 | ||||||
TOTAL US GOVERNMENTS | ||||||||
(Cost $18,353,474) | $ | 18,102,932 |
The accompanying notes are an integral part of these Schedules of Investments.
60
Brandes Core Plus Fixed Income Fund
SCHEDULE OF INVESTMENTS — March 31, 2014 (Unaudited) (continued)
Shares | Value | |||||||
COMMON STOCKS – 0.04% | ||||||||
Paper & Forest Products – 0.04% | ||||||||
Resolute Forest Products, Inc.(a) | 691 | $ | 13,882 | |||||
Semiconductors – 0.00% | ||||||||
MagnaChip Semiconductor Corp.(a) | 22 | 307 | ||||||
TOTAL COMMON STOCKS | ||||||||
(Cost $56,874) | $ | 14,189 | ||||||
PREFERRED STOCKS – 1.24% | ||||||||
Banks & Thrifts – 0.57% | ||||||||
Ally Financial, Inc., 8.500% | 7,800 | $ | 213,330 | |||||
Technology Hardware & Equipment – 0.67% | ||||||||
Pitney Bowes International Holdings, Inc., 6.125%(b) | 235 | 248,674 | ||||||
TOTAL PREFERRED STOCKS | ||||||||
(Cost $423,970) | $ | 462,004 | ||||||
Principal | ||||||||
Amount | Value | |||||||
ASSET BACKED SECURITIES – 3.08% | ||||||||
Student Loan – 3.08% | ||||||||
SLM Student Loan Trust | ||||||||
Series 2004-B, 0.663%, 09/15/2033 | $ | 300,000 | $ | 250,355 | ||||
Series 2005-A, 0.543%, 12/15/2038 | 400,000 | 349,641 | ||||||
Series 2006-A, 0.523%, 06/15/2039 | 275,000 | 245,359 | ||||||
Series 2007-A, 0.473%, 12/15/2041 | 350,000 | 299,333 | ||||||
TOTAL ASSET BACKED SECURITIES | ||||||||
(Cost $1,096,337) | $ | 1,144,688 | ||||||
CORPORATE BONDS – 37.52% | ||||||||
Advertising – 0.71% | ||||||||
The Interpublic Group of Companies, Inc. | ||||||||
6.250%, 11/15/2014 | $ | 255,000 | $ | 262,969 | ||||
Automobiles – 0.62% | ||||||||
Chrysler Group LLC | ||||||||
8.250%, 06/15/2021 | 205,000 | 231,906 | ||||||
Banks & Thrifts – 8.23% | ||||||||
Ally Financial, Inc. | ||||||||
6.750%, 12/1/2014 | 520,000 | 538,850 | ||||||
Citigroup, Inc. | ||||||||
6.125%, 11/21/2017 | 235,000 | 269,078 | ||||||
6.875%, 3/5/2038 | 76,000 | 97,823 | ||||||
Fifth Third Bancorp | ||||||||
8.250%, 03/1/2038 | 175,000 | 246,449 |
The accompanying notes are an integral part of these Schedules of Investments.
61
Brandes Core Plus Fixed Income Fund
SCHEDULE OF INVESTMENTS — March 31, 2014 (Unaudited) (continued)
Principal | ||||||||
Amount | Value | |||||||
First Horizon National Corp. | ||||||||
5.375%, 12/15/2015 | $ | 130,000 | $ | 138,308 | ||||
JP Morgan Chase & Co. | ||||||||
7.900%, Perpetual | 770,000 | 870,100 | ||||||
National City Corp. | ||||||||
4.900%, 01/15/2015 | 235,000 | 243,163 | ||||||
Regions Financial Corp. | ||||||||
5.750%, 06/15/2015 | 435,000 | 458,769 | ||||||
The Goldman Sachs Group, Inc. | ||||||||
7.500%, 02/15/2019 | 165,000 | 199,615 | ||||||
3,062,155 | ||||||||
Building Materials – 2.68% | ||||||||
CRH America, Inc. | ||||||||
6.000%, 09/30/2016 | 160,000 | 177,835 | ||||||
Masco Corp. | ||||||||
6.125%, 10/3/2016 | 305,000 | 334,738 | ||||||
Mohawk Industries, Inc. | ||||||||
6.375%, 01/15/2016 | 135,000 | 145,800 | ||||||
Owens Corning | ||||||||
6.500%, 12/1/2016 | 80,000 | 88,338 | ||||||
USG Corp. | ||||||||
6.300%, 11/15/2016 | 230,000 | 248,975 | ||||||
995,686 | ||||||||
Commercial Services & Supplies – 0.45% | ||||||||
The ADT Corp. | ||||||||
3.500%, 07/15/2022 | 190,000 | 167,014 | ||||||
Diversified Financial Services – 1.98% | ||||||||
American International Group, Inc. | ||||||||
6.400%, 12/15/2020 | 400,000 | 476,577 | ||||||
Bank of America Corp. | ||||||||
3.750%, 07/12/2016 | 245,000 | 259,089 | ||||||
735,666 | ||||||||
Electric Utilities – 9.11% | ||||||||
Ameren Corp. | ||||||||
8.875%, 05/15/2014 | 300,000 | 302,874 | ||||||
Arizona Public Service Co. | ||||||||
8.750%, 03/1/2019 | 340,000 | 434,878 | ||||||
Commonwealth Edison Co. | ||||||||
5.900%, 03/15/2036 | 175,000 | 212,374 | ||||||
EDP Finance BV | ||||||||
4.900%, 10/1/2019(b) | 400,000 | 418,000 | ||||||
DPL, Inc. | ||||||||
7.250%, 10/15/2021 | 260,000 | 268,450 |
The accompanying notes are an integral part of these Schedules of Investments.
62
Brandes Core Plus Fixed Income Fund
SCHEDULE OF INVESTMENTS — March 31, 2014 (Unaudited) (continued)
Principal | ||||||||
Amount | Value | |||||||
FirstEnergy Corp. | ||||||||
7.375%, 11/15/2031 | $ | 430,000 | $ | 493,922 | ||||
Israel Electric Corporation Ltd. | ||||||||
7.250%, 01/15/2019(b) | 420,000 | 468,825 | ||||||
Nisource Finance Corp. | ||||||||
5.250%, 09/15/2017 | 285,000 | 316,846 | ||||||
Oncor Electric Delivery Co. LLC | ||||||||
6.375%, 01/15/2015 | 30,000 | 31,305 | ||||||
7.000%, 09/1/2022 | 215,000 | 267,204 | ||||||
PPL Energy Supply LLC | ||||||||
6.500%, 05/1/2018 | 155,000 | 174,079 | ||||||
3,388,757 | ||||||||
Energy – 0.59% | ||||||||
Valero Energy Corp. | ||||||||
9.375%, 03/15/2019 | 170,000 | 221,221 | ||||||
Energy Equipment & Services – 0.90% | ||||||||
Transocean, Inc. | ||||||||
4.950%, 11/15/2015 | 315,000 | 334,428 | ||||||
Equipment – 0.10% | ||||||||
Continental Airlines 2007-1 Class A Pass Through Trust | ||||||||
Series 2007-1, 5.983%, 04/19/2022 | 34,399 | 39,042 | ||||||
Food, Beverage & Tobacco – 1.13% | ||||||||
Altria Group, Inc. | ||||||||
9.700%, 11/10/2018 | 51,000 | 66,943 | ||||||
Pilgrims Pride Corp. | ||||||||
7.875%, 12/15/2018 | 130,000 | 139,750 | ||||||
Tyson Foods, Inc. | ||||||||
6.850%, 04/1/2016 | 195,000 | 215,364 | ||||||
422,057 | ||||||||
Forest Products & Paper – 0.70% | ||||||||
Sappi Papier Holding GmbH | ||||||||
7.750%, 07/15/2017(b) | 235,000 | 261,438 | ||||||
Healthcare Providers & Services – 0.44% | ||||||||
Laboratory Corp. of America Holdings | ||||||||
3.750%, 08/23/2022 | 165,000 | 163,887 | ||||||
Homebuilders – 2.06% | ||||||||
Centex Corp. | ||||||||
6.500%, 05/1/2016 | 80,000 | 88,000 | ||||||
Lennar Corp. | ||||||||
5.600%, 05/31/2015 | 320,000 | 333,600 |
The accompanying notes are an integral part of these Schedules of Investments.
63
Brandes Core Plus Fixed Income Fund
SCHEDULE OF INVESTMENTS — March 31, 2014 (Unaudited) (continued)
Principal | ||||||||
Amount | Value | |||||||
Toll Brothers Finance Corp. | ||||||||
5.150%, 05/15/2015 | $ | 270,000 | $ | 280,800 | ||||
Urbi Desarrollos Urbanos SA | ||||||||
9.500%, 01/21/2020(b)(d) | 580,000 | 63,800 | ||||||
766,200 | ||||||||
Insurance – 1.86% | ||||||||
CNA Financial Corp. | ||||||||
7.350%, 11/15/2019 | 160,000 | 195,987 | ||||||
5.875%, 08/15/2020 | 110,000 | 126,266 | ||||||
ING US, Inc. | ||||||||
5.500%, 07/15/2022 | 235,000 | 263,602 | ||||||
Marsh & McLennan Cos, Inc. | ||||||||
5.750%, 09/15/2015 | 101,000 | 107,995 | ||||||
693,850 | ||||||||
Media – 0.54% | ||||||||
McGraw Hill Financial, Inc. | ||||||||
5.900%, 11/15/2017 | 180,000 | 199,665 | ||||||
Metals & Mining – 0.39% | ||||||||
ArcelorMittal SA | ||||||||
6.000%, 03/1/2021 | 135,000 | 143,944 | ||||||
Oil & Gas – 3.01% | ||||||||
Anadarko Petroleum Corp. | ||||||||
5.950%, 09/15/2016 | 435,000 | 482,613 | ||||||
Chesapeake Energy Corp. | ||||||||
6.625%, 08/15/2020 | 370,000 | 415,325 | ||||||
El Paso Corp. | ||||||||
7.000%, 06/15/2017 | 195,000 | 220,025 | ||||||
1,117,963 | ||||||||
Pharmaceutical – 0.52% | ||||||||
Valeant Pharmaceuticals International | ||||||||
6.750%, 08/15/2018(b) | 175,000 | 192,500 | ||||||
Retail – 0.84% | ||||||||
Marks & Spencer Plc | ||||||||
7.125%, 12/1/2037(b) | 285,000 | 312,714 | ||||||
Telecommunications – 0.66% | ||||||||
Telecom Italia Capital SA | ||||||||
6.999%, 06/4/2018 | 85,000 | 96,369 | ||||||
Telefonica Emisiones SAU | ||||||||
5.462%, 02/16/2021 | 135,000 | 148,409 | ||||||
244,778 | ||||||||
TOTAL CORPORATE BONDS | ||||||||
(Cost $12,631,882) | $ | 13,957,840 |
The accompanying notes are an integral part of these Schedules of Investments.
64
Brandes Core Plus Fixed Income Fund
SCHEDULE OF INVESTMENTS — March 31, 2014 (Unaudited) (continued)
Contracts | Value | |||||||
WARRANTS – 0.00% | ||||||||
Semiconductors – 0.00% | ||||||||
MagnaChip Semiconductor Corp. | ||||||||
Expiration Date: November 2014, Exercise Price: 1.97(a)(c) | 870 | $ | — | |||||
TOTAL WARRANTS | ||||||||
(Cost $8,748) | $ | — | ||||||
Principal | ||||||||
Amount | Value | |||||||
TIME DEPOSIT – 3.32% | ||||||||
State Street Euro Dollar Time Deposit, 0.010%, due 04/01/14 | $ | 1,234,541 | $ | 1,234,541 | ||||
TOTAL TIME DEPOSIT | ||||||||
(Cost $1,234,541) | $ | 1,234,541 | ||||||
Total Investments (Cost $35,671,978) – 99.11% | $ | 36,865,413 | ||||||
Other Assets in Excess of Liabilities – 0.89% | 332,760 | |||||||
TOTAL NET ASSETS – 100.00% | $ | 37,198,173 |
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 $1,965,951 which represents 5.29% of total net assets. |
(c) | The price of 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 $0.00 or 0.00% of the Fund’s net assets and is classified as Level 2. See Note 2 in the Notes to Schedule of Investments. |
(d) | In default. |
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.
65
Brandes Credit Focus Yield Fund
SCHEDULE OF INVESTMENTS — March 31, 2014 (Unaudited)
Principal | ||||||||
Amount | Value | |||||||
FEDERAL AND FEDERALLY SPONSORED CREDITS – 0.03% | ||||||||
Fannie Mae Interest Only Strip – 0.03% | ||||||||
Fannie Mae Interest Only Strip | ||||||||
6.000%, 06/1/2036 | $ | 57,507 | $ | 10,229 | ||||
TOTAL FEDERAL AND FEDERALLY SPONSORED CREDITS | ||||||||
(Cost $10,046) | $ | 10,229 | ||||||
OTHER MORTGAGE RELATED SECURITIES – 0.09% | ||||||||
Sub-Prime Mortgages – 0.09% | ||||||||
Structured Asset Investment Loan Trust | ||||||||
Series A3, 0.914%, 07/25/2035 | $ | 27,410 | $ | 26,820 | ||||
TOTAL OTHER MORTGAGE RELATED SECURITIES | ||||||||
(Cost $25,347) | $ | 26,820 | ||||||
US GOVERNMENTS – 34.48% | ||||||||
Sovereign – 34.48% | ||||||||
United States Treasury Note | ||||||||
4.250%, 08/15/2014 | $ | 60,000 | $ | 60,940 | ||||
4.500%, 02/15/2016 | 4,095,000 | 4,411,085 | ||||||
3.375%, 11/15/2019 | 3,640,000 | 3,925,227 | ||||||
2.000%, 11/15/2021 | 1,590,000 | 1,542,796 | ||||||
2.000%, 02/15/2023 | 900,000 | 855,914 | ||||||
TOTAL US GOVERNMENTS | ||||||||
(Cost $10,991,689) | $ | 10,795,962 | ||||||
Shares | Value | |||||||
COMMON STOCKS – 0.12% | ||||||||
Paper & Forest Products – 0.11% | ||||||||
Resolute Forest Products, Inc.(a) | 1,772 | $ | 35,600 | |||||
Semiconductors – 0.01% | ||||||||
MagnaChip Semiconductor Corp.(a) | 97 | 1,352 | ||||||
TOTAL COMMON STOCKS | ||||||||
(Cost $24,407) | $ | 36,952 | ||||||
PREFERRED STOCKS – 2.01% | ||||||||
Banks & Thrifts – 1.03% | ||||||||
Ally Financial, Inc., 8.500% | 11,800 | $ | 322,730 | |||||
Technology Hardware & Equipment – 0.98% | ||||||||
Pitney Bowes International Holdings, Inc., 6.125%(b) | 290 | 306,874 | ||||||
TOTAL PREFERRED STOCKS | ||||||||
(Cost $581,415) | $ | 629,604 |
The accompanying notes are an integral part of these Schedules of Investments.
66
Brandes Credit Focus Yield Fund
SCHEDULE OF INVESTMENTS — March 31, 2014 (Unaudited) (continued)
Principal | ||||||||
Amount | Value | |||||||
ASSET BACKED SECURITIES – 0.82% | ||||||||
Student Loan – 0.82% | ||||||||
SLM Student Loan Trust | ||||||||
Series 2007-A, 0.473%, 12/15/2041 | $ | 300,000 | $ | 256,571 | ||||
TOTAL ASSET BACKED SECURITIES | ||||||||
(Cost $206,142) | $ | 256,571 | ||||||
CORPORATE BONDS – 58.59% | ||||||||
Advertising – 0.64% | ||||||||
The Interpublic Group of Companies, Inc. | ||||||||
6.250%, 11/15/2014 | $ | 195,000 | $ | 201,094 | ||||
Automobiles – 0.98% | ||||||||
Chrysler Group LLC | ||||||||
8.250%, 06/15/2021 | 270,000 | 305,438 | ||||||
Banks & Thrifts – 14.01% | ||||||||
Ally Financial, Inc. | ||||||||
6.750%, 12/1/2014 | 350,000 | 362,688 | ||||||
6.750%, 12/1/2014 | 325,000 | 336,375 | ||||||
Citigroup, Inc. | ||||||||
6.125%, 11/21/2017 | 500,000 | 572,508 | ||||||
Fifth Third Bancorp | ||||||||
8.250%, 03/1/2038 | 65,000 | 91,538 | ||||||
First Horizon National Corp. | ||||||||
5.375%, 12/15/2015 | 230,000 | 244,698 | ||||||
JP Morgan Chase & Co. | ||||||||
7.900%, Perpetual | 1,140,000 | 1,288,200 | ||||||
National City Corp. | ||||||||
4.900%, 01/15/2015 | 245,000 | 253,510 | ||||||
Regions Financial Corp. | ||||||||
5.750%, 06/15/2015 | 580,000 | 611,692 | ||||||
The Goldman Sachs Group, Inc. | ||||||||
7.500%, 02/15/2019 | 275,000 | 332,692 | ||||||
USB Capital IX | ||||||||
6.189%, Perpetual | 350,000 | 292,250 | ||||||
4,386,151 | ||||||||
Building Materials – 3.18% | ||||||||
CRH America, Inc. | ||||||||
6.000%, 09/30/2016 | 90,000 | 100,032 | ||||||
Masco Corp. | ||||||||
6.125%, 10/3/2016 | 505,000 | 554,238 | ||||||
Mohawk Industries, Inc. | ||||||||
6.625%, 01/15/2016 | 75,000 | 81,000 | ||||||
Owens Corning | ||||||||
6.500%, 12/1/2016 | 100,000 | 110,422 |
The accompanying notes are an integral part of these Schedules of Investments.
67
Brandes Credit Focus Yield Fund
SCHEDULE OF INVESTMENTS — March 31, 2014 (Unaudited) (continued)
Principal | ||||||||
Amount | Value | |||||||
USG Corp. | ||||||||
6.300%, 11/15/2016 | $ | 140,000 | $ | 151,550 | ||||
997,242 | ||||||||
Commercial Services & Supplies – 0.87% | ||||||||
The ADT Corp. | ||||||||
3.500%, 07/15/2022 | 310,000 | 272,496 | ||||||
Computers & Peripherals – 2.22% | ||||||||
Apple, Inc. | ||||||||
2.400%, 05/3/2023 | 750,000 | 695,459 | ||||||
Diversified Financial Services – 5.67% | ||||||||
American International Group, Inc. | ||||||||
6.400%, 12/15/2020 | 485,000 | 577,849 | ||||||
Bank of America Corp. | ||||||||
3.750%, 07/12/2016 | 490,000 | 518,179 | ||||||
Prudential Plc | ||||||||
11.750%, 12/29/2049 | 635,000 | 681,126 | ||||||
1,777,154 | ||||||||
Electric Utilities – 9.97% | ||||||||
Ameren Corp. | ||||||||
8.875%, 05/15/2014 | 120,000 | 121,150 | ||||||
Arizona Public Service Co. | ||||||||
8.750%, 03/1/2019 | 435,000 | 556,388 | ||||||
Commonwealth Edison Co. | ||||||||
Series 104, 5.950%, 08/15/2016 | 110,000 | 122,428 | ||||||
DPL, Inc. | ||||||||
7.250%, 10/15/2021 | 355,000 | 366,537 | ||||||
FirstEnergy Corp. | ||||||||
7.375%, 11/15/2031 | 380,000 | 436,489 | ||||||
Israel Electric Corporation Ltd. | ||||||||
7.250%, 01/15/2019(b) | 505,000 | 563,706 | ||||||
Nisource Finance Corp. | ||||||||
5.250%, 09/15/2017 | 65,000 | 72,263 | ||||||
Oncor Electric Delivery Co. LLC | ||||||||
6.375%, 01/15/2015 | 465,000 | 485,237 | ||||||
7.000%, 09/1/2022 | 120,000 | 149,137 | ||||||
PPL Energy Supply LLC | ||||||||
6.500%, 05/1/2018 | 220,000 | 247,080 | ||||||
3,120,415 | ||||||||
Energy – 0.79% | ||||||||
Valero Energy Corp. | ||||||||
9.375%, 03/15/2019 | 190,000 | 247,247 |
The accompanying notes are an integral part of these Schedules of Investments.
68
Brandes Credit Focus Yield Fund
SCHEDULE OF INVESTMENTS — March 31, 2014 (Unaudited) (continued)
Principal | ||||||||
Amount | Value | |||||||
Energy Equipment & Services – 2.39% | ||||||||
Transocean, Inc. | ||||||||
4.950%, 11/15/2015 | $ | 705,000 | $ | 748,482 | ||||
Equipment – 0.31% | ||||||||
Continental Airlines 2007-1 Class A Pass Through Trust | ||||||||
Series 2007-1, 5.983%, 10/19/2023 | 85,997 | 97,606 | ||||||
Food, Beverage & Tobacco – 1.68% | ||||||||
Altria Group, Inc. | ||||||||
9.700%, 11/10/2018 | 43,000 | 56,442 | ||||||
Pilgrims Pride Corp. | ||||||||
7.875%, 12/15/2018 | 230,000 | 247,250 | ||||||
Tyson Foods, Inc. | ||||||||
6.850%, 04/1/2016 | 200,000 | 220,886 | ||||||
524,578 | ||||||||
Forest Products & Paper – 1.07% | ||||||||
Sappi Papier Holding GmbH | ||||||||
7.750%, 07/15/2017(b) | 300,000 | 333,750 | ||||||
Healthcare Providers & Services – 0.76% | ||||||||
Laboratory Corp. of America Holdings | ||||||||
3.750%, 08/23/2022 | 240,000 | 238,381 | ||||||
Homebuilders – 3.02% | ||||||||
Centex Corp. | ||||||||
6.500%, 05/1/2016 | 155,000 | 170,500 | ||||||
Lennar Corp. | ||||||||
5.600%, 05/31/2015 | 505,000 | 526,463 | ||||||
Toll Brothers Finance Corp. | ||||||||
5.150%, 05/15/2015 | 160,000 | 166,400 | ||||||
Urbi Desarrollos Urbanos SA | ||||||||
9.500%, 01/21/2020(b)(d) | 745,000 | 81,950 | ||||||
945,313 | ||||||||
Insurance – 3.03% | ||||||||
CNA Financial Corp. | ||||||||
7.350%, 11/15/2019 | 125,000 | 153,115 | ||||||
5.875%, 08/15/2020 | 235,000 | 269,751 | ||||||
ING US, Inc. | ||||||||
5.500%, 07/15/2022 | 355,000 | 398,208 | ||||||
Marsh & McLennan Cos, Inc. | ||||||||
5.750%, 09/15/2015 | 120,000 | 128,310 | ||||||
949,384 |
The accompanying notes are an integral part of these Schedules of Investments.
69
Brandes Credit Focus Yield Fund
SCHEDULE OF INVESTMENTS — March 31, 2014 (Unaudited) (continued)
Principal | ||||||||
Amount | Value | |||||||
Media – 0.94% | ||||||||
McGraw Hill Financial, Inc. | ||||||||
5.900%, 11/15/2017 | $ | 265,000 | $ | 293,951 | ||||
Metals & Mining – 0.82% | ||||||||
ArcelorMittal SA | ||||||||
6.000%, 03/1/2021 | 240,000 | 255,900 | ||||||
Oil & Gas – 4.73% | ||||||||
Anadarko Petroleum Corp. | ||||||||
5.950%, 09/15/2016 | 510,000 | 565,822 | ||||||
Chesapeake Energy Corp. | ||||||||
6.625%, 08/15/2020 | 545,000 | 611,762 | ||||||
El Paso Corp. | ||||||||
7.000%, 06/15/2017 | 270,000 | 304,651 | ||||||
1,482,235 | ||||||||
Pharmaceutical – 0.72% | ||||||||
Valeant Pharmaceuticals International | ||||||||
6.750%, 08/15/2018(b) | 205,000 | 225,500 | ||||||
Telecommunications – 0.79% | ||||||||
Telecom Italia Capital SA | ||||||||
6.999%, 06/4/2018 | 140,000 | 158,725 | ||||||
Telefonica Emisiones SAU | ||||||||
5.462%, 02/16/2021 | 80,000 | 87,946 | ||||||
246,671 | ||||||||
TOTAL CORPORATE BONDS | ||||||||
(Cost $17,967,137) | $ | 18,344,447 | ||||||
Contracts | Value | |||||||
WARRANTS – 0.00% | ||||||||
Semiconductors – 0.00% | ||||||||
MagnaChip Semiconductor Corp. | ||||||||
Expiration Date: November 2014, Exercise Price: 1.97(a)(c) | 3,900 | $ | — | |||||
TOTAL WARRANTS | ||||||||
(Cost $0) | $ | — |
The accompanying notes are an integral part of these Schedules of Investments.
70
Brandes Credit Focus Yield Fund
SCHEDULE OF INVESTMENTS — March 31, 2014 (Unaudited) (continued)
Principal | ||||||||
Amount | Value | |||||||
REPURCHASE AGREEMENTS – 2.93% | ||||||||
State Street Bank and Trust Repurchase Agreement, | ||||||||
(Dated 03/31/14), due 04/01/2014, 0.00% [Collateralized | ||||||||
by $1,000,000 Fannie Mae Bond, 2.08%, 11/02/22, | ||||||||
(Market Value $939,859)] (proceeds $917,673) | $ | 917,673 | $ | 917,673 | ||||
TOTAL REPURCHASE AGREEMENTS (Cost $917,673) | $ | 917,673 | ||||||
Total Investments (Cost $30,723,856) – 99.07% | $ | 31,018,258 | ||||||
Other Assets in Excess of Liabilities – 0.93% | 292,760 | |||||||
TOTAL NET ASSETS – 100.00% | $ | 31,311,018 |
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 $1,511,780 which represents 4.83% of total net assets. |
(c) | The price of 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 $0.00 or 0.00% of the Fund’s net assets and is classified as Level 2. See Note 2 in the Notes to Financial Statements. |
(d) | In default. |
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.
71
Brandes Investment Trust
STATEMENT OF ASSETS AND LIABILITIES — March 31, 2014 (Unaudited)
Brandes | ||||
International | ||||
Equity Fund | ||||
ASSETS | ||||
Investment in securities, at value(1) | $ | 493,698,145 | ||
Foreign Currency(1) | 647,567 | |||
Receivables: | ||||
Securities sold | 3,012,646 | |||
Fund shares sold | 1,837,536 | |||
Dividends and interest | 2,912,129 | |||
Foreign currency spot trade | — | |||
Tax reclaims | 1,001,601 | |||
Due from Advisor | — | |||
Prepaid expenses and other assets | 63,413 | |||
Total Assets | 503,173,037 | |||
LIABILITIES | ||||
Payables: | ||||
Securities purchased | — | |||
Fund shares redeemed | 26,392,329 | |||
Due to Advisor | 334,732 | |||
12b-1 Fee | 5,850 | |||
Trustee Fees | 10,896 | |||
Dividends payable | 205,322 | |||
Foreign Tax Withholding | 272,066 | |||
Foreign currency spot trade payable | 6,278 | |||
Accrued expenses | 200,547 | |||
Total Liabilities | 27,428,020 | |||
NET ASSETS | $ | 475,745,017 | ||
COMPONENTS OF NET ASSETS | ||||
Paid-in capital | $ | 550,618,297 | ||
Undistributed net investment income (loss) | (1,604,212 | ) | ||
Accumulated net realized gain (loss) on investments and foreign currency | (96,866,226 | ) | ||
Net unrealized appreciation (depreciation) on: | ||||
Investments | 23,500,974 | |||
Foreign currency | 96,184 | |||
Total Net Assets | $ | 475,745,017 | ||
Net asset value, offering price and redemption proceeds per share | ||||
Class A Shares | ||||
Net Assets | $ | 4,874,748 | ||
Shares outstanding (unlimited shares authorized without par value) | 283,180 | |||
Offering and redemption price | $ | 17.21 | ||
Maximum offering price per share* | $ | 18.26 | ||
Class C Shares | ||||
Net Assets | $ | 1,849,917 | ||
Shares outstanding (unlimited shares authorized without par value) | 107,985 | |||
Offering and redemption price | $ | 17.13 | ||
Class E Shares | ||||
Net Assets | $ | 32,564,508 | ||
Shares outstanding (unlimited shares authorized without par value) | 1,894,287 | |||
Offering and redemption price | $ | 17.19 | ||
Class I Shares | ||||
Net Assets | $ | 436,455,844 | ||
Shares outstanding (unlimited shares authorized without par value) | 25,314,006 | |||
Offering and redemption price | $ | 17.24 | ||
(1) Cost of: | ||||
Investments in securities | $ | 470,199,228 | ||
Foreign currency | 645,509 |
* | 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.
72
Brandes Investment Trust
STATEMENT OF ASSETS AND LIABILITIES — March 31, 2014 (Unaudited) (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 | ||||||||||||||
$ | 45,808,604 | $ | 734,533,502 | $ | 358,994,514 | $ | 36,865,413 | $ | 31,018,258 | |||||||||
44,048 | 646,882 | 9,962,135 | — | — | ||||||||||||||
236,036 | — | 3,357,902 | — | 649,771 | ||||||||||||||
183,786 | 11,105,452 | 17,313,079 | 281,357 | — | ||||||||||||||
198,397 | 1,436,081 | 733,276 | 389,225 | 366,312 | ||||||||||||||
— | 414,934 | — | — | — | ||||||||||||||
10,515 | 107,657 | 17,467 | — | — | ||||||||||||||
— | — | — | 10,108 | 601 | ||||||||||||||
37,287 | 92,046 | 52,782 | 34,554 | 29,871 | ||||||||||||||
46,518,673 | 748,336,554 | 390,431,155 | 37,580,657 | 32,064,813 | ||||||||||||||
51,082 | 9,213,872 | 44,956,868 | 218,180 | 683,199 | ||||||||||||||
12,363 | 1,974,840 | 278,901 | 92,567 | 1,530 | ||||||||||||||
10,127 | 532,047 | 168,832 | — | — | ||||||||||||||
1,645 | 111,910 | 35,873 | 2,104 | 2,009 | ||||||||||||||
11,461 | 11,080 | 11,813 | 11,417 | 11,858 | ||||||||||||||
2,963 | — | 15,547 | 832 | — | ||||||||||||||
16,031 | 189,065 | 108,819 | — | — | ||||||||||||||
433 | — | 66,029 | — | — | ||||||||||||||
61,997 | 173,111 | 85,603 | 57,384 | 55,199 | ||||||||||||||
168,102 | 12,205,925 | 45,728,285 | 382,484 | 753,795 | ||||||||||||||
$ | 46,350,571 | $ | 736,130,629 | $ | 344,702,870 | $ | 37,198,173 | $ | 31,311,018 | |||||||||
$ | 36,731,802 | $ | 732,572,905 | $ | 315,498,495 | $ | 35,776,388 | $ | 30,617,813 | |||||||||
(27,237 | ) | (1,459,556 | ) | (3,893,417 | ) | 12,132 | (2,619 | ) | ||||||||||
877,820 | 13,038,574 | 7,618,010 | 216,218 | 401,422 | ||||||||||||||
8,768,290 | (8,000,805 | ) | 25,538,093 | 1,193,435 | 294,402 | |||||||||||||
(104 | ) | (20,489 | ) | (58,311 | ) | — | — | |||||||||||
$ | 46,350,571 | $ | 736,130,629 | $ | 344,702,870 | $ | 37,198,173 | $ | 31,311,018 | |||||||||
$ | 790,593 | $ | 188,791,312 | $ | 59,893,818 | $ | 6,947,749 | $ | 4,813,481 | |||||||||
30,954 | 20,530,787 | 4,338,942 | 754,267 | 469,067 | ||||||||||||||
$ | 25.54 | $ | 9.20 | $ | 13.80 | $ | 9.21 | $ | 10.26 | |||||||||
$ | 27.10 | $ | 9.76 | $ | 14.65 | $ | 9.57 | $ | 10.66 | |||||||||
$ | 533,439 | $ | 13,557,056 | $ | 5,953,875 | N/A | N/A | |||||||||||
20,965 | 1,483,845 | 433,700 | — | — | ||||||||||||||
$ | 25.44 | $ | 9.14 | $ | 13.73 | N/A | N/A | |||||||||||
$ | 263,133 | N/A | N/A | $ | 1,723,594 | N/A | ||||||||||||
10,399 | — | — | 185,799 | — | ||||||||||||||
$ | 25.30 | N/A | N/A | $ | 9.28 | N/A | ||||||||||||
$ | 44,763,406 | $ | 533,782,261 | $ | 278,855,177 | $ | 28,526,830 | $ | 26,497,537 | |||||||||
1,747,072 | 57,938,812 | 20,168,458 | 3,082,221 | 2,582,143 | ||||||||||||||
$ | 25.62 | $ | 9.21 | $ | 13.83 | $ | 9.26 | $ | 10.26 | |||||||||
$ | 37,040,549 | $ | 742,541,493 | $ | 333,463,195 | $ | 35,671,978 | $ | 30,723,856 | |||||||||
43,813 | 639,696 | 9,955,360 | — | — |
The accompanying notes to financial statements are an integral part of this statement.
73
Brandes Investment Trust
STATEMENT OF OPERATIONS — For the Period Ended March 31, 2014 (Unaudited)
Brandes | ||||
International | ||||
Equity Fund | ||||
INVESTMENT INCOME | ||||
Income | ||||
Dividend income | $ | 5,938,027 | ||
Less: foreign taxes withheld & issuance fees | (745,597 | ) | ||
Interest income | 30 | |||
Less: Foreign taxes withheld | — | |||
Income from securities lending | 118,801 | |||
Total Income | 5,311,261 | |||
Expenses | ||||
Advisory fees (Note 3) | 1,848,011 | |||
Custody fees | 33,755 | |||
Administration fees (Note 3) | 63,723 | |||
Insurance expense | 16,695 | |||
Legal fees | 8,445 | |||
Printing fees | 22,864 | |||
Miscellaneous | 38,010 | |||
Registration expense | 37,272 | |||
Trustee fees | 19,444 | |||
Transfer agent fees | 73,269 | |||
12b-1 Fees – Class A | 3,485 | |||
12b-1 Fees – Class C | 3,520 | |||
Shareholder Service Fees – Class C | 1,173 | |||
Shareholder Service Fees – Class E | 34,882 | |||
Shareholder Service Fees – Class I | 107,593 | |||
Accounting fees | 35,527 | |||
Auditing fees | 14,875 | |||
Total expenses | 2,362,543 | |||
Less reimbursement / waiver | (7,464 | ) | ||
Total expenses net of reimbursement / waiver | 2,355,079 | |||
Net investment income | 2,956,182 | |||
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS | ||||
Net realized gain (loss) on: | ||||
Investments | 22,851,211 | |||
Foreign currency transactions | 106,591 | |||
Net realized gain (loss) | 22,957,802 | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | 9,876,099 | |||
Foreign currency transactions | (8,307 | ) | ||
Net unrealized appreciation | 9,867,792 | |||
Net realized and unrealized gain on | ||||
investments and foreign currency transactions | 32,825,594 | |||
Net Increase in net assets resulting from operations | $ | 35,781,776 |
The accompanying notes to financial statements are an integral part of this statement.
74
Brandes Investment Trust
STATEMENT OF OPERATIONS — For the Period Ended March 31, 2014 (Unaudited) (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 | ||||||||||||||
$ | 549,211 | $ | 4,715,437 | $ | 1,569,149 | $ | 13,494 | $ | 18,059 | |||||||||
(50,892 | ) | (565,831 | ) | (187,207 | ) | — | — | |||||||||||
— | 7,422 | 2,024 | 610,128 | 405,584 | ||||||||||||||
— | (2,128 | ) | (733 | ) | — | — | ||||||||||||
7,079 | — | 23 | — | — | ||||||||||||||
505,398 | 4,154,900 | 1,383,256 | 623,622 | 423,643 | ||||||||||||||
172,369 | 2,629,448 | 758,220 | 57,837 | 75,151 | ||||||||||||||
2,975 | 74,914 | 19,399 | 2,536 | 2,184 | ||||||||||||||
5,933 | 63,000 | 17,474 | 4,868 | 4,257 | ||||||||||||||
1,351 | 11,702 | 2,689 | 1,250 | 823 | ||||||||||||||
8,445 | 8,445 | 8,445 | 8,445 | 8,356 | ||||||||||||||
3,675 | 27,684 | 7,446 | 3,246 | 2,518 | ||||||||||||||
4,959 | 35,828 | 9,916 | 3,636 | 2,904 | ||||||||||||||
29,588 | 46,366 | 32,009 | 26,656 | 15,536 | ||||||||||||||
19,072 | 19,349 | 18,971 | 19,074 | 18,882 | ||||||||||||||
33,626 | 95,027 | 42,536 | 25,677 | 17,428 | ||||||||||||||
535 | 195,011 | 57,261 | 3,410 | 5,464 | ||||||||||||||
1,151 | 35,306 | 11,605 | N/A | N/A | ||||||||||||||
384 | 11,768 | 3,868 | N/A | N/A | ||||||||||||||
— | N/A | N/A | 1,810 | N/A | ||||||||||||||
10,526 | 97,036 | 27,680 | 7,218 | — | ||||||||||||||
33,132 | 30,877 | 31,941 | 28,847 | 22,952 | ||||||||||||||
14,924 | �� | 14,678 | 15,195 | 17,380 | 17,489 | |||||||||||||
342,645 | 3,396,439 | 1,064,655 | 211,890 | 193,944 | ||||||||||||||
(124,796 | ) | (54,374 | ) | (74,076 | ) | (125,090 | ) | (83,269 | ) | |||||||||
217,849 | 3,342,065 | 990,579 | 86,800 | 110,675 | ||||||||||||||
287,549 | 812,835 | 392,677 | 536,822 | 312,968 | ||||||||||||||
922,724 | 14,018,577 | 10,030,316 | 217,265 | (11,264 | ) | |||||||||||||
(532 | ) | (274,221 | ) | (35,997 | ) | — | — | |||||||||||
922,192 | 13,744,356 | 9,994,319 | 217,265 | (11,264 | ) | |||||||||||||
2,722,660 | 2,539,146 | 8,988,934 | 42,798 | 372,578 | ||||||||||||||
(94 | ) | (24,337 | ) | (60,345 | ) | — | — | |||||||||||
2,722,566 | 2,514,809 | 8,928,589 | 42,798 | 372,578 | ||||||||||||||
3,644,758 | 16,259,165 | 18,922,908 | 260,063 | 361,314 | ||||||||||||||
$ | 3,932,307 | $ | 17,072,000 | $ | 19,315,585 | $ | 796,885 | $ | 674,282 |
The accompanying notes to financial statements are an integral part of this statement.
75
Brandes Investment Trust
STATEMENTS OF CHANGES IN NET ASSETS
Brandes International | Brandes Global | Brandes Emerging | ||||||||||||||||||||||
Equity Fund | Equity Fund | Markets Fund | ||||||||||||||||||||||
Six Months | Six Months | Six Months | ||||||||||||||||||||||
Ended | Year ended | Ended | Year ended | Ended | Year ended | |||||||||||||||||||
March 31, | September 30, | March 31, | September 30, | March 31, | September 30, | |||||||||||||||||||
2014 | 2013 | 2014 | 2013 | 2014 | 2013 | |||||||||||||||||||
(Unaudited) | (Unaudited) | (Unaudited) | ||||||||||||||||||||||
INCREASE | ||||||||||||||||||||||||
(DECREASE) IN | ||||||||||||||||||||||||
NET ASSETS FROM: | ||||||||||||||||||||||||
OPERATIONS | ||||||||||||||||||||||||
Net investment | ||||||||||||||||||||||||
income | $ | 2,956,182 | $ | 9,496,676 | $ | 287,549 | $ | 665,492 | $ | 812,835 | $ | 3,631,292 | ||||||||||||
Net realized | ||||||||||||||||||||||||
gain (loss) on: | ||||||||||||||||||||||||
Investments | 22,851,211 | (1,599,281 | ) | 922,724 | 1,291,119 | 14,018,577 | 11,768,377 | |||||||||||||||||
Foreign currency | ||||||||||||||||||||||||
transactions | 106,591 | (139,146 | ) | (532 | ) | (4,139 | ) | (274,221 | ) | (197,501 | ) | |||||||||||||
Net change in unrealized | ||||||||||||||||||||||||
appreciation | ||||||||||||||||||||||||
(depreciation) on: | ||||||||||||||||||||||||
Investments | 9,876,099 | 83,500,849 | 2,722,660 | 6,188,336 | 2,539,146 | 6,780,613 | ||||||||||||||||||
Foreign currency | ||||||||||||||||||||||||
transactions | (8,307 | ) | 58,622 | (94 | ) | 646 | (24,337 | ) | 14,091 | |||||||||||||||
Net increase | ||||||||||||||||||||||||
in net assets | ||||||||||||||||||||||||
resulting from | ||||||||||||||||||||||||
operations | 35,781,776 | 91,317,720 | 3,932,307 | 8,141,454 | 17,072,000 | 21,996,872 | ||||||||||||||||||
DISTRIBUTIONS TO | ||||||||||||||||||||||||
SHAREHOLDERS | ||||||||||||||||||||||||
From net investment | ||||||||||||||||||||||||
income | ||||||||||||||||||||||||
Class A | (26,233 | ) | (7,058 | ) | (3,668 | ) | (4,965 | ) | (698,567 | ) | (2,110,259 | ) | ||||||||||||
Class C | (6,777 | ) | (3,900 | ) | (1,360 | ) | (1,612 | ) | (30,504 | ) | (25,399 | ) | ||||||||||||
Class E | (178,009 | ) | (678,654 | ) | (1,766 | ) | (9,392 | ) | N/A | N/A | ||||||||||||||
Class I | (2,920,047 | ) | (21,820,503 | ) | (284,166 | ) | (1,466,752 | ) | (2,134,815 | ) | (4,840,178 | ) | ||||||||||||
From net realized gains | ||||||||||||||||||||||||
Class A | — | — | (10,640 | ) | (1,515 | ) | (3,436,586 | ) | (1,665,022 | ) | ||||||||||||||
Class C | — | — | (7,095 | ) | — | (192,219 | ) | — | ||||||||||||||||
Class E | — | — | (7,646 | ) | (3,242 | ) | N/A | N/A | ||||||||||||||||
Class I | — | — | (1,246,167 | ) | (489,837 | ) | (8,404,316 | ) | (3,312,472 | ) | ||||||||||||||
Decrease in net | ||||||||||||||||||||||||
assets from | ||||||||||||||||||||||||
distributions | (3,131,066 | ) | (22,510,115 | ) | (1,562,508 | ) | (1,977,315 | ) | (14,897,007 | ) | (11,953,330 | ) | ||||||||||||
CAPITAL SHARE | ||||||||||||||||||||||||
TRANSACTIONS | ||||||||||||||||||||||||
Proceeds from | ||||||||||||||||||||||||
shares sold | 96,496,482 | 137,245,545 | 4,144,802 | 6,499,248 | 379,602,979 | 266,629,812 | ||||||||||||||||||
Net asset value of shares | ||||||||||||||||||||||||
issued on reinvestment | ||||||||||||||||||||||||
of distributions | 2,891,209 | 20,426,954 | 1,543,827 | 1,111,307 | 13,271,478 | 11,542,833 | ||||||||||||||||||
Cost of shares | ||||||||||||||||||||||||
redeemed | (83,463,790 | ) | (158,699,984 | ) | (1,659,235 | ) | (4,240,206 | ) | (83,630,697 | ) | (66,090,176 | ) | ||||||||||||
Net increase (decrease) | ||||||||||||||||||||||||
in net assets from | ||||||||||||||||||||||||
capital share | ||||||||||||||||||||||||
transactions | 15,923,901 | (1,027,485 | ) | 4,029,394 | 3,370,349 | 309,243,760 | 212,082,469 | |||||||||||||||||
Total increase | ||||||||||||||||||||||||
in net assets | 48,574,611 | 67,780,120 | 6,399,193 | 9,534,488 | 311,418,753 | 222,126,011 | ||||||||||||||||||
NET ASSETS | ||||||||||||||||||||||||
Beginning of | ||||||||||||||||||||||||
the Period | 427,170,406 | 359,390,286 | 39,951,378 | 30,416,890 | 424,711,876 | 202,585,865 | ||||||||||||||||||
End of the Period | $ | 475,745,017 | $ | 427,170,406 | $ | 46,350,571 | $ | 39,951,378 | $ | 736,130,629 | $ | 424,711,876 | ||||||||||||
Undistributed net | �� | |||||||||||||||||||||||
investment | ||||||||||||||||||||||||
income (loss) | $ | (1,604,212 | ) | $ | (1,429,328 | ) | $ | (27,237 | ) | $ | (23,826 | ) | $ | (1,459,556 | ) | $ | 591,494 |
The accompanying notes to financial statements are an integral part of this statement.
76
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 | ||||||||||||||||||||||
Six Months | Six Months | Six Months | ||||||||||||||||||||||
Ended | Year ended | Ended | Year ended | Ended | Year ended | |||||||||||||||||||
March 31, | September 30, | March 31, | September 30, | March 31, | September 30, | |||||||||||||||||||
2014 | 2013 | 2014 | 2013 | 2014 | 2013 | |||||||||||||||||||
(Unaudited) | (Unaudited) | (Unaudited) | ||||||||||||||||||||||
INCREASE | ||||||||||||||||||||||||
(DECREASE) IN | ||||||||||||||||||||||||
NET ASSETS FROM: | ||||||||||||||||||||||||
OPERATIONS | ||||||||||||||||||||||||
Net investment | ||||||||||||||||||||||||
income | $ | 392,677 | $ | 511,498 | $ | 536,822 | $ | 1,111,562 | $ | 312,968 | $ | 574,312 | ||||||||||||
Net realized | ||||||||||||||||||||||||
gain (loss) on: | ||||||||||||||||||||||||
Investments | 10,030,316 | 6,719,939 | 217,265 | 264,047 | (11,264 | ) | 14,692 | |||||||||||||||||
Foreign currency | ||||||||||||||||||||||||
transactions | (35,997 | ) | (27,045 | ) | — | — | — | — | ||||||||||||||||
Net change in unrealized | ||||||||||||||||||||||||
appreciation | ||||||||||||||||||||||||
(depreciation) on: | ||||||||||||||||||||||||
Investments | 8,988,934 | 14,867,448 | 42,798 | (1,214,389 | ) | 372,578 | (536,907 | ) | ||||||||||||||||
Foreign currency | ||||||||||||||||||||||||
transactions | (60,345 | ) | 1,815 | — | — | — | — | |||||||||||||||||
Net increase | ||||||||||||||||||||||||
in net assets | ||||||||||||||||||||||||
resulting from | ||||||||||||||||||||||||
operations | 19,315,585 | 22,073,655 | 796,885 | 161,220 | 674,282 | 52,097 | ||||||||||||||||||
DISTRIBUTIONS TO | ||||||||||||||||||||||||
SHAREHOLDERS | ||||||||||||||||||||||||
From net investment | ||||||||||||||||||||||||
income | ||||||||||||||||||||||||
Class A | (1,164,935 | ) | (166,193 | ) | (38,075 | ) | (19,362 | ) | (40,465 | ) | (46,034 | ) | ||||||||||||
Class C | (70,494 | ) | (2,388 | ) | N/A | N/A | N/A | N/A | ||||||||||||||||
Class E | N/A | N/A | (21,275 | ) | (191,022 | ) | N/A | N/A | ||||||||||||||||
Class I | (2,922,165 | ) | (765,007 | ) | (465,340 | ) | (1,060,910 | ) | (270,148 | ) | (546,949 | ) | ||||||||||||
From net realized gains | ||||||||||||||||||||||||
Class A | (2,789,921 | ) | (90,469 | ) | (2,526 | ) | — | (5,066 | ) | (5,802 | ) | |||||||||||||
Class C | (158,354 | ) | — | N/A | N/A | N/A | N/A | |||||||||||||||||
Class E | N/A | N/A | (2,065 | ) | (93,234 | ) | N/A | N/A | ||||||||||||||||
Class I | (6,063,124 | ) | (533,046 | ) | (45,217 | ) | (286,860 | ) | (30,148 | ) | (143,186 | ) | ||||||||||||
Decrease in net | ||||||||||||||||||||||||
assets from | ||||||||||||||||||||||||
distributions | (13,168,993 | ) | (1,557,103 | ) | (574,498 | ) | (1,651,388 | ) | (345,827 | ) | (741,971 | ) | ||||||||||||
CAPITAL SHARE | ||||||||||||||||||||||||
TRANSACTIONS | ||||||||||||||||||||||||
Proceeds from | ||||||||||||||||||||||||
shares sold | 224,350,513 | 58,169,343 | 10,664,343 | 21,074,938 | 1,244,392 | 10,104,427 | ||||||||||||||||||
Net asset value of shares | ||||||||||||||||||||||||
issued on reinvestment | ||||||||||||||||||||||||
of distributions | 11,498,559 | 1,315,774 | 564,008 | 1,471,758 | 345,827 | 744,456 | ||||||||||||||||||
Cost of shares | ||||||||||||||||||||||||
redeemed | (11,490,629 | ) | (10,096,132 | ) | (6,534,141 | ) | (20,914,985 | ) | (34,714 | ) | (37,519 | ) | ||||||||||||
Net increase | ||||||||||||||||||||||||
in net assets from | ||||||||||||||||||||||||
capital share | ||||||||||||||||||||||||
transactions | 224,358,443 | 49,388,985 | 4,694,210 | 1,631,711 | 1,555,505 | 10,811,364 | ||||||||||||||||||
Total increase | ||||||||||||||||||||||||
in net assets | 230,505,035 | 69,905,537 | 4,916,597 | 141,543 | 1,883,960 | 10,121,490 | ||||||||||||||||||
NET ASSETS | ||||||||||||||||||||||||
Beginning of | ||||||||||||||||||||||||
the Period | 114,197,835 | 44,292,298 | 32,281,576 | 32,140,033 | 29,427,058 | 19,305,568 | ||||||||||||||||||
End of the Period | $ | 344,702,870 | $ | 114,197,835 | $ | 37,198,173 | $ | 32,281,576 | $ | 31,311,018 | $ | 29,427,058 | ||||||||||||
Undistributed net | ||||||||||||||||||||||||
investment | ||||||||||||||||||||||||
income (loss) | $ | (3,893,417 | ) | $ | (128,500 | ) | $ | 12,132 | $ | (115,691 | ) | $ | (2,619 | ) | $ | (4,974 | ) |
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 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) | ||||||||||||||||||||||||
3/31/2014 (Unaudited) | $ | 16.03 | 0.09 | (5) | 1.19 | 1.28 | (0.10 | ) | — | |||||||||||||||
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 | ||||||||||||||||||||||||
3/31/2014 (Unaudited) | $ | 15.98 | 0.03 | (5) | 1.18 | 1.21 | (0.06 | ) | — | |||||||||||||||
1/31/2013(3) – 9/30/2013 | $ | 14.30 | 0.15 | (5) | 1.84 | 1.99 | (0.31 | ) | — | |||||||||||||||
Class E | ||||||||||||||||||||||||
3/31/2014 (Unaudited) | $ | 16.01 | 0.09 | (5) | 1.19 | 1.28 | (0.10 | ) | — | |||||||||||||||
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 | ||||||||||||||||||||||||
3/31/2014 (Unaudited) | $ | 16.05 | 0.11 | (5) | 1.19 | 1.30 | (0.11 | ) | — | |||||||||||||||
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.
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 | |||||||||||||||||||||||
$ | 17.21 | 7.99 | %(1) | $ | 4.9 | 1.20 | %(2) | 1.10 | %(2) | 1.20 | %(2) | 1.10 | %(2) | 24.65 | %(1) | |||||||||||||||
$ | 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) | |||||||||||||||
$ | 17.13 | 7.60 | %(1) | $ | 1.8 | 1.95 | %(2) | 0.35 | %(2) | 1.95 | %(2) | 0.35 | %(2) | 24.65 | %(1) | |||||||||||||||
$ | 15.98 | 14.17 | %(7) | $ | 0.1 | 1.95 | %(2) | 1.53 | %(2) | 1.97 | %(2) | 1.51 | %(2) | 19.43 | % | |||||||||||||||
$ | 17.19 | 7.97 | %(1) | $ | 32.5 | 1.20 | %(2) | 1.10 | %(2) | 1.21 | %(2) | 1.09 | %(2) | 24.65 | %(1) | |||||||||||||||
$ | 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) | |||||||||||||||
$ | 17.24 | 8.10 | %(1) | $ | 436.5 | 1.00 | %(2) | 1.30 | %(2) | 1.01 | %(2) | 1.29 | %(2) | 24.65 | %(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.
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 Global Equity Fund | ||||||||||||||||||||||||
Class A(8) | ||||||||||||||||||||||||
3/31/2014 (Unaudited) | $ | 24.20 | 0.14 | (5) | 2.11 | 2.25 | (0.15 | ) | (0.76 | ) | ||||||||||||||
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 | ||||||||||||||||||||||||
3/31/2014 (Unaudited) | $ | 24.14 | 0.04 | (5) | 2.10 | 2.14 | (0.08 | ) | (0.76 | ) | ||||||||||||||
1/31/2013(3) – 9/30/2013 | $ | 21.21 | 0.15 | (5) | 3.12 | 3.27 | (0.34 | ) | — | |||||||||||||||
Class E | ||||||||||||||||||||||||
3/31/2014 (Unaudited) | $ | 24.00 | 0.14 | (5) | 2.09 | 2.23 | (0.17 | ) | (0.76 | ) | ||||||||||||||
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 | ||||||||||||||||||||||||
3/31/2014 (Unaudited) | $ | 24.26 | 0.17 | (5) | 2.11 | 2.28 | (0.16 | ) | (0.76 | ) | ||||||||||||||
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.
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 | |||||||||||||||||||||||
$ | 25.54 | 9.43 | %(1) | $ | 0.8 | 1.25 | %(2) | 1.09 | %(2) | 1.77 | %(2) | 0.57 | %(2) | 13.29 | %(1) | |||||||||||||||
$ | 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) | |||||||||||||||
$ | 25.44 | 9.04 | %(1) | $ | 0.5 | 2.00 | %(2) | 0.35 | %(2) | 2.52 | %(2) | (0.17 | )%(2) | 13.29 | %(1) | |||||||||||||||
$ | 24.14 | 15.55 | %(7) | $ | 0.1 | 2.00 | %(2) | 0.97 | %(2) | 2.71 | %(2) | 0.26 | %(2) | 24.37 | % | |||||||||||||||
$ | 25.30 | 9.44 | %(1) | $ | 0.3 | 1.25 | %(2) | 1.09 | %(2) | 1.53 | %(2) | 0.81 | %(2) | 13.29 | %(1) | |||||||||||||||
$ | 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) | |||||||||||||||
$ | 25.62 | 9.56 | %(1) | $ | 44.8 | 1.00 | %(2) | 1.34 | %(2) | 1.58 | %(2) | 0.76 | %(2) | 13.29 | %(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.
81
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) | ||||||||||||||||||||||||||||
3/31/2014 (Unaudited) | $ | 9.23 | 0.01 | 0.21 | — | 0.22 | (0.04 | ) | (0.21 | ) | ||||||||||||||||||
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 | ||||||||||||||||||||||||||||
3/31/2014 (Unaudited) | $ | 9.19 | (0.03 | ) | 0.22 | — | 0.19 | (0.03 | ) | (0.21 | ) | |||||||||||||||||
1/31/2013(3) – 9/30/2013 | $ | 9.54 | 0.02 | (0.30 | ) | — | (0.28 | ) | (0.07 | ) | — | |||||||||||||||||
Class I | ||||||||||||||||||||||||||||
3/31/2014 (Unaudited) | $ | 9.24 | 0.02 | 0.21 | — | 0.23 | (0.05 | ) | (0.21 | ) | ||||||||||||||||||
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) | ||||||||||||||||||||||||||||
3/31/2014 (Unaudited) | $ | 13.72 | 0.02 | 1.28 | — | 1.30 | (0.33 | ) | (0.89 | ) | ||||||||||||||||||
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 | ||||||||||||||||||||||||||||
3/31/2014 (Unaudited) | $ | 13.68 | (0.03 | ) | 1.28 | — | 1.25 | (0.31 | ) | (0.89 | ) | |||||||||||||||||
1/31/2013(3) – 9/30/2013 | $ | 11.90 | (0.02 | ) | 1.83 | — | 1.81 | (0.03 | ) | — | ||||||||||||||||||
Class I | ||||||||||||||||||||||||||||
3/31/2014 (Unaudited) | $ | 13.74 | 0.04 | 1.28 | — | 1.32 | (0.34 | ) | (0.89 | ) | ||||||||||||||||||
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.
82
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 | |||||||||||||||||||||||
$ | 9.20 | 2.47 | %(1) | $ | 188.8 | 1.37 | %(2) | 0.13 | %(2) | 1.35 | %(2) | 0.15 | %(2) | 10.83 | %(1) | |||||||||||||||
$ | 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) | |||||||||||||||
$ | 9.14 | 2.10 | %(1) | $ | 13.5 | 2.12 | %(2) | (0.62 | )%(2) | 2.10 | %(2) | (0.60 | )%(2) | 10.83 | %(1) | |||||||||||||||
$ | 9.19 | (2.84 | )%(7) | $ | 5.3 | 2.12 | %(2) | 0.42 | %(2) | 2.20 | %(2) | 0.34 | %(2) | 21.74 | % | |||||||||||||||
$ | 9.21 | 2.56 | %(1) | $ | 533.8 | 1.12 | %(2) | 0.38 | %(2) | 1.15 | %(2) | 0.35 | %(2) | 10.83 | %(1) | |||||||||||||||
$ | 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) | |||||||||||||||
$ | 13.80 | 10.15 | %(1) | $ | 60.0 | 1.40 | %(2) | 0.33 | %(2) | 1.46 | %(2) | 0.27 | %(2) | 14.58 | %(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) | |||||||||||||||
$ | 13.73 | 9.78 | %(1) | $ | 5.9 | 2.15 | %(2) | (0.41 | )%(2) | 2.21 | %(2) | (0.47 | )%(2) | 14.58 | %(1) | |||||||||||||||
$ | 13.68 | 15.23 | %(7) | $ | 1.5 | 2.15 | %(2) | (0.25 | )%(2) | 2.40 | %(2) | (0.50 | )%(2) | 24.45 | % | |||||||||||||||
$ | 13.83 | 10.33 | %(1) | $ | 278.8 | 1.15 | %(2) | 0.59 | %(2) | 1.26 | %(2) | 0.48 | %(2) | 14.58 | %(1) | |||||||||||||||
$ | 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.
83
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 | ||||||||||||||||||||||||
3/31/2014 (Unaudited) | $ | 9.16 | 0.14 | (5) | 0.06 | 0.20 | (0.14 | ) | (0.01 | ) | ||||||||||||||
1/31/2013(3) – 9/30/2013 | $ | 9.43 | 0.20 | (5) | (0.28 | ) | (0.08 | ) | (0.19 | ) | — | |||||||||||||
Class E | ||||||||||||||||||||||||
3/31/2014 (Unaudited) | $ | 9.21 | 0.14 | (5) | 0.08 | 0.22 | (0.14 | ) | (0.01 | ) | ||||||||||||||
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 | ||||||||||||||||||||||||
3/31/2014 (Unaudited) | $ | 9.19 | 0.15 | (5) | 0.08 | 0.23 | (0.15 | ) | (0.01 | ) | ||||||||||||||
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) | ||||||||||||||||||||||||
3/31/2014 (Unaudited) | $ | 10.15 | 0.09 | (5) | 0.12 | 0.21 | (0.09 | ) | (0.01 | ) | ||||||||||||||
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 | ||||||||||||||||||||||||
3/31/2014 (Unaudited) | $ | 10.15 | 0.11 | (5) | 0.12 | 0.23 | (0.11 | ) | (0.01 | ) | ||||||||||||||
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 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.
84
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 | |||||||||||||||||||||||
$ | 9.21 | 2.20 | %(1) | $ | 7.0 | 0.70 | %(2) | 3.08 | %(2) | 1.42 | %(2) | 2.36 | %(2) | 16.40 | %(1) | |||||||||||||||
$ | 9.16 | (0.88 | )%(7) | $ | 1.4 | 0.70 | %(2) | 3.23 | % | 1.45 | %(2) | 2.48 | %(2) | 33.91 | % | |||||||||||||||
$ | 9.28 | 2.53 | %(1) | $ | 1.7 | 0.70 | %(2) | 3.08 | %(2) | 1.46 | %(2) | 2.32 | %(2) | 16.40 | %(1) | |||||||||||||||
$ | 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 | % | |||||||||||||||
$ | 9.26 | 2.55 | %(1) | $ | 28.5 | 0.50 | %(2) | 3.27 | %(2) | 1.26 | %(2) | 2.51 | %(2) | 16.40 | %(1) | |||||||||||||||
$ | 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 | % | |||||||||||||||
$ | 10.26 | 2.14 | %(1) | $ | 4.8 | 0.95 | %(2) | 1.87 | %(2) | 1.50 | %(2) | 1.32 | %(2) | 7.70 | %(1) | |||||||||||||||
$ | 10.15 | 0.13 | % | $ | 4.2 | 0.95 | % | 1.84 | % | 1.61 | % | 1.18 | % | 23.05 | % | |||||||||||||||
$ | 10.39 | 4.51 | %(1) | — | 0.95 | %(2) | 2.69 | %(2) | 1.05 | %(2) | 2.06 | %(2) | 162.73 | %(1) | ||||||||||||||||
$ | 10.26 | 2.27 | %(1) | $ | 26.5 | 0.70 | %(2) | 2.11 | %(2) | 1.25 | %(2) | 1.56 | %(2) | 7.70 | %(1) | |||||||||||||||
$ | 10.15 | 0.40 | % | $ | 25.2 | 0.70 | % | 2.09 | % | 1.42 | % | 1.37 | % | 23.05 | % | |||||||||||||||
$ | 10.39 | 6.23 | %(1) | $ | 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.
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NOTES TO FINANCIAL STATEMENTS — (Unaudited)
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 Markets, 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.
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NOTES TO FINANCIAL STATEMENTS — (Unaudited) (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 |
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Brandes Investment Trust
NOTES TO FINANCIAL STATEMENTS — (Unaudited) (continued)
longer 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 have any open commitments on delayed delivery securities as of March 31, 2014. | ||
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 six months ended March 31, 2014, 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 March 31, 2014. The Emerging Markets Fund invested in a participatory note with HSBC Bank Plc in which HSBC Bank Plc is an investment vehicle used to purchase an underlying security: Etihad Etisalat Co. The average monthly market value of this security was $7,614,003 during the six months ended March |
88
Brandes Investment Trust
NOTES TO FINANCIAL STATEMENTS — (Unaudited) (continued)
31, 2014. As a result of the investment in the participation note, the Emerging Markets Fund recognized a net unrealized gain of $2,949,797 and no realized gain (loss). The market value of the security on March 31, 2014 was $8,227,401 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 March 31, 2014, 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 securities, (ii) the borrower may not be able to provide additional |
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Brandes Investment Trust
NOTES TO FINANCIAL STATEMENTS — (Unaudited) (continued)
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 March 31, 2014, the Global Equity Fund, Emerging Markets Fund, Core Plus Fund and Credit Focus Yield Fund did not have any securities on loan. The International Equity Fund and International Small Cap Fund had market values of securities loaned of $8,039,778 and $2,633,758 and received non-cash collateral for the loans of $8,521,465 and $2,782,211, respectively. Non-cash collateral received by the Funds may not be sold or re-pledged except to satisfy a borrower default. Therefore, non-cash collateral is not included on the Fund’s Schedule of Investments or Statement of Assets and Liabilities. | ||
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 March 31, 2014 the Trust has no examinations in progress. |
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Brandes Investment Trust
NOTES TO FINANCIAL STATEMENTS — (Unaudited) (continued)
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. | ||
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 |
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Brandes Investment Trust
NOTES TO FINANCIAL STATEMENTS — (Unaudited) (continued)
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 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 March 31, 2014, 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 $406,823,756, $26,229,028, $382,508,513, $161,535,843, $0 and $0, that represents 85.51%, 56.59%, 51.96%, 46.86%, 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 |
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Brandes Investment Trust
NOTES TO FINANCIAL STATEMENTS — (Unaudited) (continued)
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. | |
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 March 31, 2014 |
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Brandes Investment Trust
NOTES TO FINANCIAL STATEMENTS — (Unaudited) (continued)
include conversion value and correlation to similar securities. Additionally, 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 effect of any 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 March 31, 2014, 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 | $ | — | $ | 45,525,997 | $ | — | $ | 45,525,997 | ||||||||
Consumer Staples | — | 64,507,760 | — | 64,507,760 | ||||||||||||
Energy | 8,019,813 | 33,865,040 | — | 41,884,853 | ||||||||||||
Financials | 8,084,186 | 80,468,330 | — | 88,552,516 | ||||||||||||
Health Care | — | 61,400,724 | — | 61,400,724 | ||||||||||||
Industrials | 5,047,033 | 8,561,895 | — | 13,608,928 | ||||||||||||
Information Technology | 5,643,792 | 18,834,609 | — | 24,478,401 | ||||||||||||
Materials | 4,545,891 | 22,643,406 | �� | — | 27,189,297 | |||||||||||
Telecommunication Services | 10,772,399 | 53,047,578 | — | 63,819,977 | ||||||||||||
Utilities | 3,473,405 | 17,968,417 | — | 21,441,822 | ||||||||||||
Total Equities | 45,586,519 | 406,823,756 | — | 452,410,275 | ||||||||||||
Preferred Stocks | ||||||||||||||||
Energy | 9,270,292 | — | — | 9,270,292 | ||||||||||||
Telecommunication Services | 4,279,074 | — | — | 4,279,074 | ||||||||||||
Total Preferred Stocks | 13,549,366 | — | — | 13,549,366 | ||||||||||||
Time Deposit | — | 27,738,504 | — | 27,738,504 | ||||||||||||
Total Investments in Securities | $ | 59,135,885 | $ | 434,562,260 | $ | — | $ | 493,698,145 |
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Brandes Investment Trust
NOTES TO FINANCIAL STATEMENTS — (Unaudited) (continued)
Description | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Global Fund | ||||||||||||||||
Equities | ||||||||||||||||
Consumer Discretionary | $ | 746,437 | $ | 4,136,363 | $ | — | $ | 4,882,800 | ||||||||
Consumer Staples | 817,465 | 4,681,412 | — | 5,498,877 | ||||||||||||
Energy | 1,360,168 | 2,929,344 | — | 4,289,512 | ||||||||||||
Financials | 4,461,945 | 3,932,156 | — | 8,394,101 | ||||||||||||
Health Care | 2,318,386 | 2,841,551 | — | 5,159,937 | ||||||||||||
Industrials | 466,410 | — | — | 466,410 | ||||||||||||
Information Technology | 4,362,676 | 1,924,233 | — | 6,286,909 | ||||||||||||
Materials | — | 1,034,102 | — | 1,034,102 | ||||||||||||
Telecommunication Services | 1,071,912 | 3,390,754 | — | 4,462,666 | ||||||||||||
Utilities | 524,207 | 1,359,113 | — | 1,883,320 | ||||||||||||
Total Equities | 16,129,606 | 26,229,028 | — | 42,358,634 | ||||||||||||
Preferred Stocks | ||||||||||||||||
Energy | 982,967 | — | — | 982,967 | ||||||||||||
Total Preferred Stocks | 982,967 | — | — | 982,967 | ||||||||||||
Repurchase Agreements | — | 2,467,003 | — | 2,467,003 | ||||||||||||
Total Investments in Securities | $ | 17,112,573 | $ | 28,696,031 | $ | — | $ | 45,808,604 | ||||||||
Emerging Markets Fund | ||||||||||||||||
Equities | ||||||||||||||||
Consumer Discretionary | $ | 6,678,779 | $ | 79,902,306 | $ | — | $ | 86,581,085 | ||||||||
Consumer Staples | 44,200,652 | 274,713 | — | 44,475,365 | ||||||||||||
Energy | 37,771,745 | 14,652,854 | — | 52,424,599 | ||||||||||||
Financials | 61,329,868 | 104,279,981 | — | 165,609,849 | ||||||||||||
Health Care | 3,255,365 | 8,540,568 | — | 11,795,933 | ||||||||||||
Industrials | 23,292,186 | — | — | 23,292,186 | ||||||||||||
Information Technology | 3,455,002 | 29,922,527 | — | 33,377,529 | ||||||||||||
Materials | 18,715,476 | 59,701,775 | — | 78,417,251 | ||||||||||||
Telecommunication Services | 34,532,853 | 40,395,397 | — | 74,928,250 | ||||||||||||
Utilities | 14,671,653 | 26,953,227 | — | 41,624,880 | ||||||||||||
Total Equities | 247,903,579 | 364,623,348 | — | 612,526,927 | ||||||||||||
Participatory Notes | ||||||||||||||||
Telecommunication Services | — | 8,227,401 | — | 8,227,401 | ||||||||||||
Total Participatory Notes | — | 8,227,401 | — | 8,227,401 | ||||||||||||
Preferred Stocks | ||||||||||||||||
Consumer Discretionary | — | 11,902,985 | — | 11,902,985 | ||||||||||||
Energy | 35,460,246 | — | — | 35,460,246 | ||||||||||||
Telecommunication Services | 15,247,287 | — | — | 15,247,287 | ||||||||||||
Utilities | 7,257,303 | — | — | 7,257,303 | ||||||||||||
Total Preferred Stocks | 57,964,836 | 11,902,985 | — | 69,867,821 | ||||||||||||
Real Estate Investment Trusts | 16,198,044 | — | — | 16,198,044 | ||||||||||||
Convertible Bonds | — | 988,973 | — | 988,973 | ||||||||||||
Repurchase Agreements | — | 26,724,334 | — | 26,724,334 | ||||||||||||
Short Term Investments | 2 | — | — | 2 | ||||||||||||
Total Investments in Securities | $ | 322,066,461 | $ | 412,467,041 | $ | — | $ | 734,533,502 |
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NOTES TO FINANCIAL STATEMENTS — (Unaudited) (continued)
Description | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
International Small Cap Fund | ||||||||||||||||
Equities | ||||||||||||||||
Consumer Discretionary | $ | 28,943,957 | $ | 55,917,642 | $ | — | $ | 84,861,599 | ||||||||
Consumer Staples | 28,756,903 | 3,268,471 | — | 32,025,374 | ||||||||||||
Financials | 6,769,934 | 4,034,363 | — | 10,804,297 | ||||||||||||
Health Care | 9,399,597 | 8,665,269 | — | 18,064,866 | ||||||||||||
Industrials | 1,469,680 | 33,359,348 | — | 34,829,028 | ||||||||||||
Information Technology | 13,020,453 | 12,263,016 | — | 25,283,469 | ||||||||||||
Materials | 3,935,705 | 16,913,198 | — | 20,848,903 | ||||||||||||
Telecommunication Services | 3,712,301 | 8,253,913 | — | 11,966,214 | ||||||||||||
Utilities | 3,499,210 | 19,647,604 | — | 23,146,814 | ||||||||||||
Total Equities | 99,507,740 | 162,322,824 | — | 261,830,564 | ||||||||||||
Preferred Stocks | ||||||||||||||||
Utilities | 1,464,390 | — | — | 1,464,390 | ||||||||||||
Telecommunication Services | 262,581 | — | — | 262,581 | ||||||||||||
Total Preferred Stocks | 1,726,971 | — | — | 1,726,971 | ||||||||||||
Real Estate Investment Trusts | 7,015,158 | — | — | 7,015,158 | ||||||||||||
Convertible Bonds | — | 340,466 | — | 340,466 | ||||||||||||
Corporate Bonds | — | 1,793,234 | — | 1,793,234 | ||||||||||||
Repurchase Agreements | — | 86,288,121 | — | 86,288,121 | ||||||||||||
Total Investments in Securities | $ | 108,249,869 | $ | 250,744,645 | $ | — | $ | 358,994,514 | ||||||||
Core Plus Fund | ||||||||||||||||
Equities* | $ | 14,189 | $ | — | $ | — | $ | 14,189 | ||||||||
Preferred Stocks | 213,330 | 248,674 | — | 462,004 | ||||||||||||
Asset Backed Securities | — | — | 1,144,688 | 1,144,688 | ||||||||||||
Corporate Bonds | — | 13,957,840 | — | 13,957,840 | ||||||||||||
Government Securities | — | 18,102,932 | — | 18,102,932 | ||||||||||||
Mortgage Backed Securities | — | 1,863,660 | 85,559 | 1,949,219 | ||||||||||||
Warrants | — | — | — | — | ||||||||||||
Time Deposit | — | 1,234,541 | — | 1,234,541 | ||||||||||||
Total Investments in Securities | $ | 227,519 | $ | 35,407,647 | $ | 1,230,247 | $ | 36,865,413 | ||||||||
Credit Focus Yield Fund | ||||||||||||||||
Equities* | $ | 36,952 | $ | — | $ | — | $ | 36,952 | ||||||||
Preferred Stocks | 322,730 | 306,874 | — | 629,604 | ||||||||||||
Asset Backed Securities | — | — | 256,571 | 256,571 | ||||||||||||
Corporate Bonds | — | 18,344,447 | — | 18,344,447 | ||||||||||||
Government Securities | — | 10,795,962 | — | 10,795,962 | ||||||||||||
Mortgage Backed Securities | — | 26,820 | 10,229 | 37,049 | ||||||||||||
Warrants | — | — | — | — | ||||||||||||
Repurchase Agreements | — | 917,673 | — | 917,673 | ||||||||||||
Total Investments in Securities | $ | 359,682 | $ | 30,391,776 | $ | 266,800 | $ | 31,018,258 |
* | Please refer to the Schedule of Investments for additional information regarding the composition of the amounts listed above. |
96
Brandes Investment Trust
NOTES TO FINANCIAL STATEMENTS — (Unaudited) (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 | $ | — | $ | — | $ | 10,572,045 | $ | 10,692,987 | $ | — | $ | — | ||||||||||||
Transfers out of Level 1 | — | — | 19,333,692 | 8,658,122 | — | — | ||||||||||||||||||
Net Transfers | ||||||||||||||||||||||||
in/(out) of Level 1 | $ | — | $ | — | $ | (8,761,647 | ) | $ | 2,034,865 | $ | — | $ | — | |||||||||||
Transfers into Level 2 | $ | — | $ | — | $ | 19,333,692 | $ | 8,658,122 | $ | — | $ | — | ||||||||||||
Transfers out of Level 2 | — | — | 10,572,045 | 10,692,987 | — | — | ||||||||||||||||||
Net Transfers | ||||||||||||||||||||||||
in/(out) of Level 2 | $ | — | $ | — | $ | 8,761,647 | $ | (2,034,865 | ) | $ | — | $ | — |
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 March 31, 2014. 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 March 31, 2014.
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 March 31, 2014:
Credit | ||||||||
Core Plus | Focus Yield | |||||||
Fund | Fund | |||||||
Beginning Balance – October 1, 2013 | $ | 1,285,702 | $ | 408,796 | ||||
Purchases | — | — | ||||||
Sales | (237,928 | ) | (232,125 | ) | ||||
Transfers in to level 3 | — | — | ||||||
Transfers out of level 3 | — | — | ||||||
Realized gains (losses), net | (30,426 | ) | 411 | |||||
Change in unrealized gains (losses) | 212,899 | 89,718 | ||||||
Ending Balance – March 31, 2014 | $ | 1,230,247 | $ | 266,800 |
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 March 31, 2014 the Core Plus and Credit Focus Yield Funds had $47,533 and $50,612 of unrealized gains from Level 3 securities, respectively.
97
Brandes Investment Trust
NOTES TO FINANCIAL STATEMENTS — (Unaudited) (continued)
The following table presents information about unobservable inputs related to the Trust’s categories of Level 3 investments as of March 31, 2014.
Fair Value | Valuation | |||||||||
at 3/31/14 | Techniques | Unobservable Inputs | Ranges | |||||||
Student Loans | $ | 1,401,259 | Consensus | Third party inputs | N/A | |||||
pricing | ||||||||||
Prepayment speeds | 2 – 4% | |||||||||
Federal & Federally | $ | 95,788 | 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. 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% based upon their average daily net assets, respectively. For the six months ended March 31, 2014, 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 $1,848,011, $172,369, $2,629,448, $758,220, $57,837 and $75,151 in advisory fees, respectively.
98
Brandes Investment Trust
NOTES TO FINANCIAL STATEMENTS — (Unaudited) (continued)
Certain officers and trustees of the Trust are also officers of the Advisor.
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, 2015 (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% |
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 six months ended March 31, 2014, the Advisor waived expenses and/or reimbursed the Funds $7,464, $124,796, $54,374, $74,076, $125,090 and $83,269 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 |
The Advisor did not recoup any fees previously waived or reimbursed for the Global Fund, Core Plus Fund and Credit Focus Yield Fund. For the six months ended March 31, 2014, the Advisor recouped fees previously waived or reimbursed in the amounts of:
Fund | Class A | Class C | Class E | Class I | ||||||||||||
International Fund | $ | 15 | $ | 25 | $ | 1,410 | $ | 6,546 | ||||||||
Emerging Markets Fund | $ | 13,427 | $ | 687 | N/A | $ | — | |||||||||
International Small Cap Fund | $ | 342 | $ | — | N/A | $ | — |
B. Administration Fee. U.S. Bancorp Fund Services, LLC (the “Administrator”) acts as administrator for the Funds. The Administrator prepares
99
Brandes Investment Trust
NOTES TO FINANCIAL STATEMENTS — (Unaudited) (continued)
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 six months ended March 31, 2014, the International Fund, Global Fund, Emerging Markets Fund, International Small Cap Fund, Core Plus Fund and Credit Focus Yield Fund incurred $63,723, $5,933, $63,000, $17,474, $4,868 and $4,257 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 six months ended March 31, 2014, 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 six months ended March 31, 2014, the following Funds incurred expenses pursuant to the Plan:
Class A | Class C | |||||||
International Fund | $ | 3,485 | $ | 3,520 | ||||
Global Fund | 535 | 1,151 | ||||||
Emerging Markets Fund | 195,011 | 35,306 | ||||||
International Small Cap Fund | 57,261 | 11,605 | ||||||
Core Plus Fund | 3,410 | N/A | ||||||
Credit Focus Yield Fund | 5,464 | N/A |
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
100
Brandes Investment Trust
NOTES TO FINANCIAL STATEMENTS — (Unaudited) (continued)
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 six months ended March 31, 2014, the Funds incurred the following Service Fees:
Fund | Class C | Class E | Class I | |||||||||
International Fund | $ | 1,173 | $ | 34,882 | $ | 107,593 | ||||||
Global Fund | 384 | — | 10,526 | |||||||||
Emerging Markets Fund | 11,768 | N/A | 97,036 | |||||||||
International Small Cap Fund | 3,868 | N/A | 27,680 | |||||||||
Core Plus Fund | N/A | 1,810 | 7,218 | |||||||||
Credit Focus Yield Fund | N/A | N/A | — |
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 six months ended March 31, 2014:
U.S. Government | Other | |||||||||||||||
Fund | Purchases | Sales | Purchases | Sales | ||||||||||||
International Fund | $ | — | $ | — | $ | 118,012,952 | $ | 108,658,046 | ||||||||
Global Fund | $ | — | $ | — | $ | 7,181,997 | $ | 5,467,540 | ||||||||
Emerging Markets Fund | $ | — | $ | — | $ | 360,535,056 | $ | 57,958,883 | ||||||||
International Small Cap Fund | $ | — | $ | — | $ | 173,113,703 | $ | 22,502,171 | ||||||||
Core Plus Fund | $ | 8,598,391 | $ | 1,839,991 | $ | 1,091,806 | $ | 3,380,862 | ||||||||
Credit Focus Yield Fund | $ | 2,148,358 | $ | 1,488,884 | $ | 3,152,140 | $ | 745,173 |
101
Brandes Investment Trust
NOTES TO FINANCIAL STATEMENTS — (Unaudited) (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 | |||||||||||||||||||||||||||||||
Six Months | Six Months | |||||||||||||||||||||||||||||||
Ended | Year Ended | Ended | Year Ended | |||||||||||||||||||||||||||||
3/31/2014 | 9/30/2013 | 3/31/2014 | 9/30/2013 | |||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | |||||||||||||||||||||||||
Shares Sold | ||||||||||||||||||||||||||||||||
Class A | 252 | $ | 4,205 | 45 | $ | 684 | 21 | $ | 514 | 7 | $ | 158 | ||||||||||||||||||||
Class C | 81 | 1,344 | 28 | 420 | 18 | 435 | 5 | 117 | ||||||||||||||||||||||||
Class E | 630 | 10,490 | 999 | 14,506 | — | 5 | — | 11 | ||||||||||||||||||||||||
Class I | 4,802 | 80,458 | 8,351 | 121,636 | 128 | 3,191 | 287 | 6,213 | ||||||||||||||||||||||||
Issued on | ||||||||||||||||||||||||||||||||
Reinvestment | ||||||||||||||||||||||||||||||||
of Distributions | ||||||||||||||||||||||||||||||||
Class A | 1 | 26 | — | 7 | — | 11 | — | 2 | ||||||||||||||||||||||||
Class C | 1 | 6 | — | 4 | — | 8 | — | 2 | ||||||||||||||||||||||||
Class E | 10 | 178 | 49 | 676 | — | 7 | — | 10 | ||||||||||||||||||||||||
Class I | 156 | 2,681 | 1,440 | 19,740 | 62 | 1,517 | 52 | 1,097 | ||||||||||||||||||||||||
Shares Redeemed | ||||||||||||||||||||||||||||||||
Class A | (14 | ) | (234 | ) | (2 | ) | (31 | ) | (2 | ) | (33 | ) | — | (1 | ) | |||||||||||||||||
Class C | — | (1 | ) | (1 | ) | (20 | ) | (2 | ) | (50 | ) | — | — | |||||||||||||||||||
Class E | (119 | ) | (1,975 | ) | (168 | ) | (2,410 | ) | — | (6 | ) | — | (9 | ) | ||||||||||||||||||
Class I | (4,820 | ) | (81,254 | ) | (10,745 | ) | (156,239 | ) | (63 | ) | (1,570 | ) | (201 | ) | (4,230 | ) | ||||||||||||||||
Net Increase/ | ||||||||||||||||||||||||||||||||
(Decrease) | ||||||||||||||||||||||||||||||||
Resulting from | ||||||||||||||||||||||||||||||||
Fund Share | ||||||||||||||||||||||||||||||||
Transactions | 980 | $ | 15,924 | (4 | ) | $ | (1,027 | ) | 162 | $ | 4,029 | 150 | $ | 3,370 |
102
Brandes Investment Trust
NOTES TO FINANCIAL STATEMENTS — (Unaudited) (continued)
Emerging Markets Fund | International Small Cap Fund | |||||||||||||||||||||||||||||||
Six Months | Six Months | |||||||||||||||||||||||||||||||
Ended | Year Ended | Ended | Year Ended | |||||||||||||||||||||||||||||
3/31/2014 | 9/30/2013 | 3/31/2014 | 9/30/2013 | |||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | |||||||||||||||||||||||||
Shares Sold | ||||||||||||||||||||||||||||||||
Class A | 9,136 | $ | 82,597 | 9,423 | $ | 85,287 | 2,219 | $ | 29,963 | 2,208 | $ | 26,831 | ||||||||||||||||||||
Class C | 931 | 8,460 | 585 | 5,233 | 306 | 4,090 | 112 | 1,409 | ||||||||||||||||||||||||
Class I | 31,740 | 288,546 | 19,420 | 176,110 | 14,084 | 190,298 | 2,512 | 29,929 | ||||||||||||||||||||||||
Issued on | ||||||||||||||||||||||||||||||||
Reinvestment | ||||||||||||||||||||||||||||||||
of Distributions | ||||||||||||||||||||||||||||||||
Class A | 443 | 4,053 | 431 | 3,763 | 287 | 3,751 | 22 | 257 | ||||||||||||||||||||||||
Class C | 24 | 221 | 3 | 25 | 17 | 229 | — | 2 | ||||||||||||||||||||||||
Class I | 983 | 8,998 | 887 | 7,755 | 573 | 7,519 | 93 | 1,057 | ||||||||||||||||||||||||
Shares Redeemed | ||||||||||||||||||||||||||||||||
Class A | (3,320 | ) | (29,565 | ) | (3,182 | ) | (28,458 | ) | (444 | ) | (5,897 | ) | (508 | ) | (6,445 | ) | ||||||||||||||||
Class C | (43 | ) | (382 | ) | (16 | ) | (135 | ) | (2 | ) | (26 | ) | — | (3 | ) | |||||||||||||||||
Class I | (5,929 | ) | (53,684 | ) | (4,126 | ) | (37,498 | ) | (414 | ) | (5,569 | ) | (319 | ) | (3,648 | ) | ||||||||||||||||
Net Increase | ||||||||||||||||||||||||||||||||
Resulting from | ||||||||||||||||||||||||||||||||
Fund Share | ||||||||||||||||||||||||||||||||
Transactions | 33,965 | $ | 309,244 | 23,425 | $ | 212,082 | 16,626 | $ | 224,358 | 4,120 | $ | 49,389 | ||||||||||||||||||||
Core Plus Fund | Credit Focus Yield Fund | |||||||||||||||||||||||||||||||
Six Months | Six Months | |||||||||||||||||||||||||||||||
Ended | Year Ended | Ended | Year Ended | |||||||||||||||||||||||||||||
3/31/2014 | 9/30/2013 | 3/31/2014 | 9/30/2013 | |||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | |||||||||||||||||||||||||
Shares Sold | ||||||||||||||||||||||||||||||||
Class A | 611 | $ | 5,635 | 167 | $ | 1,568 | 53 | $ | 543 | 413 | $ | 4,286 | ||||||||||||||||||||
Class E | 64 | 594 | 198 | 1,874 | N/A | N/A | N/A | N/A | ||||||||||||||||||||||||
Class I | 480 | 4,435 | 1,880 | 17,634 | 68 | 701 | 559 | 5,818 | ||||||||||||||||||||||||
Issued on | ||||||||||||||||||||||||||||||||
Reinvestment | ||||||||||||||||||||||||||||||||
of Distributions | ||||||||||||||||||||||||||||||||
Class A | 5 | 41 | 2 | 19 | 5 | 46 | 5 | 52 | ||||||||||||||||||||||||
Class E | 2 | 21 | 29 | 271 | N/A | N/A | N/A | N/A | ||||||||||||||||||||||||
Class I | 54 | 502 | 126 | 1,181 | 29 | 300 | 67 | 693 | ||||||||||||||||||||||||
Shares Redeemed | ||||||||||||||||||||||||||||||||
Class A | (18 | ) | (169 | ) | (11 | ) | (108 | ) | (3 | ) | (32 | ) | (4 | ) | (36 | ) | ||||||||||||||||
Class E | (6 | ) | (58 | ) | (816 | ) | (7,693 | ) | N/A | N/A | N/A | N/A | ||||||||||||||||||||
Class I | (684 | ) | (6,307 | ) | (1,407 | ) | (13,114 | ) | — | (2 | ) | — | (2 | ) | ||||||||||||||||||
Net Increase | ||||||||||||||||||||||||||||||||
Resulting from | ||||||||||||||||||||||||||||||||
Fund Share | ||||||||||||||||||||||||||||||||
Transactions | 508 | $ | 4,694 | 168 | $ | 1,632 | 152 | $ | 1,556 | 1,040 | $ | 10,811 |
103
Brandes Investment Trust
NOTES TO FINANCIAL STATEMENTS — (Unaudited) (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.
104
Brandes Investment Trust
NOTES TO FINANCIAL STATEMENTS — (Unaudited) (continued)
The tax composition of dividends for the periods ended September 30, 2013 and September 30, 2012 for the Funds, were as follows:
Long Term | Return | |||||||||||||||||||||||
Ordinary Income | Capital Gains | of Capital | ||||||||||||||||||||||
2013 | 2012 | 2013 | 2012 | 2013 | 2012 | |||||||||||||||||||
International Fund | $ | 22,510,115 | $ | 21,557,103 | $ | — | $ | — | $ | 251,542 | $ | — | ||||||||||||
Global Fund | $ | 1,506,408 | $ | 949,989 | $ | 470,907 | $ | 2,084,132 | $ | — | $ | — | ||||||||||||
Emerging Markets Fund | $ | 9,388,621 | $ | 1,650,809 | $ | 2,564,709 | $ | 1,078,185 | $ | — | $ | — | ||||||||||||
International | ||||||||||||||||||||||||
Small Cap Fund | $ | 1,497,320 | $ | — | $ | 59,783 | $ | — | $ | — | $ | — | ||||||||||||
Core Plus Fund | $ | 1,307,835 | $ | 1,634,799 | $ | 343,555 | $ | 363,367 | $ | — | $ | — | ||||||||||||
Credit Focus Yield Fund | $ | 678,771 | $ | 297,635 | $ | 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.
As of 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.
At 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
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NOTES TO FINANCIAL STATEMENTS — (Unaudited) (continued)
investment income/loss by $115,692 and decreased accumulated net realized 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 March 31, 2014, the Advisor or affiliates of the Advisor beneficially owned shares of the Funds as follows:
International | Emerging | ||||||||||||
Fund | Global Fund | Fund | |||||||||||
Class C | Class E | Class A | Class C | Class E | Class I | Class C | |||||||
Shares | 71 | 8,207 | 5 | 49 | 6,543 | 973,535 | 109 | ||||||
Percent of total | |||||||||||||
outstanding shares | 0.07% | 0.44% | 0.02% | 0.27% | 63.11% | 55.99% | 0.01% | ||||||
International | Credit | ||||||||||||
Small Cap | Focus | ||||||||||||
Fund | Core Plus Fund | Yield Fund | |||||||||||
Class C | Class I | Class A | Class I | Class I | |||||||||
Shares | 92 | 2,312,422 | 106 | 620,542 | 2,475,215 | ||||||||
Percent of total | |||||||||||||
outstanding shares | 0.02% | 12.42% | 0.01% | 20.18% | 96.02% |
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ADDITIONAL INFORMATION — (Unaudited)
BOARD CONSIDERATION AND CONTINUATION OF INVESTMENT ADVISORY AGREEMENT
In November 2013, the Board of Trustees of the Trust, including the independent Trustees, unanimously approved renewal of the Investment Advisory Agreement (the “Agreement”) between the Trust and Brandes Investment Partners, L.P. (the “Advisor”) for an additional one-year term with respect to 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 “Small Cap Fund”), the Brandes Core Plus Fixed Income Fund (the “Core Plus Fund”) and the Brandes Credit Focus Yield Fund (the “Credit Focus Fund”). Each of the International Fund, Global Fund, Emerging Markets Fund, Small Cap Fund, Core Plus Fund and Credit Focus Fund is referred to below as a “Fund” and they are collectively referred to below as the “Funds.”
Information Reviewed
During the course of each year, Board members review a wide variety of materials relating to the nature, extent and quality of the services provided by the Advisor to the Funds, including reports on each Fund’s investment results, portfolio composition, portfolio trading practices, and other matters. In addition, in connection with its annual review of the Agreement with respect to the Funds, the Board requested and reviewed supplementary information that included materials regarding the Funds’ investment results, advisory fees and expense comparisons for peer groups and categories of similar funds identified by Morningstar Associates (“Morningstar”); financial and profitability information regarding the Advisor; descriptions of various functions such as compliance monitoring and portfolio trading practices; and information about the personnel providing investment management and administrative services to the Funds.
In connection with its reviews, the Board received assistance and advice regarding legal and industry standards from counsel to the Trust and the independent Trustees. The independent Trustees discussed the approval of the Agreement with respect to each Fund with representatives of the Advisor at two Board meetings and in private sessions with counsel at which no representatives of the Advisor were present. In deciding to recommend approval of the Agreement with respect to each Fund, the Board and the independent Trustees did not identify any single or particular piece of information that, in isolation, was the controlling factor, and each Trustee did not necessarily attribute the same weight to each factor. This summary describes the most important, but not all, of the factors considered by the Board and the independent Trustees.
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ADDITIONAL INFORMATION — (Unaudited) (continued)
Nature, Extent and Quality of Services
With respect to the nature, extent and quality of services provided by the Advisor to the Funds, the Trustees reviewed among other things the quality and depth of the Advisor’s investment management staff, its regulatory compliance procedures, the day-to-day administrative services provided by the Advisor to the Funds, and the investment results of the Funds.
With respect to each Fund’s investment results, the Trustees reviewed detailed information regarding a peer group of similarly managed funds selected by Morningstar Associates, all of the funds in the larger Morningstar category of funds managed with the same general style, and the Fund’s benchmark indices. The Trustees also discussed with representatives of Morningstar the principles used in determining the Funds’ peer groups and categories, and differences in those groups from those presented by Morningstar in connection with the Trustees’ 2012 review of the Agreement. In addition, they reviewed the results of certain Funds considered by the Advisor to be the most direct competitors to the Funds in the Funds’ marketing channels.
The independent Trustees noted that the investment results of the I Class shares of all of the Funds were in the first or second quartiles of their respective peer groups for the one-year, three-year, five-year and ten-year periods ended September 30, 2013, except for the investment results of the International Fund for the three-year, five-year and ten-year periods. They also noted that the investment results of the I Class shares of all of the Funds were above those of their respective benchmark indices, except for the International Fund for the three-year, five-year, ten-year and since inception periods and the Global Fund for the three-year and since-inception periods.
As in their past annual reviews of the Agreement with respect to the International and Global Funds, the independent Trustees noted the Advisor’s fundamental commitment to the Graham and Dodd value strategy of investment management and that the Advisor has had little style drift compared with other value managers; considered that it is not unusual for the performance of funds managed with the long-term Graham and Dodd value strategy to fall below the performance of measurement indices for some periods, and that the investment returns from value stocks were out of favor in the markets for almost five years during the ten-year periods considered (an unprecedentedly long period since 1977); and further noted that the Funds’ investment approaches are fully described in its prospectus and the Funds’ shareholders likely were willing to accept the long-term outlook associated with the Advisor’s approach.
Based on these discussions and reviews, the Trustees determined that under all the circumstances the investment results of the Funds were satisfactory.
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ADDITIONAL INFORMATION — (Unaudited) (continued)
Advisory Fees, Total Expenses, Profitability and Ancillary Benefits
With respect to advisory fees and total expenses of the Funds, the independent Trustees noted that:
• | The management fees and total expenses for all of the Funds, after waivers by the Advisor of expenses above stated expense caps, were below the median fees and expenses of the funds in their respective Morningstar peer groups. The independent Trustees also noted that the Advisor continues to waive any expenses over stated expense caps for the Funds. | |
• | Although the Advisor’s management fee is higher for the Funds than for its similar institutional separate accounts and, in the case of the International Fund, for other mutual funds to which the Advisor provides sub-advisory services, the Trustees noted information provided by the Advisor regarding the additional responsibilities and expenses that the Advisor incurs in sponsoring and operating the Funds. | |
• | The independent Trustees noted that although the Advisor’s fees for the Funds other than the International Fund do not have breakpoints as those Funds’ assets increase, the Advisor believes that it is premature to discuss economies of scale when it is subsidizing the Funds’ expenses. The independent Trustees also noted that the Advisor had agreed to review the nature and extent of any economies of scale that it may realize as the Funds’ assets increase in the future and how such economies would be shared with the Funds’ shareholders. |
In addition, the independent Trustees reviewed an analysis of the profitability to the Advisor of its relationship with the Funds and information regarding the Advisor’s financial capability to continue to provide services to the Funds in the future. They also reviewed the methods used by the Advisor to evaluate and compensate its professional investment personnel. Finally, they considered ancillary benefits to the Advisor as a result of its relationships with the Funds. They noted that these were primarily related to the benefit of proprietary and third-party research provided by broker-dealers executing portfolio transactions on behalf of the Funds.
Conclusions
Based on their review, including consideration of each of the factors referred to above, the Board and the independent Trustees concluded that the Agreement is fair and reasonable to the Funds and their respective shareholders, that each of the factors discussed above supported renewal of the Agreement with respect to each of the Funds, and that renewal of the Agreement was in the best interests of each Fund and its shareholders.
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ADDITIONAL INFORMATION — (Unaudited) (continued)
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.
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TRUSTEE AND OFFICER 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 | Trust | ||
Suite 600 | Chairman | 2008 | |||
San Diego, CA 92130 | |||||
(Age 56) | |||||
Robert M. Fitzgerald, CPA | Trustee | Since | Retired. | 7 | Hotchkis and |
11988 El Camino Real, | April | Wiley Mutual | |||
Suite 600 | 2008 | Funds. | |||
San Diego, CA 92130 | |||||
(Age 62) | |||||
Craig Wainscott, CFA | Trustee | Since | Partner with The | 7 | None |
11988 El Camino Real, | February | Paradigm Project | |||
Suite 600 | 2012 | and advisor to | |||
San Diego, CA 92130 | early-stage companies. | ||||
(Age 52) |
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TRUSTEE AND OFFICER 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 |
“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 51) | 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 53) | |||||
Officers of the Trust | |||||
Thomas M. Quinlan | Secretary | Since | Associate General | N/A | N/A |
11988 El Camino Real, | June | Counsel of the | |||
Suite 600 | 2003 | Advisor. | |||
San Diego, CA 92130 | |||||
(Age 43) | |||||
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 57) | |||||
George Stevens | Chief | Since | Director, Beacon | N/A | N/A |
11988 El Camino Real, | Compliance | January | Hill Fund Services, | ||
Suite 600 | Officer | 2010 | Inc. | ||
San Diego, CA 92130 | |||||
(Age 63) |
(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. |
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PRIVACY NOTICE
Brandes Investment Partners, L.P. and the Brandes Investment Trust collect nonpublic information about you from the following sources:
• | Information we receive about you on applications or other forms; |
• | Information you give us orally; and |
• | Information about your transactions with us or others. |
We do not disclose any nonpublic personal information about our customers or former customers without the customer’s authorization, except as permitted by law or in response to inquires from governmental authorities.
We restrict access to your personal and account information to those personnel who need to know that information to provide products and services to you. We also may disclose that information to unaffiliated third parties (such as to brokers or custodians) only as permitted by law and only as needed for us to provide agreed services to you. We maintain physical, electronic and procedural safeguards to guard your nonpublic personal information.
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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
SEMI-ANNUAL REPORT
For the six months ended
March 31, 2014
Brandes Separately Managed Account Reserve Trust
Dear Shareholder,
The Brandes Separately Managed Account Reserve Trust Fund (“the Fund”) gained 5.06% during the six-month period ended March 31, 2014, outperforming the Barclays U.S. Aggregate Bond Index, which returned 1.70% in the same period.
In this letter, I will examine the sector- and security-specific factors that affected the Fund’s performance and describe changes in the Fund’s composition for the six-month period. I will also discuss how the Fund is positioned for the future.
The Markets
For much of the period, fixed-income market participants remained focused on U.S. monetary policy and macroeconomic themes. With data surprising to the upside in the weeks leading up to the U.S. Federal Reserve’s December meeting, all eyes were on the Fed, especially given its decision in September 2013 to hold off tapering its quantitative easing program designed to stimulate growth. Toward the close of 2013, the Fed decided that economic data was sufficiently positive to begin a modest reduction of $10 billion per month (off of $85 billion), with the hope of increasing the amount of the taper in 2014.
The credit markets largely shrugged off the volatility in emerging market equities in the first quarter of 2014, which stemmed from signs of slowing economic growth in China, the Russian annexation of Crimea and the first public meeting of the new Fed Chair Janet Yellen.
The Fund
During the period, the Fund’s outperformance was primarily driven by holdings in banking, utilities, energy and student loan asset backed securities (ABS). We started to see stabilization in the performance of the underlying student loan collateral in 2013, a trend that is beginning to flow through to market prices for these securities.
We also saw a modest positive contribution from the non-agency mortgage backed securities (MBS) sector. Non-agency MBS bonds have been standout performers over the last few years as the economy and the general housing market have slowly recovered and investors have looked for bonds offering any kind of yield. Several of the securities that we own in this sector reached our estimate of their fair values during the quarter; and thus, we decided to pare our exposure to the sector. Non-agency MBS now represents approximately 1% of the Fund’s value and the securities we continue to own receive monthly principal payments, so we expect our weighting to continue to decline over the course of the year.
Performance was adversely affected during the quarter by holdings in the home building sector, largely attributable to a bond holding in Mexican homebuilder Urbi Desarrollos Urbanos. There were rumors of financial shenanigans in the Mexican homebuilding industry involving overstating equity, understating debt and overstating cash flow. Given the number of unknowns, we trimmed our position in
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Brandes Separately Managed Account Reserve Trust
the credit and now hold a small amount that we view as largely option value.(1) If there is additional downside in the industry the impact on the Fund should be minimal, but potential upside remains if the homebuilders present credible restructuring plans to investors or if the government decides to follow through on its stated intent to help this struggling industry.
Additionally, the Fund’s duration positioning proved to be the largest detractor from performance during the period. We pursue a duration-controlled strategy, managed in a range of 20% above or below the respective benchmark. We have biased the Fund within our range for higher interest rates in the long term by maintaining a relative shorter Fund duration in the range of 80-85% of the benchmark. This position negatively affected returns, as the 10-year U.S. Treasury rate dropped by approximately 0.3% in the first quarter of 2014.
During the period, we added three notable new positions. The first was a bond issued by ADT (rated Ba2/BB-/BBB-). The company is an industry leader in home security, which is a growing industry with defensive characteristics. ADT has a national footprint, with 25% market share, which is about six times the size of its next largest competitor. The Fund’s second purchase was a utility bond issued by Dayton Power & Light DPL (rated Ba2/BB). DPL operates as an electric energy and utility company and engages in generation, transmission and distribution of electricity in West Central Ohio.
The Fund also added a bond issued by Chrysler Corp. (rated B1/B). This is a secured, second-lien operating company bond at Chrysler, a subsidiary of Fiat. Chrysler recently became 100% owned by Fiat, removing the risks of losing the Fiat platform sharing and cost-savings as well as management oversight expertise at the Chrysler operating company. Chrysler currently has the best-performing brands within the Fiat portfolio (particularly Jeep) and is strategically important to Fiat for its free cash flow generation, growth and North American presence, factors which help offset weakness in Fiat’s core European markets. We view the asset coverage of the bonds as attractive.
In addition to paring back exposure to the non-agency MBS sector, the Fund had one notable corporate sale – Edison Mission Energy. The company is the unregulated merchant generation subsidiary of Edison International. We purchased Edison Mission Energy bonds in January 2012 at a distressed price. The bonds traded down to distressed levels based on historically low wholesale electricity prices caused by low natural gas prices and sluggish electricity demand. Additionally, Edison Mission was facing elevated capital expenditures to comply with stricter environmental regulations at its coal facilities. We viewed the company as a bankruptcy candidate and valued the bonds based on our assessment of tangible asset coverage in a more normalized pricing and demand environment.
(1) | Option value: The value placed on an individual’s willingness to pay for maintaining or preserving a public asset or service even if there is little or no likelihood of the individual actually ever using it. |
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Brandes Separately Managed Account Reserve Trust
As we expected, Edison Mission filed for bankruptcy in December 2012. NRG Energy offered to purchase Edison Mission in October 2013 for a total consideration of $71 to bondholders. Edison Mission bonds ultimately traded above the offer price due primarily to the market’s view of the value of a tax-sharing agreement with its parent, Edison International. We exited our position after the security traded above our estimate of fair value.
Our Outlook
We are as cautious today on the market as we have been over the last decade. Corporate credit spreads, approaching pre-credit crisis levels, continue to grind tighter as investors gravitate to any instrument offering an attractive yield. Balance sheets remain in good shape, but we are seeing signs that aggregate credit quality may have peaked and more companies are actively considering or implementing shareholder enhancement actions that are often detrimental to underlying credit quality. Finally, there is an enormous amount of private equity cash on the sidelines that is often used to fund leveraged buyouts.
Due to these concerns, we have positioned the Fund with a defensive posture. As mentioned earlier, the duration of the Fund is near the bottom end of our duration range as we anticipate higher interest rates over the longer term. Our high-yield weighting is at the lowest level in 10 years. Within the corporate bonds we hold, we have favored shorter-to-intermediate maturities. Finally, the securities that we have added recently fit the theme of offering, in our view, an attractive yield for strong asset coverage and steady and predictable cash flows.
As always, thank you for your business and the trust you have placed in us.
Sincerely yours,
Jeffrey A. Busby, CFA
President, Brandes Investment Trust
On behalf of the Brandes Fixed Income Investment Team
Timothy Doyle, CFA, Chuck Gramling, CFA, David Gilson, CFA
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Brandes Separately Managed Account Reserve 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.
International and emerging markets investing is subject to certain risks such as currency fluctuations and social and political changes, political instability, differences in financial reporting standards and less stringent regulation of securities markets; 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.
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 that 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 Fund may hold illiquid securities which may reduce the return of the Fund because it may be unable to sell such illiquid securities at an advantageous time or price. Illiquid securities may also be difficult to value. The Fund is actively managed, and may frequently buy and sell securities. Frequent trading increases a Fund’s portfolio turnover rate and may increase transaction costs, such as brokerage commissions and taxes, which in turn could detract from the Fund’s performance.
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Brandes Separately Managed Account Reserve Trust
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.
Cash flow: Movement of money out of or into a business.
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.
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.
Credit distribution is determined from the highest available credit rating from any Nationally Recognized Statistical Rating Organization (S&P, Moody’s and Fitch), which assign ratings based on their analysis of the issuer’s credit worthiness. The highest rating given is AAA and the lowest is C.
Yield: the annual income from the investment (dividend, interest, etc.) divided by the current market price of the investment.
The Brandes Separately Managed Account Trust Fund is distributed by Quasar Distributors, LLC.
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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 March 31, 2014 as compared with the Barclays Capital U.S. Aggregate Index and Barclays Capital U.S. Intermediate Credit Index.
Cumulative Performance of $10,000 Investment
Since Inception – (Unaudited)
Average Annual Total Return | ||||
Periods Ended March 31, 2014 | ||||
Since | ||||
One | Three | Five | Inception | |
Year | Year | Year | (10/3/05) | |
Separately Managed Account | ||||
Reserve Trust | 4.69% | 7.40% | 17.31% | 6.29% |
Barclays Capital | ||||
U.S. Aggregate Index | -0.10% | 3.75% | 4.80% | 4.88% |
Barclays Capital | ||||
U.S. Intermediate Credit Index | 0.98% | 4.60% | 7.63% | 5.36% |
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.
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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
March 31, 2014 – (Unaudited)
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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 October 1, 2013 to March 31, 2014 (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 | $1,050.60 | 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 | $1,024.93 | 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 182/365 (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 — March 31, 2014 (Unaudited)
Principal | ||||||||
Amount | Value | |||||||
FEDERAL AND FEDERALLY SPONSORED CREDITS – 0.60% | ||||||||
Fannie Mae Interest Only Strip – 0.60% | ||||||||
5.500%, 01/1/2036 | $ | 1,870,772 | $ | 361,639 | ||||
6.000%, 06/1/2036 | 2,334,297 | 415,201 | ||||||
TOTAL FEDERAL AND FEDERALLY SPONSORED CREDITS | ||||||||
(Cost $855,952) | $ | 776,840 | ||||||
OTHER MORTGAGE RELATED SECURITIES – 0.57% | ||||||||
Collateralized Mortgage Obligations – 0.01% | ||||||||
Wells Fargo Mortgage Backed Securities Trust | ||||||||
Series 2006-AR14, 5.822%, 10/25/2036 | $ | 16,570 | $ | 16,185 | ||||
Sub-Prime Mortgages – 0.56% | ||||||||
Structured Asset Investment Loan Trust | ||||||||
Series A3, 0.914%, 07/25/2035 | 728,946 | 713,267 | ||||||
TOTAL OTHER MORTGAGE RELATED SECURITIES | ||||||||
(Cost $734,133) | $ | 729,452 | ||||||
US GOVERNMENTS – 8.30% | ||||||||
Sovereign – 8.30% | ||||||||
United States Treasury Bond | ||||||||
4.750%, 02/15/2037 | $ | 1,535,000 | $ | 1,865,504 | ||||
United States Treasury Note | ||||||||
2.000%, 02/15/2023 | 9,275,000 | 8,820,673 | ||||||
TOTAL US GOVERNMENTS | ||||||||
(Cost $10,369,909) | $ | 10,686,177 | ||||||
Shares | Value | |||||||
COMMON STOCKS – 0.56% | ||||||||
Paper & Forest Products – 0.54% | ||||||||
Resolute Forest Products, Inc. (a) | 34,174 | $ | 686,556 | |||||
Semiconductors – 0.02% | ||||||||
MagnaChip Semiconductor Corp. (a) | 2,010 | 28,019 | ||||||
TOTAL COMMON STOCKS | ||||||||
(Cost $3,375,523) | $ | 714,575 | ||||||
PREFERRED STOCKS – 4.23% | ||||||||
Banks & Thrifts – 2.68% | ||||||||
Ally Financial, Inc., 8.500% | 126,200 | $ | 3,451,570 | |||||
Technology Hardware & Equipment – 1.55% | ||||||||
Pitney Bowes International Holdings, Inc., 6.125% (b) | 1,879 | 1,988,334 | ||||||
TOTAL PREFERRED STOCKS | ||||||||
(Cost $4,767,540) | $ | 5,439,904 |
The accompanying notes are an integral part of this Schedule of Investments.
10
Brandes Separately Managed Account Reserve Trust
SCHEDULE OF INVESTMENTS — March 31, 2014 (Unaudited) (continued)
Principal | ||||||||
Amount | Value | |||||||
ASSET BACKED SECURITIES – 3.76% | ||||||||
Student Loan – 3.76% | ||||||||
SLM Student Loan Trust | ||||||||
Series 2004-B, 0.663%, 09/15/2033 | $ | 1,500,000 | $ | 1,251,774 | ||||
Series 2005-A, 0.543%, 12/15/2038 | 1,865,000 | 1,630,202 | ||||||
Series 2006-A, 0.523%, 06/15/2039 | 2,200,000 | 1,962,871 | ||||||
TOTAL ASSET BACKED SECURITIES | ||||||||
(Cost $4,701,224) | $ | 4,844,847 | ||||||
CORPORATE BONDS – 79.46% | ||||||||
Advertising – 3.14% | ||||||||
The Interpublic Group of Companies, Inc. | ||||||||
6.250%, 11/15/2014 | $ | 3,920,000 | $ | 4,042,500 | ||||
Automobiles – 1.42% | ||||||||
Chrysler Group LLC | ||||||||
8.250%, 06/15/2021 | 1,615,000 | 1,826,969 | ||||||
Banks & Thrifts – 13.45% | ||||||||
Ally Financial, Inc. | ||||||||
6.750%, 12/1/2014 | 3,041,000 | 3,151,236 | ||||||
First Horizon National Corp. | ||||||||
5.375%, 12/15/2015 | 1,780,000 | 1,893,753 | ||||||
JP Morgan Chase & Co. | ||||||||
7.900%, Perpetual | 5,620,000 | 6,350,600 | ||||||
Regions Financial Corp. | ||||||||
5.750%, 06/15/2015 | 3,890,000 | 4,102,557 | ||||||
The Goldman Sachs Group, Inc. | ||||||||
7.500%, 02/15/2019 | 1,500,000 | 1,814,682 | ||||||
17,312,828 | ||||||||
Building Materials – 9.41% | ||||||||
CRH America, Inc. | ||||||||
6.000%, 09/30/2016 | 1,915,000 | 2,128,465 | ||||||
Masco Corp. | ||||||||
6.125%, 10/3/2016 | 4,040,000 | 4,433,900 | ||||||
Mohawk Industries, Inc. | ||||||||
6.375%, 01/15/2016 | 1,570,000 | 1,695,600 | ||||||
Owens Corning | ||||||||
6.500%, 12/1/2016 | 750,000 | 828,167 | ||||||
USG Corp. | ||||||||
6.300%, 11/15/2016 | 2,790,000 | 3,020,175 | ||||||
12,106,307 | ||||||||
Commercial Services & Supplies – 1.12% | ||||||||
The ADT Corp. | ||||||||
3.500%, 07/15/2022 | 1,640,000 | 1,441,593 |
The accompanying notes are an integral part of this Schedule of Investments.
11
Brandes Separately Managed Account Reserve Trust
SCHEDULE OF INVESTMENTS — March 31, 2014 (Unaudited) (continued)
Principal | ||||||||
Amount | Value | |||||||
Diversified Financial Services – 2.58% | ||||||||
American International Group, Inc. | ||||||||
6.400%, 12/15/2020 | $ | 2,785,000 | $ | 3,318,166 | ||||
Electric Utilities – 11.66% | ||||||||
EDP Finance BV | ||||||||
4.900%, 10/1/2019 (b) | 4,450,000 | 4,650,250 | ||||||
DPL, Inc. | ||||||||
7.250%, 10/15/2021 | 2,100,000 | 2,168,250 | ||||||
FirstEnergy Corp. | ||||||||
7.375%, 11/15/2031 | 3,950,000 | 4,537,191 | ||||||
Israel Electric Corporation Ltd. | ||||||||
7.250%, 01/15/2019 (b) | 3,275,000 | 3,655,719 | ||||||
15,011,410 | ||||||||
Energy – 1.35% | ||||||||
Valero Energy Corp. | ||||||||
9.375%, 03/15/2019 | 1,340,000 | 1,743,742 | ||||||
Food, Beverage & Tobacco – 5.46% | ||||||||
Pilgrims Pride Corp. | ||||||||
7.875%, 12/15/2018 | 1,790,000 | 1,924,250 | ||||||
Tyson Foods, Inc. | ||||||||
6.850%, 04/1/2016 | 4,615,000 | 5,096,944 | ||||||
7,021,194 | ||||||||
Forest Products & Paper – 1.58% | ||||||||
Sappi Papier Holding GmbH | ||||||||
7.750%, 07/15/2017 (b) | 1,825,000 | 2,030,312 | ||||||
Healthcare Providers & Services – 0.96% | ||||||||
Laboratory Corp. of America Holdings | ||||||||
3.750%, 08/23/2022 | 1,250,000 | 1,241,569 | ||||||
Homebuilders – 9.63% | ||||||||
Centex Corp. | ||||||||
6.500%, 05/1/2016 | 2,695,000 | 2,964,500 | ||||||
Lennar Corp. | ||||||||
5.600%, 05/31/2015 | 4,275,000 | 4,456,688 | ||||||
Toll Brothers Finance Corp. | ||||||||
5.150%, 05/15/2015 | 4,235,000 | 4,404,400 | ||||||
Urbi Desarrollos Urbanos SA | ||||||||
9.500%, 01/21/2020 (b)(d) | 5,140,000 | 565,400 | ||||||
12,390,988 | ||||||||
Insurance – 5.26% | ||||||||
CNA Financial Corp. | ||||||||
7.350%, 11/15/2019 | 1,700,000 | 2,082,361 | ||||||
5.875%, 08/15/2020 | 1,250,000 | 1,434,845 |
The accompanying notes are an integral part of this Schedule of Investments.
12
Brandes Separately Managed Account Reserve Trust
SCHEDULE OF INVESTMENTS — March 31, 2014 (Unaudited) (continued)
Principal | ||||||||
Amount | Value | |||||||
ING US, Inc. | ||||||||
5.500%, 07/15/2022 | $ | 2,220,000 | $ | 2,490,201 | ||||
Marsh & McLennan Cos, Inc. | ||||||||
5.750%, 09/15/2015 | 714,000 | 763,447 | ||||||
6,770,854 | ||||||||
Media – 1.31% | ||||||||
The McGraw Hill Cos, Inc. | ||||||||
5.900%, 11/15/2017 | 1,525,000 | 1,691,606 | ||||||
Metals & Mining – 1.04% | ||||||||
ArcelorMittal SA | ||||||||
6.000%, 03/1/2021 | 1,255,000 | 1,338,144 | ||||||
Oil & Gas – 4.51% | ||||||||
Chesapeake Energy Corp. | ||||||||
6.625%, 08/15/2020 | 3,555,000 | 3,990,487 | ||||||
El Paso Corp. | ||||||||
7.000%, 06/15/2017 | 1,610,000 | 1,816,621 | ||||||
5,807,108 | ||||||||
Pharmaceutical – 1.11% | ||||||||
Valeant Pharmaceuticals International | ||||||||
6.750%, 08/15/2018 (b) | 1,300,000 | 1,430,000 | ||||||
Retail – 2.54% | ||||||||
Marks & Spencer Plc | ||||||||
7.125%, 12/1/2037 (b) | 2,975,000 | 3,264,292 | ||||||
Telecommunications – 1.93% | ||||||||
Telecom Italia Capital SA | ||||||||
6.999%, 06/4/2018 | 840,000 | 952,350 | ||||||
Telefonica Emisiones SAU | ||||||||
5.462%, 02/16/2021 | 1,390,000 | 1,528,070 | ||||||
2,480,420 | ||||||||
TOTAL CORPORATE BONDS | ||||||||
(Cost $93,019,338) | $ | 102,270,002 | ||||||
Contracts | Value | |||||||
WARRANTS – 0.00% | ||||||||
Semiconductors – 0.00% | ||||||||
MagnaChip Semiconductor Corp. | ||||||||
Expiration Date: November 2014, Exercise Price: 1.97 (a)(c) | 80,400 | $ | — | |||||
TOTAL WARRANTS | ||||||||
(Cost $863,486) | $ | — |
The accompanying notes are an integral part of this Schedule of Investments.
13
Brandes Separately Managed Account Reserve Trust
SCHEDULE OF INVESTMENTS — March 31, 2014 (Unaudited) (continued)
Principal | ||||||||
Amount | Value | |||||||
TIME DEPOSIT – 1.25% | ||||||||
State Street Euro Dollar Time Deposit, 0.010%, due 04/01/14 | $ | 1,612,200 | $ | 1,612,200 | ||||
TOTAL TIME DEPOSIT | ||||||||
(Cost $1,612,200) | $ | 1,612,200 | ||||||
Total Investments (Cost $120,299,305) – 98.73% | $ | 127,073,997 | ||||||
Other Assets in Excess of Liabilities – 1.27% | 1,639,088 | |||||||
TOTAL NET ASSETS – 100.00% | $ | 128,713,085 |
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 $17,584,307 which represents 13.66% of total net assets. |
(c) | The price of 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 $0.00 or 0.00% of the Fund’s net assets and is classified as Level 2. See Note 2 in the Notes to Financial Statements. |
(d) | In default. |
The accompanying notes are an integral part of this Schedule of Investments.
14
Brandes Separately Managed Account Reserve Trust
STATEMENT OF ASSETS AND LIABILITIES — March 31, 2014 (Unaudited)
ASSETS | ||||
Investments in securities, at cost | $ | 120,299,305 | ||
Investment in securities, at value | $ | 127,073,997 | ||
Receivables: | ||||
Fund shares sold | 390,865 | |||
Dividends and interest | 1,951,340 | |||
Total Assets | 129,416,202 | |||
LIABILITIES | ||||
Payables: | ||||
Fund shares redeemed | 695,177 | |||
Distributions payable | 7,940 | |||
Total Liabilities | 703,117 | |||
NET ASSETS | $ | 128,713,085 | ||
COMPONENTS OF NET ASSETS | ||||
Paid-in capital | $ | 149,566,541 | ||
Undistributed net investment loss | (77,062 | ) | ||
Accumulated net realized loss on investments | (27,551,086 | ) | ||
Net unrealized appreciation on investments | 6,774,692 | |||
Total Net Assets | $ | 128,713,085 | ||
Net asset value, offering price and redemption proceeds per share | ||||
Net Assets | $ | 128,713,085 | ||
Shares outstanding (unlimited shares authorized without par value) | 14,181,061 | |||
Offering and redemption price | $ | 9.08 |
The accompanying notes to financial statements are an integral part of this statement.
15
Brandes Separately Managed Account Reserve Trust
STATEMENT OF OPERATIONS — For the Period Ended March 31, 2014 (Unaudited)
INVESTMENT INCOME | ||||
Income | ||||
Dividend income | $ | 186,763 | ||
Interest income | 3,134,825 | |||
Total income | 3,321,588 | |||
Expenses (Note 3) | ||||
Total expenses | — | |||
Less reimbursement / waiver | — | |||
Total expenses net of reimbursement / waiver | — | |||
Net investment income | 3,321,588 | |||
REALIZED AND UNREALIZED GAIN ON INVESTMENTS: | ||||
Net realized gain on investments | 382,433 | |||
Net change in unrealized appreciation on investments | 2,574,885 | |||
Net realized and unrealized gain on investments | 2,957,318 | |||
Net increase in net assets resulting from operations | $ | 6,278,906 |
The accompanying notes to financial statements are an integral part of this statement.
16
Brandes Separately Managed Account Reserve Trust
STATEMENT OF CHANGES IN NET ASSETS
Six Months Ended | Year Ended | |||||||
March 31, | September 30, | |||||||
2014 | 2013 | |||||||
(Unaudited) | ||||||||
INCREASE (DECREASE) IN NET ASSETS FROM: | ||||||||
OPERATIONS | ||||||||
Net investment income | $ | 3,321,588 | $ | 7,375,564 | ||||
Net realized gain (loss) on investments | 382,433 | (1,917,766 | ) | |||||
Net change in unrealized appreciation on investments | 2,574,885 | 275,348 | ||||||
Net increase in net assets | ||||||||
resulting from operations | 6,278,906 | 5,733,146 | ||||||
DISTRIBUTIONS TO SHAREHOLDERS | ||||||||
From net investment income | (3,600,702 | ) | (7,462,478 | ) | ||||
Decrease in net assets from distributions | (3,600,702 | ) | (7,462,478 | ) | ||||
CAPITAL SHARE TRANSACTIONS | ||||||||
Proceeds from shares sold | 14,626,230 | 28,518,289 | ||||||
Net asset value of shares issued | ||||||||
on reinvestment of distributions | 3,532,346 | 6,645,826 | ||||||
Cost of shares redeemed | (18,392,988 | ) | (48,751,533 | ) | ||||
Net decrease in net assets | ||||||||
from capital share transactions | (234,412 | ) | (13,587,418 | ) | ||||
Total increase (decrease) in net assets | 2,443,792 | (15,316,750 | ) | |||||
NET ASSETS | ||||||||
Beginning of the Year | 126,269,293 | 141,586,043 | ||||||
End of the Year | $ | 128,713,085 | $ | 126,269,293 | ||||
Undistributed net investment income (loss) | $ | (77,062 | ) | $ | 202,052 |
The accompanying notes to financial statements are an integral part of this statement.
17
Brandes Separately Managed Account Reserve Trust
FINANCIAL HIGHLIGHTS
Six Months | ||||||||||||||||||||||||
Ended | ||||||||||||||||||||||||
March 31, | Year Ended September 30, | |||||||||||||||||||||||
2014 | 2013 | 2012 | 2011 | 2010 | 2009 | |||||||||||||||||||
(Unaudited) | ||||||||||||||||||||||||
Net asset value, | ||||||||||||||||||||||||
beginning of period | $ | 8.89 | $ | 9.01 | $ | 8.32 | $ | 8.46 | $ | 7.46 | $ | 6.97 | ||||||||||||
Income (Loss) from | ||||||||||||||||||||||||
investment operations: | ||||||||||||||||||||||||
Net investment income | 0.24 | (4) | 0.51 | (4) | 0.49 | (4) | 0.52 | (4) | 0.60 | (4) | 0.64 | |||||||||||||
Net realized and unrealized | ||||||||||||||||||||||||
gain/(loss) on investments | 0.21 | (0.12 | ) | 0.73 | (0.12 | ) | 0.97 | 0.47 | ||||||||||||||||
Total from investment operations | 0.45 | 0.39 | 1.22 | 0.40 | 1.57 | 1.11 | ||||||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||||
Dividends from net | ||||||||||||||||||||||||
investment income | (0.26 | ) | (0.51 | ) | (0.53 | ) | (0.54 | ) | (0.57 | ) | (0.62 | ) | ||||||||||||
Total dividends and distributions | (0.26 | ) | (0.51 | ) | (0.53 | ) | (0.54 | ) | (0.57 | ) | (0.62 | ) | ||||||||||||
Net asset value, end of period | $ | 9.08 | $ | 8.89 | $ | 9.01 | $ | 8.32 | $ | 8.46 | $ | 7.46 | ||||||||||||
Total return | 5.06 | %(1) | 4.42 | % | 15.13 | % | 4.61 | % | 21.81 | % | 18.25 | % | ||||||||||||
Net assets, end | ||||||||||||||||||||||||
of period (millions) | $ | 128.7 | $ | 126.3 | $ | 141.6 | $ | 142.4 | $ | 158.5 | $ | 157.5 | ||||||||||||
Ratio of expenses to | ||||||||||||||||||||||||
average net assets(3) | 0.00 | %(2) | 0.00 | % | 0.00 | % | 0.00 | % | 0.00 | % | 0.00 | % | ||||||||||||
Ratio of net investment income | ||||||||||||||||||||||||
to average net assets(3) | 5.24 | %(2) | 5.61 | % | 5.66 | % | 5.98 | % | 7.53 | % | 10.15 | % | ||||||||||||
Portfolio turnover rate | 15.86 | %(1) | 28.88 | % | 27.44 | % | 56.16 | % | 36.90 | % | 40.53 | % |
(1) | Not annualized. |
(2) | Annualized. |
(3) | 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. |
(4) | 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 (Unaudited)
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 (Unaudited) (continued)
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 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. | ||
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. The Fund did not have any open commitments on delayed delivery securities as of March 31, 2014. | |
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 |
20
Brandes Separately Managed Account Reserve Trust
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
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 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 March 31, 2014, 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 |
21
Brandes Separately Managed Account Reserve Trust
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
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. |
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 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. | ||
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 |
22
Brandes Separately Managed Account Reserve Trust
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
be fair valued. Thinly traded securities and certain foreign securities may be impacted more by the use of fair valuations than other securities. | |
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. | |
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 |
23
Brandes Separately Managed Account Reserve Trust
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
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. None of the Fund’s securities were fair valued utilizing this method as of March 31, 2014. | |
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. | |
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. |
24
Brandes Separately Managed Account Reserve Trust
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
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 effect 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 March 31, 2014, 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* | $ | 714,575 | $ | — | $ | — | $ | 714,575 | ||||||||
Preferred Stocks | 3,451,570 | 1,988,334 | — | 5,439,904 | ||||||||||||
Asset Backed Securities | — | — | 4,844,847 | 4,844,847 | ||||||||||||
Corporate Bonds | — | 102,270,002 | — | 102,270,002 | ||||||||||||
Government Securities | — | 10,686,177 | — | 10,686,177 | ||||||||||||
Mortgage Backed Securities | — | 729,452 | 776,840 | 1,506,292 | ||||||||||||
Time Deposit | — | 1,612,200 | — | 1,612,200 | ||||||||||||
Total Investments in Securities | $ | 4,166,145 | $ | 117,286,165 | $ | 5,621,687 | $ | 127,073,997 |
* 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 (Unaudited) (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 | $ | — | ||
Transfers out of Level 2 | — | |||
Net Transfers in/(out) of Level 2 | $ | — |
Below is a reconciliation that details the activity of securities in Level 3 during the six months ended March 31, 2014:
Beginning Balance − October 1, 2013 | $ | 5,911,188 | ||
Purchases | — | |||
Sales | (870,469 | ) | ||
Transfers into level 3 | — | |||
Transfers out of level 3 | — | |||
Realized losses | (111,355 | ) | ||
Change in unrealized gains | 692,323 | |||
Ending Balance − March 31, 2014 | $ | 5,621,687 |
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 March 31, 2014, the Fund had $64,511 of unrealized gains from Level 3 securities.
The following table presents information about unobservable inputs related to the Trust’s categories of Level 3 investments as of March 31, 2014:
Fair value | Valuation | |||||||||
at 3/31/14 | Techniques | Unobservable Inputs | Ranges | |||||||
Student Loans | $ | 4,844,847 | Consensus | Third party inputs | N/A | |||||
pricing | ||||||||||
Prepayment speeds | 2 − 4% | |||||||||
Federal & Federally | $ | 776,840 | 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 (Unaudited) (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. | |
Certain officers and Trustees of the Trust are also officers of the Advisor. | ||
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 |
27
Brandes Separately Managed Account Reserve Trust
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
underwriter in a continuous public offering of the Fund’s shares. The Distributor is an affiliate of the Administrator. All of the Fund’s distribution fees are paid by 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 six months ended March 31, 2014:
U.S. Government | Other | |||||
Purchases | Sales | Purchases | Sales | |||
$13,096,463 | $6,140,955 | $6,611,743 | $14,047,224 |
NOTE 5 − CAPITAL STOCK TRANSACTIONS
The Fund’s capital stock activity in shares and dollars during the six months ended March 31, 2014 and the year ended September 30, 2013, was as follows (shares and dollar amounts in thousands):
Six Months Ended 3/31/14 | Year Ended 9/30/13 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Shares Sold | 1,621 | $ | 14,626 | 3,149 | $ | 28,518 | ||||||||||
Issued on Reinvestment of Distributions | 391 | 3,532 | 734 | 6,646 | ||||||||||||
Shares Redeemed | (2,040 | ) | (18,392 | ) | (5,395 | ) | (48,751 | ) | ||||||||
Net Decrease Resulting | ||||||||||||||||
from Fund Share Transactions | (28 | ) | $ | (234 | ) | (1,512 | ) | $ | (13,587 | ) |
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 (Unaudited) (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 periods ended September 30, 2013 and September 30, 2012 for the Fund were as follows:
Long Term | Return | ||||||
Ordinary Income | Capital Gains | of Capital | |||||
2013 | 2012 | 2013 | 2012 | 2013 | 2012 | ||
$7,462,478 | $8,827,035 | $ — | $ — | $ — | $ — |
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 increased 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 March 31, 2014, the Advisor or an affiliate of the Advisor beneficially owned 658,248 shares of the Fund which comprised 4.65% of the total outstanding shares.
29
Brandes Separately Managed Account Reserve Trust
ADDITIONAL INFORMATION — (Unaudited)
BOARD CONSIDERATION AND CONTINUATION OF INVESTMENT ADVISORY AGREEMENT
In November 2013 the Board of Trustees of the Trust, including the independent Trustees, unanimously approved renewal of the Investment Advisory Agreement (the “Agreement”) between the Trust and Brandes Investment Partners, L.P. (the “Advisor”) with respect to the SMART Fund (the “Fund”) for an additional one-year term.
Information Reviewed
During the course of each year, Board members review a wide variety of materials relating to the nature, extent and quality of the services provided to the Fund by the Advisor, including reports on the Fund’s investment results, portfolio composition, portfolio trading practices, and other matters. In addition, in connection with its annual review of the Agreement with respect to the Fund, the Board requested and reviewed supplementary information that included materials regarding the Fund’s investment results, advisory fee and expense comparisons, financial and profitability information regarding the Advisor, descriptions of various functions such as compliance monitoring and portfolio trading practices, and information about the personnel providing investment management and administrative services to the Fund.
In connection with its reviews, the Board received assistance and advice regarding legal and industry standards from counsel to the Trust and the independent Trustees. The independent Trustees discussed the approval of the Agreement with respect to the Fund with representatives of the Advisor and in private sessions with counsel at which no representatives of the Advisor were present. In deciding to recommend approval of the Agreement with respect to the Fund, the Board and the independent Trustees did not identify any single or particular piece of information that, in isolation, was the controlling factor, and each Trustee did not necessarily attribute the same weight to each factor. This summary describes the most important, but not all, of the factors considered by the Board and the independent Trustees.
Nature, Extent and Quality of Services
With respect to the nature, extent and quality of services provided by the Advisor to the Fund, the Trustees reviewed among other things the quality and depth of the Advisor’s investment management staff, its regulatory compliance procedures, the day-to-day administrative services provided by the Advisor to the Fund and the investment results of the Fund.
The Trustees noted that the Fund’s investment results gross of fees (which are paid by the Advisor) were in the first quartile of the results of a peer group of
30
Brandes Separately Managed Account Reserve Trust
ADDITIONAL INFORMATION — (Unaudited) (continued)
funds identified by Morningstar Associates (“Morningstar”) for the one-year, three-year and five-year periods ended September 30, 2013; were in the first quartile of the larger group of funds in its Morningstar Intermediate-Term Bond Fund category for each of those periods; and were above its benchmark indices (the Barclays Capital U.S. Aggregate Index and Barclays Capital U.S. Intermediate Credit Index) for the one-year, three-year, five-year and since-inception periods ended October 30, 2013. They concluded that the Fund’s performance was satisfactory.
Advisory Fees, Total Expenses, Profitability and Ancillary Benefits
The Trustees noted that the Fund does not incur any advisory fees or other expenses, all of which are paid by the Advisor, and as a result the Advisor’s relationship with the Fund alone is not profitable. The Board also considered ancillary benefits to the Advisor as a result of its relationship with the Fund. They noted that these were primarily related to the Advisor’s receipt of wrap account fees from Fund shareholders through various broker-dealer sponsors that are not affiliated with either the Fund or the Advisor, and the benefit of proprietary and third-party research provided by broker-dealers executing portfolio transactions on behalf of the Fund.
Conclusions
Based on their review, including consideration of each of the factors referred to above, the Board and the independent Trustees concluded that the Agreement is fair and reasonable to the Fund and its shareholders, that each of the factors discussed above supported renewal of the Agreement, and that renewal of the Agreement was in the best interests of the Fund and its shareholders.
31
Brandes Separately Managed Account Reserve Trust
ADDITIONAL INFORMATION — (Unaudited) (continued)
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.
32
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 | Trust | ||
Suite 600 | Chairman | 2008 | |||
San Diego, CA 92130 | |||||
(Age 56) | |||||
Robert M. Fitzgerald, CPA | Trustee | Since | Retired. | 7 | Hotchkis and |
11988 El Camino Real, | April | Wiley Mutual | |||
Suite 600 | 2008 | Funds. | |||
San Diego, CA 92130 | |||||
(Age 62) | |||||
Craig Wainscott, CFA | Trustee | Since | Partner with The | 7 | None |
11988 El Camino Real, | February | Paradigm Project | |||
Suite 600 | 2012 | and advisor to | |||
San Diego, CA 92130 | early-stage companies. | ||||
(Age 52) |
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 |
“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 51) | 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 53) | |||||
Officers of the Trust | |||||
Thomas M. Quinlan | Secretary | Since | Associate General | N/A | N/A |
11988 El Camino Real, | June | Counsel of the | |||
Suite 600 | 2003 | Advisor. | |||
San Diego, CA 92130 | |||||
(Age 43) | |||||
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 57) | |||||
George Stevens | Chief | Since | Director, Beacon | N/A | N/A |
11988 El Camino Real, | Compliance | January | Hill Fund Services, | ||
Suite 600 | Officer | 2010 | Inc. | ||
San Diego, CA 92130 | |||||
(Age 63) |
(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
Brandes Separately Managed Account Reserve Trust
PRIVACY POLICY
Brandes Investment Partners, L.P. and the Brandes Investment Trust collect nonpublic information about you from the following sources:
• | Information we receive about you on applications or other forms; |
• | Information you give us orally; and |
• | Information about your transactions with us or others. |
We do not disclose any nonpublic personal information about our customers or former customers without the customer’s authorization, except as permitted by law or in response to inquires from governmental authorities.
We restrict access to your personal and account information to those personnel who need to know that information to provide products and services to you. We also may disclose that information to unaffiliated third parties (such as to brokers or custodians) only as permitted by law and only as needed for us to provide agreed services to you. We maintain physical, electronic and procedural safeguards to guard your nonpublic personal information.
35
(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.
Not applicable for semi-annual reports.
Item 3. Audit Committee Financial Expert.
Not applicable for semi-annual reports.
Item 4. Principal Accountant Fees and Services.
Not applicable for semi-annual reports.
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 5/27/14
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 5/27/14
By (Signature and Title)* /s/ Gary Iwamura
Gary Iwamura, Treasurer
Date 5/27/14
* Print the name and title of each signing officer under his or her signature.