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: September 30, 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
ANNUAL REPORT
For the year ended
September 30, 2014
Brandes International Equity Fund
Dear Shareholder:
The Brandes International Equity Fund (Class I Shares) returned 5.61% during the 12 months ended September 30, 2014. For the same period, the Fund’s benchmark, the MSCI EAFE Index, rose 4.25%.
In this letter, we will discuss sector-, country- and stock-specific factors that affected the Fund’s performance and describe changes in its composition during the fiscal year. In addition, we will share insight into how the Fund is currently positioned for the future.
The Markets
The past 12 months marked an eventful period for international equity markets, with a number of geopolitical and macroeconomic concerns affecting investor sentiment.
In Europe, recent data on stagnating economic growth seemed to overshadow the European Central Bank’s suggested readiness to provide more aggressive stimulus to support the euro zone’s fragile recovery. In addition, political tensions between Ukraine and Russia weighed on investor sentiment. Even though Russian equities rebounded in the second quarter of 2014, the escalation of the crisis brought investor fear anew.
The road was no less bumpy for other emerging markets. Following the downturn in mid-2013, the asset class had a major comeback in the second quarter of 2014, only to decline again in the third quarter. Worry over slowing economic growth persisted, while fears that the U.S. Federal Reserve was moving closer to raising interest rates again caused investor concern. Also putting pressure on market sentiment was the uncertainty over the pro-democracy protest in Hong Kong against the Chinese government.
The Fund
The Fund’s telecommunication services holdings made up the majority of the top 10 contributors to performance. France-based Orange, Telecom Italia, Japan’s NTT, Mexico’s America Movil and China Mobile performed well for the 12-month period, returning more than 25% each.
Additionally, the Fund benefited from its allocation to financial services, most notably Italy-based Intesa Sanpaolo and Dutch insurer AEGON. Also helping performance were U.K.-based pharmaceutical firm AstraZeneca and French multi utility SUEZ Environnement.
The Fund’s positions in food & staples retailing hurt returns during the period. Most of the Fund’s holdings in this industry are domiciled in the United Kingdom, where the food retailing landscape has been challenging. With economic conditions still difficult, discount retailers have been able to steal market share from traditional grocers such as Wm Morrison and Tesco. Nonetheless, we remain convinced that these companies represent attractive businesses with value in their
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Brandes International Equity Fund
property portfolios, as well as in their non-core and international assets. Additionally, we are attracted to their capacity to improve cost structures.
Tesco, the leading food retailer in the United Kingdom and one of the largest retailers globally, saw its shares hit particularly hard this quarter after reports of further market-share slippage. In addition, the company issued a trading statement where it disclosed an overstatement of its expected profit for the first half of the year, primarily attributed to the accelerated recognition of commercial income and delayed accrual of costs. The company’s senior management, which was newly appointed from outside of Tesco, is leading the review. While most headlines have focused on domestic operations, we see substantial value in Tesco’s non-U.K. assets and in their real estate holdings. We are closely monitoring the unfolding situation to determine its potential impact on our estimate of Tesco’s intrinsic value.
From a country perspective, Italy and France helped returns meaningfully, driven mainly by our positions in Orange, Telecom Italia and Intesa Sanpaolo. Conversely, the Fund’s allocation to the United Kingdom weighed on performance, mostly due to the food & staples retailers discussed above.
During the period, the investment team divested the Fund’s positions in some of the aforementioned top performers, namely AstraZeneca, NTT and SUEZ Environnement, as their shares appreciated toward our estimates of their intrinsic values. The team also sold off a few of the Fund’s large allocations, including France-based multinational energy company Total, German automaker Daimler and Japanese photography and imaging company Fujifilm Holdings.
In our view, volatility in emerging markets over the last 12 months provided fertile ground for the patient investor seeking out-of-favor companies with attractive long-term prospects. The investment team took this opportunity to initiate positions in China Mobile, as well as Russia-based Gazprom and LukOil. Additionally, the team added two developed-market companies which have significant exposures to emerging markets, namely Hong Kong-based conglomerate First Pacific and Austria-based Erste Group Bank. First Pacific owns telecom, food product, and infrastructure businesses in the Philippines and Indonesia, while Erste Group Bank derives the majority of its profitability from Eastern Europe.
Outlook
The last 12 months have been marked by a rash of world events that seemed to have led to an elevated level of concern in equity markets globally. As one of the first firms to bring a global perspective to value investing, Brandes understands that while macroeconomic events should be considered, they affect each individual business differently. Our established global research infrastructure, including a deep bench of analysts with extensive knowledge about their specific industries, allows us to think and invest independently from the market consensus.
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Brandes International Equity Fund
As always, thank you for your business and continued trust.
Sincerely yours,
The Brandes International Large-Cap Investment Committee
Brandes Investment Trust
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.
Current and future portfolio holdings are subject to risk.
Please refer to the Schedule of Investments in the report for complete holdings information. Fund holdings, geographic allocations and/or sector allocations are subject to change at any time and are not a recommendation to buy or sell any security.
The foregoing reflects the thoughts and opinions of Brandes Investment Partners® exclusively and is subject to change without notice.
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Brandes International Equity Fund
Brandes Investment Partners® is a registered trademark of Brandes Investment Partners, L.P. in the United States and Canada.
Must be preceded or accompanied by a prospectus.
Index Guide
The MSCI EAFE (Europe, Australasia, Far East) Index with net dividends measures the equity market performance of developed markets in Europe, Australasia, and the Far East. One cannot invest directly in an index.
MSCI has not approved, reviewed or produced this report, makes no express or implied warranties or representations and is not liable whatsoever for any data in the report. You may not redistribute the MSCI data or use it as a basis for other indices or investment products.
The Brandes International Equity Fund is distributed by Quasar Distributors, LLC.
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Brandes International Equity Fund
The following chart compares the value of a hypothetical $10,000 investment in the Brandes International Equity Fund – Class I from September 30, 2004 to September 30, 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
Average Annual Total Return | |||||
Periods Ended September 30, 2014 | |||||
One | Five | Ten | Since | ||
Year | Years | Years | Inception(1) | ||
Brandes International Equity Fund | |||||
Class A* | 5.47% | 5.10% | 5.40% | 8.61% | |
Class A* (with maximum sales charge) | -0.60% | 3.87% | 4.77% | 8.25% | |
Class C* | 4.64% | 4.25% | 4.57% | 7.78% | |
Class E* | 5.38% | 5.13% | 5.43% | 8.64% | |
Class I | 5.61% | 5.26% | 5.61% | 8.85% | |
Morgan Stanley Capital International | |||||
EAFE Index | 4.25% | 6.56% | 6.32% | 4.92% |
(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
September 30, 2014
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 (Class I Shares) returned 10.46% during the 12 months ended September 30, 2014. For the same period, the MSCI World Index rose 12.20%.
In this letter, we will review sector-, country- and stock-specific factors that affected the Fund’s performance and describe changes in its composition during the 2014 fiscal year. In addition, we will share insight into how the Fund is currently positioned for the future.
The Markets
Global equity markets moved higher in the period as positive themes seemed to outdo negative ones during much of the last 12 months. Continued investor confidence on the strength of the U.S. economy and a measured reduction of the Federal Reserve’s quantitative easing program contributed significantly to market optimism, as did a generally accommodative monetary policy in Europe and Japan.
A number of investor concerns somewhat tempered the markets’ rise. These included uncertainty over the Russia-Ukraine conflict and data on stagnating euro zone economic growth, which appeared to have offset the European Central Bank’s suggested readiness to provide more aggressive stimulus to support the region’s fragile recovery. In Japan, economic reports indicating sluggish growth contributed to sending markets lower in the period. Moreover, worries over slowing economic expansion in Latin America and China weighed on global markets in the first quarter of 2014.
The Fund
The Fund’s positive absolute performance during the fiscal year was driven mainly by investments in the United States, France and Italy, and especially in the telecommunication services and financials sectors. In each of these countries and sectors, we believe the benefits of individual stock selection show well, as Fund holdings generally fared better compared to those in the benchmark.
During the period, telecommunication services holdings performed strongly, and our allocation to the sector has been the largest contributor to absolute and relative returns. Holdings that did particularly well included: Telecom Italia and France’s Orange SA in the diversified telecommunication services industry; as well as Mexico’s America Movil, Brazil’s TIM Participacoes and China Mobile in the wireless telecommunication services industry.
In July, China Mobile formally announced a jointly established telecommunications tower company between China’s three state-owned wireless carriers (China Mobile, China Unicom, and China Telecom). The partnership was made to help reduce individual spending, allow for the companies to share
7
Brandes Global Equity Fund
infrastructure, and ultimately increase each carrier’s network coverage and quality. While industry watchers had already speculated on the transaction for months, China Mobile’s share price appreciated on the formal announcement.
America Movil announced — also in July — that it would begin to take measures to reduce its share in the Mexican telecommunications services market to below 50%. Possible measures include spinning off its cellular towers so that it can lease them at market rates, and divesting some of its assets on the east coast of Mexico. This asset disposal plan is popularly viewed as a pragmatic step for America Movil to appease the new regulator. The market seemed to welcome the news as it alleviated some of the uncertainty related to the new regulations in the Mexican telecommunication services sector, which had weighed on America Movil’s shares for several months. We believe the company is well-managed and has a strong competitive position in many markets with attractive, long-term growth prospects. Moreover, it also has a strong balance sheet and generates significant free cash flow.
The Fund’s significant exposure to the food & staples retailing industry was the most significant performance detractor in the period. Most of the Fund’s holdings are domiciled in the United Kingdom, where the food retailing landscape has been challenging for the last few years. With economic conditions still difficult, discount retailers have been able to steal market share from traditional grocers such as Wm. Morrison, J. Sainsbury, and Tesco. Nonetheless, we remain convinced that these companies represent attractive businesses with additional value in their property portfolios, as well as in their non-core and international assets.
Tesco’s shares were hit particularly hard this quarter after reports of further market-share slippage. In addition, the company issued a trading statement where it disclosed an overstatement of its expected profit for the first half of the year, primarily attributed to the accelerated recognition of commercial income and delayed accrual of costs. The company’s senior management, which was newly appointed from outside of Tesco, is leading a review of the situation, which will be concluded by late October 2014. While most headlines have focused on domestic operations, we see substantial value in Tesco’s non-U.K. assets and in its real estate holdings. We are closely monitoring the unfolding situation to determine its potential impact on our estimate of Tesco’s intrinsic value.
As always, the Fund’s allocations are a result of our bottom-up stock selection process and not the result of top-down views on the relative attractiveness of specific sectors, industries or regions.
Among the decisions made during the period, we divested the Fund’s positions in a number of holdings, including: U.S.-based semiconductor firm Intel; France’s Total SA and Orange SA; U.K.-based pharmaceutical firm Astra Zeneca; Brazil’s Banco Santander Brasil; and Italy’s Intesa Sanpaolo.
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Brandes Global Equity Fund
New buys during the period included China Mobile, Turkish bank Turkiye Garanti, and U.K.-based British Sky Broadcasting, HSBC Holdings, Tesco and Barclays.
Outlook
The Fund’s 2014 fiscal year was marked by a rash of world events that seemed to have led to an elevated level of concern in equity markets globally. As one of the first firms to bring a global perspective to value investing, Brandes understands that while macroeconomic events should be considered, they affect each individual business differently. Our established global research infrastructure, which includes a deep bench of analysts with extensive knowledge about their specific industries, allows us to think and invest independently from the market consensus.
As always, thank you for your business and continued trust.
Sincerely yours,
The Brandes Global Large-Cap Investment Committee
Brandes Investment Trust
Brent Fredberg, Kenneth Little, CFA, Brian Matthews, CFA, Ted Kim, CFA, James Brown, 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
9
Brandes Global Equity Fund
currencies that are not free-floating against the U.S. dollar. Certain of these currencies have experienced, and may experience in the future, substantial fluctuations or a steady devaluation relative to the U.S. dollar.
Current and future portfolio holdings are subject to risk.
Free cash flow: Operating cash flow less capital expenditures
Please refer to the Schedule of Investments in the report for complete holdings information. Fund holdings, geographic allocations and/or sector allocations are subject to change at any time and are not a recommendation to buy or sell any security.
The foregoing reflects the thoughts and opinions of Brandes Investment Partners® exclusively and is subject to change without notice.
Brandes Investment Partners® is a registered trademark of Brandes Investment Partners, L.P., in the United States and Canada.
Must be preceded or accompanied by a prospectus.
Index Guide
The MSCI World Index with net dividends measures the equity market performance of developed markets.
MSCI has not approved, reviewed or produced this report, makes no express or implied warranties or representations and is not liable whatsoever for any data in the report. You may not redistribute the MSCI data or use it as a basis for other indices or investment products.
The Brandes Global Equity Fund is distributed by Quasar Distributors, LLC.
10
Brandes Global Equity Fund
The following chart compares the value of a hypothetical $10,000 investment in the Brandes Global Equity Fund – Class I from its inception (October 6, 2008) to September 30, 2014 and in the Morgan Stanley Capital International World Index.
Value of $10,000 Investment vs Morgan Stanley
Capital International World Index
Average Annual Total Return | |||||
Periods Ended September 30, 2014 | |||||
One | Three | Five | Since | ||
Year | Years | Years | Inception(1) | ||
Brandes Global Equity Fund | |||||
Class A* | 10.18% | 16.92% | 9.46% | 8.98% | |
Class A* (with maximum sales charge) | 3.83% | 14.63% | 8.17% | 7.91% | |
Class C* | 9.34% | 16.06% | 8.59% | 8.12% | |
Class E | 10.20% | 16.91% | 9.41% | 8.99% | |
Class I | 10.46% | 17.21% | 9.67% | 9.20% | |
Morgan Stanley Capital | |||||
International World Index | 12.20% | 17.93% | 10.86% | 10.35% |
(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. |
11
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
September 30, 2014
The sector classifications represented in the graph above and industry classifications represented in the Schedule of Investments are in accordance with Global Industry Classification Standard (GICS®), which was developed by and/or is the exclusive property of MSCI, Inc. and Standard & Poor Financial Services LLC.
12
Brandes Emerging Markets Fund
Dear Shareholder:
The Brandes Emerging Markets Fund (Class I Shares) returned 7.41% during the 12 months ended September 30, 2014. For the same period, the Fund’s benchmark, the MSCI Emerging Markets Index, rose 4.66%.
In this letter, we will discuss sector-, country- and stock-specific factors that affected the Fund’s performance and describe changes in the Fund’s composition during the past year. In addition, we will share insight into how the Fund is currently positioned for the future.
The Markets
The last 12 months provided a good example of how volatility is nothing unusual for the emerging-market asset class. Worry over slowing economic growth persisted, while a number of major political events in some emerging countries added to investor concerns. These included the civil unrest in Turkey that started in mid-2013, the ongoing tensions between Russia and Ukraine, and the pro-democracy protest in Hong Kong against the Chinese government.
Moreover, speculation about the U.S. Federal Reserve’s timing for reducing its quantitative easing program also affected market sentiment. In the second quarter of 2014, investors seemed to warm up to emerging markets after the fragile five (Brazil, South Africa, India, Indonesia and Turkey) undertook economic reforms which included interest-rate increases. However, the asset class declined again in the third quarter as fears that the Fed was moving closer to raising interest rates caused investor concern about a potential repeat of last year’s sell-off.
Despite these factors, the MSCI Emerging Markets Index recorded gains for the 12-month period.
The Fund
The Fund’s allocation to materials represented the strongest contributor to both absolute and relative performance as India-based agrochemical company UPL Limited delivered a stellar return of 140% over the last 12 months. Also aiding performance were several holdings in consumer staples, most notably Egypt’s Eastern Tobacco and South Korea’s beverage company Lotte Chilsung.
From a country perspective, the Fund benefited most from its positions in India. Aside from UPL Limited, conglomerate Reliance Infrastructure, Indian Oil and Tata Chemicals performed well during the period, returning over 60% each.
The Fund’s allocation to information technology detracted from performance, mainly due to our underweights in the internet software & services and semiconductors & semiconductor equipment industries. Additionally, some of the Fund’s positions in consumer discretionary hurt returns, including Chinese down apparel manufacturer Bosideng and Hong Kong’s specialty retailer Luk Fook Holdings.
13
Brandes Emerging Markets Fund
Amid the geopolitical tensions between Russia and Ukraine, it is not surprising that our Russian holdings weighed on performance. These included Sberbank, LukOil, Gazprom and TCS Group, a retail bank which is domiciled in Cyprus but conducts the majority of its business in Russia. We are monitoring the situation closely and have maintained our holdings in Russia.
During the period, the investment team exited the Fund’s positions in a number of companies as their shares appreciated toward our estimates of their intrinsic values. Sold-off positions included Eastern Tobacco, Chinese logistics company Sinotrans, Singapore-based electronic manufacturing services company Flextronics and petrochemical company Saudi Basic Industries.
Exemplifying the Fund’s flexible approach, the team initiated positions in companies that are domiciled in “off-index” countries, such as Panamanian Copa Holdings, Hong Kong-based Lifestyle International Holding, as well as Standard Chartered and ITE Group (ITE), both headquartered in the United Kingdom.
ITE, the sixth-largest exhibition organizer in the world by revenue and the third-largest in emerging markets, is essentially a Russian company with over 65% of operating profit coming from Russia and another 20% from its operations in Central Asia and Caucasus (e.g., Kazakhstan, Uzbekistan).
ITE’s business model is “asset light” with very little fixed assets. The company’s real asset value comes in intangible and intellectual form (i.e., the brands of its trade shows, logistics expertise in running large events in emerging markets, relationships with key event venue stakeholders). These assets are difficult to expropriate, which we see as an advantage, especially in times of crisis, such as the ongoing conflict in Russia.
Pursuant to its asset-light business model, ITE’s cost structure is largely variable in nature. Exhibition space and marketing can quickly be scaled back as needed, and the company has adequate lead time (about six to nine months) in terms of bookings and deposits for each event. ITE’s profit margins have been fairly stable, and because of the low capital expenditures, the operations are free-cash-flow generative, leading to strong returns on invested capital and a solid balance sheet.
Obvious key risks associated with the investment in ITE include the company’s direct economic exposure to Russia and Ukraine, as well as foreign-exchange fluctuations, not only in relation to the Russian ruble but also to other currencies of emerging countries in which ITE operates. In addition, the company intends to grow its business, especially among emerging markets in Asia, through acquisitions, which may pose a risk for capital misallocation.
Measuring these risks against ITE’s current share price, which has been negatively affected by the Russia-Ukraine crisis escalation, we believe the investment offers an attractive risk/reward tradeoff.
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Brandes Emerging Markets Fund
Outlook
The number of events — and the gravity of some of them — evolving in emerging markets seemed to have led many short-term oriented investors and speculators to take on a risk on, risk off approach to emerging-market stocks. This can be seen in the market sentiment swings toward the asset class just over the last several months.
As long-time investors in emerging markets, however, we understand that while macroeconomic events need to be considered, they affect each emerging-market company differently. Our established global research infrastructure, which encompasses a team of analysts with extensive knowledge about their specific industries, allows us to think and invest independently from the market consensus.
As always, thank you for your business and continued trust.
Sincerely yours,
The Brandes Emerging Markets Investment Committee
Brandes Investment Trust
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
15
Brandes Emerging Markets Fund
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.
Current and future portfolio holdings are subject to risk.
Please refer to the Schedule of Investments in the report for complete holdings information. Fund holdings, geographic allocations and/or sector allocations are subject to change at any time and are not considered a recommendation to buy or sell any security.
The foregoing reflects the thoughts and opinions of Brandes Investment Partners® exclusively and is subject to change without notice.
Brandes Investment Partners® is a registered trademark of Brandes Investment Partners, L.P. in the United States and Canada.
Must be preceded or accompanied by a prospectus.
Free cash flow: The cash that a company is able to generate after laying out the money required to maintain or expand its asset base; calculated as operating cash flow minus capital expenditures.
Return on invested capital: Net income minus dividends divided by total capital; used to assess a company’s efficiency at allocating the capital under its control to profitable investments.
Index Guide
The MSCI Emerging Markets Index with gross dividends measures equity market performance of emerging markets. One cannot invest directly in an index.
MSCI has not approved, reviewed or produced this report, makes no express or implied warranties or representations and is not liable whatsoever for any data in the report. You may not redistribute the MSCI data or use it as a basis for other indices or investment products.
The Brandes Emerging Markets Fund is distributed by Quasar Distributors, LLC.
16
Brandes Emerging Markets Fund
The following chart compares the value of a hypothetical $10,000 investment in the Brandes Emerging Markets Fund – Class I from September 30, 2004 to September 30, 2014 and in the Morgan Stanley Emerging Markets Index.
Value of $10,000 Investment vs Morgan Stanley
Capital Emerging Markets Index
Average Annual Total Return | |||||
Periods Ended September 30, 2014** | |||||
One | Five | Ten | Since | ||
Year | Years | Years | Inception(1) | ||
Brandes Emerging Markets Fund | |||||
Class A | 7.09% | 7.13% | 11.56% | 8.84% | |
Class A (with maximum sales charge) | 0.94% | 5.87% | 10.90% | 8.49% | |
Class C* | 6.38% | 6.35% | 10.71% | 8.03% | |
Class I | 7.41% | 7.39% | 11.80% | 9.11% | |
Morgan Stanley Capital International | |||||
Emerging Markets Index | 4.66% | 4.76% | 11.03% | 7.06% |
(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 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. |
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Brandes Emerging Markets 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
September 30, 2014
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.
18
Brandes International Small Cap Equity Fund
Dear Shareholder:
The Brandes International Small Cap Equity Fund (Class I Shares) returned 8.67% during the 12 months ended September 30, 2014. For the same period, the Fund’s benchmark, the S&P Developed Ex-U.S. SmallCap Index, rose 4.86%.
In this letter, we will review sector-, country- and stock-specific factors that affected the Fund’s performance and describe changes in its composition during the past year. In addition, we will share insight into how the Fund is currently positioned for the future.
The Markets
The past 12 months marked an eventful period for international equity markets, with a number of geopolitical and macroeconomic concerns affecting investor sentiment.
In Europe, recent data on stagnating economic growth seemed to overshadow the European Central Bank’s suggested readiness to provide more aggressive stimulus to support the euro zone’s fragile recovery. In addition, political tensions between Ukraine and Russia weighed on investor sentiment. Even though Russian equities rebounded in the second quarter of 2014, the escalation of the crisis brought investor fear anew.
The road was no less bumpy for other emerging markets. Following the downturn in mid-2013, the asset class had a major comeback in the second quarter of 2014, only to decline again in the third quarter. Worry over slowing economic growth persisted, while fears that the U.S. Federal Reserve was moving closer to raising interest rates again caused investor concern. Also putting pressure on market sentiment was the uncertainty over the pro-democracy protest in Hong Kong against the Chinese government.
Amid this background, international small-cap equities, as represented by the S&P Developed Ex-U.S. SmallCap Index, recorded gains for the 12-month period ended September 30, 2014.
The Fund
Our overweight to and stock selection within utilities contributed most to outperformance. Notable contributors in this sector included electric utilities India-based Reliance Infrastructure, Brazil’s Copel and First Philippine Holdings.
Also helping performance was the Fund’s allocation to materials, where positive returns were driven by Europe-based interrelated cement companies Italcementi, Ciments Francais and Italmobiliare. Besides holdings in utilities and materials, other positive contributors included Egypt’s Eastern Tobacco, Canadian Sierra Wireless, India-based battery maker Exide Industries and Brazilian Marfrig Global Foods.
19
Brandes International Small Cap Equity Fund
Main performance detractors included several of the Fund’s consumer discretionary holdings, most notably British multiline retailer Debenhams, Belgium-based distributor D’Ieteren and Canadian mini-conglomerate Dorel Industries. Estate agent LSL Property Services and household product company McBride, both based in the United Kingdom, as well as Switzerland’s Micronas Semiconductor also hurt returns during the 12-month period.
There were a number of new additions to the Fund during the period, including real-estate investment trust Macquarie Mexican REIT, Japanese power tool manufacturer Hitachi Koki and U.K.-based telecommunications testing company Spirent Communications.
In addition to these purchases, other major fund activity included the divestments of Ciment Francais, Sierra Wireless, Switzerland’s Panalpina World Transport, and South Korean beverage company Lotte Chilsung. Furthermore, the investment team took the opportunity of Dorel Industries’ share-price decline in recent months to increase the Fund’s allocation to the company.
Based in Canada, Dorel Industries (Dorel) is a consumer product conglomerate operating in three product segments: juvenile, home furnishings and leisure. Dorel’s brands — which include Schwinn and Cannondale bicycles, as well as Cosco and Safety 1st baby gears — enjoy a good market share in their respective categories.
The company has faced some challenges recently related to the tepid economic recovery in North America and Europe, which together account for about 90% of sales. In addition, increased competition in the juvenile product segment has resulted in reduced market share for the company. The situation worsened for Dorel after its Chinese product suppliers decided to compete against the company by selling their own branded products. To address these challenges, Dorel is taking measures to restructure its business, including acquiring a Chinese juvenile product manufacturer.
Aside from the operational issues, the company increased its financial leverage with recent acquisitions and has a poor corporate governance structure with dual-class shares that serves to concentrate voting power with the controlling family. Despite these challenges and risks, we believe Dorel’s positive cash-flow generation, its established branded-product portfolio and, most importantly, its share price combine to present an attractive investment case for the patient investor.
Outlook
The past year has been an overall positive period for international small-cap equities, although much of the asset class’ strong performance earlier in the period was offset by the decline during the third quarter of 2014.
20
Brandes International Small Cap Equity Fund
A rash of world events over the last few months seemed to have led to an elevated level of concern in equity markets globally. As one of the first firms to bring a global perspective to value investing, Brandes understands that while macroeconomic events should be considered, they affect each individual business differently. Our established global research infrastructure, which encompasses a team of analysts with extensive knowledge about their specific industries, allows us to think and invest independently from the market consensus.
As always, thank you for your business and continued trust.
Sincerely yours,
The Brandes Small-Cap Investment Committee
Brandes Investment Trust
Mark Costa, CFA, Robert Gallagher, CFA, Yingbin Chen, CFA, Ralph Birchmeier, CFA, Luiz Sauerbronn
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
21
Brandes International Small Cap Equity Fund
in small and medium capitalization companies tend to have limited liquidity and greater price volatility than large capitalization companies.
Current and future portfolio holdings are subject to risk.
Please refer to the Schedule of Investments in the report for complete holdings information. Fund holdings, geographic allocations and/or sector allocations are subject to change at any time and are not considered a recommendation to buy or sell any security.
The foregoing reflects the thoughts and opinions of Brandes Investment Partners® exclusively and is subject to change without notice.
Brandes Investment Partners® is a registered trademark of Brandes Investment Partners, L.P. in the United States and Canada.
Must be preceded or accompanied by a prospectus.
Index Guide
The S&P Developed Ex-U.S. SmallCap Index with gross dividends measures the equity performance of small capitalization companies from developed markets around the world, excluding the United States. Please note that all indices are unmanaged and are not available for direct investment.
The Brandes International Small Cap Equity Fund is distributed by Quasar Distributors, LLC.
22
Brandes International Small Cap Equity Fund
The following chart compares the value of a hypothetical $10,000 investment in the Brandes International Small Cap Fund – Class I from September 30, 2004 to September 30, 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
Average Annual Total Return | |||||
Periods Ended September 30, 2014** | |||||
One | Five | Ten | Since | ||
Year | Years | Years | Inception(1) | ||
Brandes International Small Cap Fund | |||||
Class A | 8.36% | 13.29% | 9.05% | 10.63% | |
Class A (with maximum sales charge) | 2.13% | 11.96% | 8.40% | 10.27% | |
Class C* | 7.60% | 12.45% | 8.23% | 9.80% | |
Class I | 8.67% | 13.56% | 9.31% | 10.90% | |
S&P Developed Small Cap – | |||||
Ex. U.S. Index | 4.86% | 9.17% | 8.78% | 7.08% |
(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 |
23
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
September 30, 2014
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.
24
Brandes Core Plus Fixed Income Fund
Dear Shareholder:
The Brandes Core Plus Fixed Income Fund (Class I Shares) gained 4.10% during the 12 months ended September 30, 2014, while its benchmark, the Barclays U.S. Aggregate Bond Index, returned 3.96%.
In this letter, we will examine the sector- and security-specific factors that affected the Fund’s performance. We will also review changes in the Fund’s composition during the fiscal year and how the Fund is positioned for the future.
The Markets
Fixed-income markets maintained their upward trajectory for the most part of the last 12 months amid a number of positive themes that helped drive returns in all taxable bond sectors. These included 1) continued easy monetary policy globally, especially in the United States; 2) strength of the U.S. economy, which has outperformed its developed-country peers; and 3) low volatility for much of the period.
In February, the Board of Governors of the Federal Reserve System welcomed Janet Yellen as its 15th Chair, taking over the helm from Ben Bernanke to begin her four-year term in arguably the world’s most influential central bank. Ms. Yellen leads the Fed in determining the direction of U.S. monetary policy, pursuing three objectives: inflation control, full employment and stable economic growth. Capital markets had a generally positive reaction to the new Fed leader amid expectations that she would adhere to Mr. Bernanke’s blueprint on tapering the Fed’s quantitative-easing program as the U.S. economy gains further steam.
Toward the close of the Fund’s fiscal year, the fixed-income markets experienced mini bouts of volatility, leading to negative returns for many taxable fixed-income asset classes in the third quarter of 2014. Treasury rates continued their largely unexpected downward path at the beginning of the quarter — with the 10-year U.S. Treasury touching a 2014 year-to-date low of 2.34% in late August. The persistent strength of U.S. Treasuries thus far in 2014 appeared to be fueled by Fed policy. While the central bank has been gradually unwinding the past several years’ easy monetary policy, it remains highly accommodative and historically unprecedented.
During much of the 12-month period, geopolitical concerns weighed on investor sentiment. In the second quarter of 2014, the market was focused on the Russian annexation of Crimea, while in the third quarter the focus was on the escalation of violence from the Islamic State.
25
Brandes Core Plus Fixed Income Fund
The Fund
The Fund’s positive absolute performance during the fiscal year was led primarily by holdings in floating rate securities backed by pools of private student loans. Electric utilities were also a strong contributor to performance during the period.
The largest detractor from performance was the duration positioning of the Fund. We have biased the Fund within our range for higher interest rates in the long term by maintaining a relatively shorter duration in the range of 80-85% of the benchmark. This positioning detracted from performance as the 10-year U.S. Treasury rate dropped by approximately 0.15% during the trailing 12 months.
During the third quarter, the Fund initiated a new position in Cloud Peak Energy (6.375% coupon rate, maturing in March 2024 and a rating of B1/BB-). Cloud Peak Energy is a pure play coal miner. It is the lowest-cost player in the lowest cost-mining region in the world — the Powder River Basin, located in southeast Montana and northeast Wyoming. Coal mining is a highly cyclical industry, and producers have high fixed costs. Additionally, the coal industry is facing significant structural headwinds and powerful negative sentiment, owing to coal’s status as dirty energy. U.S. coal demand has been largely stagnant due to a combination of low natural gas prices and much stricter emission regulations. What we find attractive about Cloud Peak Energy is that the company’s ardent focus on cost control should enable the company to generate positive cash flows through the volatile demand and pricing cycles. The quality of the mining assets at Cloud Peak Energy also supports strong asset coverage, in our view. Finally, coal miners operating in the Powder River Basin continue to take market share from operators in the Appalachians, where the extraction costs are much higher.
In the second quarter, we added to existing holdings in Masco Corp. (rated Ba3/BBB-). Masco manufactures a number of home-improvement and building products, including faucets, cabinets, architectural coatings and windows, and is one of the largest installers of insulation for new-home construction. Masco posted steady improvement in sales and EBITDA in 2013 consistent with improvement in the housing market. Additionally, the company continues to chip away at reducing its debt load. We added to our existing holding in a 2016 maturity. We believe Masco is an improving credit with an attractive yield in the front-end of the yield curve.
During the fiscal year, another transaction of note was the swap of our holding in Sappi Papier 7.75% 7/15/17 (rated Ba2/BB) into a longer maturity Sappi Papier 6.625% 4/15/21(Ba2/BB). Sappi is a South African based company that is one of the global market leaders in paper. It is geographically diversified with 59% of sales in Europe, 23% in North America and 18% in South Africa. It is also a low cost leader
26
Brandes Core Plus Fixed Income Fund
in the industry. More recently Sappi has undertaken a large capital expenditure program to convert two plants (one in North America and one in South Africa) to produce chemical cellulose. Chemical cellulose is a dissolving wood pulp that is in a wide range of consumer products from food to packaging, but in particular it is used as a fiber in clothing and textiles. With the recent plant conversions, Sappi has become the largest chemical cellulose producer in the world.
We made our initial investment in Sappi in September 2013 as we viewed the company’s large capital expenditure program as a long-term positive. However, at that time, the company’s EBITDA was lower, free cash flow was negative and liquidity was stressed. Since our initial investment, the two plant conversions are now completed and fully operational, and we have seen Sappi return to positive free cash flow – allowing the company to pay down debt and improve leverage ratios. Similar to our investment in the 2017 maturity (mentioned above), we purchased first lien notes, which are secured by the company’s physical plant assets from several facilities worldwide. While we expect that credit metrics are at an inflection point and should continue to improve, the asset coverage provided by the first lien structure, we believe, gives us protection in the event that liquidity or credit metrics become further stressed. The transaction allowed us to move into a lower-priced issue and also pick up additional yield.
Outlook
We are as cautious today on the market as we have been over the last decade. Corporate credit spreads continue to grind tighter as many 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. Agency mortgage-backed security spreads also remain tight. Even with the tapering program, the Fed is buying virtually all of the net new supply — creating a strong supply/demand imbalance in that market.
Due to these concerns, we have positioned the Fund defensively. 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 it has been 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 a nimble manager, Brandes can take advantage of market dynamics and volatility to find potentially mispriced bonds, buying them at a discount to our estimates of their true worth. Importantly, amid constantly evolving and complex
27
Brandes Core Plus Fixed Income Fund
markets, look to Brandes to consistently employ a straightforward, transparent and focused approach to pursuing value on your behalf.
Sincerely yours,
The Brandes Fixed Income Investment Committee
Brandes Investment Trust
Timothy Doyle, CFA, Chuck Gramling, CFA, David Gilson, CFA
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.
EBITDA: Earnings before interest, taxes, depreciation and amortization
Free Cash Flow: Operating cash flow less capital expenditures
Source for bond ratings: Moody’s and Standard & Poor’s. Bond ratings are grades given to bonds that indicate their credit quality as determined by a private independent rating service such as Standard & Poor’s. The firm evaluates a bond issuer’s financial strength, or its ability to pay a bond’s principal and interest in a timely fashion. Ratings are expressed as letters ranging from ‘AAA’, which is the highest grade, to ‘D’, which is the lowest grade. In limited situations when the rating agency has not issued a formal rating, the Advisor will classify the security as nonrated.
Yield: Annual income from the investment (dividend, interest, etc.) divided by the current market price of the investment.
Past performance does not guarantee future results.
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. As with most fixed income funds, the income on and value of your shares in the Fund will fluctuate along with interest rates.
28
Brandes Core Plus Fixed Income Fund
When interest rates rise, the market prices of the debt securities the Fund owns usually decline. When interest rates fall, the prices of these securities usually increase. Generally, the longer the Fund’s average portfolio maturity and the lower the average quality of its portfolio, the greater the price fluctuation. The price of any security owned by the Fund may also fall in response to events affecting the issuer of the security, such as its ability to continue to make principal and interest payments or its credit rating. Below investment grade debt securities are speculative and involve a greater risk of default and price change due to changes in the issuer’s creditworthiness. The market prices of these debt securities may fluctuate more than the market prices of investment grade debt securities and may decline significantly in periods of general economic difficulty.
Investing in foreign securities poses additional risks. The performance of foreign securities can be adversely affected by the different political, regulatory 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 may experience substantial fluctuations or steady devaluation relative to the U.S. dollar. Mortgage-related securities are subject to certain additional risks. Rising interest rates tend to extend the duration of mortgage-related securities, making them more sensitive to changes in interest rates. As a result, when holding mortgage-related securities in a period of rising interest rates, a Fund may exhibit additional volatility. In addition, mortgage-related securities are subject to prepayment risk. When interest rates decline, borrowers may pay off their mortgages sooner than expected. This can reduce the returns of a Fund because it will have to reinvest that money at the lower prevailing interest rates.
Please refer to the Schedule of Investments in the report for complete holdings information. Fund holdings, geographic allocations and/or sector allocations are subject to change at any time and are not a recommendation to buy or sell any security.
Investment performance reflects fee waivers and/or reimbursement of expenses. In the absence of such waivers/reimbursements, total return would be reduced.
The foregoing reflects the thoughts and opinions of Brandes Investment Partners® exclusively and is subject to change without notice.
Brandes Investment Partners® is a registered trademark of Brandes Investment Partners, L.P. in the United States and Canada.
Must be preceded or accompanied by a prospectus.
29
Brandes Core Plus Fixed Income Fund
Index Guide
The Barclays U.S. Aggregate Bond Index is an unmanaged index consisting of U.S. dollar-denominated, fixed-rate, taxable bonds. The U.S. Aggregate Bond Index is a broad-based benchmark that measures the investment grade, U.S. dollar-denominated, fixed-rate taxable bond market, including Treasuries, government-related and corporate securities, MBS (agency fixed-rate and hybrid ARM passthroughs), ABS, and CMBS. The U.S. Aggregate rolls up into other Barclays Capital flagship indices such as the multi-currency Global Aggregate Index and the U.S. Universal Index, which includes high yield and emerging markets debt. The U.S. Aggregate Index was created in 1986, with index history backfilled to January 1, 1976. The index is a total return index which reflects the price changes and interest of each bond in the index.
Please note that all indices are unmanaged are not available for direct investment.
The Brandes Core Plus Fixed Income Fund is distributed by Quasar Distributors, LLC.
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 September 30, 2014 and in the Barclays Capital U.S. Aggregate Index.
Value of $10,000 Investment vs Barclays Capital
U.S. Aggregate Index
Average Annual Total Return | |||||
Periods Ended September 30, 2014 | |||||
One | Three | Five | Since | ||
Year | Years | Years | Inception(1) | ||
Brandes Core Plus Fixed Income Fund | |||||
Class A* | 3.52% | 4.47% | 6.07% | 4.29% | |
Class A* (with maximum sales charge) | -0.40% | 3.17% | 5.26% | 3.70% | |
Class E* | 3.86% | 4.77% | 6.24% | 4.43% | |
Class I | 4.10% | 4.95% | 6.45% | 4.61% | |
Barclays Capital U.S. Aggregate Index | 3.96% | 2.43% | 4.12% | 4.72% |
(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
September 30, 2014
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.
32
Brandes Credit Focus Yield Fund
Dear Shareholder:
The Brandes Credit Focus Yield Fund (Class I Shares) gained 3.20% during the 12 months ended September 30, 2014, while its benchmark, the Barclays U.S. Intermediate Credit Bond Index, returned 4.04%.
In this letter, we will examine the sector- and security-specific factors that affected the Fund’s performance. We will also review changes in the Fund’s composition during the fiscal year and how the Fund is positioned for the future.
The Markets
Fixed-income markets maintained their upward trajectory for the most part of the last 12 months amid a number of positive themes that helped drive returns in all taxable bond sectors. These included 1) continued easy monetary policy globally, especially in the United States; 2) strength of the U.S. economy, which has outperformed its developed-country peers; and 3) low volatility for much of the period.
In February, the Board of Governors of the Federal Reserve System welcomed Janet Yellen as its 15th Chair, taking over the helm from Ben Bernanke to begin her four-year term in arguably the world’s most influential central bank. Ms. Yellen leads the Fed in determining the direction of U.S. monetary policy, pursuing three objectives: inflation control, full employment and stable economic growth. Capital markets had a generally positive reaction to the new Fed leader amid expectations that she would adhere to Mr. Bernanke’s blueprint on tapering the Fed’s quantitative-easing program as the U.S. economy gains further steam.
Toward the close of the Fund’s fiscal year, the fixed-income markets experienced mini bouts of volatility, leading to negative returns for many taxable fixed-income asset classes in the third quarter of 2014. Treasury rates continued their largely unexpected downward path at the beginning of the quarter — with the 10-year U.S. Treasury touching a 2014 year-to-date low of 2.34% in late August. The persistent strength of U.S. Treasuries thus far in 2014 appeared to be fueled by Fed policy. While the central bank has been gradually unwinding the past several years’ easy monetary policy, it remains highly accommodative and historically unprecedented.
During much of the 12-month period, geopolitical concerns weighed on investor sentiment. In the second quarter of 2014, the market was focused on the Russian annexation of Crimea, while in the third quarter the focus was on the escalation of violence from the Islamic State.
33
Brandes Credit Focus Yield Fund
The Fund
The Fund’s positive absolute performance during the fiscal year was led primarily by holdings in floating rate securities backed by pools of private student loans. Electric utilities were also strong contributors to performance during the period.
The largest detractor from performance was the duration positioning of the Fund. We have biased the Fund within our range for higher interest rates in the long term by maintaining a relatively shorter duration in the range of 80-85% of the benchmark. This positioning detracted from performance as the 10-year U.S. Treasury rate dropped by approximately 0.15% during the trailing 12 months.
During the third quarter, the Fund initiated a new position in Cloud Peak Energy (6.375% coupon rate, maturing in March 2024 and a rating of B1/BB-). Cloud Peak Energy is a pure play coal miner. It is the lowest-cost player in the lowest cost-mining region in the world — the Powder River Basin, located in southeast Montana and northeast Wyoming. Coal mining is a highly cyclical industry, and producers have high fixed costs. Additionally, the coal industry is facing significant structural headwinds and powerful negative sentiment, owing to coal’s status as dirty energy. U.S. coal demand has been largely stagnant due to a combination of low natural gas prices and much stricter emission regulations. What we find attractive about Cloud Peak Energy is that the company’s ardent focus on cost control should enable the company to generate positive cash flows through the volatile demand and pricing cycles. The quality of the mining assets at Cloud Peak Energy also supports strong asset coverage, in our view. Finally, coal miners operating in the Powder River Basin continue to take market share from operators in the Appalachians, where the extraction costs are much higher.
In the second quarter, we added to existing holdings in Masco Corp. (rated Ba3/BBB-). Masco manufactures a number of home-improvement and building products, including faucets, cabinets, architectural coatings and windows, and is one of the largest installers of insulation for new-home construction. Masco posted steady improvement in sales and EBITDA in 2013 consistent with improvement in the housing market. Additionally, the company continues to chip away at reducing its debt load. We added to our existing holding in a 2016 maturity. We believe Masco is an improving credit with an attractive yield in the front-end of the yield curve.
During the fiscal year, another transaction of note was the swap of our holding in Sappi Papier 7.75% 7/15/17 (rated Ba2/BB) into a longer maturity Sappi Papier 6.625% 4/15/21(Ba2/BB). Sappi is a South African based company that is one of the global market leaders in paper. It is geographically diversified with 59% of sales in Europe, 23% in North America and 18% in South Africa. It is also a low cost leader
34
Brandes Credit Focus Yield Fund
in the industry. More recently Sappi has undertaken a large capital expenditure program to convert two plants (one in North America and one in South Africa) to produce chemical cellulose. Chemical cellulose is a dissolving wood pulp that is in a wide range of consumer products from food to packaging, but in particular it is used as a fiber in clothing and textiles. With the recent plant conversions, Sappi has become the largest chemical cellulose producer in the world.
We made our initial investment in Sappi in September 2013 as we viewed the company’s large capital expenditure program as a long-term positive. However, at that time, the company’s EBITDA was lower, free cash flow was negative and liquidity was stressed. Since our initial investment, the two plant conversions are now completed and fully operational, and we have seen Sappi return to positive free cash flow – allowing the company to pay down debt and improve leverage ratios. Similar to our investment in the 2017 maturity (mentioned above), we purchased first lien notes, which are secured by the company’s physical plant assets from several facilities worldwide. While we expect that credit metrics are at an inflection point and should continue to improve, the asset coverage provided by the first lien structure, we believe, gives us protection in the event that liquidity or credit metrics become further stressed. The transaction allowed us to move into a lower-priced issue and also pick up additional yield.
Outlook
We are as cautious today on the market as we have been over the last decade. Corporate credit spreads continue to grind tighter as many 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. Agency mortgage-backed security spreads also remain tight. Even with the tapering program, the Fed is buying virtually all of the net new supply — creating a strong supply/demand imbalance in that market.
Due to these concerns, we have positioned the Fund defensively. 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 it has been 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 a nimble manager, Brandes can take advantage of market dynamics and volatility to find potentially mispriced bonds, buying them at a discount to our
35
Brandes Credit Focus Yield Fund
estimates of their true worth. Importantly, amid constantly evolving and complex markets, look to Brandes to consistently employ a straightforward, transparent and focused approach to pursuing value on your behalf.
Sincerely yours,
The Brandes Fixed Income Investment Committee
Brandes Investment Trust
Timothy Doyle, CFA, Chuck Gramling, CFA, David Gilson, CFA
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.
EBITDA: Earnings before interest, taxes, depreciation and amortization
Free Cash Flow: Operating cash flow less capital expenditures
Source for bond ratings: Moody’s and Standard & Poor’s. Bond ratings are grades given to bonds that indicate their credit quality as determined by a private independent rating service such as Standard & Poor’s. The firm evaluates a bond issuer’s financial strength, or its ability to pay a bond’s principal and interest in a timely fashion. Ratings are expressed as letters ranging from ‘AAA’, which is the highest grade, to ‘D’, which is the lowest grade. In limited situations when the rating agency has not issued a formal rating, the Advisor will classify the security as nonrated.
Yield: Annual income from the investment (dividend, interest, etc.) divided by the current market price of the investment.
Past performance does not guarantee future results.
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. As with most fixed income funds, the income on and
36
Brandes Credit Focus Yield Fund
value of your shares in the Fund will fluctuate along with interest rates. When interest rates rise, the market prices of the debt securities the Fund owns usually decline. When interest rates fall, the prices of these securities usually increase. Generally, the longer the Fund’s average portfolio maturity and the lower the average quality of its portfolio, the greater the price fluctuation. The price of any security owned by the Fund may also fall in response to events affecting the issuer of the security, such as its ability to continue to make principal and interest payments or its credit rating. Below investment grade debt securities are speculative and involve a greater risk of default and price change due to changes in the issuer’s creditworthiness. The market prices of these debt securities may fluctuate more than the market prices of investment grade debt securities and may decline significantly in periods of general economic difficulty.
Investing in foreign securities poses additional risks. The performance of foreign securities can be adversely affected by the different political, regulatory 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 may experience substantial fluctuations or steady devaluation relative to the U.S. dollar. Mortgage-related securities are subject to certain additional risks. Rising interest rates tend to extend the duration of mortgage-related securities, making them more sensitive to changes in interest rates. As a result, when holding mortgage-related securities in a period of rising interest rates, a Fund may exhibit additional volatility. In addition, mortgage-related securities are subject to prepayment risk. When interest rates decline, borrowers may pay off their mortgages sooner than expected. This can reduce the returns of a Fund because it will have to reinvest that money at the lower prevailing interest rates.
Please refer to the Schedule of Investments in the report for complete holdings information. Fund holdings, geographic allocations and/or sector allocations are subject to change at any time and are not a recommendation to buy or sell any security.
Investment performance reflects fee waivers and/or reimbursement of expenses. In the absence of such waivers/reimbursements, total return would be reduced.
The foregoing reflects the thoughts and opinions of Brandes Investment Partners® exclusively and is subject to change without notice.
Brandes Investment Partners® is a registered trademark of Brandes Investment Partners, L.P. in the United States and Canada.
37
Brandes Credit Focus Yield Fund
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.
One cannot invest directly in an index.
Please note that all indices are unmanaged are not available for direct investment.
The Brandes Credit Focus Yield Fund is distributed by Quasar Distributors, LLC.
38
Brandes Credit Focus Yield Fund
The following chart compares the value of a hypothetical $10,000 investment in the Brandes Credit Focus Yield Fund – Class I from September 30, 2004 to September 30, 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
Average Annual Total Return | |||||
Periods Ended September 30, 2014** | |||||
One | Five | Ten | Since | ||
Year | Years | Years | Inception(1) | ||
Brandes Credit Focus Yield Fund | |||||
Class A* | 2.94% | 6.74% | 4.51% | 5.92% | |
Class A* (with maximum sales charge) | -0.96% | 5.92% | 4.11% | 5.64% | |
Class I | 3.20% | 7.04% | 4.80% | 6.20% | |
Barclays Capital U.S. Intermediate | |||||
Credit Index | 4.04% | 5.17% | 4.88% | 6.00% |
(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 restrictions imposed by the 1940 Act and the Internal Revenue Code of 1986, which, if applicable, may have adversely affected its performance. |
39
Brandes Credit Focus Yield 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
September 30, 2014
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.
40
Brandes Investment Trust
Expense Example (Unaudited)
As a shareholder of a Fund, you incur ongoing costs, including investment advisory and administrative fees and other fund expenses. The examples below are intended to help you understand your ongoing costs (in dollars) of investing in the Funds and to compare these costs with ongoing costs of investing in other mutual funds.
The examples are based on an investment of $1,000 invested at the beginning of the period and held for the entire period from April 1, 2014 to September 30, 2014 (the “Period”).
Actual Expenses
This section provides information about actual account values and actual expenses. The “Ending Account Value” shown is derived from each 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 | $ 976.70 | 1.19% | $5.90 | |
Global Equity Fund | $1,000.00 | $1,006.90 | 1.25% | $6.29 | |
Emerging Markets Fund | $1,000.00 | $1,045.10 | 1.37% | $7.02 | |
International Small Cap Fund | $1,000.00 | $ 983.80 | 1.40% | $6.96 | |
Core Plus Fixed Income Fund | $1,000.00 | $1,012.90 | 0.70% | $3.53 | |
Credit Focus Yield Fund | $1,000.00 | $1,007.80 | 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 | $ 972.50 | 1.93% | $9.54 | |
Global Equity Fund | $1,000.00 | $1,003.20 | 2.00% | $10.04 | |
Emerging Markets Fund | $1,000.00 | $1,041.90 | 2.12% | $10.85 | |
International Small Cap Fund | $1,000.00 | $ 980.20 | 2.14% | $10.62 |
41
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 | $ 976.00 | 1.19% | $5.89 | |
Global Equity Fund | $1,000.00 | $1,007.00 | 1.25% | $6.29 | |
Core Plus Fixed Income Fund | $1,000.00 | $1,014.10 | 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 | $ 977.00 | 1.00% | $4.96 | |
Global Equity Fund | $1,000.00 | $1,008.20 | 1.00% | $5.03 | |
Emerging Markets Fund | $1,000.00 | $1,047.30 | 1.12% | $5.75 | |
International Small Cap Fund | $1,000.00 | $ 984.90 | 1.15% | $5.72 | |
Core Plus Fixed Income Fund | $1,000.00 | $1,015.10 | 0.50% | $2.53 | |
Credit Focus Yield Fund | $1,000.00 | $1,009.10 | 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 are not the Fund’s actual returns. 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.
42
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 | $1,019.10 | 1.19% | $6.02 | |
Global Equity Fund | $1,000.00 | $1,018.80 | 1.25% | $6.33 | |
Emerging Markets Fund | $1,000.00 | $1,018.20 | 1.37% | $6.93 | |
International Small Cap Fund | $1,000.00 | $1,018.05 | 1.40% | $7.08 | |
Core Plus Fixed Income Fund | $1,000.00 | $1,021.56 | 0.70% | $3.55 | |
Credit Focus Yield Fund | $1,000.00 | $1,020.31 | 0.95% | $4.81 | |
Class C | |||||
Expenses | |||||
Beginning | Ending | Annual | Paid | ||
Account | Account | Expense | During | ||
Fund | Value | Value | Ratio | the Period* | |
International Equity Fund | $1,000.00 | $1,015.39 | 1.93% | $9.75 | |
Global Equity Fund | $1,000.00 | $1,015.04 | 2.00% | $10.10 | |
Emerging Markets Fund | $1,000.00 | $1,014.44 | 2.12% | $10.71 | |
International Small Cap Fund | $1,000.00 | $1,014.34 | 2.14% | $10.81 | |
Class E | |||||
Expenses | |||||
Beginning | Ending | Annual | Paid | ||
Account | Account | Expense | During | ||
Fund | Value | Value | Ratio | the Period* | |
International Equity Fund | $1,000.00 | $1,019.10 | 1.19% | $6.02 | |
Global Equity Fund | $1,000.00 | $1,018.80 | 1.25% | $6.33 | |
Core Plus Fixed Income Fund | $1,000.00 | $1,021.56 | 0.70% | $3.55 | |
Class I | |||||
Expenses | |||||
Beginning | Ending | Annual | Paid | ||
Account | Account | Expense | During | ||
Fund | Value | Value | Ratio | the Period* | |
International Equity Fund | $1,000.00 | $1,020.05 | 1.00% | $5.06 | |
Global Equity Fund | $1,000.00 | $1,020.05 | 1.00% | $5.06 | |
Emerging Markets Fund | $1,000.00 | $1,019.45 | 1.12% | $5.67 | |
International Small Cap Fund | $1,000.00 | $1,019.30 | 1.15% | $5.82 | |
Core Plus Fixed Income Fund | $1,000.00 | $1,022.56 | 0.50% | $2.54 | |
Credit Focus Yield Fund | $1,000.00 | $1,021.56 | 0.70% | $3.55 |
* | Expenses are equal to the Funds’ expense ratio for the period, multiplied by the average account value over the period, multiplied by 183/365 (to reflect the one-half year period). |
43
Brandes International Equity Fund
SCHEDULE OF INVESTMENTS — September 30, 2014 |
Shares | Value | ||||||
COMMON STOCKS – 90.14% | |||||||
Austria – 1.21% | |||||||
289,280 | Erste Group | ||||||
Bank AG | $ | 6,605,021 | |||||
Brazil – 3.38% | |||||||
667,800 | Banco Santander | ||||||
Brasil SA – ADR | 4,367,412 | ||||||
1,223,030 | Centrais Electricas | ||||||
Brasileiras SA – ADR | 3,302,181 | ||||||
176,180 | Embraer SA – ADR | 6,909,779 | |||||
148,934 | Tim Participacoes | ||||||
SA – ADR | 3,902,071 | ||||||
18,481,443 | |||||||
China – 1.45% | |||||||
680,000 | China Mobile Ltd. | 7,957,699 | |||||
France – 10.95% | |||||||
263,064 | Carrefour SA | 8,124,636 | |||||
182,012 | Compagnie | ||||||
De Saint – Gobain | 8,316,445 | ||||||
621,357 | GDF Suez | 15,584,003 | |||||
561,187 | Orange SA | 8,374,420 | |||||
104,800 | Renault SA | 7,581,239 | |||||
105,935 | Sanofi | 11,978,204 | |||||
59,958,947 | |||||||
Germany – 0.76% | |||||||
276,000 | Deutsche Telekom AG | 4,177,711 | |||||
Hong Kong – 1.19% | |||||||
6,276,000 | First Pacific Co. Ltd. | 6,509,769 | |||||
Ireland – 3.09% | |||||||
376,538 | CRH Plc | 8,555,851 | |||||
202,450 | Willis Group | ||||||
Holdings Plc | 8,381,430 | ||||||
16,937,281 | |||||||
Italy – 6.45% | |||||||
465,615 | ENI SpA(b) | 11,047,346 | |||||
3,626,512 | Intesa Sanpaolo SpA | ||||||
Savings Shares | 9,666,750 | ||||||
392,226 | Italcementi Fabbriche | ||||||
Riunite Cemento SpA | 2,504,613 | ||||||
4,166,774 | Telecom Italia SpA(a) | 4,765,884 | |||||
8,304,250 | Telecom Italia SpA | ||||||
Savings Shares | 7,340,324 | ||||||
35,324,917 | |||||||
Japan – 22.48% | |||||||
391,000 | Canon, Inc. | 12,721,551 | |||||
405,400 | Dai Nippon Printing | ||||||
Co. Ltd. | 4,067,878 | ||||||
775,902 | Daiichi Sankyo Co. Ltd. | 12,192,545 | |||||
326,600 | Honda Motor Co. Ltd. | 11,205,593 | |||||
551,500 | Mitsubishi Tanabe | ||||||
Pharma Corp. | 8,092,445 | ||||||
1,194,400 | Mitsubishi UFJ | ||||||
Financial Group, Inc. | 6,731,298 | ||||||
380,299 | MS&AD Insurance | ||||||
Group Holdings | 8,295,126 | ||||||
1,444,400 | Nissan Motor Co. Ltd. | 13,982,011 | |||||
396,000 | Sompo Japan Nipponkoa | ||||||
Holdings, Inc. | 9,606,394 | ||||||
2,054,000 | Sumitomo Mitsui | ||||||
Trust Holdings, Inc. | 8,551,743 | ||||||
120,000 | Taisho Pharmaceutical | ||||||
Co. Ltd. | 8,213,719 | ||||||
144,600 | Takeda Pharmaceutical | ||||||
Co. Ltd. | 6,286,112 | ||||||
208,500 | Tokio Marine | ||||||
Holdings, Inc. | 6,469,255 | ||||||
113,500 | Toyota Motor Corp. | 6,678,248 | |||||
123,093,918 | |||||||
Mexico – 1.99% | |||||||
211,798 | America Movil | ||||||
SAB de CV – ADR | 5,337,310 | ||||||
425,825 | Cemex SAB de | ||||||
CV – ADR(a) | 5,552,758 | ||||||
10,890,068 | |||||||
Netherlands – 4.52% | |||||||
900,605 | Aegon NV | 7,415,808 | |||||
504,332 | Royal Ahold NV | 8,166,340 | |||||
231,604 | Unilever NV | 9,191,289 | |||||
24,773,437 | |||||||
Russia – 2.75% | |||||||
1,174,900 | Gazprom OAO | 4,075,595 | |||||
34,570 | Lukoil OAO | 1,755,479 | |||||
181,503 | Lukoil OAO – ADR | 9,238,503 | |||||
15,069,577 | |||||||
Singapore – 0.70% | |||||||
369,000 | Flextronics | ||||||
International Ltd.(a) | 3,808,080 |
The accompanying notes are an integral part of these Schedules of Investments.
44
Brandes International Equity Fund
SCHEDULE OF INVESTMENTS — September 30, 2014 (continued)
Shares | Value | ||||||
South Korea – 3.03% | |||||||
33,720 | Hyundai Mobis | ||||||
Co. Ltd. | $ | 8,209,182 | |||||
27,305 | POSCO | 8,398,824 | |||||
16,608,006 | |||||||
Sweden – 1.63% | |||||||
706,000 | LM Ericsson | ||||||
Telefon AB Class B | 8,901,863 | ||||||
Switzerland – 3.26% | |||||||
85,620 | Swiss Re AG | 6,813,842 | |||||
636,137 | UBS AG | 11,057,861 | |||||
17,871,703 | |||||||
United Kingdom – 21.30% | |||||||
2,540,736 | Barclays Plc | 9,345,234 | |||||
1,618,654 | BP Plc | 11,840,924 | |||||
573,710 | British Sky | ||||||
Broadcasting Group Plc | 8,182,859 | ||||||
2,031,149 | G4S Plc | 8,236,132 | |||||
722,720 | GlaxoSmithKline Plc | 16,509,815 | |||||
790,220 | HSBC Holdings Plc | 8,029,603 | |||||
158,110 | Imperial Tobacco | ||||||
Group Plc | 6,807,533 | ||||||
2,052,300 | J. Sainsbury Plc | 8,345,440 | |||||
1,577,879 | Kingfisher Plc | 8,252,060 | |||||
1,199,019 | Marks & Spencer | ||||||
Group Plc | 7,839,730 | ||||||
3,153,000 | Tesco Plc | 9,418,778 | |||||
5,074,611 | WM. Morrison | ||||||
Supermarkets Plc | 13,807,853 | ||||||
116,615,961 | |||||||
TOTAL COMMON STOCKS | |||||||
(Cost $502,968,438) | $ | 493,585,401 | |||||
PREFERRED STOCKS – 1.94% | |||||||
Brazil – 1.94% | |||||||
445,860 | Petroleo Brasileiro | ||||||
SA – ADR | $ | 6,638,855 | |||||
201,463 | Telefonica Brasil | ||||||
SA – ADR | 3,964,792 | ||||||
TOTAL PREFERRED STOCKS | |||||||
(Cost $10,823,647) | $ | 10,603,647 |
Principal | |||||||||
Amount | Value | ||||||||
TIME DEPOSIT – 9.47% | |||||||||
State Street Euro Dollar Time Deposit, 0.010%, due 10/01/14 | $ | 51,826,073 | $ | 51,826,073 | |||||
TOTAL TIME DEPOSIT (Cost $51,826,073) | $ | 51,826,073 | |||||||
Total Investments (Cost $565,618,158) – 101.55% | $ | 556,015,121 | |||||||
Liabilities in Excess of Other Assets – (1.55%) | (8,472,526 | ) | |||||||
TOTAL NET ASSETS – 100.00% | $ | 547,542,595 |
__________
Percentages are stated as a percent of net assets.
ADR American Depositary Receipt
(a) | Non-income producing security. |
(b) | All or 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.
45
Brandes International Equity Fund
SCHEDULE OF INVESTMENTS BY INDUSTRY — September 30, 2014 (Unaudited)
COMMON STOCKS | ||||
Aerospace & Defense | 1.26 | % | ||
Auto Components | 1.50 | % | ||
Automobiles | 7.21 | % | ||
Banks | 9.74 | % | ||
Building Products | 1.52 | % | ||
Capital Markets | 2.02 | % | ||
Commercial Services & Supplies | 2.25 | % | ||
Communications Equipment | 1.62 | % | ||
Construction Materials | 3.03 | % | ||
Diversified Financial Services | 1.19 | % | ||
Diversified Telecommunication Services | 4.51 | % | ||
Electric Utilities | 0.60 | % | ||
Electronic Equipment, Instruments & Components | 0.69 | % | ||
Food & Staples Retailing | 8.74 | % | ||
Food Products | 1.68 | % | ||
Insurance | 8.58 | % | ||
Media | 1.49 | % | ||
Metals & Mining | 1.53 | % | ||
Multiline Retail | 1.43 | % | ||
Multi-Utilities | 2.84 | % | ||
Oil, Gas & Consumable Fuels | 6.94 | % | ||
Pharmaceuticals | 11.56 | % | ||
Specialty Retail | 1.51 | % | ||
Technology Hardware, Storage & Peripherals | 2.32 | % | ||
Tobacco | 1.24 | % | ||
Wireless Telecommunication Services | 3.14 | % | ||
TOTAL COMMON STOCKS | 90.14 | % | ||
PREFERRED STOCKS | ||||
Diversified Telecommunication Services | 0.72 | % | ||
Oil, Gas & Consumable Fuels | 1.22 | % | ||
TOTAL PREFERRED STOCKS | 1.94 | % | ||
TIME DEPOSIT | 9.47 | % | ||
TOTAL INVESTMENTS | 101.55 | % | ||
Liabilities in Excess of Other Assets | (1.55 | )% | ||
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.
46
Brandes Global Equity Fund
SCHEDULE OF INVESTMENTS — September 30, 2014
Shares | Value | ||||||
COMMON STOCKS – 90.29% | |||||||
Auto Components – 2.06% | |||||||
4,110 | Hyundai Mobis | ||||||
Co. Ltd. | $ | 1,000,585 | |||||
Automobiles – 4.91% | |||||||
21,900 | Honda Motor Co. Ltd. | 751,385 | |||||
111,700 | Nissan Motor Co. Ltd. | 1,081,273 | |||||
9,300 | Toyota Motor Corp. | 547,205 | |||||
2,379,863 | |||||||
Banks – 11.74% | |||||||
31,832 | Bank of America Corp. | 542,736 | |||||
147,420 | Barclays Plc | 542,234 | |||||
20,986 | Citigroup, Inc. | 1,087,495 | |||||
19,420 | Erste Group Bank AG | 443,410 | |||||
51,503 | HSBC Holdings Plc | 523,334 | |||||
89,300 | Mitsubishi UFJ | ||||||
Financial Group, Inc. | 503,269 | ||||||
8,930 | PNC Financial Services | ||||||
Group, Inc. | 764,229 | ||||||
160,480 | Turkiye Garanti | ||||||
Bankasi AS | 564,049 | ||||||
13,869 | Wells Fargo & Co. | 719,385 | |||||
5,690,141 | |||||||
Beverages – 1.88% | |||||||
9,790 | Pepsico, Inc. | 911,351 | |||||
Building Products – 1.75% | |||||||
35,400 | Masco Corp. | 846,768 | |||||
Capital Markets – 5.41% | |||||||
19,600 | Bank of New York | ||||||
Mellon Corp. | 759,108 | ||||||
15,278 | State Street Corp. | 1,124,614 | |||||
42,430 | UBS AG | 737,553 | |||||
2,621,275 | |||||||
Communications Equipment – 1.65% | |||||||
63,500 | LM Ericsson Telefon | ||||||
AB Class B | 800,663 | ||||||
Construction Materials – 1.65% | |||||||
35,232 | CRH Plc | 800,556 | |||||
Diversified Financial Services – 1.43% | |||||||
10,300 | Deutsche Boerse AG | 691,656 | |||||
Diversified Telecommunication | |||||||
Services – 2.99% | |||||||
10,900 | Nippon Telegraph | ||||||
& Telephone Corp. | 675,956 | ||||||
875,400 | Telecom Italia SpA | ||||||
Savings Shares | 773,787 | ||||||
1,449,743 | |||||||
Electric Utilities – 1.22% | |||||||
17,280 | Exelon Corp. | 589,075 | |||||
Electronic Equipment, Instruments | |||||||
& Components – 1.47% | |||||||
36,880 | Corning, Inc. | 713,259 | |||||
Food & Staples Retailing – 6.30% | |||||||
14,857 | Carrefour SA | 458,853 | |||||
115,000 | J. Sainsbury Plc | 467,634 | |||||
44,684 | Royal Ahold NV | 723,541 | |||||
223,590 | Tesco Plc | 667,918 | |||||
269,900 | WM. Morrison | ||||||
Supermarkets Plc | 734,389 | ||||||
3,052,335 | |||||||
Food Products – 1.84% | |||||||
22,500 | Unilever NV | 892,921 | |||||
Health Care Providers | |||||||
& Services – 1.66% | |||||||
11,388 | Express Scripts | ||||||
Holding Co.(a) | 804,334 | ||||||
Hotels, Restaurants & Leisure – 1.43% | |||||||
545,000 | Genting | ||||||
Malaysia Berhad | 694,274 | ||||||
Insurance – 4.19% | |||||||
21,900 | MS&AD Insurance | ||||||
Group Holdings | 477,685 | ||||||
19,600 | Sompo Japan | ||||||
Nipponkoa Holdings, Inc. | 475,468 | ||||||
7,100 | Swiss Re AG | 565,035 | |||||
16,500 | Tokio Marine | ||||||
Holdings, Inc. | 511,956 | ||||||
2,030,144 | |||||||
Media – 1.44% | |||||||
49,040 | British Sky | ||||||
Broadcasting Group Plc | 699,460 |
The accompanying notes are an integral part of these Schedules of Investments.
47
Brandes Global Equity Fund
SCHEDULE OF INVESTMENTS — September 30, 2014 (continued)
Shares | Value | ||||||
Multiline Retail – 0.97% | |||||||
71,700 | Marks & Spencer | ||||||
Group Plc | $ | 468,807 | |||||
Multi–Utilities – 2.57% | |||||||
49,684 | GDF Suez | 1,246,104 | |||||
Oil, Gas & Consumable Fuels – 7.67% | |||||||
146,425 | BP Plc | 1,071,142 | |||||
30,170 | Chesapeake | ||||||
Energy Corp. | 693,608 | ||||||
36,500 | ENI SpA | 866,012 | |||||
97,770 | Gazprom OAO | 339,153 | |||||
14,700 | Lukoil OAO – ADR | 748,230 | |||||
3,718,145 | |||||||
Pharmaceuticals – 10.86% | |||||||
56,400 | Daiichi Sankyo Co. Ltd. | 886,271 | |||||
11,200 | Eli Lilly & Co. | 726,320 | |||||
51,700 | GlaxoSmithKline Plc | 1,181,035 | |||||
13,599 | Merck & Co., Inc. | 806,148 | |||||
29,054 | Pfizer, Inc. | 859,127 | |||||
7,100 | Sanofi | 802,806 | |||||
5,261,707 | |||||||
Software – 2.01% | |||||||
21,000 | Microsoft Corp. | 973,560 | |||||
Technology Hardware, Storage | |||||||
& Peripherals – 4.05% | |||||||
15,900 | Canon, Inc. | 517,321 | |||||
630 | Samsung Electronics | ||||||
Co. Ltd. | 705,605 | ||||||
7,590 | Western Digital Corp. | 738,659 | |||||
1,961,585 | |||||||
Tobacco – 2.20% | |||||||
24,790 | Imperial Tobacco | ||||||
Group Plc | 1,067,350 | ||||||
Wireless Telecommunication | |||||||
Services – 4.94% | |||||||
29,500 | America Movil | ||||||
SAB de CV – ADR | 743,400 | ||||||
73,500 | China Mobile Ltd. | 860,134 | |||||
30,000 | Tim Participacoes | ||||||
SA – ADR | 786,000 | ||||||
2,389,534 | |||||||
TOTAL COMMON STOCKS | |||||||
(Cost $37,722,786) | $ | 43,755,195 | |||||
PREFERRED STOCKS – 1.61% | |||||||
Oil, Gas & Consumable Fuels – 1.61% | |||||||
52,430 | Petroleo Brasileiro | ||||||
SA – ADR | $ | 780,683 | |||||
TOTAL PREFERRED STOCKS | |||||||
(Cost $686,402) | $ | 780,683 |
Principal | ||||||||
Amount | Value | |||||||
REPURCHASE AGREEMENTS – 7.34% | ||||||||
State Street Bank and Trust Repurchase Agreement, (Dated 09/30/14), | ||||||||
due 10/01/2014, 0.00% [Collateralized by $3,625,700 U.S. Treasury Note, | ||||||||
1.50%, 08/31/18, (Market Value $3,628,507)] (proceeds $3,557,287) | $ | 3,557,287 | $ | 3,557,287 | ||||
TOTAL REPURCHASE AGREEMENTS (Cost $3,557,287) | $ | 3,557,287 | ||||||
Total Investments (Cost $41,966,475) – 99.24% | $ | 48,093,165 | ||||||
Other Assets in Excess of Liabilities – 0.76% | 369,767 | |||||||
TOTAL NET ASSETS – 100.00% | $ | 48,462,932 |
__________
Percentages are stated as a percent of net assets.
ADR American Depositary Receipt
(a) | Non-income producing security. |
The accompanying notes are an integral part of these Schedules of Investments.
48
Brandes Global Equity Fund
SCHEDULE OF INVESTMENTS BY COUNTRY — September 30, 2014 (Unaudited)
COMMON STOCKS | ||||
Austria | 0.91 | % | ||
Brazil | 1.62 | % | ||
China | 1.77 | % | ||
France | 5.17 | % | ||
Germany | 1.43 | % | ||
Ireland | 1.65 | % | ||
Italy | 3.38 | % | ||
Japan | 13.26 | % | ||
Malaysia | 1.43 | % | ||
Mexico | 1.53 | % | ||
Netherlands | 3.34 | % | ||
Russia | 2.24 | % | ||
South Korea | 3.52 | % | ||
Sweden | 1.65 | % | ||
Switzerland | 2.69 | % | ||
Turkey | 1.16 | % | ||
United Kingdom | 15.33 | % | ||
United States | 28.21 | % | ||
TOTAL COMMON STOCKS | 90.29 | % | ||
PREFERRED STOCKS | ||||
Brazil | 1.61 | % | ||
TOTAL PREFERRED STOCKS | 1.61 | % | ||
REPURCHASE AGREEMENTS | 7.34 | % | ||
TOTAL INVESTMENTS | 99.24 | % | ||
Other Assets in Excess of Liabilities | 0.76 | % | ||
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.
49
Brandes Emerging Markets Fund
SCHEDULE OF INVESTMENTS — September 30, 2014
Shares | Value | ||||||
COMMON STOCKS – 83.43% | |||||||
Austria – 1.86% | |||||||
1,172,528 | Erste Group | ||||||
Bank AG | $ | 26,771,890 | |||||
Brazil – 11.99% | |||||||
542,330 | Banco Bradesco SA | 7,823,378 | |||||
1,586,750 | Banco do Brasil SA | 16,504,404 | |||||
5,053,555 | Centrais Electricas | ||||||
Brasileiras SA – ADR | 13,644,599 | ||||||
4,441,900 | Companhia de | ||||||
Saneamento Basico | 36,021,536 | ||||||
768,910 | Companhia Paranaense | ||||||
de Energia | 7,344,343 | ||||||
906,444 | Embraer SA – ADR | 35,550,733 | |||||
12,179,242 | Marfrig Global | ||||||
Foods SA(a) | 33,536,142 | ||||||
830,198 | Tim Participacoes | ||||||
SA – ADR | 21,751,188 | ||||||
1,419,243 | Viver Incorporadora e | ||||||
Construtora SA(a) | 75,376 | ||||||
172,251,699 | |||||||
China – 8.53% | |||||||
189,878,000 | Bosideng International | ||||||
Holdings Ltd. | 27,344,622 | ||||||
3,433,934 | Chaoda Modern | ||||||
Agriculture Holdings | |||||||
Ltd.(a)(c)(e) | 103,019 | ||||||
3,283,900 | China Mobile Ltd. | 38,429,836 | |||||
159,770 | China Yuchai | ||||||
International Ltd. | 2,962,136 | ||||||
17,047,000 | Dongfeng Motor | ||||||
Group Co. Ltd. | 27,950,777 | ||||||
13,963,377 | Weiqiao Textile Co. | 6,979,851 | |||||
19,759,500 | Yingde Gases | ||||||
Group Co. Ltd. | 18,744,397 | ||||||
122,514,638 | |||||||
Cyprus – 1.43% | |||||||
1,611,570 | Globaltrans Investment | ||||||
Plc – GDR | 13,537,188 | ||||||
1,481,080 | TCS Group | ||||||
Holding – GDR(a) | 6,946,265 | ||||||
20,483,453 | |||||||
Czech Republic – 1.59% | |||||||
1,586,000 | Telefonica Czech | ||||||
Republic AS | 22,807,091 | ||||||
Hong Kong – 5.54% | |||||||
3,993,800 | Chow Tai | ||||||
Fook Jewellery | |||||||
Group Ltd. | 5,192,674 | ||||||
208,228 | Dickson Concepts | ||||||
International Ltd. | 112,899 | ||||||
21,503,899 | First Pacific Co. Ltd. | 22,304,878 | |||||
11,555,000 | Lifestyle International | ||||||
Holdings Ltd.(c)(e) | 21,726,498 | ||||||
7,288,000 | Luk Fook Holdings | ||||||
International Ltd. | 21,198,115 | ||||||
3,014,500 | Yue Yuen Industrial | ||||||
Holdings Ltd. | 9,106,675 | ||||||
79,641,739 | |||||||
Hungary – 2.88% | |||||||
1,853,803 | Chemical Works of | ||||||
Gedeon Richter Plc | 28,949,824 | ||||||
8,490,204 | Magyar Telekom | ||||||
Telecommunications | |||||||
Plc(a) | 12,473,712 | ||||||
41,423,536 | |||||||
India – 5.03% | |||||||
2,415,150 | Indian Oil Corp. Ltd. | 14,146,792 | |||||
2,531,428 | Reliance | ||||||
Infrastructure Ltd. | 23,888,716 | ||||||
4,187,880 | Tata Chemicals Ltd. | 27,027,042 | |||||
1,309,928 | United Phosphorus | ||||||
Ltd. | 7,193,984 | ||||||
72,256,534 | |||||||
Indonesia – 1.30% | |||||||
36,683,940 | PT XL Axiata Tbk | 18,665,608 | |||||
Luxembourg – 1.10% | |||||||
1,793,063 | Adecoagro SA(a) | 15,778,954 | |||||
Malaysia – 0.87% | |||||||
9,795,200 | Genting Malaysia | ||||||
Berhad | 12,478,082 | ||||||
Mexico – 2.85% | |||||||
690,370 | America Movil | ||||||
SAB de CV – ADR | 17,397,324 | ||||||
1,672,904 | Cemex SAB de | ||||||
CV – ADR(a) | 21,814,668 | ||||||
4,615,026 | Desarrolladora Homex | ||||||
S.A.B. de C.V.(a)(c)(e) | 761,411 |
The accompanying notes are an integral part of these Schedules of Investments.
50
Brandes Emerging Markets Fund
SCHEDULE OF INVESTMENTS — September 30, 2014 (continued)
Shares | Value | ||||||
13,687,865 | Urbi Desarrollos Urbanos | ||||||
SA de CV(a)(c)(e) | $ | 938,105 | |||||
40,911,508 | |||||||
Pakistan – 1.13% | |||||||
13,954,660 | Nishat Mills Ltd. | 16,187,596 | |||||
Panama – 2.28% | |||||||
344,347 | Banco Latinoamericano | ||||||
de Comercio | |||||||
Exterior SA | 10,564,566 | ||||||
206,640 | Copa Holdings SA | 22,170,406 | |||||
32,734,972 | |||||||
Russia – 7.97% | |||||||
5,316,528 | Gazprom | ||||||
OAO – ADR | 37,109,366 | ||||||
688,910 | Lukoil OAO – ADR | 35,065,519 | |||||
6,339,260 | RusHydro | ||||||
OJSC – ADR | 11,410,668 | ||||||
180,204,090 | RusHydro OJSC | 3,199,163 | |||||
3,528,840 | Sberbank of | ||||||
Russia – ADR | 27,764,912 | ||||||
114,549,628 | |||||||
Singapore – 0.44% | |||||||
916,410 | Haw Par Corp. Ltd. | 6,300,004 | |||||
South Korea – 17.74% | |||||||
767,490 | Hana Financial | ||||||
Group, Inc. | 27,934,367 | ||||||
144,240 | Hyundai Mobis | ||||||
Co. Ltd. | 35,115,433 | ||||||
724,210 | KB Financial | ||||||
Group, Inc. | 26,401,739 | ||||||
25,337 | KB Financial | ||||||
Group, Inc. – ADR | 917,706 | ||||||
663,950 | KIA Motors Corp. | 33,721,393 | |||||
6,700 | Lotte Confectionery | ||||||
Co. Ltd. | 13,834,921 | ||||||
142,550 | POSCO | 43,847,367 | |||||
44,891 | Samsung Electronics | ||||||
Co. Ltd. | 50,278,254 | ||||||
14,558 | Shinhan Financial | ||||||
Group Co. Ltd. – ADR | 661,807 | ||||||
481,630 | Shinhan Financial | ||||||
Group Co. Ltd. | 22,172,617 | ||||||
254,885,604 | |||||||
Turkey – 6.04% | |||||||
5,301,892 | Aygaz AS | 21,640,660 | |||||
3,183,830 | Haci Omer Sabanci | ||||||
Holding AS | 13,413,045 | ||||||
6,456,794 | Selcuk Ecza Deposu | ||||||
Ticaret ve Sanayi A.S. | 5,922,734 | ||||||
6,560,530 | Turkiye Garanti | ||||||
Bankasi AS | 23,058,718 | ||||||
12,291,700 | Turkiye Vakiflar | ||||||
Bankasi Tao | 22,790,012 | ||||||
86,825,169 | |||||||
United Kingdom – 2.86% | |||||||
884,640 | APR Energy Plc | 7,740,419 | |||||
4,569,180 | ITE Group Plc | 12,521,035 | |||||
1,127,940 | Standard | ||||||
Chartered Plc | 20,804,562 | ||||||
41,066,016 | |||||||
TOTAL COMMON STOCKS | |||||||
(Cost $1,253,708,244) | $ | 1,198,533,721 | |||||
PARTICIPATORY NOTES – 0.94% | |||||||
Saudi Arabia – 0.94% | |||||||
564,516 | Etihad | ||||||
Etisalat Co.(a)(b)(c) | $ | 13,556,635 | |||||
TOTAL PARTICIPATORY | |||||||
NOTES | |||||||
(Cost $10,618,513) | $ | 13,556,635 | |||||
PREFERRED STOCKS – 9.67% | |||||||
Argentina – 0.03% | |||||||
16,356 | Nortel Inversora | ||||||
SA – ADR | $ | 363,103 | |||||
Brazil – 6.31% | |||||||
792,030 | Banco Bradesco SA | 11,325,115 | |||||
1,015,313 | Companhia Paranaense | ||||||
de Energia – ADR | 13,879,329 | ||||||
2,597,379 | Petroleo Brasileiro | ||||||
SA – ADR | 38,674,973 | ||||||
1,368,211 | Telefonica Brasil | ||||||
SA – ADR | 26,926,392 | ||||||
90,805,809 | |||||||
Colombia – 1.00% | |||||||
1,064,890 | Grupo Aval Acciones | ||||||
y Valores – ADR | 14,429,260 |
The accompanying notes are an integral part of these Schedules of Investments.
51
Brandes Emerging Markets Fund
SCHEDULE OF INVESTMENTS — September 30, 2014 (continued)
Shares | Value | ||||||
Russia – 1.52% | |||||||
2,426,034 | Surgutneftegas | ||||||
OJSC – ADR | $ | 16,497,031 | |||||
7,645,900 | Surgutneftegaz | ||||||
OJSC | 5,271,848 | ||||||
21,768,879 | |||||||
South Korea – 0.81% | |||||||
103,490 | Hyundai Motor Co. | 11,572,443 | |||||
TOTAL PREFERRED STOCKS | |||||||
(Cost $126,136,102) | $ | 138,939,494 | |||||
REAL ESTATE INVESTMENT | |||||||
TRUSTS – 3.03% | |||||||
Mexico – 3.03% | |||||||
15,450,580 | Macquarie Mexico | ||||||
Real Estate | |||||||
Management | |||||||
SA de CV | 27,264,714 | ||||||
7,348,863 | TF Administradora | ||||||
Industrial S de | |||||||
RL de CV | 16,190,973 | ||||||
TOTAL REAL ESTATE | |||||||
INVESTMENT TRUSTS | |||||||
(Cost $43,278,574) | $ | 43,455,687 |
Principal | ||||||||
Amount | Value | |||||||
CONVERTIBLE BONDS – 0.05% | ||||||||
Brazil – 0.05% | ||||||||
Viver Incorporadora e Construtora SA 2.000%, 08/06/2016(c)(d) | $ | 3,299,971 | $ | 701,046 | ||||
TOTAL CONVERTIBLE BONDS | ||||||||
(Cost $1,488,955) | $ | 701,046 | ||||||
REPURCHASE AGREEMENTS – 2.55% | ||||||||
State Street Bank and Trust Repurchase Agreement, | ||||||||
(Dated 09/30/14), due 10/01/14, 0.00% [Collateralized | ||||||||
by $38,390,000 Freddie Mac Bond, 2.08%, 10/17/22, | ||||||||
(Market Value $37,301,405)] (proceeds $36,567,185) | $ | 36,567,185 | $ | 36,567,185 | ||||
TOTAL REPURCHASE AGREEMENTS | ||||||||
(Cost $36,567,185) | $ | 36,567,185 |
The accompanying notes are an integral part of these Schedules of Investments.
52
Brandes Emerging Markets Fund
SCHEDULE OF INVESTMENTS — September 30, 2014 (continued)
Shares | Value | ||||||
SHORT TERM INVESTMENTS – 0.00% | |||||||
Money Market Fund – 0.00% | |||||||
2 | Northern Institutional Treasury Portfolio, 0.010% | $ | 2 | ||||
TOTAL MONEY MARKET FUNDS (Cost $2) | $ | 2 | |||||
Total Investments (Cost $1,471,797,575) – 99.67% | $ | 1,431,753,770 | |||||
Other Assets in Excess of Liabilities – 0.33% | 4,713,606 | ||||||
TOTAL NET ASSETS – 100.00% | $ | 1,436,467,376 |
__________
Percentages are stated as a percent of net assets.
ADR American Depositary Receipt
GDR Global Depositary 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 $37,786,714 or 2.63% of the Fund’s net assets and, with the exception of Lifestyle International Holdings Ltd., are classified as Level 2 securities. Lifestyle International Holdings is classified as a Level 3 security. 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 Rule) or pursuant to another exemption from registration. The market value of this security totals $701,046 which represents 0.05% of the Fund’s total net assets. |
(e) | These securities have limited liquidity and represent $23,529,033 or 1.64% of the Fund’s net assets and, with the exception of Lifestyle International Holdings Ltd., are classified as Level 2 securities. Lifestyle International Holdings is classified as a Level 3 security. See Note 2 in the Notes to Financial Statements. |
The accompanying notes are an integral part of these Schedules of Investments.
53
Brandes Emerging Markets Fund
SCHEDULE OF INVESTMENTS BY INDUSTRY — September 30, 2014 (Unaudited)
COMMON STOCKS | ||||
Aerospace & Defense | 2.47 | % | ||
Airlines | 1.54 | % | ||
Auto Components | 2.44 | % | ||
Automobiles | 4.29 | % | ||
Banks | 16.79 | % | ||
Chemicals | 3.69 | % | ||
Construction Materials | 1.52 | % | ||
Diversified Financial Services | 2.49 | % | ||
Diversified Telecommunication Services | 3.76 | % | ||
Electric Utilities | 4.14 | % | ||
Food Products | 4.40 | % | ||
Gas Utilities | 1.51 | % | ||
Health Care Providers & Services | 0.41 | % | ||
Hotels, Restaurants & Leisure | 0.87 | % | ||
Household Durables | 0.12 | % | ||
Independent Power and Renewable Electricity Producers | 0.54 | % | ||
Machinery | 0.21 | % | ||
Media | 0.87 | % | ||
Metals & Mining | 3.05 | % | ||
Multiline Retail | 1.51 | % | ||
Oil, Gas & Consumable Fuels | 6.01 | % | ||
Pharmaceuticals | 2.45 | % | ||
Road & Rail | 0.94 | % | ||
Specialty Retail | 1.85 | % | ||
Technology Hardware, Storage & Peripherals | 3.50 | % | ||
Textiles, Apparel & Luxury Goods | 4.15 | % | ||
Water Utilities | 2.51 | % | ||
Wireless Telecommunication Services | 5.40 | % | ||
TOTAL COMMON STOCKS | 83.43 | % | ||
PARTICIPATORY NOTES | ||||
Wireless Telecommunication Services | 0.94 | % | ||
TOTAL PARTICIPATORY NOTES | 0.94 | % | ||
PREFERRED STOCKS | ||||
Automobiles | 0.81 | % | ||
Banks | 1.79 | % | ||
Diversified Telecommunication Services | 1.90 | % | ||
Electric Utilities | 0.97 | % | ||
Oil, Gas & Consumable Fuels | 4.20 | % | ||
TOTAL PREFERRED STOCKS | 9.67 | % | ||
REAL ESTATE INVESTMENT TRUSTS | 3.03 | % | ||
CONVERTIBLE BONDS | ||||
Household Durables | 0.05 | % | ||
TOTAL CONVERTIBLE BONDS | 0.05 | % |
The accompanying notes are an integral part of these Schedules of Investments.
54
Brandes Emerging Markets Fund
SCHEDULE OF INVESTMENTS BY INDUSTRY — September 30, 2014 (Unaudited) (continued)
REPURCHASE AGREEMENTS | 2.55 | % | ||
TOTAL INVESTMENTS | 99.67 | % | ||
Other Assets in Excess of Liabilities | 0.33 | % | ||
TOTAL NET ASSETS | 100.00 | % |
The industry classifications represented in the Schedule of Investments are in accordance with Global Industry Classification Standards (GICS), which was developed by and/or is the exclusive property of MSCI, Inc. and Standard & Poor Financial Services LLC.
The accompanying notes are an integral part of these Schedules of Investments.
55
Brandes International Small Cap Equity Fund
SCHEDULE OF INVESTMENTS — September 30, 2014
Shares | Value | ||||||
COMMON STOCKS – 81.49% | |||||||
Belgium – 3.32% | |||||||
538,830 | D’Ieteren SA | $ | 20,914,006 | ||||
Brazil – 2.06% | |||||||
653,520 | Companhia Paranaense | ||||||
de Energia | 6,242,180 | ||||||
2,420,200 | Marfrig Global | ||||||
Foods SA(a) | 6,664,140 | ||||||
1,815,154 | Viver Incorporadora e | ||||||
Construtora SA(a) | 96,403 | ||||||
13,002,723 | |||||||
Canada – 4.83% | |||||||
518,997 | Celestica, Inc.(a) | 5,267,820 | |||||
683,980 | Dorel Industries, | ||||||
Inc. | 20,428,707 | ||||||
7,734 | E-L Financial | ||||||
Corp. Ltd. | 4,771,815 | ||||||
30,468,342 | |||||||
China – 1.57% | |||||||
69,390 | China Yuchai | ||||||
International Ltd. | 1,286,490 | ||||||
17,217,500 | Weiqiao Textile Co. | 8,606,484 | |||||
9,892,974 | |||||||
Denmark – 2.32% | |||||||
654,242 | H. Lundbeck A/S | 14,608,894 | |||||
Egypt – 1.09% | |||||||
273,055 | Eastern Tobacco Co. | 6,868,717 | |||||
France – 2.22% | |||||||
190,473 | Bongrain SA | 13,967,972 | |||||
Germany – 0.57% | |||||||
44,460 | Draegerwerk | ||||||
AG & Co. KGaA | 3,591,145 | ||||||
Greece – 1.45% | |||||||
944,566 | Sarantis SA | 9,162,552 | |||||
Hong Kong – 2.71% | |||||||
5,712,000 | APT Satellite | ||||||
Holdings Ltd. | 8,108,413 | ||||||
8,290,000 | COSCO International | ||||||
Holdings Ltd. | 3,661,977 | ||||||
9,857,000 | Dickson Concepts | ||||||
International Ltd. | 5,344,336 | ||||||
17,114,726 | |||||||
Hungary – 1.36% | |||||||
5,824,710 | Magyar Telekom | ||||||
Telecommunications | |||||||
Plc(a) | 8,557,598 | ||||||
India – 4.63% | |||||||
3,502,659 | Exide Industries Ltd. | 9,596,972 | |||||
170,370 | Nava Bharat | ||||||
Ventures Ltd. | 587,634 | ||||||
1,549,141 | NIIT Technologies Ltd. | 10,031,162 | |||||
953,090 | Reliance | ||||||
Infrastructure Ltd. | 8,994,171 | ||||||
29,209,939 | |||||||
Israel – 1.67% | |||||||
1,052,350 | Syneron | ||||||
Medical Ltd.(a) | 10,544,547 | ||||||
Italy – 4.87% | |||||||
8,198,215 | Iren Spa | 10,279,708 | |||||
1,223,273 | Italcementi | ||||||
Fabbriche Riunite | |||||||
Cemento SpA | 7,811,377 | ||||||
544,763 | Italmobiliare SpA | ||||||
Savings Shares | 10,665,033 | ||||||
959,777 | Natuzzi SpA – ADR(a) | 1,948,347 | |||||
30,704,465 | |||||||
Japan – 23.04% | |||||||
351,500 | Chudenko Corp. | 5,748,064 | |||||
2,160,000 | Fuji Machine | ||||||
Manufacturing Co. Ltd. | 20,758,058 | ||||||
328,200 | Futaba Corp. | 4,931,401 | |||||
562,100 | Hibiya Engineering Ltd. | 8,133,190 | |||||
1,349,200 | Hitachi Koki Co. Ltd. | 11,747,619 | |||||
1,245,750 | Hosiden Corp. | 6,748,722 | |||||
198,000 | Hyakugo Bank Ltd. | 794,934 | |||||
1,599,300 | Noritsu Koki Co. Ltd. | 9,411,498 | |||||
188,100 | Nuflare Technology, Inc. | 9,405,246 | |||||
164,600 | Okinawa Cellular | ||||||
Telephone Co. | 4,426,324 | ||||||
297,900 | Otsuka Kagu Ltd. | 3,037,304 | |||||
1,200,000 | Sanki Engineering | ||||||
Co. Ltd. | 8,943,459 | ||||||
1,207,900 | Tachi-s Co. Ltd. | 17,494,135 | |||||
634,000 | Tenma Corporation | 9,226,723 | |||||
184,500 | Torii Pharmaceutical | ||||||
Co. Ltd. | 5,111,676 | ||||||
844,700 | TSI Holdings Co. Ltd. | 5,923,473 |
The accompanying notes are an integral part of these Schedules of Investments.
56
Brandes International Small Cap Equity Fund
SCHEDULE OF INVESTMENTS — September 30, 2014 (continued)
Shares | Value | ||||||
256,700 | Tsutsumi Jewelry | ||||||
Co. Ltd. | $ | 6,247,783 | |||||
1,750,000 | Yodogawa Steel | ||||||
Works Ltd. | 7,163,805 | ||||||
145,253,414 | |||||||
Mexico – 3.24% | |||||||
43,348,757 | Consorcio ARA | ||||||
S.A.B. de C.V.(a) | 19,720,852 | ||||||
1,671,404 | Desarrolladora Homex | ||||||
S.A.B. de C.V.(a)(b)(e) | 275,757 | ||||||
6,089,400 | Urbi Desarrollos | ||||||
Urbanos | |||||||
SA de C.V.(a)(b)(e) | 417,340 | ||||||
20,413,949 | |||||||
Philippines – 1.17% | |||||||
3,664,840 | First Philippine | ||||||
Holdings Corp. | 7,349,688 | ||||||
Singapore – 2.40% | |||||||
725,270 | Flextronics | ||||||
International Ltd.(a) | 7,484,786 | ||||||
1,064,100 | Haw Par Corp. Ltd. | 7,315,323 | |||||
1,293,000 | HTL International | ||||||
Holdings Ltd. | 299,001 | ||||||
15,099,110 | |||||||
South Korea – 0.70% | |||||||
30,497 | Samchully Co. Ltd. | 4,391,538 | |||||
Spain – 1.15% | |||||||
547,410 | Hispania Activos | ||||||
Inmobiliarios SA(a) | 7,259,805 | ||||||
Switzerland – 2.13% | |||||||
1,779,859 | Micronas Semiconductor | ||||||
Holding AG(f) | 13,404,406 | ||||||
Turkey – 0.63% | |||||||
4,310,319 | Selcuk Ecza Deposu | ||||||
Ticaret ve Sanayi A.S. | 3,953,800 | ||||||
United Kingdom – 12.36% | |||||||
815,400 | APR Energy Plc | 7,134,583 | |||||
2,938,780 | Balfour Beatty Plc | 8,985,230 | |||||
781,463 | Chime | ||||||
Communications Plc | 3,699,233 | ||||||
80,320 | Clarkson Plc | 3,059,934 | |||||
11,171,987 | Debenhams Plc | 10,534,123 | |||||
2,401,250 | ITE Group Plc | 6,580,204 | |||||
1,316,228 | LSL Property | ||||||
Services Plc | 6,956,153 | ||||||
5,818,550 | Mcbride Plc(a) | 8,206,433 | |||||
6,081,450 | Spirent | ||||||
Communications Plc | 10,312,388 | ||||||
4,577,150 | WM. Morrison | ||||||
Supermarkets Plc | 12,454,278 | ||||||
77,922,559 | |||||||
TOTAL COMMON STOCKS | |||||||
(Cost $519,889,890) | $ | 513,656,869 | |||||
PREFERRED STOCKS – 0.89% | |||||||
Brazil – 0.51% | |||||||
237,300 | Companhia Paranaense | ||||||
de Energia | $ | 3,244,788 | |||||
Germany – 0.38% | |||||||
27,228 | Draegerwerk AG & | ||||||
Co. KGaA | 2,410,775 | ||||||
TOTAL PREFERRED STOCKS | |||||||
(Cost $3,005,586) | $ | 5,655,563 | |||||
REAL ESTATE | |||||||
INVESTMENT TRUSTS – 4.22% | |||||||
Ireland – 0.77% | |||||||
2,950,330 | Green Real Estate | ||||||
Investment Trust Plc | $ | 4,844,365 | |||||
Mexico – 2.29% | |||||||
8,165,300 | Macquarie Mexico | ||||||
Real Estate | |||||||
Management | |||||||
SA de CV | 14,408,817 | ||||||
Spain – 1.16% | |||||||
576,419 | Merlin Properties | ||||||
Socimi SA | 7,316,902 | ||||||
TOTAL REAL ESTATE | |||||||
INVESTMENT TRUSTS | |||||||
(Cost $27,542,938) | $ | 26,570,084 |
The accompanying notes are an integral part of these Schedules of Investments.
57
Brandes International Small Cap Equity Fund
SCHEDULE OF INVESTMENTS — September 30, 2014 (continued)
Principal | ||||||||
Amount | Value | |||||||
CONVERTIBLE BONDS – 0.04% | ||||||||
Brazil – 0.04% | ||||||||
Viver Incorporadora e Construtora SA 2.000%, 08/06/2016(b)(c) | $ | 1,136,056 | $ | 241,344 | ||||
TOTAL CONVERTIBLE BONDS | ||||||||
(Cost $512,591) | $ | 241,344 | ||||||
CORPORATE BONDS – 0.39% | ||||||||
Mexico – 0.39% | ||||||||
Desarrolladora Homex S.A.B. de C.V. 7.500%, 09/28/2015(d)(e) | $ | 8,195,000 | $ | 1,393,150 | ||||
Urbi Desarrollos Urbanos SA de C.V. 8.500%, 04/19/2016(d)(e) | 8,014,000 | 1,049,834 | ||||||
TOTAL CORPORATE BONDS | ||||||||
(Cost $3,258,672) | $ | 2,442,984 |
REPURCHASE AGREEMENTS – 13.73% | ||||||||
State Street Bank and Trust Repurchase Agreement, | ||||||||
(Dated 09/30/14), due 10/01/14, 0.00% [Collateralized | ||||||||
by $88,840,000 U.S. Treasury Note, 1.50%, 02/28/19, | ||||||||
(Market Value $88,318,873)] (proceeds $86,566,553) | $ | 86,566,533 | $ | 86,566,553 | ||||
TOTAL REPURCHASE AGREEMENTS (Cost $86,566,553) | $ | 86,566,553 | ||||||
Total Investments (Cost $640,776,230) – 100.76% | $ | 635,133,397 | ||||||
Liabilities in Excess of Other Assets – (0.76)% | (4,799,625 | ) | ||||||
TOTAL NET ASSETS – 100.00% | $ | 630,333,772 |
__________
Percentages are stated as a percent of net assets.
ADR American Depositary 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 $934,441 or 0.15% 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 Rule) or pursuant to another exemption from registration. The market value of this security totals $241,344 which represents 0.04% of the Fund’s total net assets. |
(d) | In default. |
(e) | These securities have limited liquidity and represent $3,136,081 or 0.50% of the Fund’s net assets and are classified as Level 2 securities. See Note 2 in the Notes to Financial Statements. |
(f) | Affiliated issuer. See Note 8 in the Notes to the Financial Statements. |
The accompanying notes are an integral part of these Schedules of Investments.
58
Brandes International Small Cap Equity Fund
SCHEDULE OF INVESTMENTS BY INDUSTRY — September 30, 2014 (Unaudited)
COMMON STOCKS | ||||
Auto Components | 4.30 | % | ||
Banks | 0.13 | % | ||
Chemicals | 1.46 | % | ||
Communications Equipment | 1.64 | % | ||
Construction & Engineering | 5.05 | % | ||
Construction Materials | 2.93 | % | ||
Distributors | 3.32 | % | ||
Diversified Telecommunication Services | 2.64 | % | ||
Electric Utilities | 3.58 | % | ||
Electrical Equipment | 0.78 | % | ||
Electronic Equipment, Instruments & Components | 3.09 | % | ||
Food & Staples Retailing | 1.98 | % | ||
Food Products | 3.27 | % | ||
Gas Utilities | 0.70 | % | ||
Health Care Equipment & Supplies | 2.24 | % | ||
Health Care Providers & Services | 0.63 | % | ||
Household Durables | 6.85 | % | ||
Household Products | 1.30 | % | ||
Independent Power and Renewable Electricity Producers | 1.13 | % | ||
Industrial Conglomerates | 0.09 | % | ||
Insurance | 0.76 | % | ||
Machinery | 5.36 | % | ||
Marine | 0.49 | % | ||
Media | 1.63 | % | ||
Metals & Mining | 1.14 | % | ||
Multiline Retail | 1.67 | % | ||
Multi-Utilities | 1.63 | % | ||
Personal Products | 1.45 | % | ||
Pharmaceuticals | 4.29 | % | ||
Real Estate Management & Development | 2.26 | % | ||
Semiconductors & Semiconductor Equipment | 3.62 | % | ||
Software | 1.59 | % | ||
Specialty Retail | 2.32 | % | ||
Technology Hardware & Equipment | 1.49 | % | ||
Textiles, Apparel & Luxury Goods | 2.31 | % | ||
Tobacco | 1.09 | % | ||
Transportation Infrastructure | 0.58 | % | ||
Wireless Telecommunication Services | 0.70 | % | ||
TOTAL COMMON STOCKS | 81.49 | % | ||
PREFERRED STOCKS | ||||
Electric Utilities | 0.51 | % | ||
Health Care Equipment & Supplies | 0.38 | % | ||
TOTAL PREFERRED STOCKS | 0.89 | % |
The accompanying notes are an integral part of these Schedules of Investments.
59
Brandes International Small Cap Equity Fund
SCHEDULE OF INVESTMENTS BY INDUSTRY — September 30, 2014 (Unaudited) (continued)
REAL ESTATE INVESTMENT TRUSTS | 4.22 | % | ||
CONVERTIBLE BONDS | ||||
Household Durables | 0.04 | % | ||
TOTAL CONVERTIBLE BONDS | 0.04 | % | ||
CORPORATE BONDS | ||||
Household Durables | 0.39 | % | ||
TOTAL CORPORATE BONDS | 0.39 | % | ||
REPURCHASE AGREEMENTS | 13.73 | % | ||
TOTAL INVESTMENTS | 100.76 | % | ||
Liabilities in Excess of Other Assets | (0.76 | )% | ||
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.
60
Brandes Core Plus Fixed Income Fund
SCHEDULE OF INVESTMENTS — September 30, 2014
Principal | ||||||||
Amount | Value | |||||||
FEDERAL AND FEDERALLY SPONSORED CREDITS – 2.96% | ||||||||
Federal National Mortgage Association – 1.98% | ||||||||
Pool MA0918, 4.000%, 12/1/2041 | $ | 636,680 | $ | 671,874 | ||||
Pool 934124, 5.500%, 07/1/2038 | 92,976 | 103,453 | ||||||
Pool 254631, 5.000%, 02/1/2018 | 149,831 | 158,182 | ||||||
933,509 | ||||||||
Freddie Mac Mortgage – 0.98% | ||||||||
Pool G0-6018, 6.500%, 04/1/2039 | 83,422 | 94,326 | ||||||
Pool A9-3505, 4.500%, 08/1/2040 | 343,817 | 371,167 | ||||||
465,493 | ||||||||
TOTAL FEDERAL AND FEDERALLY SPONSORED CREDITS | ||||||||
(Cost $1,333,652) | $ | 1,399,002 | ||||||
MORTGAGE RELATED SECURITIES – 0.55% | ||||||||
Collateralized Mortgage Obligations – 0.00% | ||||||||
Wells Fargo Mortgage Backed Securities Trust | ||||||||
Series 2006-AR14, 5.894%, 10/25/2036(e) | $ | 1,705 | $ | 1,668 | ||||
Near Prime Mortgage – 0.55% | ||||||||
Bear Stearns Alt-A Trust | ||||||||
Series 2004-11, 0.835%, 11/25/2034 | 262,845 | 258,037 | ||||||
TOTAL MORTGAGE RELATED SECURITIES | ||||||||
(Cost $235,014) | $ | 259,705 | ||||||
US GOVERNMENTS – 53.79% | ||||||||
Sovereign – 53.79% | ||||||||
United States Treasury Bond | ||||||||
4.750%, 02/15/2037 | $ | 475,000 | $ | 606,812 | ||||
United States Treasury Note | ||||||||
4.500%, 02/15/2016 | 3,315,000 | 3,505,871 | ||||||
3.375%, 11/15/2019 | 11,890,000 | 12,801,262 | ||||||
2.000%, 11/15/2021 | 8,370,000 | 8,239,872 | ||||||
2.000%, 02/15/2023 | 280,000 | 271,709 | ||||||
TOTAL US GOVERNMENTS | ||||||||
(Cost $25,541,166) | $ | 25,425,526 |
The accompanying notes are an integral part of these Schedules of Investments.
61
Brandes Core Plus Fixed Income Fund
SCHEDULE OF INVESTMENTS — September 30, 2014 (continued)
Shares | Value | |||||||
COMMON STOCKS – 0.02% | ||||||||
Paper & Forest Products – 0.02% | ||||||||
Resolute Forest Products, Inc.(a) | 691 | $ | 10,807 | |||||
TOTAL COMMON STOCKS | ||||||||
(Cost $55,124) | $ | 10,807 | ||||||
PREFERRED STOCKS – 0.98% | ||||||||
Consumer Finance – 0.44% | ||||||||
Ally Financial, Inc., 8.500% | 7,800 | $ | 210,054 | |||||
Technology Hardware & Equipment – 0.54% | ||||||||
Pitney Bowes International Holdings, Inc., 6.125%(b) | 235 | 254,534 | ||||||
TOTAL PREFERRED STOCKS | ||||||||
(Cost $423,970) | $ | 464,588 | ||||||
Principal | ||||||||
Amount | Value | |||||||
ASSET BACKED SECURITIES – 2.54% | ||||||||
Student Loan – 2.54% | ||||||||
SLM Private Credit Student Loan Trust | ||||||||
Series 2004-B, 0.664%, 09/15/2033 | $ | 300,000 | $ | 273,242 | ||||
Series 2005-A, 0.544%, 12/15/2038 | 400,000 | 362,335 | ||||||
Series 2006-A, 0.524%, 06/15/2039 | 275,000 | 252,450 | ||||||
Series 2007-A, 0.474%, 12/15/2041 | 350,000 | 311,284 | ||||||
TOTAL ASSET BACKED SECURITIES | ||||||||
(Cost $1,109,772) | $ | 1,199,311 | ||||||
CORPORATE BONDS – 34.77% | ||||||||
Automobiles – 0.93% | ||||||||
Chrysler Group LLC | ||||||||
8.250%, 06/15/2021 | $ | 405,000 | $ | 441,450 | ||||
Banks & Thrifts – 7.59% | ||||||||
Ally Financial, Inc. | ||||||||
6.750%, 12/1/2014 | 520,000 | 522,600 | ||||||
Citigroup, Inc. | ||||||||
6.125%, 11/21/2017 | 385,000 | 434,321 | ||||||
6.875%, 03/5/2038 | 76,000 | 100,310 | ||||||
Fifth Third Bancorp | ||||||||
8.250%, 03/1/2038 | 175,000 | 257,259 | ||||||
First Horizon National Corp. | ||||||||
5.375%, 12/15/2015 | 130,000 | 136,250 | ||||||
JP Morgan Chase & Co. | ||||||||
7.900%, 04/29/2049 | 920,000 | 995,900 | ||||||
National City Corp. | ||||||||
4.900%, 01/15/2015 | 235,000 | 238,096 |
The accompanying notes are an integral part of these Schedules of Investments.
62
Brandes Core Plus Fixed Income Fund
SCHEDULE OF INVESTMENTS — September 30, 2014 (continued)
Principal | ||||||||
Amount | Value | |||||||
Regions Financial Corp. | ||||||||
5.750%, 06/15/2015 | $ | 595,000 | $ | 613,964 | ||||
The Goldman Sachs Group, Inc. | ||||||||
7.500%, 02/15/2019 | 240,000 | 286,182 | ||||||
3,584,882 | ||||||||
Building Materials – 2.49% | ||||||||
CRH America, Inc. | ||||||||
6.000%, 09/30/2016 | 160,000 | 175,006 | ||||||
Masco Corp. | ||||||||
6.125%, 10/3/2016 | 605,000 | 645,535 | ||||||
Mohawk Industries, Inc. | ||||||||
6.125%, 01/15/2016 | 105,000 | 111,691 | ||||||
USG Corp. | ||||||||
6.300%, 11/15/2016 | 230,000 | 242,362 | ||||||
1,174,594 | ||||||||
Building Products – 0.19% | ||||||||
Owens Corning | ||||||||
6.500%, 12/1/2016 | 80,000 | 88,132 | ||||||
Commercial Services & Supplies – 0.63% | ||||||||
The ADT Corp. | ||||||||
3.500%, 07/15/2022 | 190,000 | 164,350 | ||||||
4.125%, 06/15/2023 | 150,000 | 133,500 | ||||||
297,850 | ||||||||
Diversified Financial Services – 1.67% | ||||||||
Bank of America Corp. | ||||||||
3.750%, 07/12/2016 | 395,000 | 412,336 | ||||||
Voya Financial, Inc. | ||||||||
5.500%, 07/15/2022 | 335,000 | 377,663 | ||||||
789,999 | ||||||||
Electric Utilities – 7.21% | ||||||||
Arizona Public Service Co. | ||||||||
8.750%, 03/1/2019 | 340,000 | 431,914 | ||||||
Commonwealth Edison Co. | ||||||||
5.900%, 03/15/2036 | 175,000 | 218,669 | ||||||
Series 104, 5.950%, 08/15/2016 | 50,000 | 54,587 | ||||||
DPL, Inc. | ||||||||
7.250%, 10/15/2021 | 455,000 | 469,787 | ||||||
EDP Finance BV | ||||||||
4.900%, 10/1/2019(b) | 400,000 | 413,060 | ||||||
FirstEnergy Corp. | ||||||||
7.375%, 11/15/2031 | 515,000 | 608,826 | ||||||
Israel Electric Corporation Ltd. | ||||||||
7.250%, 01/15/2019(b) | 420,000 | 470,400 |
The accompanying notes are an integral part of these Schedules of Investments.
63
Brandes Core Plus Fixed Income Fund
SCHEDULE OF INVESTMENTS — September 30, 2014 (continued)
Principal | ||||||||
Amount | Value | |||||||
Nisource Finance Corp. | ||||||||
5.250%, 09/15/2017 | $ | 285,000 | $ | 314,407 | ||||
Oncor Electric Delivery Co. LLC | ||||||||
6.375%, 01/15/2015 | 30,000 | 30,492 | ||||||
7.000%, 09/1/2022 | 315,000 | 397,618 | ||||||
3,409,760 | ||||||||
Energy – 0.46% | ||||||||
Valero Energy Corp. | ||||||||
9.375%, 03/15/2019 | 170,000 | 218,610 | ||||||
Energy Equipment & Services – 1.02% | ||||||||
Transocean, Inc. | ||||||||
4.950%, 11/15/2015 | 465,000 | 482,888 | ||||||
Equipment – 0.08% | ||||||||
Continental Airlines 2007–1 Class A Pass Through Trust | ||||||||
Series 2007–1, 5.983%, 10/19/2023 | 33,710 | 37,418 | ||||||
Food, Beverage & Tobacco – 1.11% | ||||||||
Altria Group, Inc. | ||||||||
9.700%, 11/10/2018 | 51,000 | 65,699 | ||||||
Pilgrims Pride Corp. | ||||||||
7.875%, 12/15/2018 | 235,000 | 245,575 | ||||||
Tyson Foods, Inc. | ||||||||
6.600%, 04/1/2016 | 195,000 | 210,988 | ||||||
522,262 | ||||||||
Forest Products & Paper – 0.59% | ||||||||
Sappi Papier Holding GmbH | ||||||||
6.625%, 04/15/2021(b) | 270,000 | 279,450 | ||||||
Health Care Providers & Services – 0.35% | ||||||||
Laboratory Corp. of America Holdings | ||||||||
3.750%, 08/23/2022 | 165,000 | 166,885 | ||||||
Homebuilders – 2.74% | ||||||||
Centex Corp. | ||||||||
6.500%, 05/1/2016 | 130,000 | 138,775 | ||||||
Lennar Corp. | ||||||||
5.600%, 05/31/2015 | 720,000 | 735,300 | ||||||
Toll Brothers Finance Corp. | ||||||||
5.150%, 05/15/2015 | 340,000 | 346,800 | ||||||
Urbi Desarrollos Urbanos SA | ||||||||
9.500%, 01/21/2020(b)(d)(e) | 580,000 | 75,400 | ||||||
1,296,275 | ||||||||
Independent Power and Renewable Electricity Producers – 0.59% | ||||||||
PPL Energy Supply LLC | ||||||||
6.500%, 05/1/2018 | 255,000 | 276,753 |
The accompanying notes are an integral part of these Schedules of Investments.
64
Brandes Core Plus Fixed Income Fund
SCHEDULE OF INVESTMENTS — September 30, 2014 (continued)
Principal | ||||||||
Amount | Value | |||||||
Insurance – 2.15% | ||||||||
American International Group, Inc. | ||||||||
6.400%, 12/15/2020 | $ | 500,000 | $ | 594,859 | ||||
CNA Financial Corp. | ||||||||
7.350%, 11/15/2019 | 160,000 | 192,292 | ||||||
5.875%, 08/15/2020 | 110,000 | 125,444 | ||||||
Marsh & McLennan Cos, Inc. | ||||||||
5.750%, 09/15/2015 | 101,000 | 105,786 | ||||||
1,018,381 | ||||||||
Media – 0.42% | ||||||||
McGraw Hill Financial, Inc. | ||||||||
5.900%, 11/15/2017 | 180,000 | 197,717 | ||||||
Metals & Mining – 0.30% | ||||||||
ArcelorMittal SA | ||||||||
5.500%, 03/1/2021 | 135,000 | 141,919 | ||||||
Oil, Gas & Consumable Fuels – 2.63% | ||||||||
Anadarko Petroleum Corp. | ||||||||
5.950%, 09/15/2016 | 435,000 | 474,502 | ||||||
Chesapeake Energy Corp. | ||||||||
6.625%, 08/15/2020 | 370,000 | 408,110 | ||||||
Cloud Peak Energy, Inc. | ||||||||
6.375%, 03/15/2024 | 150,000 | 144,750 | ||||||
Kinder Morgan, Inc. | ||||||||
7.000%, 06/15/2017 | 195,000 | 214,987 | ||||||
1,242,349 | ||||||||
Pharmaceutical – 0.39% | ||||||||
Valeant Pharmaceuticals International | ||||||||
6.750%, 08/15/2018(b) | 175,000 | 184,625 | ||||||
Retail – 0.71% | ||||||||
Marks & Spencer Plc | ||||||||
7.125%, 12/1/2037(b) | 285,000 | 335,433 | ||||||
Telecommunications – 0.52% | ||||||||
Telecom Italia Capital SA | ||||||||
6.999%, 06/4/2018 | 85,000 | 95,625 | ||||||
Telefonica Emisiones SAU | ||||||||
5.462%, 02/16/2021 | 135,000 | 150,344 | ||||||
245,969 | ||||||||
TOTAL CORPORATE BONDS | ||||||||
(Cost $15,312,945) | $ | 16,433,601 |
The accompanying notes are an integral part of these Schedules of Investments.
65
Brandes Core Plus Fixed Income Fund
SCHEDULE OF INVESTMENTS — September 30, 2014 (continued)
Contracts | Value | |||||||
WARRANTS – 0.00% | ||||||||
Semiconductors – 0.00% | ||||||||
MagnaChip Semiconductor Corp. | ||||||||
Expiration Date: November 2014, Exercise Price: 1.97(c)(e) | 870 | $ | — | |||||
TOTAL WARRANTS | ||||||||
(Cost $8,748) | $ | — | ||||||
Principal | ||||||||
Amount | Value | |||||||
TIME DEPOSIT – 4.06% | ||||||||
State Street Euro Dollar Time Deposit, 0.010%, due 10/01/14 | $ | 1,921,217 | $ | 1,921,217 | ||||
TOTAL TIME DEPOSIT | ||||||||
(Cost $1,921,217) | $ | 1,921,217 | ||||||
Total Investments (Cost $45,941,608) – 99.67% | $ | 47,113,757 | ||||||
Other Assets in Excess of Liabilities – 0.33% | 155,535 | |||||||
TOTAL NET ASSETS – 100.00% | $ | 47,269,292 |
__________
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 Rule) or pursuant to another exemption from registration. The market values of these securities total $2,012,902 which represents 4.26% 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 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. |
(e) | These securities have limited liquidity and represent $77,068 or 0.16% of the Fund’s net assets and are classified as Level 2 securities. See Note 2 in the Notes to Financial Statements. |
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.
66
Brandes Credit Focus Yield Fund
SCHEDULE OF INVESTMENTS — September 30, 2014
Principal | ||||||||
Amount | Value | |||||||
MORTGAGE RELATED SECURITIES – 0.06% | ||||||||
Sub-Prime Mortgages – 0.06% | ||||||||
Structured Asset Investment Loan Trust | ||||||||
Series A3, 0.915%, 07/25/2035 | $ | 18,755 | $ | 18,477 | ||||
TOTAL MORTGAGE RELATED SECURITIES | ||||||||
(Cost $17,455) | $ | 18,477 | ||||||
US GOVERNMENTS – 31.38% | ||||||||
Sovereign – 31.38% | ||||||||
United States Treasury Note | ||||||||
4.500%, 02/15/2016 | $ | 2,345,000 | $ | 2,480,020 | ||||
3.375%, 11/15/2019 | 3,090,000 | 3,326,821 | ||||||
2.000%, 11/15/2021 | 1,590,000 | 1,565,280 | ||||||
2.000%, 02/15/2023 | 1,800,000 | 1,746,704 | ||||||
TOTAL US GOVERNMENTS | ||||||||
(Cost $9,194,926) | $ | 9,118,825 | ||||||
Shares | Value | |||||||
COMMON STOCKS – 0.10% | ||||||||
Paper & Forest Products – 0.10% | ||||||||
Resolute Forest Products, Inc.(a) | 1,772 | $ | 27,714 | |||||
TOTAL COMMON STOCKS | ||||||||
(Cost $23,464) | $ | 27,714 | ||||||
PREFERRED STOCKS – 2.18% | ||||||||
Banks & Thrifts – 1.10% | ||||||||
Ally Financial, Inc., 8.500% | 11,800 | $ | 317,774 | |||||
Technology Hardware & Equipment – 1.08% | ||||||||
Pitney Bowes International Holdings, Inc., 6.125%(b) | 290 | 314,106 | ||||||
TOTAL PREFERRED STOCKS | ||||||||
(Cost $581,415) | $ | 631,880 | ||||||
Principal | ||||||||
Amount | Value | |||||||
ASSET BACKED SECURITIES – 0.92% | ||||||||
Student Loan – 0.92% | ||||||||
SLM Private Credit Student Loan Trust | ||||||||
Series 2007-A, 0.474%, 12/15/2041 | $ | 300,000 | $ | 266,815 | ||||
TOTAL ASSET BACKED SECURITIES | ||||||||
(Cost $211,157) | $ | 266,815 |
The accompanying notes are an integral part of these Schedules of Investments.
67
Brandes Credit Focus Yield Fund
SCHEDULE OF INVESTMENTS — September 30, 2014 (continued)
Principal | ||||||||
Amount | Value | |||||||
CORPORATE BONDS – 62.88% | ||||||||
Automobiles – 1.01% | ||||||||
Chrysler Group LLC | ||||||||
8.250%, 06/15/2021 | $ | 270,000 | $ | 294,300 | ||||
Banks & Thrifts – 14.94% | ||||||||
Ally Financial, Inc. | ||||||||
6.750%, 12/1/2014 | 350,000 | 351,750 | ||||||
6.750%, 12/1/2014 | 325,000 | 327,437 | ||||||
Citigroup, Inc. | ||||||||
6.125%, 11/21/2017 | 500,000 | 564,053 | ||||||
Fifth Third Bancorp | ||||||||
8.250%, 03/1/2038 | 65,000 | 95,553 | ||||||
First Horizon National Corp. | ||||||||
5.375%, 12/15/2015 | 230,000 | 241,058 | ||||||
JP Morgan Chase & Co. | ||||||||
7.900%, Perpetual | 1,140,000 | 1,234,050 | ||||||
National City Corp. | ||||||||
4.900%, 01/15/2015 | 245,000 | 248,228 | ||||||
Regions Financial Corp. | ||||||||
5.750%, 06/15/2015 | 580,000 | 598,486 | ||||||
The Goldman Sachs Group, Inc. | ||||||||
7.500%, 02/15/2019 | 320,000 | 381,575 | ||||||
USB Capital IX | ||||||||
3.500%, Perpetual | 350,000 | 297,500 | ||||||
4,339,690 | ||||||||
Building Materials – 4.08% | ||||||||
CRH America, Inc. | ||||||||
6.000%, 09/30/2016 | 90,000 | 98,441 | ||||||
Masco Corp. | ||||||||
6.125%, 10/3/2016 | 720,000 | 768,240 | ||||||
Mohawk Industries, Inc. | ||||||||
6.125%, 01/15/2016 | 58,000 | 61,696 | ||||||
Owens Corning | ||||||||
6.500%, 12/1/2016 | 100,000 | 110,164 | ||||||
USG Corp. | ||||||||
6.300%, 11/15/2016 | 140,000 | 147,525 | ||||||
1,186,066 | ||||||||
Commercial Services & Supplies – 0.92% | ||||||||
The ADT Corp. | ||||||||
3.500%, 07/15/2022 | 310,000 | 268,150 | ||||||
Computers & Peripherals – 2.44% | ||||||||
Apple, Inc. | ||||||||
2.400%, 05/3/2023 | 750,000 | 709,179 |
The accompanying notes are an integral part of these Schedules of Investments.
68
Brandes Credit Focus Yield Fund
SCHEDULE OF INVESTMENTS — September 30, 2014 (continued)
Principal | ||||||||
Amount | Value | |||||||
Diversified Financial Services – 3.13% | ||||||||
Bank of America Corp. | ||||||||
3.750%, 07/12/2016 | $ | 490,000 | $ | 511,505 | ||||
Voya Financial, Inc. | ||||||||
5.500%, 07/15/2022 | 355,000 | 400,210 | ||||||
911,715 | ||||||||
Electric Utilities – 9.47% | ||||||||
Arizona Public Service Co. | ||||||||
8.750%, 03/1/2019 | 435,000 | 552,597 | ||||||
Commonwealth Edison Co. | ||||||||
Series 104, 5.950%, 08/15/2016 | 110,000 | 120,091 | ||||||
DPL, Inc. | ||||||||
7.250%, 10/15/2021 | 355,000 | 366,537 | ||||||
FirstEnergy Corp. | ||||||||
7.375%, 11/15/2031 | 380,000 | 449,231 | ||||||
Israel Electric Corporation Ltd. | ||||||||
7.250%, 01/15/2019(b) | 505,000 | 565,600 | ||||||
Nisource Finance Corp. | ||||||||
5.250%, 09/15/2017 | 65,000 | 71,707 | ||||||
Oncor Electric Delivery Co. LLC | ||||||||
6.375%, 01/15/2015 | 465,000 | 472,628 | ||||||
7.000%, 09/1/2022 | 120,000 | 151,473 | ||||||
2,749,864 | ||||||||
Energy – 0.91% | ||||||||
Valero Energy Corp. | ||||||||
9.375%, 03/15/2019 | 205,000 | 263,618 | ||||||
Energy Equipment & Services – 2.52% | ||||||||
Transocean, Inc. | ||||||||
4.950%, 11/15/2015 | 705,000 | 732,121 | ||||||
Equipment – 0.32% | ||||||||
Continental Airlines 2007-1 Class A Pass Through Trust | ||||||||
Series 2007-1, 5.983%, 10/19/2023 | 84,275 | 93,545 | ||||||
Food, Beverage & Tobacco – 1.76% | ||||||||
Altria Group, Inc. | ||||||||
9.700%, 11/10/2018 | 43,000 | 55,393 | ||||||
Pilgrims Pride Corp. | ||||||||
7.875%, 12/15/2018 | 230,000 | 240,350 | ||||||
Tyson Foods, Inc. | ||||||||
6.600%, 04/1/2016 | 200,000 | 216,398 | ||||||
512,141 | ||||||||
Forest Products & Paper – 1.07% | ||||||||
Sappi Papier Holding GmbH | ||||||||
6.625%, 04/15/2021(b) | 300,000 | 310,500 |
The accompanying notes are an integral part of these Schedules of Investments.
69
Brandes Credit Focus Yield Fund
SCHEDULE OF INVESTMENTS — September 30, 2014 (continued)
Principal | ||||||||
Amount | Value | |||||||
Healthcare Providers & Services – 0.84% | ||||||||
Laboratory Corp. of America Holdings | ||||||||
3.750%, 08/23/2022 | $ | 240,000 | $ | 242,742 | ||||
Homebuilders – 3.63% | ||||||||
Centex Corp. | ||||||||
6.500%, 05/1/2016 | 155,000 | 165,462 | ||||||
Lennar Corp. | ||||||||
5.600%, 05/31/2015 | 615,000 | 628,069 | ||||||
Toll Brothers Finance Corp. | ||||||||
5.150%, 05/15/2015 | 160,000 | 163,200 | ||||||
Urbi Desarrollos Urbanos SA | ||||||||
9.500%, 01/21/2020(b)(d)(e) | 745,000 | 96,850 | ||||||
1,053,581 | ||||||||
Independent Power and Renewable Electricity Producers – 0.82% | ||||||||
PPL Energy Supply LLC | ||||||||
6.500%, 05/1/2018 | 220,000 | 238,767 | ||||||
Insurance – 6.09% | ||||||||
American International Group, Inc. | ||||||||
6.400%, 12/15/2020 | 485,000 | 577,013 | ||||||
CNA Financial Corp. | ||||||||
7.350%, 11/15/2019 | 125,000 | 150,228 | ||||||
5.875%, 08/15/2020 | 235,000 | 267,995 | ||||||
Marsh & McLennan Cos, Inc. | ||||||||
5.750%, 09/15/2015 | 120,000 | 125,687 | ||||||
Prudential Plc | ||||||||
11.750%, 12/23/2014(e) | 635,000 | 647,700 | ||||||
1,768,623 | ||||||||
Media – 1.00% | ||||||||
McGraw Hill Financial, Inc. | ||||||||
5.900%, 11/15/2017 | 265,000 | 291,083 | ||||||
Metals & Mining – 0.87% | ||||||||
ArcelorMittal SA | ||||||||
5.500%, 03/1/2021 | 240,000 | 252,300 | ||||||
Oil, Gas & Consumable Fuels – 5.47% | ||||||||
Anadarko Petroleum Corp. | ||||||||
5.950%, 09/15/2016 | 510,000 | 556,313 | ||||||
Chesapeake Energy Corp. | ||||||||
6.625%, 08/15/2020 | 545,000 | 601,135 | ||||||
Cloud Peak Energy, Inc. | ||||||||
6.375%, 03/15/2024 | 140,000 | 135,100 | ||||||
Kinder Morgan, Inc. | ||||||||
7.000%, 06/15/2017 | 270,000 | 297,675 | ||||||
1,590,223 |
The accompanying notes are an integral part of these Schedules of Investments.
70
Brandes Credit Focus Yield Fund
SCHEDULE OF INVESTMENTS — September 30, 2014 (continued)
Principal | ||||||||
Amount | Value | |||||||
Pharmaceutical – 0.74% | ||||||||
Valeant Pharmaceuticals International | ||||||||
6.750%, 08/15/2018(b) | $ | 205,000 | $ | 216,275 | ||||
Telecommunications – 0.85% | ||||||||
Telecom Italia Capital SA | ||||||||
6.999%, 06/4/2018 | 140,000 | 157,500 | ||||||
Telefonica Emisiones SAU | ||||||||
5.462%, 02/16/2021 | 80,000 | 89,093 | ||||||
246,593 | ||||||||
TOTAL CORPORATE BONDS | ||||||||
(Cost $18,059,932) | $ | 18,271,076 | ||||||
Contracts | Value | |||||||
WARRANTS – 0.00% | ||||||||
Semiconductors – 0.00% | ||||||||
MagnaChip Semiconductor Corp. | ||||||||
Expiration Date: November 2014, Exercise Price: 1.97(a)(c)(e) | 3,900 | $ | — | |||||
TOTAL WARRANTS | ||||||||
(Cost $0) | $ | — |
The accompanying notes are an integral part of these Schedules of Investments.
71
Brandes Credit Focus Yield Fund
SCHEDULE OF INVESTMENTS — September 30, 2014 (continued)
Principal | ||||||||
Amount | Value | |||||||
REPURCHASE AGREEMENTS – 0.83% | ||||||||
State Street Bank and Trust Repurchase Agreement, | ||||||||
(Dated 09/30/14), due 10/01/14, 0.00% [Collateralized | ||||||||
by $245,400 U.S. Treasury Note, 1.50%, 08/31/18, | ||||||||
(Market Value $245,590)] (proceeds $240,767) | $ | 240,767 | $ | 240,767 | ||||
TOTAL REPURCHASE AGREEMENTS (Cost $240,767) | $ | 240,767 | ||||||
Total Investments (Cost $28,329,116) – 98.35% | $ | 28,575,554 | ||||||
Other Assets in Excess of Liabilities – 1.65% | 480,499 | |||||||
TOTAL NET ASSETS – 100.00% | $ | 29,056,053 |
__________
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 Rule) or pursuant to another exemption from registration. The market values of these securities total $1,503,331 which represents 5.17% 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 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. |
(e) | These securities have limited liquidity and represent $744,550 or 2.56% of the Fund’s net assets and are classified as Level 2 securities. See Note 2 in the Notes to Financial Statements. |
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.
72
(This Page Intentionally Left Blank.)
73
Brandes Investment Trust
STATEMENT OF ASSETS AND LIABILITIES — September 30, 2014
Brandes | ||||
International | ||||
Equity Fund | ||||
ASSETS | ||||
Investment in securities, at value(1) | ||||
Unaffiliated issuers | $ | 556,015,121 | ||
Affiliated issuers | — | |||
Foreign currency(1) | 1,490,739 | |||
Receivables: | ||||
Securities sold | 4,148,803 | |||
Fund shares sold | 1,872,899 | |||
Dividends and interest | 1,887,453 | |||
Foreign currency spot trade | 831 | |||
Tax reclaims | 556,210 | |||
Due from Advisor | — | |||
Prepaid expenses and other assets | 30,957 | |||
Total Assets | 566,003,013 | |||
LIABILITIES | ||||
Payables: | ||||
Securities purchased | 15,331,224 | |||
Fund shares redeemed | 2,229,232 | |||
Due to Advisor | 371,673 | |||
12b-1 fee | 19,661 | |||
Trustee fees | 12,969 | |||
Dividends payable | 82,394 | |||
Foreign tax withholding | 182,904 | |||
Foreign currency spot trade payable | — | |||
Accrued expenses | 230,361 | |||
Total Liabilities | 18,460,418 | |||
NET ASSETS | $ | 547,542,595 | ||
COMPONENTS OF NET ASSETS | ||||
Paid-in capital | $ | 644,726,349 | ||
Undistributed net investment income (loss) | 84,975 | |||
Accumulated net realized gain (loss) on investments and foreign currency | (87,667,292 | ) | ||
Net unrealized appreciation (depreciation) on: | ||||
Investments | (9,607,010 | ) | ||
Foreign currency | 5,573 | |||
Total Net Assets | $ | 547,542,595 | ||
Net asset value, offering price and redemption proceeds per share | ||||
Class A Shares | ||||
Net Assets | $ | 8,954,781 | ||
Shares outstanding (unlimited shares authorized without par value) | 540,232 | |||
Offering and redemption price | $ | 16.58 | ||
Maximum offering price per share* | $ | 17.59 | ||
Class C Shares | ||||
Net Assets | $ | 4,338,066 | ||
Shares outstanding (unlimited shares authorized without par value) | 263,167 | |||
Offering and redemption price | $ | 16.48 | ||
Class E Shares | ||||
Net Assets | $ | 12,304,154 | ||
Shares outstanding (unlimited shares authorized without par value) | 742,809 | |||
Offering and redemption price | $ | 16.56 | ||
Class I Shares | ||||
Net Assets | $ | 521,945,594 | ||
Shares outstanding (unlimited shares authorized without par value) | 31,434,783 | |||
Offering and redemption price | $ | 16.60 | ||
(1)Cost of: | ||||
Investments in securities | ||||
Unaffiliated issuers | $ | 565,618,158 | ||
Affiliated issuers | — | |||
Foreign currency | 1,494,711 |
__________
* | 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.
74
Brandes Investment Trust
STATEMENT OF ASSETS AND LIABILITIES — September 30, 2014 (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 | |||||||||||||||
$ | 48,093,165 | $ | 1,431,753,770 | $ | 621,728,991 | $ | 47,113,757 | $ | 28,575,554 | ||||||||||
— | — | 13,404,406 | — | — | |||||||||||||||
85,333 | 3,533,024 | 1,184,124 | — | — | |||||||||||||||
— | — | — | — | 1,063,560 | |||||||||||||||
314,542 | 11,940,406 | 4,954,407 | 375,985 | 28,813 | |||||||||||||||
114,062 | 1,229,169 | 1,112,120 | 514,881 | 356,444 | |||||||||||||||
— | — | — | — | — | |||||||||||||||
17,830 | 116,313 | 135,454 | — | — | |||||||||||||||
— | — | — | 12,341 | 3,527 | |||||||||||||||
28,439 | 69,089 | 29,947 | 13,083 | 12,904 | |||||||||||||||
48,653,371 | 1,448,641,771 | 642,549,449 | 48,030,047 | 30,040,802 | |||||||||||||||
50,935 | 6,525,944 | 7,386,435 | 645,338 | 876,811 | |||||||||||||||
27,636 | 2,637,834 | 3,914,519 | 26,944 | 30,888 | |||||||||||||||
11,123 | 967,608 | 455,664 | — | — | |||||||||||||||
4,685 | 236,238 | 68,947 | 1,085 | 967 | |||||||||||||||
12,966 | 12,970 | 12,964 | 12,969 | 12,967 | |||||||||||||||
1,692 | 1,123,629 | 15,706 | 933 | 53 | |||||||||||||||
9,384 | 81,486 | 106,049 | — | — | |||||||||||||||
— | 905 | 21,166 | — | — | |||||||||||||||
72,018 | 587,781 | 234,227 | 73,486 | 63,063 | |||||||||||||||
190,439 | 12,174,395 | 12,215,677 | 760,755 | 984,749 | |||||||||||||||
$ | 48,462,932 | $ | 1,436,467,376 | $ | 630,333,772 | $ | 47,269,292 | $ | 29,056,053 | ||||||||||
$ | 39,094,645 | $ | 1,442,655,712 | $ | 620,489,673 | $ | 45,816,981 | $ | 28,430,407 | ||||||||||
(21,443 | ) | (1,366,917 | ) | (3,988,261 | ) | 23,698 | (1,999 | ) | |||||||||||
3,266,127 | 35,202,037 | 19,502,854 | 256,464 | 381,207 | |||||||||||||||
6,125,823 | (40,046,026 | ) | (5,648,258 | ) | 1,172,149 | 246,438 | |||||||||||||
(2,220 | ) | 22,570 | (22,236 | ) | — | — | |||||||||||||
$ | 48,462,932 | $ | 1,436,467,376 | $ | 630,333,772 | $ | 47,269,292 | $ | 29,056,053 | ||||||||||
$ | 1,217,141 | $ | 266,849,590 | $ | 50,136,227 | $ | 2,076,543 | $ | 1,968,676 | ||||||||||
47,870 | 27,919,177 | 3,700,348 | 225,140 | 192,426 | |||||||||||||||
$ | 25.43 | $ | 9.56 | $ | 13.55 | $ | 9.22 | $ | 10.23 | ||||||||||
$ | 26.98 | $ | 10.14 | $ | 14.38 | $ | 9.58 | $ | 10.63 | ||||||||||
$ | 1,125,969 | $ | 25,333,506 | $ | 12,262,793 | N/A | N/A | ||||||||||||
44,487 | 2,665,121 | 912,034 | — | — | |||||||||||||||
$ | 25.31 | $ | 9.51 | $ | 13.45 | N/A | N/A | ||||||||||||
$ | 278,624 | N/A | N/A | $ | 1,945,411 | N/A | |||||||||||||
11,076 | — | — | 209,272 | — | |||||||||||||||
$ | 25.16 | N/A | N/A | $ | 9.30 | N/A | |||||||||||||
$ | 45,841,198 | $ | 1,144,284,280 | $ | 567,934,752 | $ | 43,247,338 | $ | 27,087,377 | ||||||||||
1,796,550 | 119,429,043 | 41,834,587 | 4,662,291 | 2,646,749 | |||||||||||||||
$ | 25.52 | $ | 9.58 | $ | 13.58 | $ | 9.28 | $ | 10.23 | ||||||||||
$ | 41,966,475 | $ | 1,471,797,575 | $ | 626,236,810 | $ | 45,941,608 | $ | 28,329,116 | ||||||||||
— | — | 14,539,420 | — | — | |||||||||||||||
86,200 | 3,535,245 | 1,189,548 | — | — |
The accompanying notes to financial statements are an integral part of this statement.
75
Brandes Investment Trust
STATEMENT OF OPERATIONS — For the Periods Ended September 30, 2014
Brandes | ||||
International | ||||
Equity Fund | ||||
INVESTMENT INCOME | ||||
Income | ||||
Dividend income | ||||
Unaffiliated issuers | $ | 17,253,416 | ||
Affiliated issuers | — | |||
Less: foreign taxes withheld | (2,034,284 | ) | ||
Interest income | 1,795 | |||
Less: foreign taxes withheld | — | |||
Income from securities lending | 230,427 | |||
Miscellaneous income | — | |||
Total income | 15,451,354 | |||
Expenses | ||||
Advisory fees (Note 3) | 3,957,751 | |||
Custody fees | 54,365 | |||
Administration fees (Note 3) | 127,078 | |||
Insurance expense | 26,218 | |||
Legal fees | 15,477 | |||
Printing fees | 19,540 | |||
Miscellaneous | 62,270 | |||
Registration expense | 112,380 | |||
Trustee fees | 42,203 | |||
Transfer agent fees | 123,342 | |||
12b-1 Fees – Class A | 12,695 | |||
12b-1 Fees – Class C | 15,913 | |||
Shareholder Service Fees – Class C | 5,304 | |||
Shareholder Service Fees – Class E | 69,938 | |||
Shareholder Service Fees – Class I | 229,772 | |||
Accounting fees | 71,924 | |||
Auditing fees | 36,942 | |||
Total expenses | 4,983,112 | |||
Less reimbursement / waiver | 54,937 | |||
Total expenses net of reimbursement / waiver | 5,038,049 | |||
Net investment income | 10,413,305 | |||
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS | ||||
Net realized gain (loss) on: | ||||
Unaffiliated investments | 33,848,011 | |||
Less: foreign taxes withheld | — | |||
Foreign currency transactions | 18,836 | |||
Net realized gain (loss) | 33,866,847 | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | (23,231,886 | ) | ||
Foreign currency transactions | (98,917 | ) | ||
Net unrealized appreciation (depreciation) | (23,330,803 | ) | ||
Net realized and unrealized gain (loss) on | ||||
investments and foreign currency transactions | 10,536,044 | |||
Net Increase in net assets resulting from operations | $ | 20,949,349 |
The accompanying notes to financial statements are an integral part of this statement.
76
Brandes Investment Trust
STATEMENT OF OPERATIONS — For the Periods Ended September 30, 2014 (continued)
Brandes | |||||||||||||||||||
Brandes | Brandes | International | Brandes | Brandes | |||||||||||||||
Global | Emerging | Small Cap | Core Plus Fixed | Credit Focus | |||||||||||||||
Equity Fund | Markets Fund | Equity Fund | Income Fund | Yield Fund | |||||||||||||||
$ | 1,464,952 | $ | 23,575,250 | $ | 6,849,149 | $ | 28,978 | $ | 39,478 | ||||||||||
— | — | 38,861 | — | — | |||||||||||||||
(129,822 | ) | (2,560,235 | ) | (690,500 | ) | — | — | ||||||||||||
— | 22,164 | 7,082 | 1,241,855 | 864,743 | |||||||||||||||
— | (4,340 | ) | (1,490 | ) | — | — | |||||||||||||
11,210 | 5,106 | 13,207 | — | — | |||||||||||||||
— | 6,486 | — | — | — | |||||||||||||||
1,346,340 | 21,044,431 | 6,216,309 | 1,270,833 | 904,221 | |||||||||||||||
367,519 | 8,114,975 | 3,244,397 | 131,768 | 152,629 | |||||||||||||||
5,857 | 412,308 | 101,537 | 5,448 | 4,908 | |||||||||||||||
12,507 | 213,889 | 85,303 | 9,408 | 7,775 | |||||||||||||||
2,360 | 24,634 | 6,450 | 2,071 | 1,649 | |||||||||||||||
15,566 | 15,477 | 15,477 | 15,566 | 15,388 | |||||||||||||||
4,632 | 77,396 | 28,128 | 5,089 | 2,520 | |||||||||||||||
7,780 | 104,699 | 34,901 | 6,197 | 4,725 | |||||||||||||||
61,030 | 195,321 | 106,851 | 53,322 | 36,046 | |||||||||||||||
41,263 | 41,925 | 40,808 | 41,312 | 40,676 | |||||||||||||||
65,257 | 325,842 | 105,639 | 49,413 | 32,894 | |||||||||||||||
1,944 | 540,379 | 135,586 | 10,682 | 10,262 | |||||||||||||||
4,212 | 113,801 | 47,712 | N/A | N/A | |||||||||||||||
1,404 | 37,934 | 15,904 | N/A | N/A | |||||||||||||||
— | N/A | N/A | 4,096 | N/A | |||||||||||||||
22,168 | 311,441 | 140,460 | 15,868 | — | |||||||||||||||
66,234 | 69,005 | 66,461 | 56,738 | 45,967 | |||||||||||||||
31,069 | 39,406 | 36,899 | 52,547 | 39,275 | |||||||||||||||
710,802 | 10,638,432 | 4,212,513 | 459,525 | 394,714 | |||||||||||||||
(243,183 | ) | (379,267 | ) | (86,310 | ) | (259,463 | ) | (170,772 | ) | ||||||||||
467,619 | 10,259,165 | 4,126,203 | 200,062 | 223,942 | |||||||||||||||
878,721 | 10,785,266 | 2,090,106 | 1,070,771 | 680,279 | |||||||||||||||
3,316,811 | 36,215,893 | 22,025,942 | 268,032 | (31,479 | ) | ||||||||||||||
— | (677,017 | ) | — | — | — | ||||||||||||||
(4,421 | ) | (827,023 | ) | (280,836 | ) | — | — | ||||||||||||
3,312,390 | 34,711,853 | 21,745,106 | 268,032 | (31,479 | ) | ||||||||||||||
80,193 | (29,506,075 | ) | (22,197,417 | ) | 21,514 | 324,614 | |||||||||||||
(2,210 | ) | 18,722 | (24,270 | ) | — | — | |||||||||||||
77,983 | (29,487,353 | ) | (22,221,687 | ) | 21,514 | 324,614 | |||||||||||||
3,390,373 | 5,224,500 | (476,581 | ) | 289,546 | 293,135 | ||||||||||||||
$ | 4,269,094 | $ | 16,009,766 | $ | 1,613,525 | $ | 1,360,317 | $ | 973,414 |
The accompanying notes to financial statements are an integral part of this statement.
77
Brandes Investment Trust
STATEMENTS OF CHANGES IN NET ASSETS
Brandes International | Brandes Global | Brandes Emerging | ||||||||||||||||||||||
Equity Fund | Equity Fund | Markets Fund | ||||||||||||||||||||||
Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||||||
September | September | September | September | September | September | |||||||||||||||||||
30, 2014 | 30, 2013 | 30, 2014 | 30, 2013 | 30, 2014 | 30, 2013 | |||||||||||||||||||
INCREASE | ||||||||||||||||||||||||
(DECREASE) IN | ||||||||||||||||||||||||
NET ASSETS FROM: | ||||||||||||||||||||||||
OPERATIONS | ||||||||||||||||||||||||
Net investment | ||||||||||||||||||||||||
income | $ | 10,413,305 | $ | 9,496,676 | $ | 878,721 | $ | 665,492 | $ | 10,785,266 | $ | 3,631,292 | ||||||||||||
Net realized | ||||||||||||||||||||||||
gain (loss) on: | ||||||||||||||||||||||||
Investments | 33,848,011 | (1,599,281 | ) | 3,316,811 | 1,291,119 | 35,538,876 | 11,768,377 | |||||||||||||||||
Foreign currency | ||||||||||||||||||||||||
transactions | 18,836 | (139,146 | ) | (4,421 | ) | (4,139 | ) | (827,023 | ) | (197,501 | ) | |||||||||||||
Net unrealized | ||||||||||||||||||||||||
appreciation | ||||||||||||||||||||||||
(depreciation) on: | ||||||||||||||||||||||||
Investments | (23,231,886 | ) | 83,500,849 | 80,193 | 6,188,336 | (29,506,075 | ) | 6,780,613 | ||||||||||||||||
Foreign currency | ||||||||||||||||||||||||
transactions | (98,917 | ) | 58,622 | (2,210 | ) | 646 | 18,722 | 14,091 | ||||||||||||||||
Net increase | ||||||||||||||||||||||||
in net assets | ||||||||||||||||||||||||
resulting from | ||||||||||||||||||||||||
operations | 20,949,349 | 91,317,720 | 4,269,094 | 8,141,454 | 16,009,766 | 21,996,872 | ||||||||||||||||||
DISTRIBUTIONS TO | ||||||||||||||||||||||||
SHAREHOLDERS | ||||||||||||||||||||||||
From net investment | ||||||||||||||||||||||||
income | ||||||||||||||||||||||||
Class A | (137,511 | ) | (7,058 | ) | (17,182 | ) | (4,965 | ) | (2,615,745 | ) | (2,110,259 | ) | ||||||||||||
Class C | (47,135 | ) | (3,900 | ) | (8,383 | ) | (1,612 | ) | (64,361 | ) | (25,399 | ) | ||||||||||||
Class E | (582,874 | ) | (678,654 | ) | (5,218 | ) | (9,392 | ) | N/A | N/A | ||||||||||||||
Class I | (10,124,412 | ) | (21,820,503 | ) | (847,446 | ) | (1,466,752 | ) | (8,867,606 | ) | (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 | (10,891,932 | ) | (22,510,115 | ) | (2,149,777 | ) | (1,977,315 | ) | (23,580,833 | ) | (11,953,330 | ) | ||||||||||||
CAPITAL SHARE | ||||||||||||||||||||||||
TRANSACTIONS | ||||||||||||||||||||||||
Proceeds from | ||||||||||||||||||||||||
shares sold | 245,338,668 | 137,245,545 | 9,757,277 | 6,499,248 | 1,315,778,422 | 266,629,812 | ||||||||||||||||||
Net asset value of shares | ||||||||||||||||||||||||
issued on reinvestment | ||||||||||||||||||||||||
of distributions | 10,383,944 | 20,426,954 | 2,123,060 | 1,111,307 | 19,941,158 | 11,542,833 | ||||||||||||||||||
Cost of shares | ||||||||||||||||||||||||
redeemed | (145,407,840 | ) | (158,699,984 | ) | (5,488,100 | ) | (4,240,206 | ) | (316,393,013 | ) | (66,090,176 | ) | ||||||||||||
Net increase (decrease) | ||||||||||||||||||||||||
in net assets from | ||||||||||||||||||||||||
capital share | ||||||||||||||||||||||||
transactions | 110,314,772 | (1,027,485 | ) | 6,392,237 | 3,370,349 | 1,019,326,567 | 212,082,469 | |||||||||||||||||
Total increase (decrease) | ||||||||||||||||||||||||
in net assets | 120,372,189 | 67,780,120 | 8,511,554 | 9,534,488 | 1,011,755,500 | 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 | $ | 547,542,595 | $ | 427,170,406 | $ | 48,462,932 | $ | 39,951,378 | $ | 1,436,467,376 | $ | 424,711,876 | ||||||||||||
Undistributed net | ||||||||||||||||||||||||
investment | ||||||||||||||||||||||||
income (loss) | $ | 84,975 | $ | (1,429,328 | ) | $ | (21,443 | ) | $ | (23,826 | ) | $ | (1,366,917 | ) | $ | 591,494 |
The accompanying notes to financial statements are an integral part of this statement.
78
Brandes Investment Trust
STATEMENTS OF CHANGES IN NET ASSETS (continued)
Brandes International | Brandes Core Plus | Brandes Credit | ||||||||||||||||||||||
Small Cap Equity Fund | Fixed Income Fund | Focus Yield Fund | ||||||||||||||||||||||
Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||||||
September | September | September | September | September | September | |||||||||||||||||||
30, 2014 | 30, 2013 | 30, 2014 | 30, 2013 | 30, 2014 | 30, 2013 | |||||||||||||||||||
INCREASE | ||||||||||||||||||||||||
(DECREASE) IN | ||||||||||||||||||||||||
NET ASSETS FROM: | ||||||||||||||||||||||||
OPERATIONS | ||||||||||||||||||||||||
Net investment | ||||||||||||||||||||||||
income | $ | 2,090,106 | $ | 511,498 | $ | 1,070,771 | $ | 1,111,562 | $ | 680,279 | $ | 574,312 | ||||||||||||
Net realized | ||||||||||||||||||||||||
gain (loss) on: | ||||||||||||||||||||||||
Investments | 22,025,942 | 6,719,939 | 268,032 | 264,047 | (31,479 | ) | 14,692 | |||||||||||||||||
Foreign currency | ||||||||||||||||||||||||
transactions | (280,836 | ) | (27,045 | ) | — | — | — | — | ||||||||||||||||
Net unrealized | ||||||||||||||||||||||||
appreciation | ||||||||||||||||||||||||
(depreciation) on: | ||||||||||||||||||||||||
Investments | (22,197,417 | ) | 14,867,448 | 21,514 | (1,214,389 | ) | 324,614 | (536,907 | ) | |||||||||||||||
Foreign currency | ||||||||||||||||||||||||
transactions | (24,270 | ) | 1,815 | — | — | — | — | |||||||||||||||||
Net increase | ||||||||||||||||||||||||
in net assets | ||||||||||||||||||||||||
resulting from | ||||||||||||||||||||||||
operations | 1,613,525 | 22,073,655 | 1,360,317 | 161,220 | 973,414 | 52,097 | ||||||||||||||||||
DISTRIBUTIONS TO | ||||||||||||||||||||||||
SHAREHOLDERS | ||||||||||||||||||||||||
From net investment | ||||||||||||||||||||||||
income | ||||||||||||||||||||||||
Class A | (1,329,555 | ) | (166,193 | ) | (106,126 | ) | (19,362 | ) | (80,806 | ) | (46,034 | ) | ||||||||||||
Class C | (76,478 | ) | (2,388 | ) | N/A | N/A | N/A | N/A | ||||||||||||||||
Class E | N/A | N/A | (42,889 | ) | (191,022 | ) | N/A | N/A | ||||||||||||||||
Class I | (4,409,777 | ) | (765,007 | ) | (908,581 | ) | (1,060,910 | ) | (596,498 | ) | (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 | (14,827,209 | ) | (1,557,103 | ) | (1,107,404 | ) | (1,651,388 | ) | (712,518 | ) | (741,971 | ) | ||||||||||||
CAPITAL SHARE | ||||||||||||||||||||||||
TRANSACTIONS | ||||||||||||||||||||||||
Proceeds from | ||||||||||||||||||||||||
shares sold | 627,248,875 | 58,169,343 | 32,926,424 | 21,074,938 | 2,818,032 | 10,104,427 | ||||||||||||||||||
Net asset value of shares | ||||||||||||||||||||||||
issued on reinvestment | ||||||||||||||||||||||||
of distributions | 13,074,103 | 1,315,774 | 1,090,276 | 1,471,758 | 712,460 | 744,456 | ||||||||||||||||||
Cost of shares | ||||||||||||||||||||||||
redeemed | (110,973,357 | ) | (10,096,132 | ) | (19,281,897 | ) | (20,914,985 | ) | (4,162,393 | ) | (37,519 | ) | ||||||||||||
Net increase | ||||||||||||||||||||||||
(decrease) in net assets | ||||||||||||||||||||||||
from capital share | ||||||||||||||||||||||||
transactions | 529,349,621 | 49,388,985 | 14,734,803 | 1,631,711 | (631,901 | ) | 10,811,364 | |||||||||||||||||
Total increase (decrease) | ||||||||||||||||||||||||
in net assets | 516,135,937 | 69,905,537 | 14,987,716 | 141,543 | (371,005 | ) | 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 | $ | 630,333,772 | $ | 114,197,835 | $ | 47,269,292 | $ | 32,281,576 | $ | 29,056,053 | $ | 29,427,058 | ||||||||||||
Undistributed net | ||||||||||||||||||||||||
investment | ||||||||||||||||||||||||
income (loss) | $ | (3,988,261 | ) | $ | (128,500 | ) | $ | 23,698 | $ | — | $ | (1,999 | ) | $ | (4,974 | ) |
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 | ||||||||||||||||||
value, | Net | unrealized | Total from | from net | ||||||||||||||||
beginning | investment | gain/(loss) on | investment | investment | ||||||||||||||||
of period | income(5) | investments | operations | income | ||||||||||||||||
Brandes International Equity Fund |
Class A(8) | ||||||||||||||||||||
9/30/14 | $ | 16.03 | 0.33 | 0.56 | 0.89 | (0.34 | ) | |||||||||||||
9/30/13 | $ | 13.50 | 0.34 | 3.02 | 3.36 | (0.83 | ) | |||||||||||||
9/30/12 | $ | 13.00 | 0.38 | 0.76 | 1.14 | (0.64 | ) | |||||||||||||
1/31/2011(3) – 9/30/2011 | $ | 15.74 | 0.26 | (3.00 | ) | (2.74 | ) | — | ||||||||||||
Class C | ||||||||||||||||||||
9/30/14 | $ | 15.98 | 0.20 | 0.55 | 0.75 | (0.25 | ) | |||||||||||||
1/31/2013(3) – 9/30/2013 | $ | 14.30 | 0.15 | 1.84 | 1.99 | (0.31 | ) | |||||||||||||
Class E | ||||||||||||||||||||
9/30/14 | $ | 16.01 | 0.33 | 0.54 | 0.87 | (0.32 | ) | |||||||||||||
9/30/13 | $ | 13.48 | 0.33 | 3.03 | 3.36 | (0.84 | ) | |||||||||||||
9/30/12 | $ | 12.97 | 0.41 | 0.74 | 1.15 | (0.64 | ) | |||||||||||||
9/30/11 | $ | 14.91 | 0.37 | (1.96 | ) | (1.59 | ) | (0.35 | ) | |||||||||||
9/30/10 | $ | 15.24 | 0.33 | (0.40 | ) | (0.07 | ) | (0.26 | ) | |||||||||||
Class I | ||||||||||||||||||||
9/30/14 | $ | 16.05 | 0.36 | 0.56 | 0.92 | (0.37 | ) | |||||||||||||
9/30/13 | $ | 13.50 | 0.35 | 3.04 | 3.39 | (0.84 | ) | |||||||||||||
9/30/12 | $ | 12.99 | 0.41 | 0.76 | 1.17 | (0.66 | ) | |||||||||||||
9/30/11 | $ | 14.92 | 0.40 | (1.98 | ) | (1.58 | ) | (0.35 | ) | |||||||||||
9/30/10 | $ | 15.24 | 0.32 | (0.38 | ) | (0.06 | ) | (0.26 | ) |
__________
(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 | |||||||||||||||||||||||
$ | 16.58 | 5.47 | % | $ | 9.0 | 1.19 | % | 1.92 | % | 1.18 | % | 1.93 | % | 39.53 | % | |||||||||||
$ | 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) | |||||||||||
$ | 16.48 | 4.64 | % | $ | 4.3 | 1.93 | % | 1.19 | % | 1.93 | % | 1.19 | % | 39.53 | % | |||||||||||
$ | 15.98 | 14.17 | %(7) | $ | 0.1 | 1.95 | %(2) | 1.53 | %(2) | 1.97 | %(2) | 1.51 | %(2) | 19.43 | %(1) | |||||||||||
$ | 16.56 | 5.38 | % | $ | 12.3 | 1.19 | % | 1.93 | % | 1.18 | % | 1.94 | % | 39.53 | % | |||||||||||
$ | 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 | % | |||||||||||
$ | 16.60 | 5.61 | % | $ | 521.9 | 1.00 | % | 2.12 | % | 0.99 | % | 2.13 | % | 39.53 | % | |||||||||||
$ | 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 | % |
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 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(5) | investments | operations | income | gains | |||||||||||||||||||
Brandes Global Equity Fund |
Class A(8) | ||||||||||||||||||||||||
9/30/14 | $ | 24.20 | 0.43 | 2.00 | 2.43 | (0.44 | ) | (0.76 | ) | |||||||||||||||
9/30/13 | $ | 20.27 | 0.38 | 4.80 | 5.18 | (0.91 | ) | (0.34 | ) | |||||||||||||||
9/30/12 | $ | 19.19 | 0.43 | 2.22 | 2.65 | (0.44 | ) | (1.13 | ) | |||||||||||||||
1/31/2011(3) – 9/30/2011 | $ | 22.34 | 0.29 | (3.44 | ) | (3.15 | ) | — | — | |||||||||||||||
Class C | ||||||||||||||||||||||||
9/30/14 | $ | 24.14 | 0.24 | 1.99 | 2.23 | (0.30 | ) | (0.76 | ) | |||||||||||||||
1/31/2013(3) – 9/30/2013 | $ | 21.21 | 0.15 | 3.12 | 3.27 | (0.34 | ) | — | ||||||||||||||||
Class E | ||||||||||||||||||||||||
9/30/14 | $ | 24.00 | 0.43 | 1.99 | 2.42 | (0.50 | ) | (0.76 | ) | |||||||||||||||
9/30/13 | $ | 20.17 | 0.37 | 4.77 | 5.14 | (0.97 | ) | (0.34 | ) | |||||||||||||||
9/30/12 | $ | 19.13 | 0.44 | 2.20 | 2.64 | (0.47 | ) | (1.13 | ) | |||||||||||||||
9/30/11 | $ | 21.73 | 0.51 | (1.59 | ) | (1.08 | ) | (0.44 | ) | (1.08 | ) | |||||||||||||
9/30/10 | $ | 21.25 | 0.37 | 0.50 | 0.87 | (0.39 | ) | — | ||||||||||||||||
Class I | ||||||||||||||||||||||||
9/30/14 | $ | 24.26 | 0.50 | 2.00 | 2.50 | (0.48 | ) | (0.76 | ) | |||||||||||||||
9/30/13 | $ | 20.33 | 0.43 | 4.81 | 5.24 | (0.98 | ) | (0.34 | ) | |||||||||||||||
9/30/12 | $ | 19.22 | 0.49 | 2.22 | 2.71 | (0.47 | ) | (1.13 | ) | |||||||||||||||
9/30/11 | $ | 21.76 | 0.51 | (1.53 | ) | (1.02 | ) | (0.44 | ) | (1.08 | ) | |||||||||||||
9/30/10 | $ | 21.24 | 0.42 | 0.48 | 0.90 | (0.38 | ) | — |
__________
(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.
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 | |||||||||||||||||||||||
$ | 25.43 | 10.18 | % | $ | 1.2 | 1.25 | % | 1.67 | % | 1.71 | % | 1.21 | % | 30.33 | % | |||||||||||||||
$ | 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) | |||||||||||||||
$ | 25.31 | 9.34 | % | $ | 1.1 | 2.00 | % | 0.92 | % | 2.46 | % | 0.46 | % | 30.33 | % | |||||||||||||||
$ | 24.14 | 15.55 | %(7) | $ | 0.1 | 2.00 | %(2) | 0.97 | %(2) | 2.71 | %(2) | 0.26 | %(2) | 24.37 | %(1) | |||||||||||||||
$ | 25.16 | 10.20 | % | $ | 0.3 | 1.25 | % | 1.68 | % | 1.48 | % | 1.45 | % | 30.33 | % | |||||||||||||||
$ | 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 | % | |||||||||||||||
$ | 25.52 | 10.46 | % | $ | 45.9 | 1.00 | % | 1.93 | % | 1.53 | % | 1.40 | % | 30.33 | % | |||||||||||||||
$ | 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 | % |
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 | ||||||||||||||||||||
Net asset | Net | realized and | increase | Dividends | Dividends | ||||||||||||||||
value, | investment | unrealized | from | Total from | from net | from net | |||||||||||||||
beginning | income/ | gain/(loss) on | payments | investment | investment | realized | |||||||||||||||
of period | (loss)(5) | investments | by affiliates | operations | income | gains | |||||||||||||||
Brandes Emerging Markets Fund |
Class A(8) | ||||||||||||||||||||||||||||
9/30/14 | $ | 9.23 | 0.11 | 0.53 | — | 0.64 | (0.10 | ) | (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 | ) | — | (9) | (2.15 | ) | — | — | |||||||||||||||||
Class C | ||||||||||||||||||||||||||||
9/30/14 | $ | 9.19 | 0.03 | 0.54 | — | 0.57 | (0.04 | ) | (0.21 | ) | ||||||||||||||||||
1/31/2013(3) – 9/30/2013 | $ | 9.54 | 0.02 | (0.30 | ) | — | (0.28 | ) | (0.07 | ) | — | |||||||||||||||||
Class I | ||||||||||||||||||||||||||||
9/30/14 | $ | 9.24 | 0.13 | 0.54 | — | 0.67 | (0.12 | ) | (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 | ) | — | (9) | (2.14 | ) | — | — | |||||||||||||||||
Brandes International Small Cap Fund | ||||||||||||||||||||||||||||
Class A(8) | ||||||||||||||||||||||||||||
9/30/14 | $ | 13.72 | 0.06 | 1.02 | — | 1.08 | (0.36 | ) | (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 | ||||||||||||||||||||||||||||
9/30/14 | $ | 13.68 | (0.04 | ) | 1.02 | — | 0.98 | (0.32 | ) | (0.89 | ) | |||||||||||||||||
1/31/2013(3) – 9/30/2013 | $ | 11.90 | (0.02 | ) | 1.83 | — | 1.81 | (0.03 | ) | — | ||||||||||||||||||
Class I | ||||||||||||||||||||||||||||
9/30/14 | $ | 13.74 | 0.09 | 1.03 | — | 1.12 | (0.39 | ) | (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) | Prior to January 31, 2013, Class A shares were known as Class S shares. |
(9) | Amount is less than $0.01 per share. |
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 | |||||||||||||||||||||||
$ | 9.56 | 7.09 | % | $ | 266.9 | 1.37 | % | 1.10 | % | 1.37 | % | 1.10 | % | 22.54 | % | |||||||||||||||
$ | 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) | |||||||||||||||
$ | 9.51 | 6.38 | % | $ | 25.3 | 2.12 | % | 0.35 | % | 2.13 | % | 0.34 | % | 22.54 | % | |||||||||||||||
$ | 9.19 | (2.84 | )%(7) | $ | 5.3 | 2.12 | %(2) | 0.42 | %(2) | 2.20 | %(2) | 0.34 | %(2) | 21.74 | %(1) | |||||||||||||||
�� | ||||||||||||||||||||||||||||||
$ | 9.58 | 7.41 | % | $ | 1,144.3 | 1.12 | % | 1.34 | % | 1.18 | % | 1.28 | % | 22.54 | % | |||||||||||||||
$ | 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) | |||||||||||||||
$ | 13.55 | 8.36 | % | $ | 50.1 | 1.40 | % | 0.42 | % | 1.39 | % | 0.43 | % | 24.30 | % | |||||||||||||||
$ | 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) | |||||||||||||||
$ | 13.45 | 7.60 | % | $ | 12.3 | 2.14 | % | (0.32 | )% | 2.14 | % | (0.32 | )% | 24.30 | % | |||||||||||||||
$ | 13.68 | 15.23 | %(7) | $ | 1.5 | 2.15 | %(2) | (0.25 | )%(2) | 2.40 | %(2) | (0.50 | )%(2) | 24.45 | %(1) | |||||||||||||||
$ | 13.58 | 8.67 | % | $ | 567.9 | 1.15 | % | 0.67 | % | 1.18 | % | 0.64 | % | 24.30 | % | |||||||||||||||
$ | 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.
85
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(5) | investments | operations | income | gains | |||||||||||||||||||
Brandes Core Plus Fixed Income Fund |
Class A | ||||||||||||||||||||||||
9/30/14 | $ | 9.16 | 0.25 | 0.06 | 0.31 | (0.24 | ) | (0.01 | ) | |||||||||||||||
1/31/2013(3) – 9/30/2013 | $ | 9.43 | 0.20 | (0.28 | ) | (0.08 | ) | (0.19 | ) | — | ||||||||||||||
Class E | ||||||||||||||||||||||||
9/30/14 | $ | 9.21 | 0.25 | 0.10 | 0.35 | (0.25 | ) | (0.01 | ) | |||||||||||||||
9/30/13 | $ | 9.61 | 0.30 | (0.22 | ) | 0.08 | (0.36 | ) | (0.12 | ) | ||||||||||||||
9/30/12 | $ | 9.36 | 0.38 | 0.50 | 0.88 | (0.44 | ) | (0.19 | ) | |||||||||||||||
9/30/11 | $ | 9.66 | 0.47 | (0.12 | ) | 0.35 | (0.48 | ) | (0.17 | ) | ||||||||||||||
9/30/10 | $ | 8.96 | 0.54 | 0.64 | 1.18 | (0.48 | ) | — | ||||||||||||||||
Class I | ||||||||||||||||||||||||
9/30/14 | $ | 9.19 | 0.27 | 0.10 | 0.37 | (0.27 | ) | (0.01 | ) | |||||||||||||||
9/30/13 | $ | 9.60 | 0.32 | (0.23 | ) | 0.09 | (0.38 | ) | (0.12 | ) | ||||||||||||||
9/30/12 | $ | 9.35 | 0.40 | 0.50 | 0.90 | (0.46 | ) | (0.19 | ) | |||||||||||||||
9/30/11 | $ | 9.65 | 0.49 | (0.12 | ) | 0.37 | (0.50 | ) | (0.17 | ) | ||||||||||||||
9/30/10 | $ | 8.95 | 0.56 | 0.64 | 1.20 | (0.50 | ) | — | ||||||||||||||||
Brandes Credit Focus Yield Fund | ||||||||||||||||||||||||
Class A(8) | ||||||||||||||||||||||||
9/30/14 | $ | 10.15 | 0.21 | 0.09 | 0.30 | (0.21 | ) | (0.01 | ) | |||||||||||||||
9/30/13 | $ | 10.39 | 0.19 | (0.17 | ) | 0.02 | (0.20 | ) | (0.06 | ) | ||||||||||||||
3/2/2012(3) – 9/30/2012 | $ | 10.10 | 0.16 | 0.29 | 0.45 | (0.16 | ) | — | ||||||||||||||||
Class I | ||||||||||||||||||||||||
9/30/14 | $ | 10.15 | 0.23 | 0.09 | 0.32 | (0.23 | ) | (0.01 | ) | |||||||||||||||
9/30/13 | $ | 10.39 | 0.22 | (0.18 | ) | 0.04 | (0.22 | ) | (0.06 | ) | ||||||||||||||
1/31/2012(3) – 9/30/2012 | $ | 10.00 | 0.23 | 0.38 | 0.61 | (0.22 | ) | — |
__________
(1) | Not annualized. |
(2) | Annualized. |
(3) | Commencement of operations. |
(4) | After fees waived and expenses absorbed or recouped by the Advisor, where applicable. |
(5) | Net investment income (loss) per share has been calculated based on average shares outstanding during the period. |
(6) | The total return calculation does not reflect the sales loads that may be imposed on Class A or C shares (see Note 7 of the Notes to Financial Statements). |
(7) | The Total return figure is the since inception return for the class which commenced operations on January 31, 2013. |
(8) | Prior to January 31, 2013, Class A shares were known as Class S shares. |
The accompanying notes to financial statements are an integral part of this statement.
86
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 | |||||||||||||||||||||||
$ | 9.22 | 3.52 | % | $ | 2.1 | 0.70 | % | 2.68 | % | 1.33 | % | 2.05 | % | 18.63 | % | |||||||||||||||
$ | 9.16 | (0.88 | )%(7) | $ | 1.4 | 0.70 | %(2) | 3.23 | %(2) | 1.45 | %(2) | 2.48 | %(2) | 33.91 | %(1) | |||||||||||||||
$ | 9.30 | 3.86 | % | $ | 1.9 | 0.70 | % | 2.68 | % | 1.39 | % | 1.99 | % | 18.63 | % | |||||||||||||||
$ | 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 | % | |||||||||||||||
$ | 9.28 | 4.10 | % | $ | 43.3 | 0.50 | % | 2.88 | % | 1.20 | % | 2.18 | % | 18.63 | % | |||||||||||||||
$ | 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 | % | |||||||||||||||
$ | 10.23 | 2.94 | % | $ | 2.0 | 0.95 | % | 2.02 | % | 1.50 | % | 1.47 | % | 26.17 | % | |||||||||||||||
$ | 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) | |||||||||||||||
$ | 10.23 | 3.20 | % | $ | 27.1 | 0.70 | % | 2.26 | % | 1.26 | % | 1.70 | % | 26.17 | % | |||||||||||||||
$ | 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.
87
Brandes Investment Trust
NOTES TO FINANCIAL STATEMENTS
NOTE 1 − ORGANIZATION
The Brandes International Equity Fund (the “International Fund”), the Brandes Global Equity Fund (the “Global Fund”), the Brandes Emerging Markets Fund (the “Emerging Markets Fund”), the Brandes International Small Cap Equity Fund (the “International Small Cap Fund”), the Brandes Core Plus Fixed Income Fund (the “Core Plus Fund”) and the Brandes Credit Focus Yield Fund (the “Credit Focus Yield Fund”) (each a “Fund” and collectively the “Funds”) are series of Brandes Investment Trust (the “Trust”). The Trust is registered under the Investment Company Act of 1940 (the “1940 Act”) as a diversified, open-end management investment company.
The International Fund, Global Fund, Emerging Markets Fund, Credit Focus Yield Fund and International Small Cap Fund began operations on January 2, 1997, October 6, 2008, January 31, 2011, January 31, 2012 and January 31, 2012, respectively. Prior to January 31, 2011 for the Emerging Markets Fund and January 31, 2012 for the International Small Cap and Credit Focus Yield Funds, these Funds’ portfolios were managed as private investment funds with investment objectives, investment policies and strategies that were, in all material respects, equivalent to those of the Emerging Markets Fund, International Small Cap Fund and Credit Focus Yield Fund, respectively. The Core Plus Fund began operations on December 28, 2007.
The International Fund and Global Fund have four classes of shares: Class A, Class C, Class E and Class I. The Emerging Markets Fund and International Small Cap Fund have three classes of shares: Class A, Class C and Class I. The Core Plus Fund has three classes of shares: Class A, Class E and Class I. The Credit Focus Yield Fund has two classes of shares: Class A and Class I. Prior to January 31, 2013, Class A shares were known as Class S shares for the International, Global, Emerging 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.
88
Brandes Investment Trust
NOTES TO FINANCIAL STATEMENTS (continued)
A. | Repurchase Agreements. Each Fund may enter into repurchase agreements with government securities dealers recognized by the Federal Reserve Board, with member banks of the Federal Reserve System or with other brokers or dealers that meet the credit guidelines established by the Board of Trustees. Each Fund will always receive and maintain, as collateral, U.S. Government securities whose market value, including accrued interest (which is recorded in the Schedules of Investments), will be at least equal to 100% of the dollar amount invested by the Fund in each agreement, and the Fund will make payment for such securities only upon physical delivery or upon evidence of book entry transfer to the account of the Fund’s custodian. To the extent that the term of any repurchase transaction exceeds one business day, the value of the collateral is marked-to-market on a daily basis to ensure the adequacy of the collateral. Before causing a Fund to enter into a repurchase agreement with any other party, the investment advisor will determine that such party does not have any apparent risk of becoming involved in bankruptcy proceedings within the time frame contemplated by the repurchase agreement. If the seller defaults and the value of the collateral declines, or if bankruptcy proceedings are commenced with respect to the seller of the security, realization of the collateral by the Fund may be delayed or limited. |
B. | Foreign Currency Translation and Transactions. Values of investments denominated in foreign currencies are converted into U.S. dollars using the spot market rates of exchange at the time of valuation. Purchases and sales of investments and dividend and interest income are translated into U.S. dollars using the spot market rates of exchange prevailing on the respective dates of such translations. The gain or loss resulting from changes in foreign exchange rates is included with net realized and unrealized gain or loss from investments, as appropriate. Foreign securities and currency transactions may involve certain considerations and risks not typically associated with those of domestic origin. |
Foreign securities are recorded in the financial statements after translation to U.S. dollars based on the applicable exchange rate at the end of the period. The Funds report certain foreign currency-related transactions as components of realized gains or losses for financial reporting purposes, whereas such components are treated as ordinary income for federal income tax purposes. | |
C. | Delayed Delivery Securities. The Funds may purchase securities on a when issued or delayed delivery basis. “When-issued” or delayed delivery refers to securities whose terms are available and for which a market exists, but that have not been issued. For a when-issued or delayed delivery transaction, no payment is made until delivery date, which is typically longer than the |
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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 September 30, 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 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 and generally are issued as an actual note from the financial intermediary or an equity linked warrant (commonly known as a low exercise price option). The Trust is relying on the creditworthiness of such banks or broker-dealers and has no rights under a participatory note against the issuer of the securities underlying such participatory note. The investment advisor has established guidelines for monitoring participatory note exposure for the Funds. Prior to investment in a participatory note, the investment advisor will complete an analysis of the prospective counterparties and once purchased, will continue to monitor creditworthiness on a quarterly basis. The investment advisor requires a minimum credit rating for such counterparties (as determined by rating agencies such as Moody’s, Fitch and S&P) of A. | |
The Funds record counterparty credit risk valuation adjustments, if material, on the participatory notes in order to appropriately reflect the credit quality of the counterparty. During the period ended September 30, 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 September 30, 2014. The Emerging Markets Fund invested in two participatory notes during the fiscal year with HSBC Bank Plc in which HSBC Bank Plc is an investment vehicle used to gain exposure to the underlying securities: Etihad Etisalat Co. and Saudi Basic Industries Corp. Etihad Etisalat Co. was held the entire |
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fiscal year while Saudi Basic Industries Corp. was held from the beginning of the fiscal year until March 19, 2014, when the position was then liquidated. The average monthly market value of these securities was $9,465,191 and $6,584,335 during each respective period. As a result of the investment in the participation notes, the Emerging Markets Fund recognized a net unrealized gain of $2,938,122 and no realized gain (loss) for Etihad Etisalat Co. and a realized gain of $1,193,948 on the sale of Saudi Basic Industries Corp. The market value of Etihad Etisalat Co. on September 30, 2014 was $13,556,635 and can be found in the Emerging Market Fund’s Schedule of Investments. | |
E. | Security Transactions, Dividends and Distributions. Security transactions are accounted for on the trade dates. Realized gains and losses are evaluated on the bases of identified costs. Dividend income and distributions to shareholders are recorded on the ex-dividend dates. Interest is recorded on an accrual basis. Withholding taxes on foreign dividends and capital gains, which are included as a component of net investment income and realized gain (loss) on investments, respectively, have been provided for in accordance with the Trust’s understanding of the applicable country’s tax rules and rates. Each Fund’s investment income, expenses, other than class specific expenses, and realized and unrealized gains and losses are allocated daily to each class of the Fund’s shares based upon the relative net asset values of outstanding shares of each class of shares at the beginning of the day (after adjusting for the current capital shares activity of the respective class). Expenses common to the Funds’ portfolios are allocated among the Funds based upon their relative net asset values or other appropriate allocation methods. The Funds amortize premiums and accrete discounts using the constant yield method. |
F. | Concentration of Risk. As of September 30, 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. |
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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 collateral, or (iii) the Fund may experience delays in recovery of the loaned securities or loss of rights in the collateral if the borrower fails financially. To minimize these risks, the borrower must agree to maintain collateral with the Fund’s custodian, marked to market daily, in the form of cash and/or U.S. Government obligations, in an amount at least equal to 102% (105% in the case of loans of foreign securities not denominated in U.S. dollars) of the market value of the loaned securities. As of September 30, 2014, the Global Equity Fund, Emerging Markets Fund, International Small Cap Fund, Core Plus Fund and Credit Focus Yield Fund did not have any securities on loan. The International Equity Fund loaned a security with a market value of $10,369,657 and received non-cash collateral for the loan of $10,896,357. 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 |
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those that are open for exam by taxing authorities (2011 through 2014). As of September 30, 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, 2014. 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 |
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options contracts that are traded on a national securities or commodities exchange, are valued at the last reported sales price at the close of regular trading on each day the exchange is open for trading, in the case of common stocks and exchange-traded funds, or, in the case of futures contracts or options contracts, the settlement price determined by the relevant exchange. Securities listed on the NASDAQ National Market System for which market quotations are readily available are valued using the NASDAQ Official Closing Price. To the extent these securities are actively traded and valuation adjustments are not applied, they are categorized as Level 1 of the fair value hierarchy. | |
Equity securities traded on an exchange for which there have been no sales on the valuation date, are generally valued at the mean between last bid and ask price on such day and are categorized as Level 2 on the fair value hierarchy, or are fair valued by the Valuation Committee. | |
Investments in registered open-end management investment companies will be valued based upon the Net Asset Values (“NAVs”) of such investments and are categorized as Level 1 of the fair value hierarchy. Investments in privately held investment funds will be valued based upon the NAVs of such investments and are categorized as Level 2 of the fair value hierarchy if significant observable inputs are used. | |
Valuation adjustments may be applied to certain common and preferred stocks that are solely traded on a foreign exchange to account for the market movement between the close of the foreign market and the close of the New York Stock Exchange (“NYSE”). These securities are generally valued using pricing service providers that consider the correlation of the trading patterns of the foreign securities to the intraday trading in the U.S. markets for investments. Securities using these valuation adjustments are categorized as Level 2 of the fair value hierarchy. As of September 30, 2014, the International Fund, Global Fund, Emerging Markets Fund and International Small Cap Fund had securities with market values of $434,619,538, $27,094,248, $714,300,022 and $242,117,401, that represents 79.38%, 55.91%, 49.73% and 38.41% 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 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. |
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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 September 30, 2014 include |
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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 September 30, 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 | $ | — | $ | 71,930,921 | $ | — | $ | 71,930,921 | ||||||||
Consumer Staples | 8,166,340 | 55,695,530 | — | 63,861,870 | ||||||||||||
Energy | 9,238,503 | 28,719,345 | — | 37,957,848 | ||||||||||||
Financials | 12,748,842 | 105,097,704 | — | 117,846,546 | ||||||||||||
Health Care | — | 63,272,840 | — | 63,272,840 | ||||||||||||
Industrials | 6,909,779 | 20,620,455 | — | 27,530,234 | ||||||||||||
Information Technology | 3,808,080 | 21,623,414 | — | 25,431,494 | ||||||||||||
Materials | 5,552,758 | 19,459,288 | — | 25,012,046 | ||||||||||||
Telecommunication Services | 9,239,380 | 32,616,038 | — | 41,855,418 | ||||||||||||
Utilities | 3,302,181 | 15,584,003 | — | 18,886,184 | ||||||||||||
Total Equities | 58,965,863 | 434,619,538 | — | 493,585,401 | ||||||||||||
Preferred Stocks | ||||||||||||||||
Energy | 6,638,855 | — | — | 6,638,855 | ||||||||||||
Telecommunication Services | 3,964,792 | — | — | 3,964,792 | ||||||||||||
Total Preferred Stocks | 10,603,647 | — | — | 10,603,647 | ||||||||||||
Time Deposit | — | 51,826,073 | — | 51,826,073 | ||||||||||||
Total Investments in Securities | $ | 69,569,510 | $ | 486,445,611 | $ | — | $ | 556,015,121 |
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Description | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Global Fund | ||||||||||||||||
Equities | ||||||||||||||||
Consumer Discretionary | $ | — | $ | 5,242,990 | $ | — | $ | 5,242,990 | ||||||||
Consumer Staples | 1,634,892 | 4,289,065 | — | 5,923,957 | ||||||||||||
Energy | 1,441,838 | 2,276,306 | — | 3,718,144 | ||||||||||||
Financials | 4,997,566 | 6,035,649 | — | 11,033,215 | ||||||||||||
Health Care | 3,195,930 | 2,870,112 | — | 6,066,042 | ||||||||||||
Industrials | 846,768 | — | — | 846,768 | ||||||||||||
Information Technology | 2,425,478 | 2,023,589 | — | 4,449,067 | ||||||||||||
Materials | — | 800,556 | — | 800,556 | ||||||||||||
Telecommunication Services | 1,529,400 | 2,309,876 | — | 3,839,276 | ||||||||||||
Utilities | 589,075 | 1,246,105 | — | 1,835,180 | ||||||||||||
Total Equities | 16,660,947 | 27,094,248 | — | 43,755,195 | ||||||||||||
Preferred Stocks | ||||||||||||||||
Energy | 780,683 | — | — | 780,683 | ||||||||||||
Total Preferred Stocks | 780,683 | — | — | 780,683 | ||||||||||||
Repurchase Agreements | — | 3,557,287 | — | 3,557,287 | ||||||||||||
Total Investments in Securities | $ | 17,441,630 | $ | 30,651,535 | $ | — | $ | 48,093,165 | ||||||||
Emerging Markets Fund | ||||||||||||||||
Equities | ||||||||||||||||
Consumer Discretionary | $ | 16,375,871 | $ | 193,308,173 | $ | 21,726,498 | $ | 231,410,542 | ||||||||
Consumer Staples | 63,150,017 | 103,019 | — | 63,253,036 | ||||||||||||
Energy | 72,174,884 | 14,146,792 | — | 86,321,676 | ||||||||||||
Financials | 71,183,039 | 205,651,829 | — | 276,834,868 | ||||||||||||
Health Care | 6,300,004 | 34,872,557 | — | 41,172,561 | ||||||||||||
Industrials | 74,220,463 | — | — | 74,220,463 | ||||||||||||
Information Technology | — | 50,278,254 | — | 50,278,254 | ||||||||||||
Materials | 21,814,668 | 96,812,790 | — | 118,627,458 | ||||||||||||
Telecommunication Services | 80,621,210 | 50,903,549 | — | 131,524,759 | ||||||||||||
Utilities | 68,421,146 | 56,468,958 | — | 124,890,104 | ||||||||||||
Total Equities | 474,261,302 | 702,545,921 | 21,726,498 | 1,198,533,721 | ||||||||||||
Participatory Notes | ||||||||||||||||
Telecommunication Services | — | 13,556,635 | — | 13,556,635 | ||||||||||||
Total Participatory Notes | — | 13,556,635 | — | 13,556,635 | ||||||||||||
Preferred Stocks | ||||||||||||||||
Consumer Discretionary | 11,572,443 | — | — | 11,572,443 | ||||||||||||
Energy | 55,172,005 | 5,271,848 | — | 60,443,853 | ||||||||||||
Financials | 25,754,374 | — | — | 25,754,374 | ||||||||||||
Telecommunication Services | 27,289,495 | — | — | 27,289,495 | ||||||||||||
Utilities | 13,879,329 | — | — | 13,879,329 | ||||||||||||
Total Preferred Stocks | 133,667,646 | 5,271,848 | — | 138,939,494 | ||||||||||||
Real Estate Investment Trusts | 43,455,687 | — | — | 43,455,687 | ||||||||||||
Convertible Bonds | — | 701,046 | — | 701,046 | ||||||||||||
Repurchase Agreements | — | 36,567,185 | — | 36,567,185 | ||||||||||||
Short Term Investments | 2 | — | — | 2 | ||||||||||||
Total Investments in Securities | $ | 651,384,637 | $ | 758,642,635 | $ | 21,726,498 | $ | 1,431,753,770 |
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Description | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
International Small Cap Fund | ||||||||||||||||
Equities | ||||||||||||||||
Consumer Discretionary | $ | 72,450,886 | $ | 78,125,074 | $ | — | $ | 150,575,960 | ||||||||
Consumer Staples | 44,869,814 | 12,454,278 | — | 57,324,092 | ||||||||||||
Energy | 3,661,977 | — | — | 3,661,977 | ||||||||||||
Financials | 18,987,773 | 794,934 | — | 19,782,707 | ||||||||||||
Health Care | 36,059,908 | 9,065,476 | — | 45,125,384 | ||||||||||||
Industrials | 34,089,712 | 40,091,367 | — | 74,181,079 | ||||||||||||
Information Technology | 36,469,400 | 26,185,129 | — | 62,654,529 | ||||||||||||
Materials | 10,665,033 | 24,201,906 | — | 34,866,939 | ||||||||||||
Telecommunication Services | — | 21,092,335 | — | 21,092,335 | ||||||||||||
Utilities | 13,591,867 | 30,800,000 | — | 44,391,867 | ||||||||||||
Total Equities | 270,846,370 | 242,810,499 | — | 513,656,869 | ||||||||||||
Preferred Stocks | ||||||||||||||||
Health Care | 2,410,775 | — | — | 2,410,775 | ||||||||||||
Utilities | 3,244,788 | — | — | 3,244,788 | ||||||||||||
Total Preferred Stocks | 5,655,563 | — | — | 5,655,563 | ||||||||||||
Real Estate Investment Trusts | 26,570,084 | — | — | 26,570,084 | ||||||||||||
Convertible Bonds | — | 241,344 | — | 241,344 | ||||||||||||
Corporate Bonds | — | 2,442,984 | — | 2,442,984 | ||||||||||||
Repurchase Agreements | — | 86,566,553 | — | 86,566,553 | ||||||||||||
Total Investments in Securities | $ | 303,072,017 | $ | 332,061,380 | $ | — | $ | 635,133,397 | ||||||||
Core Plus Fund | ||||||||||||||||
Equities | $ | 10,807 | $ | — | $ | — | $ | 10,807 | ||||||||
Preferred Stocks | 210,054 | 254,534 | — | 464,588 | ||||||||||||
Asset Backed Securities | — | 1,199,311 | — | 1,199,311 | ||||||||||||
Corporate Bonds | — | 16,433,601 | — | 16,433,601 | ||||||||||||
Government Securities | — | 25,425,526 | — | 25,425,526 | ||||||||||||
Mortgage Backed Securities | — | 1,658,707 | — | 1,658,707 | ||||||||||||
Warrants | — | — | — | — | ||||||||||||
Time Deposit | — | 1,921,217 | — | 1,921,217 | ||||||||||||
Total Investments in Securities | $ | 220,861 | $ | 46,892,896 | $ | — | $ | 47,113,757 | ||||||||
Credit Focus Yield Fund | ||||||||||||||||
Equities | $ | 27,714 | $ | — | $ | — | $ | 27,714 | ||||||||
Preferred Stocks | 317,774 | 314,106 | — | 631,880 | ||||||||||||
Asset Backed Securities | — | 266,815 | — | 266,815 | ||||||||||||
Corporate Bonds | — | 18,271,076 | — | 18,271,076 | ||||||||||||
Government Securities | — | 9,118,825 | — | 9,118,825 | ||||||||||||
Mortgage Backed Securities | — | 18,477 | — | 18,477 | ||||||||||||
Warrants | — | — | — | — | ||||||||||||
Repurchase Agreements | — | 240,767 | — | 240,767 | ||||||||||||
Total Investments in Securities | $ | 345,488 | $ | 28,230,066 | $ | — | $ | 28,575,554 |
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NOTES TO FINANCIAL STATEMENTS (continued)
Below are the transfers into or out of Levels 1 and 2 for the Funds using market values measured at the end of the reporting periods:
Emerging | International | Credit | ||||||||||||||||||||||
International | Global | Markets | Small Cap | Core Plus | Focus | |||||||||||||||||||
Fund | Fund | Fund | Fund | Fund | Yield Fund | |||||||||||||||||||
Transfers into Level 1 | $ | — | $ | — | $ | 17,872,447 | $ | 52,142,819 | $ | — | $ | — | ||||||||||||
Transfers out of Level 1 | — | — | 13,235,124 | 3,900,695 | — | — | ||||||||||||||||||
Net Transfers | ||||||||||||||||||||||||
in/(out) of Level 1 | $ | — | $ | — | $ | 4,637,323 | $ | 48,242,124 | $ | — | $ | — | ||||||||||||
Transfers into Level 2 | $ | — | $ | — | $ | 13,235,124 | $ | 3,900,695 | $ | — | $ | — | ||||||||||||
Transfers out of Level 2 | — | — | 17,872,447 | 52,142,819 | — | — | ||||||||||||||||||
Net Transfers | ||||||||||||||||||||||||
in/(out) of Level 2 | $ | — | $ | — | $ | (4,637,323 | ) | $ | (48,242,124 | ) | $ | — | $ | — |
The transfers from Level 1 to Level 2 are due to the securities being fair valued as a result of market movements following the close of local trading and/or due to the lack of trading volume on September 30, 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 September 30, 2014.
There were no Level 3 securities in the International Equity, Global Equity 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 Emerging Markets, Core Plus and Credit Focus Yield Funds during the period ended September 30, 2014:
Emerging | Core | Credit | ||||||||||
Markets | Plus | Focus Yield | ||||||||||
Fund | Fund | Fund | ||||||||||
Beginning Balance – October 1, 2013 | $ | — | $ | 1,285,702 | $ | 408,796 | ||||||
Purchases | — | — | — | |||||||||
Sales | — | (322,625 | ) | (242,632 | ) | |||||||
Transfers in to level 3 | 21,726,498 | — | — | |||||||||
Transfers out of level 3 | — | (941,246 | ) | (168,221 | ) | |||||||
Realized gains (losses), net | — | (21,831 | ) | 2,057 | ||||||||
Change in unrealized gains (losses) | — | — | — | |||||||||
Ending Balance – September 30, 2014 | $ | 21,726,498 | $ | — | $ | — |
The transfer from Level 2 to Level 3 is due to the security being stale priced, as trading of the security had been suspended. The transfers from Level 3 to Level 2 are due to the securities being quoted and the inputs being used to derive a price are observable.
The realized and unrealized gains and losses from Level 3 transactions are included with the net realized gains and losses on investments on the Statement of Assets and Liabilities. As of September 30, 2014 the Emerging Markets Fund had $664,523 of unrealized losses from Level 3 securities.
99
Brandes Investment Trust
NOTES TO FINANCIAL STATEMENTS (continued)
The following table presents information about unobservable inputs related to the Trust’s categories of Level 3 investments as of September 30, 2014.
Fair Value | Valuation | |||
at 9/30/14 | Techniques | Unobservable Inputs | Ranges | |
Common Stock | $21,726,498 | Stale price | Last traded price | N/A |
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).
Common Stock
At regular intervals the unobservable inputs referred to above are reviewed and compared to publicly available information for reasonableness. The Valuation Committee noted that trading of the security was halted pending an announcement containing inside information relating to a transaction by the controlling shareholder. The Valuation Committee determined that based on the lack of relevant data about the market impact of the announcement, the security should be priced at the last traded price.
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 incurred 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 year ended September 30, 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 $3,957,751, $367,519, $8,114,975, $3,244,397, $131,768 and $152,629 in advisory fees, respectively.
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”):
100
Brandes Investment Trust
NOTES TO FINANCIAL STATEMENTS (continued)
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 year ended September 30, 2014, the Advisor waived expenses and/or reimbursed the Funds $0, $243,183, $379,267, $86,310, $259,463 and $170,772 for the International Fund, Global Fund, Emerging Markets Fund, International Small Cap Fund, Core Plus Fund and Credit Focus Yield Fund, respectively.
Potential | Potential | Potential | ||
Recovery | Recovery | Recovery | ||
Expiring | Expiring | Expiring | ||
September 30, | September 30, | September 30, | ||
Fund | 2015 | 2016 | 2017 | |
International Fund | $208,594 | $458,927 | $ — | |
Global Fund | 229,270 | 255,029 | 243,183 | |
Emerging Markets Fund | 378,305 | 334,348 | 379,267 | |
International Small Cap Fund | 156,101 | 238,680 | 86,310 | |
Core Plus Fund | 218,903 | 237,047 | 259,463 | |
Credit Focus Yield Fund | 149,098 | 198,558 | 170,772 |
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 year ended September 30, 2014, the Advisor recouped fees previously waived or reimbursed in the amounts of:
Fund | Class A | Class C | Class E | Class I | |
International Fund | $ 232 | $ 73 | $2,889 | $67,570 | |
Emerging Markets Fund | $40,202 | $1,065 | N/A | $ — | |
International Small Cap Fund | $20,712 | $2,035 | N/A | $16,199 |
B. Administration Fee. U.S. Bancorp Fund Services, LLC (the “Administrator”) acts as administrator for the Funds. The Administrator prepares various federal and state regulatory filings; prepares reports and materials to be supplied to the Trustees; monitors the activities of the Funds’ custodian, transfer agent and accountant; coordinates the preparation and payment of Fund expenses; and reviews the Funds’ expense accruals. For its services, the Administrator receives an annual fee at the rate of 0.03% of the first $1 billion of the Trust’s average daily net assets and 0.02% in excess of $1 billion of the Trust’s average daily net assets, subject to a minimum of $50,000 per Fund per annum which is allocated among Funds based on their average net assets. For the year ended September 30,
101
Brandes Investment Trust
NOTES TO FINANCIAL STATEMENTS (continued)
2014, the International Fund, Global Fund, Emerging Markets Fund, International Small Cap Fund, Core Plus Fund and Credit Focus Yield Fund incurred $127,078, $12,507, $213,889, $85,303, $9,408 and $7,775 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 year ended September 30, 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 year ended September 30, 2014, the following Funds incurred expenses pursuant to the Plan:
Class A | Class C | ||
International Fund | $ 12,695 | $ 15,913 | |
Global Fund | 1,944 | 4,212 | |
Emerging Markets Fund | 540,379 | 113,801 | |
International Small Cap Fund | 135,586 | 47,712 | |
Core Plus Fund | 10,682 | N/A | |
Credit Focus Yield Fund | 10,262 | 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 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 year ended September 30, 2014, the Funds incurred the following Service Fees:
Fund | Class C | Class E | Class I | |
International Fund | $ 5,304 | $69,938 | $229,772 | |
Global Fund | 1,404 | — | 22,168 | |
Emerging Markets Fund | 37,934 | N/A | 311,441 | |
International Small Cap Fund | 15,904 | N/A | 140,460 | |
Core Plus Fund | N/A | 4,096 | 15,868 | |
Credit Focus Yield Fund | N/A | N/A | — |
102
Brandes Investment Trust
NOTES TO FINANCIAL STATEMENTS (continued)
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 year ended September 30, 2014:
U.S. Government | Other | |||||||||||||||
Fund | Purchases | Sales | Purchases | Sales | ||||||||||||
International Fund | $ | — | $ | — | $ | 253,255,812 | $ | 182,916,554 | ||||||||
Global Fund | $ | — | $ | — | $ | 16,228,407 | $ | 13,072,395 | ||||||||
Emerging Markets Fund | $ | — | $ | — | $ | 1,184,176,695 | $ | 183,573,488 | ||||||||
International Small Cap Fund | $ | — | $ | — | $ | 520,240,476 | $ | 74,081,450 | ||||||||
Core Plus Fund | $ | 17,096,974 | $ | 2,573,244 | $ | 4,560,071 | $ | 4,720,609 | ||||||||
Credit Focus Yield Fund | $ | 3,895,036 | $ | 4,796,868 | $ | 4,029,809 | $ | 2,849,032 |
NOTE 5 – CAPITAL STOCK TRANSACTIONS
Capital stock activity for each class of shares was as follows (shares and dollar amounts in thousands):
International Fund | Global Fund | |||||||||||||||||||||||||||||||
Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||||||||||||||||
9/30/2014 | 9/30/2013 | 9/30/2014 | 9/30/2013 | |||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | |||||||||||||||||||||||||
Shares Sold | ||||||||||||||||||||||||||||||||
Class A | 521 | $ | 8,960 | 45 | $ | 684 | 40 | $ | 1,024 | 7 | $ | 158 | ||||||||||||||||||||
Class C | 240 | 4,115 | 28 | 420 | 41 | 1,058 | 5 | 117 | ||||||||||||||||||||||||
Class E | 867 | 14,641 | 999 | 14,506 | 1 | 20 | — | 11 | ||||||||||||||||||||||||
Class I | 12,643 | 217,623 | 8,351 | 121,636 | 297 | 7,655 | 287 | 6,213 | ||||||||||||||||||||||||
Issued on | ||||||||||||||||||||||||||||||||
Reinvestment | ||||||||||||||||||||||||||||||||
of Distributions | ||||||||||||||||||||||||||||||||
Class A | 8 | 138 | — | 7 | 1 | 24 | — | 2 | ||||||||||||||||||||||||
Class C | 3 | 44 | — | 4 | 1 | 15 | — | 2 | ||||||||||||||||||||||||
Class E | 33 | 582 | 49 | 676 | — | 10 | — | 10 | ||||||||||||||||||||||||
Class I | 554 | 9,620 | 1,440 | 19,740 | 82 | 2,074 | 52 | 1,097 | ||||||||||||||||||||||||
Shares Redeemed | ||||||||||||||||||||||||||||||||
Class A | (33 | ) | (557 | ) | (2 | ) | (31 | ) | (4 | ) | (113 | ) | — | (1 | ) | |||||||||||||||||
Class C | (6 | ) | (95 | ) | (1 | ) | (20 | ) | (3 | ) | (68 | ) | — | — | ||||||||||||||||||
Class E | (1,530 | ) | (26,412 | ) | (168 | ) | (2,410 | ) | — | (6 | ) | — | (9 | ) | ||||||||||||||||||
Class I | (6,938 | ) | (118,344 | ) | (10,745 | ) | (156,239 | ) | (203 | ) | (5,301 | ) | (201 | ) | (4,230 | ) | ||||||||||||||||
Net Increase/ | ||||||||||||||||||||||||||||||||
(Decrease) | ||||||||||||||||||||||||||||||||
Resulting from | ||||||||||||||||||||||||||||||||
Fund Share | ||||||||||||||||||||||||||||||||
Transactions | 6,362 | $ | 110,315 | (4 | ) | $ | (1,027 | ) | 253 | $ | 6,392 | 150 | $ | 3,370 |
103
Brandes Investment Trust
NOTES TO FINANCIAL STATEMENTS (continued)
Emerging Markets Fund | International Small Cap Fund | |||||||||||||||||||||||||||||||
Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||||||||||||||||
9/30/2014 | 9/30/2013 | 9/30/2014 | 9/30/2013 | |||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | |||||||||||||||||||||||||
Shares Sold | ||||||||||||||||||||||||||||||||
Class A | 34,722 | $ | 341,994 | 9,423 | $ | 85,287 | 5,852 | $ | 81,558 | 2,208 | $ | 26,831 | ||||||||||||||||||||
Class C | 2,178 | 20,917 | 585 | 5,233 | 802 | 11,076 | 112 | 1,409 | ||||||||||||||||||||||||
Class E | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | ||||||||||||||||||||||||
Class I | 97,190 | 952,867 | 19,420 | 176,110 | 38,348 | 534,615 | 2,512 | 29,929 | ||||||||||||||||||||||||
Issued on | ||||||||||||||||||||||||||||||||
Reinvestment | ||||||||||||||||||||||||||||||||
of Distributions | ||||||||||||||||||||||||||||||||
Class A | 573 | 5,337 | 431 | 3,763 | 297 | 3,907 | 22 | 257 | ||||||||||||||||||||||||
Class C | 28 | 253 | 3 | 25 | 18 | 234 | — | 2 | ||||||||||||||||||||||||
Class E | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | ||||||||||||||||||||||||
Class I | 1,528 | 14,351 | 887 | 7,755 | 672 | 8,933 | 93 | 1,057 | ||||||||||||||||||||||||
Shares Redeemed | ||||||||||||||||||||||||||||||||
Class A | (21,646 | ) | (216,093 | ) | (3,182 | ) | (28,458 | ) | (4,726 | ) | (66,941 | ) | (508 | ) | (6,445 | ) | ||||||||||||||||
Class C | (113 | ) | (1,088 | ) | (16 | ) | (135 | ) | (20 | ) | (279 | ) | — | (3 | ) | |||||||||||||||||
Class E | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | ||||||||||||||||||||||||
Class I | (10,435 | ) | (99,211 | ) | (4,126 | ) | (37,498 | ) | (3,111 | ) | (43,753 | ) | (319 | ) | (3,648 | ) | ||||||||||||||||
Net Increase | ||||||||||||||||||||||||||||||||
Resulting from | ||||||||||||||||||||||||||||||||
Fund Share | ||||||||||||||||||||||||||||||||
Transactions | 104,025 | $ | 1,019,327 | 23,425 | $ | 212,082 | 38,132 | $ | 529,350 | 4,120 | $ | 49,389 | ||||||||||||||||||||
Core Plus Fund | Credit Focus Yield Fund | |||||||||||||||||||||||||||||||
Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||||||||||||||||
9/30/2014 | 9/30/2013 | 9/30/2014 | 9/30/2013 | |||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | |||||||||||||||||||||||||
Shares Sold | ||||||||||||||||||||||||||||||||
Class A | 889 | $ | 8,213 | 167 | $ | 1,568 | 84 | $ | 865 | 413 | $ | 4,286 | ||||||||||||||||||||
Class E | 106 | 980 | 198 | 1,874 | N/A | N/A | N/A | N/A | ||||||||||||||||||||||||
Class I | 2,548 | 23,734 | 1,880 | 17,634 | 190 | 1,953 | 559 | 5,818 | ||||||||||||||||||||||||
Issued on | ||||||||||||||||||||||||||||||||
Reinvestment | ||||||||||||||||||||||||||||||||
of Distributions | ||||||||||||||||||||||||||||||||
Class A | 12 | 109 | 2 | 19 | 8 | 86 | 5 | 52 | ||||||||||||||||||||||||
Class E | 4 | 41 | 29 | 271 | N/A | N/A | N/A | N/A | ||||||||||||||||||||||||
Class I | 101 | 940 | 126 | 1,181 | 61 | 626 | 67 | 693 | ||||||||||||||||||||||||
Shares Redeemed | ||||||||||||||||||||||||||||||||
Class A | (834 | ) | (7,748 | ) | (11 | ) | (108 | ) | (315 | ) | (3,249 | ) | (4 | ) | (36 | ) | ||||||||||||||||
Class E | (26 | ) | (244 | ) | (816 | ) | (7,693 | ) | N/A | N/A | N/A | N/A | ||||||||||||||||||||
Class I | (1,218 | ) | (11,290 | ) | (1,407 | ) | (13,114 | ) | (88 | ) | (913 | ) | — | (2 | ) | |||||||||||||||||
Net Increase/ | ||||||||||||||||||||||||||||||||
(Decrease) | ||||||||||||||||||||||||||||||||
Resulting from | ||||||||||||||||||||||||||||||||
Fund Share | ||||||||||||||||||||||||||||||||
Transactions | 1,582 | $ | 14,735 | 168 | $ | 1,632 | (60 | ) | $ | (632 | ) | 1,040 | $ | 10,811 |
104
Brandes Investment Trust
NOTES TO FINANCIAL STATEMENTS (continued)
NOTE 6 − FEDERAL INCOME TAX MATTERS
As of September 30, 2014, 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 | $ | 567,761,303 | $ | 42,000,704 | $ | 1,477,858,843 | ||||||
Gross tax unrealized appreciation | 47,738,688 | 7,940,897 | 97,725,026 | |||||||||
Gross tax unrealized depreciation | (59,484,870 | ) | (1,848,436 | ) | (143,830,099 | ) | ||||||
Net unrealized appreciation (depreciation) | ||||||||||||
on investments and foreign currency | (11,746,182 | ) | 6,092,461 | (46,105,073 | ) | |||||||
Distributable ordinary income | 420,516 | 503,787 | 23,707,423 | |||||||||
Distributable long-term capital gains | — | 2,796,569 | 16,361,353 | |||||||||
Total distributable earnings | 420,516 | 3,300,356 | 40,068,776 | |||||||||
Other accumulated gains/(losses) | (85,858,088 | ) | (24,530 | ) | (152,039 | ) | ||||||
Total accumulated earnings | $ | (97,183,754 | ) | $ | 9,368,287 | $ | (6,188,336 | ) | ||||
International | ||||||||||||
Small Cap | Core Plus | Credit Focus | ||||||||||
Fund | Fund | Yield Fund | ||||||||||
Cost of investments for tax purposes | $ | 651,575,271 | $ | 45,974,057 | $ | 27,964,597 | ||||||
Gross tax unrealized appreciation | 39,538,278 | 1,600,133 | 951,331 | |||||||||
Gross tax unrealized depreciation | (55,980,152 | ) | (460,433 | ) | (340,374 | ) | ||||||
Net unrealized appreciation (depreciation) | ||||||||||||
on investments and foreign currency | (16,441,874 | ) | 1,139,700 | 610,957 | ||||||||
Distributable ordinary income | 14,505,234 | 23,698 | 6,706 | |||||||||
Distributable long-term capital gains | 11,858,340 | 288,913 | 16,688 | |||||||||
Total distributable earnings | 23,363,574 | 312,611 | 23,394 | |||||||||
Other accumulated gains/(losses) | (77,601 | ) | — | (8,705 | ) | |||||||
Total accumulated earnings | $ | 9,844,099 | $ | 1,452,311 | $ | 625,646 |
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.
105
Brandes Investment Trust
NOTES TO FINANCIAL STATEMENTS (continued)
The tax composition of dividends for the periods ended September 30, 2014 and September 30, 2013 for the Funds, were as follows:
Long Term | Return | |||||||||||||||||||||||
Ordinary Income | Capital Gains | of Capital | ||||||||||||||||||||||
2014 | 2013 | 2014 | 2013 | 2014 | 2013 | |||||||||||||||||||
International Fund | $ | 10,891,932 | $ | 22,510,115 | $ | — | $ | — | $ | — | $ | 251,542 | ||||||||||||
Global Fund | $ | 1,036,532 | $ | 1,506,408 | $ | 1,113,245 | $ | 470,907 | $ | — | $ | — | ||||||||||||
Emerging Markets Fund | $ | 14,025,400 | $ | 9,388,621 | $ | 9,555,433 | $ | 2,564,709 | $ | — | $ | — | ||||||||||||
International Small Cap Fund | $ | 9,125,302 | $ | 1,497,320 | $ | 5,701,907 | $ | 59,783 | $ | — | $ | — | ||||||||||||
Core Plus Fund | $ | 1,057,596 | $ | 1,307,835 | $ | 49,808 | $ | 343,555 | $ | — | $ | — | ||||||||||||
Credit Focus Yield Fund | $ | 677,304 | $ | 678,771 | $ | 35,214 | $ | 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, 2014.
At September 30, 2014 the Funds had capital losses expiring and capital loss carryforwards utilized as indicated below:
Fund | 2018 | Indefinite | Utilized | |||||||||
International Fund | $ | 29,067,216 | $ | 56,792,472 | $ | 30,494,850 | ||||||
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, 2014, the International Fund increased undistributed net investment income/loss by $1,992,930, decreased accumulated net realized gain/loss by $1,710,111 and decreased paid in capital by $282,819, due to certain permanent book and tax differences. The Global Fund increased undistributed net investment income/loss by $1,891 and decreased accumulated net realized gain/loss by $1,891. The Emerging Markets Fund decreased undistributed net investment income/loss by $1,195,965 and, increased accumulated net realized gain/loss by $1,195,965. The International Small Cap Fund decreased undistributed net investment income/loss by $134,057 and increased accumulated net realized gain/loss by $134,057. The Core Plus Fund increased undistributed net investment income/loss by $10,523 and decreased accumulated net realized gain/loss by $10,523. The permanent book and tax differences are primarily due to reclassification of foreign currency transactions, passive foreign investment companies (PFIC) and paydown gains and losses.
106
Brandes Investment Trust
NOTES TO FINANCIAL STATEMENTS (continued)
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 – TRANSACTIONS WITH AFFILIATES
The following issuer was affiliated with the International Small Cap Fund, as the International Small Cap Fund held 5% or more of the outstanding voting securities of the issuer during the period October 1, 2013 through September 30, 2014. As defined in Section (2)(a)(3) of the 1940 Act, such issuers are:
Share | Share | |||||
Balance At | Balance At | Value At | ||||
October 1, | September 30, | Dividend | September 30, | |||
Issuer Name | 2013 | Additions | Reductions | 2014 | Income | 2014 |
Micronas | ||||||
Semiconductor | ||||||
Holding AG(1) | 292,701 | 1,487,158 | — | 1,779,859 | $38,861 | $13,404,406 |
$38,861 | $13,404,406 |
(1) Issuer was not an affiliate as of October 1, 2013. |
NOTE 9 – RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In June 2014, the Financial Accounting Standard Board issued ASU No. 2014-11 “Repurchase-to-Maturity Transactions, Repurchase Financings, and Disclosures.” ASU No. 2014-11 makes limited changes to the accounting for repurchase agreements, clarifies when repurchase agreements and securities lending transactions should be accounted for as secured borrowings, and requires additional disclosures regarding these types of transactions. The guidance is effective for fiscal years beginning on or after December 15, 2014, and for interim periods within those fiscal years. Management is currently evaluating the impact these changes will have on the Fund’s financial statement disclosures.
107
Brandes Investment Trust
NOTES TO FINANCIAL STATEMENTS (continued)
NOTE 10 − OWNERSHIP BY AFFILIATED PARTIES
As of September 30, 2014, the Advisor or affiliates of the Advisor beneficially owned shares of the Funds as follows:
International Equity Fund | |||||||||||||||||||||
Class A | Class C | Class E | Class I | ||||||||||||||||||
Shares | 7 | 72 | 8,335 | 2,652 | |||||||||||||||||
Percent of total | |||||||||||||||||||||
outstanding shares | 0.00% | 0.03% | 0.92% | 0.01% | |||||||||||||||||
Emerging | |||||||||||||||||||||
Markets | |||||||||||||||||||||
Global Equity Fund | Fund | ||||||||||||||||||||
Class A | Class C | Class E | Class I | Class I | |||||||||||||||||
Shares | 5 | 50 | 6,630 | 897,964 | 25,055 | ||||||||||||||||
Percent of total | |||||||||||||||||||||
outstanding shares | 0.01% | 0.13% | 60.01% | 50.64% | 0.03% | ||||||||||||||||
International | |||||||||||||||||||||
Small Cap | Core Plus Fixed | Credit Focus | |||||||||||||||||||
Equity Fund | Income Fund | Yield Fund | |||||||||||||||||||
Class C | Class I | Class A | Class I | Class A | Class I | ||||||||||||||||
Shares | 92 | 1,995,485 | 107 | 967,209 | 10 | 2,499,490 | |||||||||||||||
Percent of total | |||||||||||||||||||||
outstanding shares | 0.01% | 5.30% | 0.05% | 21.40% | 0.01% | 94.82% |
NOTE 11 – SUBSEQUENT EVENTS
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.
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Brandes Investment Trust
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Trustees and Shareholders
of Brandes Investment Trust
In our opinion, the accompanying statements of assets and liabilities, including the schedules of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Brandes International Equity Fund, Brandes Global Equity Fund, Brandes Emerging Markets Fund, Brandes International Small Cap Equity Fund, Brandes Core Plus Fixed Income Fund and Brandes Credit Focus Yield Fund (hereinafter collectively referred to as the “Funds”) at September 30, 2014, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the periods presented, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Funds’ management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at September 30, 2014 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion. The financial highlights of Brandes International Equity Fund, Brandes Core Plus Fixed Income Fund and Brandes Global Equity Fund for the period then ended September 30, 2010, were audited by other auditors whose report dated November 24, 2010 expressed an unqualified opinion on those statements.
/s/ PricewaterhouseCoopers LLP
Los Angeles, California
November 25, 2014
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Brandes Investment Trust
ADDITIONAL INFORMATION — (Unaudited)
PROXY VOTING PROCEDURES
The Advisor votes proxies relating to the Funds’ portfolio securities in accordance with procedures adopted by the Advisor. You may obtain a description of these procedures, free of charge, by calling toll-free 1-800-331-2979. This information is also available through the Securities and Exchange Commission’s website at http://www.sec.gov.
Information regarding how the Trust voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available without charge, upon request, by calling 1-800-331-2979. This information is also available through the Securities and Exchange Commission’s website at http://www.sec.gov.
FORM N-Q DISCLOSURE
The Trust files the Fund’s complete schedule of portfolio holdings with the Securities and Exchange Commission for the first and third quarters of each fiscal year on Form N-Q. The Trust’s Form N-Q filings are available on the Securities and Exchange Commission’s website at http://www.sec.gov. The Trust’s Form N-Q filings may be reviewed and copied at the Commission’s Public Reference Room in Washington, D.C., and information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. Information regarding the Trust’s Form N-Q filings is also available, without charge, by calling toll-free, 1-800-331-2979.
TAX NOTICE
For the periods ended September 30, 2014, 0.00%, 0.00%, 0.00%, 0.00%, 100.00% and 100.00% of the ordinary distributions paid by the International, Global, Emerging, International Small Cap, Core Plus and Credit Focus Yield Funds, respectively, qualify as interest related dividends under Internal Revenue Code Section 87(k)(1)(c). For the periods ended September 30, 2014, 0.00%, 15.27%, 17.67%, 36.27%, 0.00% and 0.00% of the ordinary distributions paid by the International, Global, Emerging, International Small Cap, Core Plus and Credit Focus Yield Funds, respectively, were designated as short-term gain distributions under Internal Revenue Code Section 871(k)(2)(c).
The percentage of dividend income distributed for the year ended September 30, 2014, which is designated as qualified dividend income under the Jobs and Growth Tax Relief Reconciliation Act of 2003, is 100.00%, 96.77%, 51.46%, 24.45%, 2.68% and 5.81% for the International, Global, Emerging, International Small Cap, Core Plus, and Credit Focus Yield Funds, respectively. Of the dividends paid by the International, Global, Emerging, International Small Cap, Core Plus, and Credit Focus Yield Funds, 0.00%, 20.30%, 0.00%, 0.00%, 2.68% and 5.81%, respectively, qualify for the corporate dividends received deduction.
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ADDITIONAL INFORMATION — (Unaudited) (continued)
For the Year Ended September 30, 2014, the International Fund, Global Fund, Emerging Markets, and International Small Cap Fund earned foreign source income from dividends earned and paid foreign taxes, as noted below, which they intend to pass through to their shareholders pursuant to Section 853 of the Internal Revenue Code, with the exception of the foreign taxes paid in the United Kingdom. The United Kingdom foreign taxes paid by the Funds do not qualify to be passed through to the Funds’ shareholders.
Gross Foreign Income | ||||||||||||||||
International | ||||||||||||||||
International | Global | Emerging | Small Cap | |||||||||||||
Fund | Fund | Markets | Fund | |||||||||||||
Argentina | $ | — | $ | — | $ | 31,241 | $ | 28,070 | ||||||||
Austria | — | — | 191,356 | — | ||||||||||||
Belgium | — | — | — | 393,086 | ||||||||||||
Bermuda | — | — | 191,724 | 129,902 | ||||||||||||
Brazil | 1,662,031 | 101,035 | 5,658,955 | 206,520 | ||||||||||||
Canada | — | — | — | 632,792 | ||||||||||||
Cayman Islands | — | — | 1,649,453 | — | ||||||||||||
Czech Republic | — | — | 569,857 | — | ||||||||||||
Denmark | — | — | — | 49,002 | ||||||||||||
Egypt | — | — | 335,442 | 122,236 | ||||||||||||
France | 3,109,817 | 181,939 | — | 209,076 | ||||||||||||
Germany | 189,039 | 17,329 | — | — | ||||||||||||
Greece | — | — | — | 149,001 | ||||||||||||
Hong Kong | 388,347 | 29,915 | 3,513,912 | 739,347 | ||||||||||||
Hungary | — | — | 181,590 | — | ||||||||||||
India | — | — | 1,444,128 | 390,073 | ||||||||||||
Indonesia | — | — | 165,873 | — | ||||||||||||
Ireland | 405,077 | 30,910 | — | — | ||||||||||||
Italy | 1,245,809 | 86,943 | — | 547,253 | ||||||||||||
Japan | 3,408,200 | 188,219 | — | 1,740,987 | ||||||||||||
Malaysia | — | 11,617 | 198,438 | — | ||||||||||||
Mexico | 132,114 | 9,666 | 301,620 | — | ||||||||||||
Netherlands | 801,813 | 50,954 | — | — | ||||||||||||
Pakistan | — | — | 36,196 | — | ||||||||||||
Panama | — | — | 420,116 | 45,629 | ||||||||||||
Philippines | — | — | — | 62,255 | ||||||||||||
Russia | 435,519 | 34,365 | 5,151,065 | — | ||||||||||||
Singapore | — | — | 100,264 | 180,427 | ||||||||||||
South Korea | 210,427 | 12,620 | 1,467,436 | 44,394 | ||||||||||||
Spain | 309,107 | 18,969 | — | — | ||||||||||||
Sweden | 267,479 | 24,012 | — | 111,376 | ||||||||||||
Switzerland | 691,599 | 69,231 | — | 38,861 | ||||||||||||
Turkey | — | 7,639 | 1,261,168 | 108,405 | ||||||||||||
United Kingdom | 4,405,824 | 315,768 | 208,810 | 959,317 | ||||||||||||
$ | 17,662,202 | $ | 1,191,131 | $ | 23,078,644 | $ | 6,888,009 |
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ADDITIONAL INFORMATION — (Unaudited) (continued)
Foreign Tax Paid | ||||||||||||||||
International | ||||||||||||||||
International | Global | Emerging | Small Cap | |||||||||||||
Fund | Fund | Markets | Fund | |||||||||||||
Argentina | $ | — | $ | — | $ | 4,073 | $ | 3,460 | ||||||||
Austria | — | — | 28,703 | — | ||||||||||||
Belgium | — | — | — | 58,963 | ||||||||||||
Brazil | 179,469 | 9,603 | 575,951 | — | ||||||||||||
Canada | — | — | — | 94,919 | ||||||||||||
Czech Republic | — | — | 167,973 | — | ||||||||||||
Denmark | — | — | — | 7,350 | ||||||||||||
France | 465,984 | 26,903 | — | 31,361 | ||||||||||||
Greece | — | — | — | 14,900 | ||||||||||||
Hong Kong | 24,802 | 2,991 | 189,943 | 35,317 | ||||||||||||
Indonesia | — | — | 33,175 | — | ||||||||||||
Italy | 149,898 | 8,938 | — | 82,088 | ||||||||||||
Japan | 418,653 | 23,268 | — | 204,799 | ||||||||||||
Mexico | — | — | 10,324 | — | ||||||||||||
Netherlands | 100,871 | 7,643 | — | — | ||||||||||||
Pakistan | — | — | 3,620 | — | ||||||||||||
Philippines | — | — | — | 18,676 | ||||||||||||
Russia | 51,822 | 4,061 | 526,358 | — | ||||||||||||
South Korea | 46,294 | 2,776 | 322,836 | 9,767 | ||||||||||||
Spain | 46,366 | 2,845 | — | — | ||||||||||||
Sweden | 40,122 | 3,602 | — | 16,706 | ||||||||||||
Turkey | — | 1,146 | 187,950 | 16,261 | ||||||||||||
United Kingdom | 440,582 | 31,577 | 20,881 | 95,932 | ||||||||||||
$ | 1,964,863 | $ | 125,353 | $ | 2,071,787 | $ | 690,499 |
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TRUSTEES AND OFFICERS INFORMATION — (Unaudited)
The Board of Trustees is responsible for the overall management of the Trust’s business. The Board approves all significant agreements between the Trust and persons or companies furnishing services to the Trust, including the Trust’s agreements with the Advisor, Administrator, Custodian and Transfer Agent. The Board of Trustees delegates the day-to-day operations of the Trust to its officers, subject to the Funds investment objectives and policies and to general supervision by the Board. The Trust’s Statement of Additional Information includes additional information about the Trustees and is available, without charge, by calling 1-800-331-2979.
The Trustees and officers of the Trust, their business addresses and principal occupations during the past five years are:
Term of | |||||
Office | Number | Other | |||
and | Principal | of Trust | Directorships/ | ||
Position(s) | Length | Occupation | Series | Trusteeships | |
Name, Address | Held with | of Time | During Past | Overseen | Held by |
and Age | Trust | Served(1) | 5 Years | by Trustee | Trustee |
Independent Trustees(2) | |||||
J. Michael Gaffney, CFA | Trustee | Since | Independent | 7 | None |
11988 El Camino Real, | June | Consultant, | |||
Suite 600 | 2004 | NATIXIS Global | |||
San Diego, CA 92130 | Asset Management, | ||||
(Age 73) | 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 57) | |||||
Robert M. Fitzgerald, CPA | Trustee | Since | Retired. | 7 | Hotchkis and |
(inactive) | April | Wiley Mutual | |||
11988 El Camino Real, | 2008 | Funds | |||
Suite 600 | |||||
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 53) |
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INFORMATION ABOUT TRUSTEES AND OFFICERS — (Unaudited) (continued)
Term of | |||||
Office | Number | Other | |||
and | Principal | of Trust | Directorships/ | ||
Position(s) | Length | Occupation | Series | Trusteeships | |
Name, Address | Held with | of Time | During Past | Overseen | Held by |
and Age | Trust | Served(1) | 5 Years | by Trustee | Trustee |
“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, CFA | 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, CPA | 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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ADVISOR
Brandes Investment Partners, L.P.
11988 El Camino Real, Suite 600
San Diego, CA 92130
800.331.2979
DISTRIBUTOR
Quasar Distributors, LLC
615 E. Michigan Street, 4th Floor
Milwaukee, WI 53202
TRANSFER AGENT
U.S. Bancorp Fund Services, LLC
615 E. Michigan Street, 3rd Floor
Milwaukee, WI 53202
INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
PricewaterhouseCoopers LLP
601 South Figueroa Street
Los Angeles, CA 90017
LEGAL COUNSEL
Bingham McCutchen LLP
355 South Grand Avenue, Suite 4400
Los Angeles, CA 90071
This report is intended for shareholders of the Brandes International Equity Fund, the Brandes Global Equity Fund, the Brandes Emerging Markets Fund, the Brandes International Small Cap Equity Fund, the Brandes Core Plus Fixed Income Fund and the Brandes Credit Focus Yield Fund and may not be used as sales literature unless preceded or accompanied by a current prospectus.
Statements and other information herein are dated and are subject to change.
SEPARATELY MANAGED
ACCOUNT RESERVE TRUST
ANNUAL REPORT
For the year ended
September 30, 2014
Brandes Separately Managed Account Reserve Trust
Dear Shareholder:
The Brandes Separately Managed Account Reserve Trust Fund (Class I Shares) gained 7.13% during the 12 months ended September 30, 2014, while its benchmark, the Barclays U.S. Aggregate Bond Index, returned 3.96%.
In this letter, we will examine the sector- and security-specific factors that affected the Fund’s performance. We will also review changes in the Fund’s composition during the fiscal year and how the Fund is positioned for the future.
The Markets
Fixed-income markets maintained their upward trajectory for the most part of the last 12 months amid a number of positive themes that helped drive returns in all taxable bond sectors. These included 1) continued easy monetary policy globally, especially in the United States; 2) strength of the U.S. economy, which has outperformed its developed-country peers; and 3) low volatility for much of the period.
In February, the Board of Governors of the Federal Reserve System welcomed Janet Yellen as its 15th Chair, taking over the helm from Ben Bernanke to begin her four-year term in arguably the world’s most influential central bank. Ms. Yellen leads the Fed in determining the direction of U.S. monetary policy, pursuing three objectives: inflation control, full employment and stable economic growth. Capital markets had a generally positive reaction to the new Fed leader amid expectations that she would adhere to Mr. Bernanke’s blueprint on tapering the Fed’s quantitative-easing program as the U.S. economy gains further steam.
Toward the close of the Fund’s fiscal year, the fixed-income markets experienced mini bouts of volatility, leading to negative returns for many taxable fixed-income asset classes in the third quarter of 2014. Treasury rates continued their largely unexpected downward path at the beginning of the quarter — with the 10-year U.S. Treasury touching a 2014 year-to-date low of 2.34% in late August. The persistent strength of U.S. Treasuries thus far in 2014 appeared to be fueled by Fed policy. While the central bank has been gradually unwinding the past several years’ easy monetary policy, it remains highly accommodative and historically unprecedented.
During much of the 12-month period, geopolitical concerns weighed on investor sentiment. In the second quarter of 2014, the market was focused on the Russian annexation of Crimea, while in the third quarter the focus was on the escalation of violence from the Islamic State.
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Brandes Separately Managed Account Reserve Trust
The Fund
The Fund’s positive absolute and relative performance during the fiscal year was led primarily by holdings in floating rate securities backed by pools of private student loans. Electric utilities were also a strong contributor to performance during the period.
The largest detractor from performance was the duration positioning of the Fund. We have biased the Fund within our range for higher interest rates in the long term by maintaining a relatively shorter duration in the range of 80-85% of the benchmark. This positioning detracted from performance as the 10-year U.S. Treasury rate dropped by approximately 0.15% during the trailing 12 months.
During the third quarter, the Fund initiated a new position in Cloud Peak Energy (6.375% coupon rate, maturing in March 2024 and a rating of B1/BB-). Cloud Peak Energy is a pure play coal miner. It is the lowest-cost player in the lowest cost-mining region in the world — the Powder River Basin, located in southeast Montana and northeast Wyoming. Coal mining is a highly cyclical industry, and producers have high fixed costs. Additionally, the coal industry is facing significant structural headwinds and powerful negative sentiment, owing to coal’s status as dirty energy. U.S. coal demand has been largely stagnant due to a combination of low natural gas prices and much stricter emission regulations. What we find attractive about Cloud Peak Energy is that the company’s ardent focus on cost control should enable the company to generate positive cash flows through the volatile demand and pricing cycles. The quality of the mining assets at Cloud Peak Energy also supports strong asset coverage, in our view. Finally, coal miners operating in the Powder River Basin continue to take market share from operators in the Appalachians, where the extraction costs are much higher.
In the second quarter, we added to existing holdings in Masco Corp. (rated Ba3/BBB-). Masco manufactures a number of home-improvement and building products, including faucets, cabinets, architectural coatings and windows, and is one of the largest installers of insulation for new-home construction. Masco posted steady improvement in sales and EBITDA in 2013 consistent with improvement in the housing market. Additionally, the company continues to chip away at reducing its debt load. We added to our existing holding in a 2016 maturity. We believe Masco is an improving credit with an attractive yield in the front-end of the yield curve.
During the fiscal year, another transaction of note was the swap of our holding in Sappi Papier 7.75% 7/15/17 (rated Ba2/BB) into a longer maturity Sappi Papier 6.625% 4/15/21(Ba2/BB). Sappi is a South African based company that is one of the global market leaders in paper. It is geographically diversified with 59% of sales in Europe, 23% in North America and 18% in South Africa. It is also a low cost leader
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Brandes Separately Managed Account Reserve Trust
in the industry. More recently Sappi has undertaken a large capital expenditure program to convert two plants (one in North America and one in South Africa) to produce chemical cellulose. Chemical cellulose is a dissolving wood pulp that is in a wide range of consumer products from food to packaging, but in particular it is used as a fiber in clothing and textiles. With the recent plant conversions, Sappi has become the largest chemical cellulose producer in the world.
We made our initial investment in Sappi in September 2013 as we viewed the company’s large capital expenditure program as a long-term positive. However, at that time, the company’s EBITDA was lower, free cash flow was negative and liquidity was stressed. Since our initial investment, the two plant conversions are now completed and fully operational, and we have seen Sappi return to positive free cash flow – allowing the company to pay down debt and improve leverage ratios. Similar to our investment in the 2017 maturity (mentioned above), we purchased first lien notes, which are secured by the company’s physical plant assets from several facilities worldwide. While we expect that credit metrics are at an inflection point and should continue to improve, the asset coverage provided by the first lien structure, we believe, gives us protection in the event that liquidity or credit metrics become further stressed. The transaction allowed us to move into a lower-priced issue and also pick up additional yield.
Outlook
We are as cautious today on the market as we have been over the last decade. Corporate credit spreads continue to grind tighter as many 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. Agency mortgage-backed security spreads also remain tight. Even with the tapering program, the Fed is buying virtually all of the net new supply — creating a strong supply/demand imbalance in that market.
Due to these concerns, we have positioned the Fund defensively. 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 it has been 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 a nimble manager, Brandes can take advantage of market dynamics and volatility to find potentially mispriced bonds, buying them at a discount to our estimates of their true worth. Importantly, amid constantly evolving and complex
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Brandes Separately Managed Account Reserve Trust
markets, look to Brandes to consistently employ a straightforward, transparent and focused approach to pursuing value on your behalf.
Sincerely yours,
The Brandes Fixed Income Investment Committee
Brandes Investment Trust
Timothy Doyle, CFA, Chuck Gramling, CFA, David Gilson, CFA
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.
EBITDA: Earnings before interest, taxes, depreciation and amortization
Free Cash Flow: Operating cash flow less capital expenditures
Yield: Annual income from the investment (dividend, interest, etc.) divided by the current market price of the investment.
Source for bond ratings: Moody’s and Standard & Poor’s. Bond ratings are grades given to bonds that indicate their credit quality as determined by a private independent rating service such as Standard & Poor’s. The firm evaluates a bond issuer’s financial strength, or its ability to pay a bond’s principal and interest in a timely fashion. Ratings are expressed as letters ranging from ‘AAA’, which is the highest grade, to ‘D’, which is the lowest grade. In limited situations when the rating agency has not issued a formal rating, the Advisor will classify the security as nonrated.
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.
4
Brandes Separately Managed Account Reserve Trust
The Fund invests in foreign securities, which involve additional risks, including currency fluctuations, political instability, differences in financial reporting standards and less stringent regulation of securities markets.
International and emerging markets investing is subject to certain risks such as currency fluctuations and social and political changes; such risks may result in greater share price volatility. Emerging market countries involve greater risks, such as immature economic structures, national policies restricting investments by foreigners, and different legal systems. The Fund’s use of derivative instruments, such as options contracts, futures contracts or swap agreements, involves risks different from, or possibly greater than, the risks associated with investing directly in securities and other more traditional investments.
Unlike bonds issued or guaranteed by the U.S. government or its agencies, stocks and other bonds are not backed by the full faith and credit of the United States. Stock and bond prices will experience market fluctuations. Please note that the value of government securities and bonds in general have an inverse relationship to interest rates. Bonds carry the risk of default, or the risk than an issuer will be unable to make income or principal payment. There is no assurance that private guarantors or insurers will meet their obligations. The credit quality of the investments in the portfolio is no guarantee of the safety or stability of the portfolio. Investments in asset-backed and mortgage-backed securities include additional risks that investors should be aware of such as credit risk, prepayment risk, possible illiquidity and default, as well as increased susceptibility to adverse economic developments.
Please refer to the Schedule of Investments in the report for complete holdings information. Fund holdings, geographic allocations and/or sector allocations are subject to change at any time and are not a recommendation to buy or sell any security.
Investment performance reflects fee waivers and/or reimbursement of expenses. In the absence of such waivers/reimbursements, total return would be reduced.
The foregoing reflects the thoughts and opinions of Brandes Investment Partners® exclusively and is subject to change without notice.
Brandes Investment Partners® is a registered trademark of Brandes Investment Partners, L.P. in the United States and Canada.
Must be preceded or accompanied by a prospectus.
5
Brandes Separately Managed Account Reserve Trust
Index Guide
The Barclays U.S. Aggregate Bond Index is an unmanaged index consisting of U.S. dollar-denominated, fixed-rate, taxable bonds. The U.S. Aggregate Bond Index is a broad-based benchmark that measures the investment grade, U.S. dollar-denominated, fixed-rate taxable bond market, including Treasuries, government-related and corporate securities, MBS (agency fixed-rate and hybrid ARM passthroughs), ABS, and CMBS. The U.S. Aggregate rolls up into other Barclays Capital flagship indices such as the multi-currency Global Aggregate Index and the U.S. Universal Index, which includes high yield and emerging markets debt. The U.S. Aggregate Index was created in 1986, with index history backfilled to January 1, 1976. The index is a total return index which reflects the price changes and interest of each bond in the index.
Please note that all indices are unmanaged are not available for direct investment.
The Brandes Separately Managed Account Reserve Trust is distributed by Quasar Distributors, LLC.
6
Brandes Separately Managed Account Reserve Trust
The following chart compares the value of a hypothetical $10,000 investment in the Separately Managed Account Reserve Trust from its inception (October 3, 2005) to September 30, 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
Average Annual Total Return | |||||
Periods Ended September 30, 2014 | |||||
Since | |||||
One | Three | Five | Inception | ||
Year | Year | Year | (10/3/05) | ||
Separately Managed Account | |||||
Reserve Trust | 7.13% | 8.80% | 10.42% | 6.16% | |
Barclays Capital | |||||
U.S. Aggregate Index | 3.96% | 2.43% | 4.12% | 4.86% | |
Barclays Capital | |||||
U.S. Intermediate Credit Index | 4.04% | 4.09% | 5.17% | 5.25% |
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.
7
Brandes Separately Managed Account Reserve Trust
The returns shown do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. The Advisor has a fee waiver arrangement in place to limit the Fund’s annual operating expenses.
Sector Allocation as a Percentage of Total Investments as of
September 30, 2014
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.
8
Brandes Separately Managed Account Reserve Trust
Expense Example (Unaudited)
As a shareholder of the Fund, you incur ongoing costs, including investment advisory and administrative fees and other Fund expenses. The examples below are intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The examples are based on an investment of $1,000 invested at the beginning of the period and held for the entire period from April 1, 2014 to September 30, 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 | $1,019.70 | 0.00% | $0.00 |
9
Brandes Separately Managed Account Reserve Trust
Hypothetical Example for Comparison Purposes
This section provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other mutual funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other mutual funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the last column of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Expenses | |||||
Beginning | Ending | Annual | Paid | ||
Account | Account | Expense | During | ||
Fund | Value | Value | Ratio | the Period* | |
Separately Managed Account | |||||
Reserve Trust** | $1,000.00 | $1,025.07 | 0.00% | $0.00 |
* | The Fund’s expenses are equal to the Fund’s expense ratio for the period, multiplied by the average account value over the period, multiplied by 183/365 (to reflect the one half-year period). | |
** | No expenses have been charged to the SMART Fund over the period, as the SMART Fund participates in a wrap-fee program sponsored by investment advisors unaffiliated with the SMART Fund. See Note 3 to the Financial Statements. |
10
Brandes Separately Managed Account Reserve Trust
SCHEDULE OF INVESTMENTS — September 30, 2014
Principal | ||||||||
Amount | Value | |||||||
MORTGAGE RELATED SECURITIES – 0.37% | ||||||||
Collateralized Mortgage Obligations – 0.01% | ||||||||
Wells Fargo Mortgage Backed Securities Trust | ||||||||
Series 2006-AR14, 5.894%, 10/25/2036 (e) | $ | 15,156 | $ | 14,828 | ||||
Sub-Prime Mortgages – 0.36% | ||||||||
Structured Asset Investment Loan Trust | ||||||||
Series A3, 0.915%, 07/25/2035 | 498,789 | 491,375 | ||||||
TOTAL MORTGAGE RELATED SECURITIES | ||||||||
(Cost $506,154) | $ | 506,203 | ||||||
US GOVERNMENTS – 17.31% | ||||||||
Sovereign – 17.31% | ||||||||
United States Treasury Bond | ||||||||
4.750%, 02/15/2037 | $ | 1,535,000 | $ | 1,960,963 | ||||
United States Treasury Note | ||||||||
3.375%, 11/15/2019 | 3,560,000 | 3,832,842 | ||||||
2.000%, 11/15/2021 | 7,815,000 | 7,693,500 | ||||||
2.000%, 02/15/2023 | 10,775,000 | 10,455,963 | ||||||
TOTAL US GOVERNMENTS | ||||||||
(Cost $23,342,849) | $ | 23,943,268 | ||||||
Shares | Value | |||||||
COMMON STOCKS – 0.39% | ||||||||
Paper & Forest Products – 0.39% | ||||||||
Resolute Forest Products, Inc. (a) | 34,174 | $ | 534,481 | |||||
TOTAL COMMON STOCKS | ||||||||
(Cost $3,202,826) | $ | 534,481 | ||||||
PREFERRED STOCKS – 3.93% | ||||||||
Banks & Thrifts – 2.46% | ||||||||
Ally Financial, Inc., 8.500% | 126,200 | $ | 3,398,566 | |||||
Technology Hardware & Equipment – 1.47% | ||||||||
Pitney Bowes International Holdings, Inc., 6.125% (b) | 1,879 | 2,035,192 | ||||||
TOTAL PREFERRED STOCKS | ||||||||
(Cost $4,767,540) | $ | 5,433,758 |
The accompanying notes are an integral part of this Schedule of Investments.
11
Brandes Separately Managed Account Reserve Trust
SCHEDULE OF INVESTMENTS — September 30, 2014 (continued)
Principal | ||||||||
Amount | Value | |||||||
ASSET BACKED SECURITIES – 3.67% | ||||||||
Student Loan – 3.67% | ||||||||
SLM Private Credit Student Loan Trust | ||||||||
Series 2004-B, 0.664%, 09/15/2033 | $ | 1,500,000 | $ | 1,366,212 | ||||
Series 2005-A, 0.544%, 12/15/2038 | 1,865,000 | 1,689,388 | ||||||
Series 2006-A, 0.524%, 06/15/2039 | 2,200,000 | 2,019,595 | ||||||
TOTAL ASSET BACKED SECURITIES | ||||||||
(Cost $4,753,497) | $ | 5,075,195 | ||||||
CORPORATE BONDS – 71.10% | ||||||||
Automobiles – 1.27% | ||||||||
Chrysler Group LLC | ||||||||
8.250%, 06/15/2021 | $ | 1,615,000 | $ | 1,760,350 | ||||
Banks & Thrifts – 12.15% | ||||||||
Ally Financial, Inc. | ||||||||
6.750%, 12/01/2014 | 3,041,000 | 3,056,205 | ||||||
First Horizon National Corp. | ||||||||
5.375%, 12/15/2015 | 1,780,000 | 1,865,582 | ||||||
JP Morgan Chase & Co. | ||||||||
7.900%, Perpetual | 5,620,000 | 6,083,650 | ||||||
Regions Financial Corp. | ||||||||
5.750%, 06/15/2015 | 3,890,000 | 4,013,982 | ||||||
The Goldman Sachs Group, Inc. | ||||||||
7.500%, 02/15/2019 | 1,500,000 | 1,788,633 | ||||||
16,808,052 | ||||||||
Building Materials – 8.64% | ||||||||
CRH America, Inc. | ||||||||
6.000%, 09/30/2016 | 1,915,000 | 2,094,604 | ||||||
Masco Corp. | ||||||||
6.125%, 10/03/2016 | 4,485,000 | 4,785,495 | ||||||
Mohawk Industries, Inc. | ||||||||
6.125%, 01/15/2016 | 1,221,000 | 1,298,802 | ||||||
Owens Corning | ||||||||
6.500%, 12/01/2016 | 750,000 | 826,235 | ||||||
USG Corp. | ||||||||
6.300%, 11/15/2016 | 2,790,000 | 2,939,963 | ||||||
11,945,099 | ||||||||
Commercial Services & Supplies – 1.03% | ||||||||
The ADT Corp. | ||||||||
3.500%, 07/15/2022 | 1,640,000 | 1,418,600 | ||||||
Diversified Financial Services – 1.81% | ||||||||
Voya Financial, Inc. | ||||||||
5.500%, 07/15/2022 | 2,220,000 | 2,502,724 |
The accompanying notes are an integral part of this Schedule of Investments.
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Brandes Separately Managed Account Reserve Trust
SCHEDULE OF INVESTMENTS — September 30, 2014 (continued)
Principal | ||||||||
Amount | Value | |||||||
Electric Utilities – 10.92% | ||||||||
DPL, Inc. | ||||||||
7.250%, 10/15/2021 | $ | 2,100,000 | $ | 2,168,250 | ||||
EDP Finance BV | ||||||||
4.900%, 10/01/2019 (b) | 4,450,000 | 4,595,292 | ||||||
FirstEnergy Corp. | ||||||||
7.375%, 11/15/2031 | 3,950,000 | 4,669,635 | ||||||
Israel Electric Corporation Ltd. | ||||||||
7.250%, 01/15/2019 (b) | 3,275,000 | 3,668,000 | ||||||
15,101,177 | ||||||||
Energy – 1.25% | ||||||||
Valero Energy Corp. | ||||||||
9.375%, 03/15/2019 | 1,340,000 | 1,723,161 | ||||||
Food, Beverage & Tobacco – 4.96% | ||||||||
Pilgrims Pride Corp. | ||||||||
7.875%, 12/15/2018 | 1,790,000 | 1,870,550 | ||||||
Tyson Foods, Inc. | ||||||||
6.600%, 04/01/2016 | 4,615,000 | 4,993,388 | ||||||
6,863,938 | ||||||||
Forest Products & Paper – 1.43% | ||||||||
Sappi Papier Holding GmbH | ||||||||
6.625%, 04/15/2021 (b) | 1,915,000 | 1,982,025 | ||||||
Healthcare Providers & Services – 0.92% | ||||||||
Laboratory Corp. of America Holdings | ||||||||
3.750%, 08/23/2022 | 1,250,000 | 1,264,281 | ||||||
Homebuilders – 8.97% | ||||||||
Centex Corp. | ||||||||
6.500%, 05/01/2016 | 2,695,000 | 2,876,913 | ||||||
Lennar Corp. | ||||||||
5.600%, 05/31/2015 | 4,440,000 | 4,534,350 | ||||||
Toll Brothers Finance Corp. | ||||||||
5.150%, 05/15/2015 | 4,235,000 | 4,319,700 | ||||||
Urbi Desarrollos Urbanos SA | ||||||||
9.500%, 01/21/2020 (b)(d)(e) | 5,140,000 | 668,200 | ||||||
12,399,163 | ||||||||
Insurance – 5.45% | ||||||||
American International Group, Inc. | ||||||||
6.400%, 12/15/2020 | 2,785,000 | 3,313,362 | ||||||
CNA Financial Corp. | ||||||||
7.350%, 11/15/2019 | 1,700,000 | 2,043,099 | ||||||
5.875%, 08/15/2020 | 1,250,000 | 1,425,508 | ||||||
Marsh & McLennan Cos, Inc. | ||||||||
5.750%, 09/15/2015 | 714,000 | 747,836 | ||||||
7,529,805 |
The accompanying notes are an integral part of this Schedule of Investments.
13
Brandes Separately Managed Account Reserve Trust
SCHEDULE OF INVESTMENTS — September 30, 2014 (continued)
Principal | ||||||||
Amount | Value | |||||||
Media – 1.21% | ||||||||
McGraw Hill Financial, Inc. | ||||||||
5.900%, 11/15/2017 | $ | 1,525,000 | $ | 1,675,103 | ||||
Metals & Mining – 0.95% | ||||||||
ArcelorMittal SA | ||||||||
5.500%, 03/01/2021 | 1,255,000 | 1,319,319 | ||||||
Oil & Gas, & Consumable Fuels – 4.82% | ||||||||
Chesapeake Energy Corp. | ||||||||
6.625%, 08/15/2020 | 3,555,000 | 3,921,165 | ||||||
Cloud Peak Energy, Inc. | ||||||||
6.375%, 03/15/2024 | 1,005,000 | 969,825 | ||||||
Kinder Morgan, Inc. | ||||||||
7.000%, 06/15/2017 | 1,610,000 | 1,775,025 | ||||||
6,666,015 | ||||||||
Pharmaceutical – 0.99% | ||||||||
Valeant Pharmaceuticals International | ||||||||
6.750%, 08/15/2018 (b) | 1,300,000 | 1,371,500 | ||||||
Retail – 2.53% | ||||||||
Marks & Spencer Plc | ||||||||
7.125%, 12/01/2037 (b) | 2,975,000 | 3,501,453 | ||||||
Telecommunications – 1.80% | ||||||||
Telecom Italia Capital SA | ||||||||
6.999%, 06/04/2018 | 840,000 | 945,000 | ||||||
Telefonica Emisiones SAU | ||||||||
5.462%, 02/16/2021 | 1,390,000 | 1,547,982 | ||||||
2,492,982 | ||||||||
TOTAL CORPORATE BONDS | ||||||||
(Cost $90,636,200) | $ | 98,324,747 | ||||||
Contracts | Value | |||||||
WARRANTS – 0.00% | ||||||||
Semiconductors – 0.00% | ||||||||
MagnaChip Semiconductor Corp. | ||||||||
Expiration Date: November 2014, Exercise Price: 1.97 (a)(c)(e) | 80,400 | $ | — | |||||
TOTAL WARRANTS | ||||||||
(Cost $863,486) | $ | — |
The accompanying notes are an integral part of this Schedule of Investments.
14
Brandes Separately Managed Account Reserve Trust
SCHEDULE OF INVESTMENTS — September 30, 2014 (continued)
Principal | ||||||||
Amount | Value | |||||||
TIME DEPOSIT – 3.91% | ||||||||
State Street Euro Dollar Time Deposit, 0.010%, due 10/01/14 | $ | 5,406,432 | $ | 5,406,432 | ||||
TOTAL TIME DEPOSIT | ||||||||
(Cost $5,406,432) | $ | 5,406,432 | ||||||
Total Investments (Cost $133,478,984) – 100.68% | $ | 139,224,084 | ||||||
Liabilities in Excess of Other Assets – (0.68%) | (933,747 | ) | ||||||
TOTAL NET ASSETS – 100.00% | $ | 138,290,337 |
__________
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 Rule) or pursuant to another exemption from registration. The market values of these securities total $17,821,662 which represents 12.89% 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 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. |
(e) | These securities have limited liquidity and represent $683,028 or 0.49% of the Fund’s net assets and are classified as Level 2 securities. See Note 2 in the Notes to Financial Statements. |
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 this Schedule of Investments.
15
Brandes Separately Managed Account Reserve Trust
STATEMENT OF ASSETS AND LIABILITIES — September 30, 2014
ASSETS | ||||
Investments in securities, at cost | $ | 133,478,984 | ||
Investment in securities, at value | $ | 139,224,084 | ||
Receivables: | ||||
Fund shares sold | 212,201 | |||
Dividends and interest | 1,994,866 | |||
Total Assets | 141,431,151 | |||
LIABILITIES | ||||
Payables: | ||||
Securities purchased | 2,482,069 | |||
Fund shares redeemed | 655,335 | |||
Dividends payable | 3,410 | |||
Total Liabilities | 3,140,814 | |||
NET ASSETS | $ | 138,290,337 | ||
COMPONENTS OF NET ASSETS | ||||
Paid-in capital | $ | 159,905,669 | ||
Undistributed net investment income | — | |||
Accumulated net realized loss on investments | (27,360,432 | ) | ||
Net unrealized appreciation on investments | 5,745,100 | |||
Total Net Assets | $ | 138,290,337 | ||
Net asset value, offering price and redemption proceeds per share | ||||
Net Assets | $ | 138,290,337 | ||
Shares outstanding (unlimited shares authorized without par value) | 15,322,201 | |||
Offering and redemption price | $ | 9.03 |
The accompanying notes to financial statements are an integral part of this statement.
16
Brandes Separately Managed Account Reserve Trust
STATEMENT OF OPERATIONS — For the Year Ended September 30, 2014
INVESTMENT INCOME | ||||
Income | ||||
Dividend income | $ | 378,394 | ||
Interest income | 6,334,219 | |||
Total income | 6,712,613 | |||
Expenses (Note 3) | ||||
Total expenses | — | |||
Less reimbursement / waiver | — | |||
Total expenses net of reimbursement / waiver | — | |||
Net investment income | 6,712,613 | |||
REALIZED AND UNREALIZED GAIN ON INVESTMENTS: | ||||
Net realized gain on investments | 594,835 | |||
Net change in unrealized appreciation on investments | 1,545,293 | |||
Net realized and unrealized gain on investments | 2,140,128 | |||
Net Increase in net assets resulting from operations | $ | 8,852,741 |
The accompanying notes to financial statements are an integral part of this statement.
17
Brandes Separately Managed Account Reserve Trust
STATEMENT OF CHANGES IN NET ASSETS
Year Ended | Year Ended | |||||||
September 30, | September 30, | |||||||
2014 | 2013 | |||||||
INCREASE (DECREASE) IN NET ASSETS FROM: | ||||||||
OPERATIONS | ||||||||
Net investment income | $ | 6,712,613 | $ | 7,375,564 | ||||
Net realized gain (loss) on investments | 594,835 | (1,917,766 | ) | |||||
Net change in unrealized appreciation on investments | 1,545,293 | 275,348 | ||||||
Net increase in net assets | ||||||||
resulting from operations | 8,852,741 | 5,733,146 | ||||||
DISTRIBUTIONS TO SHAREHOLDERS | ||||||||
From net investment income | (6,988,855 | ) | (7,462,478 | ) | ||||
Decrease in net assets from distributions | (6,988,855 | ) | (7,462,478 | ) | ||||
CAPITAL SHARE TRANSACTIONS | ||||||||
Proceeds from shares sold | 39,454,142 | 28,518,289 | ||||||
Net asset value of shares issued | ||||||||
on reinvestment of distributions | 6,898,576 | 6,645,826 | ||||||
Cost of shares redeemed | (36,195,560 | ) | (48,751,533 | ) | ||||
Net increase (decrease) in net assets | ||||||||
from capital share transactions | 10,157,158 | (13,587,418 | ) | |||||
Total increase (decrease) in net assets | 12,021,044 | (15,316,750 | ) | |||||
NET ASSETS | ||||||||
Beginning of the Year | 126,269,293 | 141,586,043 | ||||||
End of the Year | $ | 138,290,337 | $ | 126,269,293 | ||||
Undistributed net investment income | $ | — | $ | 202,052 |
The accompanying notes to financial statements are an integral part of this statement.
18
Brandes Separately Managed Account Reserve Trust
FINANCIAL HIGHLIGHTS
Year Ended September 30, | ||||||||||||||||||||
2014 | 2013 | 2012 | 2011 | 2010 | ||||||||||||||||
Net asset value, | ||||||||||||||||||||
beginning of period | $ | 8.89 | $ | 9.01 | $ | 8.32 | $ | 8.46 | $ | 7.46 | ||||||||||
Income from | ||||||||||||||||||||
investment operations: | ||||||||||||||||||||
Net investment income(2) | 0.46 | 0.51 | 0.49 | 0.52 | 0.60 | |||||||||||||||
Net realized and unrealized | ||||||||||||||||||||
gain/(loss) on investments | 0.16 | (0.12 | ) | 0.73 | (0.12 | ) | 0.97 | |||||||||||||
Total from investment operations | 0.62 | 0.39 | 1.22 | 0.40 | 1.57 | |||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||
Dividends from net | ||||||||||||||||||||
investment income | (0.48 | ) | (0.51 | ) | (0.53 | ) | (0.54 | ) | (0.57 | ) | ||||||||||
Total dividends and distributions | (0.48 | ) | (0.51 | ) | (0.53 | ) | (0.54 | ) | (0.57 | ) | ||||||||||
Net asset value, end of period | $ | 9.03 | $ | 8.89 | $ | 9.01 | $ | 8.32 | $ | 8.46 | ||||||||||
Total return | 7.13 | % | 4.42 | % | 15.13 | % | 4.61 | % | 21.81 | % | ||||||||||
Net assets, end | ||||||||||||||||||||
of period (millions) | $ | 138.3 | $ | 126.3 | $ | 141.6 | $ | 142.4 | $ | 158.5 | ||||||||||
Ratio of net expenses | ||||||||||||||||||||
to average net assets(1) | 0.00 | % | 0.00 | % | 0.00 | % | 0.00 | % | 0.00 | % | ||||||||||
Ratio of net investment income | ||||||||||||||||||||
to average net assets(1) | 5.12 | % | 5.61 | % | 5.66 | % | 5.98 | % | 7.53 | % | ||||||||||
Portfolio turnover rate | 21.61 | % | 28.88 | % | 27.44 | % | 56.16 | % | 36.90 | % |
__________
(1) | Reflects the fact that no fees or expenses are incurred by the Fund. The Fund is an integral part of “wrap-fee” programs sponsored by investment advisers and/or broker-dealers unaffiliated with the Fund or the Advisor. Participants in these programs pay a “wrap” fee to the sponsor of the program. |
(2) | Net investment income per share has been calculated based on average shares outstanding during the period. |
The accompanying notes to financial statements are an integral part of this statement.
19
Brandes Separately Managed Account Reserve Trust
NOTES TO FINANCIAL STATEMENTS
NOTE 1 − ORGANIZATION
The Separately Managed Account Reserve Trust (the “Fund”) is a series of Brandes Investment Trust (the “Trust”). The Trust is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as a diversified, open-end management investment company. The Fund began operations on October 3, 2005. The Fund invests its assets primarily in debt securities and seeks to maximize total return.
NOTE 2 − SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently followed by the Fund. These policies are in conformity with accounting principles generally accepted in the United States of America.
A. | Repurchase Agreements. The Fund may enter into repurchase agreements with government securities dealers recognized by the Federal Reserve Board, with member banks of the Federal Reserve System or with other brokers or dealers that meet the credit guidelines established by the Board of Trustees. The Fund will always receive and maintain, as collateral, securities whose market value, including accrued interest (which is recorded in the Schedule of Investments), will be at least equal to 100% of the dollar amount invested by the Fund in each agreement, and the Fund will make payment for such securities only upon physical delivery or upon evidence of book entry transfer to the account of the Fund’s custodian. To the extent that the term of any repurchase transaction exceeds one business day, the value of the Fund’s collateral is marked-to-market on a daily basis to ensure the adequacy of the collateral. Before causing the 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 |
20
Brandes Separately Managed Account Reserve Trust
NOTES TO FINANCIAL STATEMENTS (continued)
securities and currency transactions may involve certain considerations and risks not typically associated with those of domestic origin. | |
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 September 30, 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 |
21
Brandes Separately Managed Account Reserve Trust
NOTES TO FINANCIAL STATEMENTS (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 (2011 through 2014). As of September 30, 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, 2014. 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 |
22
Brandes Separately Managed Account Reserve Trust
NOTES TO FINANCIAL STATEMENTS (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. | |
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 be fair valued. Thinly traded securities and certain foreign securities may be impacted more by the use of fair valuations than other securities. |
23
Brandes Separately Managed Account Reserve Trust
NOTES TO FINANCIAL STATEMENTS (continued)
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 rolls are accounted for as purchase and sale transactions, which may increase the Fund’s portfolio turnover rate. |
24
Brandes Separately Managed Account Reserve Trust
NOTES TO FINANCIAL STATEMENTS (continued)
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 September 30, 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. | |
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 |
25
Brandes Separately Managed Account Reserve Trust
NOTES TO FINANCIAL STATEMENTS (continued)
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 September 30, 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 | $ | 534,481 | $ | — | $ | — | $ | 534,481 | ||||||||
Preferred Stocks | 3,398,566 | 2,035,192 | — | 5,433,758 | ||||||||||||
Asset Backed Securities | — | 5,075,195 | — | 5,075,195 | ||||||||||||
Corporate Bonds | — | 98,324,747 | — | 98,324,747 | ||||||||||||
Government Securities | — | 23,943,268 | — | 23,943,268 | ||||||||||||
Mortgage Backed Securities | — | 506,203 | — | 506,203 | ||||||||||||
Time Deposit | — | 5,406,432 | — | 5,406,432 | ||||||||||||
Total Investments in Securities | $ | 3,933,047 | $ | 135,291,037 | $ | — | $ | 139,224,084 |
There were no transfers into or out of levels 1 and 2 for the Fund during the reporting period.
Below is a reconciliation that details the activity of securities in Level 3 during the year ended September 30, 2014:
Beginning Balance − October 1, 2013 | $ | 5,911,188 | ||
Purchases | — | |||
Sales | (1,642,362 | ) | ||
Transfers into level 3 | — | |||
Transfers out of level 3 | (4,176,446 | ) | ||
Realized losses | (92,380 | ) | ||
Change in unrealized gains | — | |||
Ending Balance − September 30, 2014 | $ | — |
The transfers from Level 3 to Level 2 are due to the securities being quoted and the inputs being used to derive a price are observable.
The realized 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.
26
Brandes Separately Managed Account Reserve Trust
NOTES TO FINANCIAL STATEMENTS (continued)
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 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. |
27
Brandes Separately Managed Account Reserve Trust
NOTES TO FINANCIAL STATEMENTS (continued)
NOTE 4 − PURCHASES AND SALES OF SECURITIES
The cost of purchases and the proceeds from sales of securities of the Fund, excluding short-term investments, were as follows for the year ended September 30, 2014:
U.S. Government | Other | |||
Purchases | Sales | Purchases | Sales | |
$26,127,174 | $6,140,955 | $10,224,801 | $21,280,986 |
NOTE 5 − CAPITAL STOCK TRANSACTIONS
The Fund’s capital stock activity in shares and dollars during the year ended September 30, 2014 and 2013, was as follows (shares and dollar amounts in thousands):
Year Ended 9/30/14 | Year Ended 9/30/13 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Shares Sold | 4,348 | $ | 39,454 | 3,149 | $ | 28,518 | ||||||||||
Issued on Reinvestment of Distributions | 761 | 6,899 | 734 | 6,646 | ||||||||||||
Shares Redeemed | (3,995 | ) | (36,196 | ) | (5,395 | ) | (48,751 | ) | ||||||||
Net Increase/(Decrease) Resulting | ||||||||||||||||
from Fund Share Transactions | 1,114 | $ | 10,157 | (1,512 | ) | $ | (13,587 | ) |
NOTE 6 − FEDERAL INCOME TAX MATTERS
As of September 30, 2014, the Fund’s components of distributable earnings on a tax basis were as follows:
Cost of investments for tax purposes | $ | 133,621,693 | ||
Gross tax unrealized appreciation | 10,209,633 | |||
Gross tax unrealized depreciation | (4,607,242 | ) | ||
Net unrealized appreciation on investments | 5,602,391 | |||
Distributable ordinary income | — | |||
Distributable long-term capital gains | — | |||
Total distributable earnings | — | |||
Other accumulated losses | (27,217,723 | ) | ||
Total accumulated losses | $ | (21,615,332 | ) |
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 basis unrealized depreciation on investments and foreign currency is due primarily to timing differences resulting from wash sale transactions. These differences are temporary.
28
Brandes Separately Managed Account Reserve Trust
NOTES TO FINANCIAL STATEMENTS (continued)
As of September 30, 2014, 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, 2014, the Fund had a capital loss with an indefinite expiration in the amount of $2,491,403.
The tax composition of dividends for the periods ended September 30, 2014 and September 30, 2013 for the Fund were as follows:
Long Term | Return | ||||||
Ordinary Income | Capital Gains | of Capital | |||||
2014 | 2013 | 2014 | 2013 | 2014 | 2013 | ||
$6,936,413 | $7,462,478 | $— | $— | $52,442 | $— |
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, 2014, as a result of its reclassifications the Fund’s undistributed net investment income was increased by $74,190, accumulated net realized loss was decreased by $21,748 and decreased paid in capital by $52,442.
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 − RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In June 2014, the Financial Accounting Standard Board issued ASU No. 2014-11 “Repurchase-to-Maturity Transactions, Repurchase Financings, and Disclosures.” ASU No. 2014-11 makes limited changes to the accounting for repurchase agreements, clarifies when repurchase agreements and securities lending transactions should be accounted for as secured borrowings, and requires additional disclosures regarding these types of transactions. The guidance is effective for fiscal years beginning on or after December 15, 2014, and for interim periods within those fiscal years. Management is currently evaluating the impact these changes will have on the Fund’s financial statement disclosures.
NOTE 8 − OWNERSHIP BY AFFILIATED PARTIES
As of September 30, 2014, the Advisor or an affiliate of the Advisor beneficially owned 766,549 shares of the Fund which comprised 5.00% of the total outstanding shares.
29
Brandes Separately Managed Account Reserve Trust
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Trustees and Shareholders
of the Brandes Investments Trust
In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of the Brandes Separately Managed Account Reserve Trust (hereinafter referred to as the “Fund”) at September 30, 2014, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the four years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at September 30, 2014 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion. The financial highlights of the Fund for the period then ended September 30, 2010, were audited by other auditors whose report dated November 24, 2010 expressed an unqualified opinion on those statements.
/s/ PricewaterhouseCoopers LLP
Los Angeles, California
November 25, 2014
30
Brandes Separately Managed Account Reserve Trust
ADDITIONAL INFORMATION — (Unaudited)
PROXY VOTING PROCEDURES
The Advisor votes proxies relating to the Funds’ portfolio securities in accordance with procedures adopted by the Advisor. You may obtain a description of these procedures, free of charge, by calling toll-free 1-800-331-2979. This information is also available through the Securities and Exchange Commission’s website at http:// www.sec.gov.
Information regarding how the Trust voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available without charge, upon request, by calling 1-800-331-2979. This information is also available through the Securities and Exchange Commission’s website at http://www.sec.gov.
FORM N-Q DISCLOSURE
The Trust files the Fund’s complete schedule of portfolio holdings with the Securities and Exchange Commission for the first and third quarters of each fiscal year on Form N-Q. The Trust’s Form N-Q filings are available on the Securities and Exchange Commission’s website at http://www.sec.gov. The Trust’s Form N-Q filings may be reviewed and copied at the Commission’s Public Reference Room in Washington, D.C., and information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. Information regarding the Trust’s Form N-Q filings is also available, without charge, by calling toll-free, 1-800-331-2979.
TAX NOTICE
For the periods ended September 30, 2014, 90.61% of the ordinary distributions paid by the SMART Fund qualify as interest related dividends under Internal Revenue Code Section 87(k)(1)(c). For the periods ended September 30, 2014, none of the ordinary distributions paid by SMART Fund, were designated as short-term gain distributions under Internal Revenue Code Section 871(k)(2)(c).
The percentage of dividend income distributed for the year ended September 30, 2014, which is designated as qualified dividend income under the Jobs and Growth Tax Relief Reconciliation Act of 2003 is 5.60% for the SMART Fund. Of the dividends paid by the SMART Fund, 5.60% qualify for the corporate dividends received deduction.
31
Brandes Separately Managed Account Reserve Trust
TRUSTEES AND OFFICERS INFORMATION — (Unaudited)
The Board of Trustees is responsible for the overall management of the Trust’s business. The Board approves all significant agreements between the Trust and persons or companies furnishing services to the Trust, including the Trust’s agreements with the Advisor, Administrator, Custodian and Transfer Agent. The Board of Trustees delegates the day-to-day operations of the Trust to its officers, subject to the Fund’s investment objective and policies and to general supervision by the Board. The Trust’s Statement of Additional Information includes additional information about the Trustees and is available, without charge, by calling 1-800-331-2979.
The Trustees and officers of the Trust, their business addresses and principal occupations during the past five years are:
Term of | |||||
Office | Number | Other | |||
and | Principal | of Trust | Directorships/ | ||
Position(s) | Length | Occupation | Series | Trusteeships | |
Name, Address | Held with | of Time | During Past | Overseen | Held by |
and Age | Trust | Served(1) | 5 Years | by Trustee | Trustee |
Independent Trustees(2) | |||||
J. Michael Gaffney, CFA | Trustee | Since | Independent | 7 | None |
11988 El Camino Real, | June | Consultant, | |||
Suite 600 | 2004 | NATIXIS Global | |||
San Diego, CA 92130 | Asset Management, | ||||
(Age 73) | 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 57) | |||||
Robert M. Fitzgerald, CPA | Trustee | Since | Retired. | 7 | Hotchkis and |
(inactive) | April | Wiley Mutual | |||
11988 El Camino Real, | 2008 | Funds | |||
Suite 600 | |||||
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 53) |
32
Brandes Separately Managed Account Reserve Trust
TRUSTEES AND OFFICERS INFORMATION — (Unaudited) (continued)
Term of | |||||
Office | Number | Other | |||
and | Principal | of Trust | Directorships/ | ||
Position(s) | Length | Occupation | Series | Trusteeships | |
Name, Address | Held with | of Time | During Past | Overseen | Held by |
and Age | Trust | Served(1) | 5 Years | by Trustee | Trustee |
“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, CFA | 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, CPA | 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. |
33
ADVISOR
Brandes Investment Partners, L.P.
11988 El Camino Real, Suite 600
San Diego, CA 92130
800.331.2979
DISTRIBUTOR
Quasar Distributors, LLC
615 E. Michigan Street, 4th Floor
Milwaukee, WI 53202
TRANSFER AGENT
U.S. Bancorp Fund Services, LLC
615 E. Michigan Street, 3rd Floor
Milwaukee, WI 53202
INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
PricewaterhouseCoopers LLP
601 South Figueroa Street
Los Angeles, CA 90017
LEGAL COUNSEL
Bingham McCutchen LLP
355 South Grand Avenue, Suite 4400
Los Angeles, CA 90071
This report is intended for shareholders of the Brandes Separately Managed Account Reserve Trust and may not be used as sales literature unless preceded or accompanied by a current prospectus.
Statements and other information herein are dated and are subject to change.
Item 2. Code of Ethics.
The registrant has adopted a code of ethics that applies to the registrant’s principal executive officer and principal financial officer. The registrant has not made any amendments to its code of ethics during the period covered by this report. The registrant has not granted any waivers from any provisions of the code of ethics during the period covered by this report. The registrant undertakes to provide to any person without charge, upon request, a copy of such code of ethics by mail when they call the registrant at 1-800-331-2979.
Item 3. Audit Committee Financial Expert.
The registrant’s board of trustees has determined that there is at least one audit committee financial expert serving on its audit committee. Robert Fitzgerald is the “audit committee financial expert” and is considered to be “independent” as each term is defined in Item 3 of Form N-CSR.
Item 4. Principal Accountant Fees and Services.
The registrant has engaged its principal accountant to perform audit services, audit-related services, tax services and other services during the past two fiscal years. “Audit services” refers to performing an audit of the registrant's annual financial statements or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for those fiscal years. “Audit-related services” refers to the assurance and related services by the principal accountant that are reasonably related to the performance of the audit. “Tax services” refers to professional services rendered by the principal accountant for tax compliance, tax advice, and tax planning. The following table details the aggregate fees billed or expected to be billed for each of the last two fiscal years for audit services, audit-related services, tax services and other services by the principal accountant.
FYE 9/30/2014 | FYE 9/30/2013 | |
Audit Fees | $215,206 | $229,300 |
Audit-Related Fees | None | None |
Tax Fees | $48,237 | $46,382 |
All Other Fees | None | None |
The registrant’s audit committee has adopted pre-approval policies and procedures that require the audit committee to pre-approve all audit and non-audit services of the registrant, including services provided to any entity affiliated with the registrant.
All of the principal accountant’s hours spent on auditing the registrant’s financial statements were attributed to work performed by full-time permanent employees of the principal accountant. The following table indicates the non-audit fees billed or expected to be billed by the registrant’s accountant for services to the registrant and to the registrant’s investment adviser (and any entity controlling, controlled by, or under common control with the investment adviser for the last two years.
Non-Audit Related Fees | FYE 9/30/2014 | FYE 9/30/2013 |
Registrant | None | None |
Registrant’s Investment Adviser | None | None |
Item 5. Audit Committee of Listed Registrants.
Not applicable to registrants who are not listed issuers (as defined in Rule 10A-3 under the Securities Exchange Act of 1934).
Item 6. Investments.
(a) | Schedule of Investments is included as part of the report to shareholders filed under Item 1 of this Form. |
(b) | Not Applicable |
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.
Not applicable to open-end investment companies.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
Not applicable to open-end investment companies.
Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers.
Not applicable to open-end investment companies.
Item 10. Submission of Matters to a Vote of Security Holders.
There have been no material changes to the procedures by which shareholders may recommend nominees to the registrant’s board of trustees.
Item 11. Controls and Procedures.
(a) | The registrant’s President and Treasurer have reviewed the Registrant's disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940 (the “Act”)) as of a date within 90 days of the filing of this report, as required by Rule 30a-3(b) under the Act and Rules 13a-15(b) or 15d-15(b) under the Securities Exchange Act of 1934. Based on their review, such officers have concluded that the disclosure controls and procedures are effective in ensuring that information required to be disclosed in this report is appropriately recorded, processed, summarized and reported and made known to them by others within the Registrant and by the Registrant’s service provider. |
(b) | No changes in the registrant's internal control over financial reporting (as defined in Rule 30a-3(d) under the Act) occurred during the second fiscal quarter of the period covered by this report that materially affected, or are reasonably likely to materially affect, the registrant's internal control over financial reporting. |
Item 12. Exhibits.
(a) | (1) Any code of ethics or amendment thereto, that is the subject of the disclosure required by Item 2, to the extent that the registrant intends to satisfy Item 2 requirements through filing an exhibit. 1) Incorporated by reference to the registrant’s Form N-CSR filed January 7, 2005. |
(2) A separate certification for each principal executive and principal financial officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Filed herewith.
(3) Any written solicitation to purchase securities under Rule 23c-1 under the Act sent or given during the period covered by the report by or on behalf of the registrant to 10 or more persons. Not applicable to open-end investment companies.
(b) | Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Furnished herewith. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) Brandes Investment Trust
By (Signature and Title)* /s/ Jeff Busby
Jeff Busby, President
Date December 3, 2014
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By (Signature and Title)* /s/ Jeff Busby
Jeff Busby, President
Date December 3, 2014
By (Signature and Title)* /s/ Gary Iwamura
Gary Iwamura, Treasurer
Date December 3, 2014
* Print the name and title of each signing officer under his or her signature.