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 500
San Diego, CA 92130
(Address of principal executive offices) (Zip code)
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, 2012
Date of reporting period: March 31, 2012
Item 1. Reports to Stockholders.
Separately Managed Account Reserve Trust
SEMI-ANNUAL REPORT
For the six months ended
March 31, 2012
Brandes Separately Managed Account Reserve Trust
Dear Shareholder:
The Separately Managed Account Reserve Trust (“SMART” or “the Fund”) gained 8.76% in the 6-month period ending March 31, 2012. The Barclays Capital U.S. Aggregate Bond Index gained 1.43% and the Barclays Capital U.S. Intermediate Credit Bond Index gained 3.66% during the same 6-month period.
In this letter, I will examine the sector and security-specific factors that affected the Fund’s performance and describe changes in the Fund’s composition for the 6-month period ending March 31, 2012. I will also discuss how the Fund is positioned for the future.
The Markets
The great Yogi Berra once said: “It’s like déjà-vu, all over again.” This quote could accurately be applied to the fixed income markets during the six months ended March 31, 2012, relative to the 6-month period ending March 31, 2011. One year ago at this time, economic measures were largely pointing toward a moderate expansion, risk assets rallied meaningfully and inflation fears began festering as both crude oil and gasoline prices were rising sharply. European debt concerns persisted, but the U.S. markets showed increasing signs of decoupling. A fast forward to the end of the first quarter 2012 reads like a carbon copy of the market environment 12 months ago: U.S economic data has continued its growth trajectory, risk assets staged a significant rally and gasoline prices have risen above $4.00/gallon throughout most of the country. Finally, the market’s perception of the euro zone debt crisis has ebbed somewhat; or more specifically, the market’s perception of the overall “tail risk” associated with a negative outcome to the ongoing euro zone crisis appreciably declined during the quarter.
The Fund
During the 6-month period, positive relative performance was led by the corporate bond sector. More specifically, within the corporate sector, returns were led by banks and the homebuilding/building product industries. The Fund’s holdings in non-agency mortgage backed securities were also a positive factor in performance. Finally, the Fund benefited from an underweight position in U.S. Treasury securities as well as a modest underweight of duration relative to the benchmark. The Fund’s yield premium to the benchmarks was once again a positive factor in relative performance. As of March 31, 2012, the Fund’s most substantial weighting was in the corporate bonds sector, particularly the industrials industry.
U.S. financials experienced considerable spread tightening during the period. The financials component of the Index posted an excess return of 13.11%, which was greater than the 11.94% excess return of the Barclays Capital U.S. Corporate High-Yield Bond Index. It appears that the market finally began to catch up with the fundamental strengthening of bank balance sheets since the credit crisis of 2008.
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Since the credit crisis, the banking industry has aggressively written down (or off) problem loans, raised additional capital and changed lending practices to make new loans on much stricter terms.
In fact, during the fourth quarter the Fed released its annual stress test of the banking system, also referred to as the Comprehensive Capital Analysis and Review (CCAR). The stress test was applied to the 19 largest bank holding companies and assumed a peak unemployment rate of 13%, a 50% decrease in equities, and a 21% decline in housing prices. The net result was that if planned dividends and share repurchases were excluded, 18 of the 19 banks were able to maintain a minimum tier I capital ratio of 5%. Underscoring the overall health of the financial system post-credit crisis, according to the Fed, the 19 banks have raised their aggregate capital by nearly $340 billion since the first quarter of 2009. The SMART fund has been overweight financials for some time as we have consistently felt that market technical factors have overshadowed and overwhelmed the dramatic fundamental improvement that banks have undertaken. We still believe that the yield spreads offered by banks are attractive relative to their risk profiles.
The outperformance of homebuilding/building products bonds and non-agency mortgage-backed securities was largely due to better feelings about the state of the U.S. housing market. It would be difficult to fashion an argument that the arrow on the housing market is now pointing upward, but given the data received on building permits, new housing starts and existing home sales, not to mention an absence of downright pessimism in public comments from the largest homebuilders, it appears that the housing market may have (hopefully) found a bottom. If the market has indeed found a bottom, this bodes well for the homebuilders who have largely done an admirable job of managing their balance sheets through the crisis by concentrating on maintaining liquidity through terming out their debt maturities and focusing on maintaining positive cash flow until the market shows signs of life again. A bottoming of the housing market should also benefit non-agency mortgage-backed securities as previous calamitous assumptions regarding defaults and recoveries on underlying loans may prove to be unduly conservative.
During the 6-month period, notable purchases in the Fund consisted of corporate bonds issued by Eastman Kodak, Edison Mission Energy, and Chesapeake Energy Corp. The Fund added to its holdings of Marks & Spencer and Regions Financial. The Fund sold its positions in corporate bonds such as those issued by Anadarko Petroleum, Nisource Finance Corp, and Chiquita Brands. The Fund also sold one ABS security backed by subprime loans.
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Our Outlook
As we move into the second quarter of 2012 credit and mortgage yield spreads have experienced appreciable tightening year to date, but remain wide of their historical averages. If yield spreads are examined in the context of aggregate leverage—which is at or near 25-year bests—yield spreads still appear to offer compelling value.
Certainly, the market remains fraught with risks that astute investors need to keep their eyes on. While Europe appears calm for now, there is some concern that the sizeable liquidity provided to European banks by the ECB through the Long Term Refinance Operation is masking the continent’s true fundamental debt and growth problems. We remain cautious on the euro zone and feel we have not heard the last of Greece, not to mention the possibility of problems escalating in Portugal, Spain or even Italy.
Closer to home, the fundamental U.S economic picture continues to improve but we feel the economic recovery remains susceptible to exogenous shocks, which could take the form of a re-escalation of euro zone stress, high energy prices derailing the economic expansion or another unexpected leg down in the housing market. What these concerns mean to us is that we feel the myriad of unknowns places a premium on fundamental research and deliberative security selection. There are a number of securities today whose yield spreads are more a function of macro and technical factors than the underlying credit fundamentals. We believe that thoughtful research, bottom-up security selection and a patient, long-term approach are paramount in an environment like today’s where technical factors—both positive and negative—can overwhelm and temporarily mask true credit fundamentals.
Sincerely yours,
Jeffrey A. Busby, CFA
President
Brandes Investment Trust
Past performance does not guarantee future results.
Market conditions may impact performance. The performance results presented were achieved in particular market conditions which may not be repeated. Moreover, the current market volatility and uncertain regulatory environment may have a negative impact on future performance.
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The Fund invests in foreign securities, which involve additional risks, including currency fluctuations, political instability, differences in financial reporting standards and less stringent regulation of securities markets.
International and emerging markets investing is subject to certain risks such as currency fluctuations and social and political changes; such risks may result in greater share price volatility. Emerging market countries involve greater risks, such as immature economic structures, national policies restricting investments by foreigners, and different legal systems. Below investment grade debt securities are speculative and involve a greater risk of default and price change due to changes in the issuer’s creditworthiness. The Fund’s use of derivative instruments, such as options contracts, futures contracts or swap agreements, involves risks different from, or possibly greater than, the risks associated with investing directly in securities and other more traditional investments.
Unlike bonds issued or guaranteed by the U.S. government or its agencies, stocks and other bonds are not backed by the full faith and credit of the United States. Stock and bond prices will experience market fluctuations. Please note that the value of government securities and bonds in general have an inverse relationship to interest rates. Bonds carry the risk of default, or the risk than an issuer will be unable to make income or principal payment. There is no assurance that private guarantors or insurers will meet their obligations. The credit quality of the investments in the portfolio is no guarantee of the safety or stability of the portfolio. Investments in asset-backed and mortgage-backed securities include additional risks that investors should be aware of such as credit risk, prepayment risk, possible illiquidity and default, as well as increased susceptibility to adverse economic developments.
Please refer to the Schedule of Investments in the report for complete holdings information. Fund holdings, geographic allocations and/or sector allocations are subject to change at any time and are not a recommendation to buy or sell any security.
Investment performance reflects fee waivers and/or reimbursement of expenses. In the absence of such waivers/reimbursements, total return would be reduced.
The foregoing reflects the thoughts and opinions of Brandes Investment Partners® exclusively and is subject to change without notice.
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.
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Index Guide
The Barclays Capital U.S. Aggregate Bond Index is an unmanaged index consisting of U.S. dollar-denominated, fixed-rate, taxable bonds. The U.S. Aggregate Bond Index is a broad-based benchmark that measures the investment grade, U.S. dollar-denominated, fixed-rate taxable bond market, including Treasuries, government-related and corporate securities, MBS (agency fixed-rate and hybrid ARM passthroughs), ABS, and CMBS. The U.S. Aggregate rolls up into other Barclays Capital flagship indices such as the multi-currency Global Aggregate Index and the U.S. Universal Index, which includes high yield and emerging markets debt. The U.S. Aggregate Index was created in 1986, with index history backfilled to January 1, 1976. The index is a total return index which reflects the price changes and interest of each bond in the index.
The Barclays Capital U.S. Intermediate Credit Bond Index is an unmanaged index consisting of U.S. dollar-denominated, publicly issued, fixed-rate corporate securities. Issues must have at least $250 million par amount outstanding and have a maturity from one up to (but not including) ten years. Securities must be rated investment grade (Baa3/BBB-/BBB- or above) by Moody’s, S&P, and Fitch, respectively. When all three agencies rate an issue, a median or “two out of three” rating is used to determine Index eligibility by dropping the highest and lowest rating. When a rating from only two agencies is available, the lower (“most conservative”) of the two is used. When a rating from only one agency is available, that rating is used to determine Index eligibility. The index is a total return index which reflects the price changes and interest of each bond in the index.
Barclays Capital U.S. Corporate High-Yield Bond Index: The Barclays Capital U.S. Corporate High-Yield Bond Index is an unmanaged index consisting of U.S. dollar-denominated, non-investment grade, fixed-rate, taxable corporate bonds. The U.S. Corporate High-Yield Index measures the market of USD-denominated, non-investment grade, fixed-rate, taxable corporate bonds. Securities are classified as high yield if the middle rating of Moody’s, Fitch, and S&P is Ba1/BB+/BB+ or below. The index excludes emerging market debt. It was created in 1986, with history backfilled to July 1, 1983. The U.S. Corporate High-Yield Index is part of the U.S. Universal and Global High-Yield Indices. The index is a total return index which reflects the price changes and interest of each bond in the index.
Cash Flow: Measures the cash generating capability of a company by adding non-cash charges (e.g. depreciation) and interest expense to pretax income.
One cannot invest directly in an index.
The Brandes Separately Managed Account Reserve Trust (“SMART”) Fund is distributed by Quasar Distributors, LLC.
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The following chart compares the value of a hypothetical $1,000,000 investment in the Separately Managed Account Reserve Trust from its inception (October 3, 2005) to March 31, 2012 and in the Barclays Capital U.S. Aggregate Index and Barclays Capital U.S. Intermediate Credit Index for the same period.
Cumulative Performance of $1,000,000 Since Inception
Average Annual Total Return Periods Ended March 31, 2012 (Unaudited) | ||||||||||||||||
One Year | Three Years | Five Years | Since Inception (10/3/05) | |||||||||||||
Separately Managed Account Reserve Trust | 6.68 | % | 24.15 | % | 5.15 | % | 5.84 | % | ||||||||
Barclays Capital U.S. Aggregate Index | 7.71 | % | 6.83 | % | 6.25 | % | 5.84 | % | ||||||||
Barclays Capital U.S. Intermediate Credit Index | 6.95 | % | 10.52 | % | 6.38 | % | 5.96 | % |
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Brandes Separately Managed Account Reserve Trust
Sector Allocation as a Percentage of Total Investments as of March 31, 2012
(Unaudited)
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Brandes Separately Managed Account Reserve Trust
Expense Example (Unaudited)
As a shareholder of the Fund, you incur ongoing costs, including investment advisory and administrative fees and other fund expenses. The examples below are intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The examples are based on an investment of $1,000 invested at the beginning of the period and held for the entire period from October 1, 2011 to March 31, 2012 (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.
Fund | Beginning Account Value | Ending Account Value | Annual Expense Ratio | Expenses Paid During the Period | ||||||||||||
Separately Managed Account Reserve Trust* | $ | 1,000.00 | $ | 1,087.60 | 0.00 | % | $ | 0.00 |
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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.
Fund | Beginning Account Value | Ending Account Value | Annual Expense Ratio | Expenses Paid During the Period | ||||||||||||
Separately Managed Account Reserve Trust* | $ | 1,000.00 | $ | 1,025.00 | 0.00 | % | $ | 0.00 |
* | 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. |
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SCHEDULE OF INVESTMENTS March 31, 2012 (Unaudited)
Principal Amount | Value | ||||||||
FEDERAL AND FEDERALLY SPONSORED CREDITS – 1.22% | |||||||||
Fannie Mae Interest Only Strip – 1.22% | |||||||||
5.500%, 01/01/2036 | $ | 5,134,277 | $ | 763,893 | |||||
6.000%, 06/01/2036 | 6,444,319 | 1,028,878 | |||||||
TOTAL FEDERAL AND FEDERALLY SPONSORED CREDITS (Cost $2,259,613) | $ | 1,792,771 | |||||||
OTHER MORTGAGE RELATED SECURITIES – 8.46% | |||||||||
Collateralized Mortgage Obligations – 0.03% | |||||||||
Wells Fargo Mortgage Backed Securities Trust | |||||||||
Series 2006-AR14, 5.861%, 10/25/2036 | $ | 44,702 | $ | 42,013 | |||||
Near Prime Mortgage – 4.10% | |||||||||
Bear Stearns Adjustable Rate Mortgage Trust | |||||||||
Series 2005-10, 2.689%, 10/25/2035 | 3,699,995 | 2,972,649 | |||||||
Countrywide Home Loan Mortgage Pass Through Trust | |||||||||
Series 2006-HYB1, 2.818%, 03/20/2036 | 1,427,536 | 741,280 | |||||||
Merrill Lynch Mortgage Investors, Inc. | |||||||||
Series 2005-A9, 2.572%, 12/25/2035 | 1,007,395 | 798,580 | |||||||
Wells Fargo Alternative Loan Trust | |||||||||
Series 2007-PA5, 6.000%, 11/25/2022 | 1,494,892 | 1,492,010 | |||||||
6,004,519 | |||||||||
Sub-Prime Mortgages – 4.33% | |||||||||
Argent Securities, Inc. | |||||||||
Series 2004-W11, 1.442%, 11/25/2034 | 666,414 | 122,702 | |||||||
Countrywide Asset-Backed Certificates | |||||||||
Series 2004-10, 1.292%, 12/25/2034 | 3,367,568 | 618,198 | |||||||
Series 2004-13, 1.092%, 04/25/2035 | 1,810,000 | 1,103,680 | |||||||
First Franklin Mortgage Loan Asset Backed Certificates | |||||||||
Series 2004-FF8, 1.667%, 10/25/2034 | 1,995,362 | 1,004,733 | |||||||
JP Morgan Mortgage Acquisition Corp. | |||||||||
Series 2006-NC1, 0.412%, 04/25/2036 | 2,476,308 | 1,669,024 | |||||||
Structured Asset Investment Loan Trust | |||||||||
Series A3, 0.622%, 07/25/2035 | 2,052,808 | 1,835,647 | |||||||
6,353,984 | |||||||||
TOTAL OTHER MORTGAGE RELATED SECURITIES (Cost $17,904,220) | $ | 12,400,516 |
The accompanying notes are an integral part of these Schedules of Investments.
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SCHEDULE OF INVESTMENTS March 31, 2012 (Unaudited) (continued)
Principal Amount | Value | ||||||||
US GOVERNMENTS – 6.12% | |||||||||
Sovereign – 6.12% | |||||||||
United States Treasury Bond | |||||||||
4.750%, 02/15/2037 | $ | 1,535,000 | $ | 1,942,734 | |||||
United States Treasury Note | |||||||||
3.375%, 11/15/2019 | 4,475,000 | 4,995,917 | |||||||
2.000%, 11/15/2021 | 2,075,000 | 2,042,740 | |||||||
TOTAL US GOVERNMENTS (Cost $8,634,543) | $ | 8,981,391 |
Shares | Value | ||||||||
COMMON STOCKS – 0.47% | |||||||||
Paper & Forest Products – 0.45% | |||||||||
AbitibiBowater, Inc.(a) | 31,224 | $ | 445,879 | ||||||
Abitibi-Consolidated(a)(c) | 3,950,000 | — | |||||||
Quad/Graphics, Inc. | 15,701 | 218,244 | |||||||
Quebecor World(a)(c) | 9,700,000 | — | |||||||
664,123 | |||||||||
Semiconductors – 0.02% | |||||||||
Magnachip Semiconductor Corp.(a) | 2,010 | 24,120 | |||||||
TOTAL COMMON STOCKS (Cost $4,082,221) | $ | 688,243 | |||||||
PREFERRED STOCKS – 0.77% | |||||||||
Consumer Finance – 0.77% | |||||||||
Ally Financial, Inc. , 7.000%(b) | 1,363 | $ | 1,135,592 | ||||||
TOTAL PREFERRED STOCKS (Cost $0) | $ | 1,135,592 |
The accompanying notes are an integral part of these Schedules of Investments.
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SCHEDULE OF INVESTMENTS March 31, 2012 (Unaudited) (continued)
Principal Amount | Value | ||||||||
ASSET BACKED SECURITIES – 4.74% | |||||||||
Student Loan – 4.74% | |||||||||
National Collegiate Student Loan Trust | |||||||||
Series A-4, 0.547%, 10/25/2033 | $ | 1,500,000 | $ | 682,972 | |||||
SLM Student Loan Trust | |||||||||
Series 2004-B, 0.804%, 03/15/2024 | 2,980,000 | 2,371,403 | |||||||
Series 2004-B, 0.904%, 09/15/2033 | 1,500,000 | 932,594 | |||||||
Series 2005-A, 0.784%, 12/15/2038 | 1,865,000 | 1,215,267 | |||||||
Series 2006-A, 0.764%, 06/15/2039 | 2,200,000 | 1,741,804 | |||||||
6,261,068 | |||||||||
TOTAL ASSET BACKED SECURITIES (Cost $7,673,191) | $ | 6,944,040 | |||||||
CORPORATE BONDS – 75.58% | |||||||||
Advertising – 2.92% | |||||||||
The Interpublic Group of Companies, Inc. | |||||||||
6.250%, 11/15/2014 | $ | 3,920,000 | $ | 4,272,800 | |||||
Automobile Parts & Equipment – 1.73% | |||||||||
American Axle & Manufacturing, Inc. | |||||||||
5.250%, 02/11/2014 | 2,465,000 | 2,532,788 | |||||||
Banks & Thrifts – 16.16% | |||||||||
Ally Financial, Inc. | |||||||||
7.500%, 12/31/2013 | 1,029,000 | 1,093,313 | |||||||
6.750%, 12/01/2014 | 3,646,000 | 3,819,185 | |||||||
8.000%, 12/31/2018 | 1,235,000 | 1,312,188 | |||||||
First Horizon National Corp. | |||||||||
5.375%, 12/15/2015 | 1,780,000 | 1,891,150 | |||||||
JP Morgan Chase & Co. | |||||||||
7.900%, 04/30/2099 | 5,620,000 | 6,156,821 | |||||||
M&I Marshall & Ilsley Bank | |||||||||
5.000%, 01/17/2017 | 3,380,000 | 3,636,647 | |||||||
Regions Financial Corp. | |||||||||
5.750%, 06/15/2015 | 3,890,000 | 4,074,775 | |||||||
The Goldman Sachs Group, Inc. | |||||||||
7.500%, 02/15/2019 | 1,500,000 | 1,713,803 | |||||||
23,697,882 |
The accompanying notes are an integral part of these Schedules of Investments.
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SCHEDULE OF INVESTMENTS March 31, 2012 (Unaudited) (continued)
Principal Amount | Value | ||||||||
Building Materials – 9.44% | |||||||||
CRH America, Inc. | |||||||||
6.000%, 09/30/2016 | 1,915,000 | 2,085,544 | |||||||
Masco Corp. | |||||||||
6.125%, 10/03/2016 | 4,040,000 | 4,270,603 | |||||||
Mohawk Industries, Inc. | |||||||||
6.375%, 01/15/2016 | 2,965,000 | 3,276,325 | |||||||
Owens Corning | |||||||||
6.500%, 12/01/2016 | 1,445,000 | 1,605,352 | |||||||
USG Corp. | |||||||||
6.300%, 11/15/2016 | 2,790,000 | 2,608,650 | |||||||
13,846,474 | |||||||||
Chemical – 1.53% | |||||||||
Lyondell Chemical Co. | |||||||||
11.000%, 05/01/2018 | 2,028,837 | 2,241,865 | |||||||
Consumer Products – 2.52% | |||||||||
Spectrum Brands Holdings, Inc. | |||||||||
9.500%, 06/15/2018 | 3,285,000 | 3,703,837 | |||||||
Diversified Financial Services – 6.51% | |||||||||
American International Group, Inc. | |||||||||
6.400%, 12/15/2020 | 2,785,000 | 3,151,865 | |||||||
International Lease Finance Corp. | |||||||||
6.625%, 11/15/2013 | 3,350,000 | 3,417,000 | |||||||
SLM Corp. | |||||||||
5.000%, 10/01/2013 | 2,920,000 | 2,985,700 | |||||||
9,554,565 | |||||||||
Electric Utilities – 5.78% | |||||||||
EDP Finance BV | |||||||||
4.900%, 10/01/2019(b) | 4,450,000 | 3,617,405 | |||||||
FirstEnergy Corp. | |||||||||
7.375%, 11/15/2031 | 3,950,000 | 4,862,703 | |||||||
8,480,108 | |||||||||
Energy – 1.20% | |||||||||
Valero Energy Corp. | |||||||||
9.375%, 03/15/2019 | 1,340,000 | 1,755,176 |
The accompanying notes are an integral part of these Schedules of Investments.
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SCHEDULE OF INVESTMENTS March 31, 2012 (Unaudited) (continued)
Principal Amount | Value | ||||||||
Food, Beverage & Tobacco – 4.79% | |||||||||
Pilgrims Pride Corp. | |||||||||
7.875%, 12/15/2018 | 1,790,000 | 1,785,525 | |||||||
Tyson Foods, Inc. | |||||||||
6.850%, 04/01/2016 | 4,615,000 | 5,238,025 | |||||||
7,023,550 | |||||||||
Homebuilders – 10.31% | |||||||||
Centex Corp. | |||||||||
6.500%, 05/01/2016 | 2,695,000 | 2,897,125 | |||||||
Lennar Corp. | |||||||||
5.600%, 05/31/2015 | 4,275,000 | 4,467,375 | |||||||
Pulte Group, Inc. | |||||||||
5.200%, 02/15/2015 | 3,205,000 | 3,269,100 | |||||||
Toll Brothers Finance Corp. | |||||||||
5.150%, 05/15/2015 | 4,235,000 | 4,480,854 | |||||||
15,114,454 | |||||||||
Industrial – 1.19% | |||||||||
Eastman Kodak Co. | |||||||||
9.750%, 03/01/2018(b) | 2,020,000 | 1,742,250 | |||||||
Insurance – 3.41% | |||||||||
CNA Financial Corp. | |||||||||
7.350%, 11/15/2019 | 1,700,000 | 1,984,487 | |||||||
5.875%, 08/15/2020 | 1,250,000 | 1,339,990 | |||||||
Marsh & McLennan Cos, Inc. | |||||||||
5.750%, 09/15/2015 | 1,490,000 | 1,671,188 | |||||||
4,995,665 | |||||||||
Media – 1.39% | |||||||||
The McGraw Hill Cos, Inc. | |||||||||
5.900%, 11/15/2017 | 1,075,000 | 1,257,858 | |||||||
Virgin Media Finance Plc | |||||||||
9.500%, 08/15/2016 | 698,000 | 786,995 | |||||||
2,044,853 | |||||||||
Oil & Gas – 0.79% | |||||||||
El Paso Corp. | |||||||||
7.000%, 06/15/2017 | 1,035,000 | 1,152,518 | |||||||
Oil, Gas & Consumable Fuels – 1.19% | |||||||||
Chesapeake Energy Corp. | |||||||||
6.625%, 08/15/2020 | 1,720,000 | 1,750,100 |
The accompanying notes are an integral part of these Schedules of Investments.
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SCHEDULE OF INVESTMENTS March 31, 2012 (Unaudited) (continued)
Principal Amount | Value | ||||||||
Retail – 2.10% | |||||||||
Marks & Spencer Plc | |||||||||
7.125%, 12/01/2037(b) | 2,975,000 | 3,075,400 | |||||||
Technology, Equipment & Services – 1.05% | |||||||||
Unisys Corp. | |||||||||
12.500%, 01/15/2016 | 1,454,000 | 1,546,693 | |||||||
Telecommunications – 0.61% | |||||||||
Telecom Italia Capital SA | |||||||||
6.999%, 06/04/2018 | 840,000 | 894,600 | |||||||
Utilities – 0.96% | |||||||||
Edison Mission Energy | |||||||||
7.000%, 05/15/2017 | 2,230,000 | 1,404,900 | |||||||
TOTAL CORPORATE BONDS (Cost $102,365,432) | $ | 110,830,478 |
Contracts | Value | ||||||||
WARRANTS – 0.00% | |||||||||
Semiconductors – 0.00% | |||||||||
MagnaChip Semiconductor Corp. | |||||||||
Expiration Date: November 2014, Exercise Price: $1.97(c) | 80,400 | $ | — | ||||||
TOTAL WARRANTS (Cost $863,486) | $ | — |
Principal Amount | Value | |||||||
SHORT TERM INVESTMENT – 1.82% | ||||||||
Repurchase Agreement – 1.82% | ||||||||
State Street Bank and Trust Repurchase Agreement, (Dated 3/31/12), due 4/2/12, 0.01%, [Collateralized by $2,671,179 United States Treasury Bill, 7/31/16, (Market Value $2,724,460)] (proceeds $2,671,181) | $ | 2,671,179 | $ | 2,671,179 | ||||
TOTAL SHORT TERM INVESTMENT (Cost $2,671,179) | $ | 2,671,179 | ||||||
Total Investments (Cost $146,453,885) – 99.18% | $ | 145,444,210 | ||||||
Other Assets in Excess of Liabilites – 0.82% | 1,201,957 | |||||||
TOTAL NET ASSETS – 100.00% | $ | 146,646,167 |
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 $9,570,647, which represents 6.53% of of total net assets. |
The accompanying notes are an integral part of these Schedules of Investments.
15
Brandes Separately Managed Account Reserve Trust
SCHEDULE OF INVESTMENTS March 31, 2012 (Unaudited) (continued)
(c) | The prices for these securities were derived from an estimate of fair market value pursuant to procedures approved by the Fund's Board of Trustees. These securities represent $0 or 0.00% of the Fund's net assets. The accompanying notes are an integral part of these Schedules of Investments. |
The accompanying notes are an integral part of these Schedules of Investments.
16
Brandes Separately Managed Account Reserve Trust
STATEMENT OF ASSETS AND LIABILITIES — March 31, 2012 (Unaudited)
ASSETS | ||||
Investments in securities, at cost | $ | 146,453,885 | ||
Investments in securities, at value | $ | 145,444,210 | ||
Receivables: | ||||
Fund shares sold | 395,078 | |||
Dividends and interest | 2,336,722 | |||
Total Assets | 148,176,010 | |||
LIABILITIES | ||||
Payables: | ||||
Securities purchased | 897,979 | |||
Fund shares redeemed | 141,446 | |||
Dividends payable | 490,418 | |||
Total Liabilities | 1,529,843 | |||
NET ASSETS | $ | 146,646,167 | ||
COMPONENTS OF NET ASSETS | ||||
Paid-in capital | $ | 172,415,457 | ||
Undistributed net investment income | (57,955 | ) | ||
Accumulated net realized loss on investments and currency | (24,701,660 | ) | ||
Net unrealized depreciation on: | ||||
Investments | (1,009,675 | ) | ||
Total Net Assets | $ | 146,646,167 | ||
Net asset value, offering price and redemption proceeds per share | ||||
Net Assets | $ | 146,646,167 | ||
Shares outstanding (unlimited shares authorized without per value) | 16,745,379 | |||
Offering and redemption price | $ | 8.76 |
The accompanying notes to financial statements are an integral part of this statement.
17
Brandes Separately Managed Account Reserve Trust
STATEMENT OF OPERATIONS — For the Six Months Ended March 31, 2012 (Unaudited)
INVESTMENT INCOME | ||||
Income | ||||
Dividend income | $ | 54,519 | ||
Interest income | 4,111,033 | |||
Miscellaneous income | 10,163 | |||
Total income | 4,175,715 | |||
Expenses (Note 3) | ||||
Total expenses | — | |||
Less reimbursement / waiver | — | |||
Total expenses net of reimbursement / waiver | — | |||
Net investment income | 4,175,715 | |||
REALIZED AND UNREALIZED GAIN ON INVESTMENTS | ||||
Net realized gain on Investments | 1,159,539 | |||
Net change in unrealized appreciation on: | ||||
Investments | 6,573,594 | |||
Net realized and unrealized gain | 7,733,133 | |||
Net increase in net assets resulting from operations | $ | 11,908,848 |
The accompanying notes to financial statements are an integral part of this statement.
18
Brandes Separately Managed Account Reserve Trust
STATEMENT OF CHANGES IN NET ASSETS
Six Months Ended March 31, 2012 | Year Ended September 30, 2011 | |||||||
INCREASE (DECREASE) IN NET ASSETS FROM: | (Unaudited) | |||||||
OPERATIONS | ||||||||
Net investment income | $ | 4,175,715 | $ | 9,199,824 | ||||
Net realized gain (loss) on: | ||||||||
Investments | 1,159,539 | (176,172 | ) | |||||
Foreign currency transactions | — | (36,812 | ) | |||||
Net unrealized appreciation (depreciation) on: | ||||||||
Investments | 6,573,594 | (1,461,568 | ) | |||||
Foreign currency transactions | — | (977 | ) | |||||
Net increase in net assets resulting from operations | 11,908,848 | 7,524,295 | ||||||
DISTRIBUTIONS TO SHAREHOLDERS | ||||||||
From net investment income | (4,661,728 | ) | (9,522,282 | ) | ||||
Decrease in net assets from distributions | (4,661,728 | ) | (9,522,282 | ) | ||||
CAPITAL SHARE TRANSACTIONS | ||||||||
Proceeds from shares sold | 11,211,142 | 22,052,366 | ||||||
Net asset value of share issued on reinvestment of distributions | 1,268,216 | 2,989,334 | ||||||
Cost of shares redeemed | (15,502,743 | ) | (39,113,330 | ) | ||||
Net decrease in net assets from capital share transactions | (3,023,385 | ) | (14,071,630 | ) | ||||
Total Increase (Decrease) in net assets | 4,223,735 | (16,069,617 | ) | |||||
NET ASSETS | ||||||||
Beginning of the Period | 142,422,433 | 158,492,050 | ||||||
End of the Period | $ | 146,646,168 | $ | 142,422,433 | ||||
Undistributed net investment income | $ | (57,955 | ) | $ | 428,058 |
The accompanying notes to financial statements are an integral part of this statement.
19
Brandes Separately Managed Account Reserve Trust
FINANCIAL HIGHLIGHTS
Six Months Ended March 31, 2012 (Unaudited) | ||||
Net asset value, beginning of period | $ | 8.32 | ||
Income (Loss) from investment operations: | ||||
Net investment income | 0.25 | (4) | ||
Net realized and unrealized gain/(loss) on investments | 0.47 | |||
Net increase from payments by affiliates (Note 2H) | — | |||
Total from investment operations | 0.72 | |||
Less dividends and distributions: | ||||
Dividends from net investment income | (0.28 | ) | ||
Dividends from net realized gain | — | |||
Total dividends and distributions | (0.28 | ) | ||
Net asset value, end of period | $ | 8.76 | ||
Total return | 8.76 | %(2) | ||
Net assets, end of period (millions) | $ | 146.6 | ||
Ratio of net expenses to average net assets(3) | 0.00 | % | ||
Ratio of net investment income to average net assets (3) | 5.84 | %(1) | ||
Portfolio turnover rate | 15.34 | %(2) |
(1) | Not annualized. |
(2) | Annualized. |
(3) | Reflects the fact that no fees or expenses are incurred by the Fund. The Fund is an integral part of “wrap-fee” programs sponsored by investment advisers and/or broker-dealers unaffiliated with the Fund or the Advisor. Participants in these programs pay a “wrap” fee to the sponsor of the program. |
(4) | Net investment income per share has been calculated based on average shares outstanding during the period. |
(5) | The Fund's total return consists of a voluntary reimbursement by the Advisor for a realized investment loss on a transaction not meeting the Fund's investment guidelines. This item had an impact of less than 0.005% on the SMART Fund's total return. See Note 2H in the Notes to Financial Statements. |
The accompanying notes to financial statements are an integral part of this statement.
20
Brandes Separately Managed Account Reserve Trust
FINANCIAL HIGHLIGHTS (continued)
Year Ended September 30, 2011 | Year Ended September 30, 2010 | Year Ended September 30, 2009 | Year Ended September 30, 2008 | Year Ended September 30, 2007 | ||||||||||||||||
$ | 8.46 | $ | 7.46 | $ | 6.97 | $ | 9.61 | $ | 9.87 | |||||||||||
0.52 | (4) | 0.60 | (4) | 0.64 | 0.81 | 0.69 | ||||||||||||||
(0.12 | ) | 0.97 | 0.47 | (2.63 | ) | (0.27 | ) | |||||||||||||
— | — | — | 0.01 | — | ||||||||||||||||
0.40 | 1.57 | 1.11 | (1.81 | ) | 0.42 | |||||||||||||||
(0.54 | ) | (0.57 | ) | (0.62 | ) | (0.81 | ) | (0.68 | ) | |||||||||||
— | — | — | (0.02 | ) | — | |||||||||||||||
(0.54 | ) | (0.57 | ) | (0.62 | ) | (0.83 | ) | (0.68 | ) | |||||||||||
$ | 8.32 | $ | 8.46 | $ | 7.46 | $ | 6.97 | $ | 9.61 | |||||||||||
4.61 | % | 21.81 | % | 18.25 | % | (20.15 | )%(5) | 4.22 | % | |||||||||||
$ | 142.4 | $ | 158.5 | $ | 157.5 | $ | 154.6 | $ | 142.5 | |||||||||||
0.00 | % | 0.00 | % | 0.00 | % | 0.00 | % | 0.00 | % | |||||||||||
5.98 | % | 7.53 | % | 10.15 | % | 9.28 | % | 7.27 | % | |||||||||||
56.16 | % | 36.90 | % | 40.53 | % | 157.66 | % | 230.69 | % |
The accompanying notes to financial statements are an integral part of this statement.
21
Brandes Separately Managed Account Reserve Trust
NOTES TO FINANCIAL STATEMENTS — (Unaudited)
NOTE 1 – ORGANIZATION
The Separately Managed Account Reserve Trust (the “Fund”) is a series of Brandes Investment Trust (the “Trust”). The Trust is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as a diversified, open-end management investment company. The Fund began operations on October 3, 2005. The Fund invests its assets primarily in diversified portfolios of 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. 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. |
C. | Delayed Delivery Securities. The Fund may purchase securities on a when-issued or delayed delivery basis. “When-issued” or delayed delivery |
22
Brandes Separately Managed Account Reserve Trust
NOTES TO FINANCIAL STATEMENTS — (Unaudited) (continued)
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 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. |
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. Distributions to shareholders are recorded on the ex-dividend dates. Interest is recorded on an accrual basis. The Fund amortizes premiums and accretes discounts using the constant yield method. |
E. | Use of Estimates. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and revenue and expenses and disclosure of contingent assets and liabilities and revenue and expenses at the date of the financial statements. Actual results could differ from those estimates. |
F. | Indemnification Obligations. Under the Trust’s organizational documents, its current and former officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the Trust. In addition, in the normal course of business, the Trust enters into contracts that contain a variety of representations and warranties and provide general indemnifications. The Fund’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred or that would be covered by other parties. |
G. | Accounting for Uncertainty in Income Taxes. The Trust 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 Trust may be subject to a nondeductible excise tax calculated as a percentage of certain undistributed amounts of net invest- |
23
Brandes Separately Managed Account Reserve Trust
NOTES TO FINANCIAL STATEMENTS — (Unaudited) (continued)
ment income and net capital gains. The Trust 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 (2008 through 2011). As of March 31, 2012 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, 2011. The Trust identifies its major tax jurisdictions as U.S. Federal 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. | Payment by Affiliate. During the fiscal year ended September 30, 2008, the Trust’s investment advisor, Brandes Investment Partners, L.P., voluntarily reimbursed the Fund $145,127, relating to the Fund’s purchase of a security of an affiliate of the Distributor which violated the Fund’s investment restrictions. This reimbursement has been classified on the Financial Highlights as “Net increase from payments by affiliates”. |
I. | Fair Value Measurements. The Trust has adopted US GAAP 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 in changes in valuation techniques and related inputs during the period. These inputs are summarized in the three broad levels listed below: |
Level 1 — | Unadjusted quoted market prices in active markets |
Level 2 — | Quoted prices for similar instruments or inputs derived from observable market data. Directly observable inputs for the life of the financial instrument |
Level 3 — | Unobservable inputs developed using the reporting entity’s estimates and assumptions, which reflect those that market participants would use |
24
Brandes Separately Managed Account Reserve Trust
NOTES TO FINANCIAL STATEMENTS — (Unaudited) (continued)
J. | Security Valuation. Bonds and other fixed-income securities (other than short-term securities) are valued using the bid price on the day of the valuation provided by an independent pricing service. |
Securities traded on a national securities exchange are valued at the last reported sale price at the close of regular trading on each day the exchange is open for trading. Securities listed on the NASDAQ National Market System for which market quotations are readily available are valued using the NASDAQ Official Closing Price. Securities traded on an exchange for which there have been no sales are valued at the mean between last bid and ask price on such day. Securities for which quotations are not readily available are valued at their respective fair values as determined in good faith pursuant to procedures adopted by the Board of Trustees. U.S. Government securities with less than 60 days remaining to maturity when acquired by the Fund are valued on an amortized cost basis.
Short-term securities including U.S. Government and other fixed income securities, with more than 60 days remaining to maturity are valued at the current market value as provided by an independent pricing service on the day of valuation until the 60th day prior to maturity, and are then valued at amortized cost based upon the value on such date unless the Board determines during such 60-day period that this amortized cost basis does not represent fair value.
The Fund 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.
The Fund uses a third party fair valuation service to adjust the prices of foreign securities held by the Fund that are traded on foreign exchanges in order to reflect the price impacts of events occurring after the close of such foreign exchanges that may affect the values of such securities. None of the Fund’s securities were fair valued using this third party fair valuation service as of March 31, 2012.
25
Brandes Separately Managed Account Reserve Trust
NOTES TO FINANCIAL STATEMENTS — (Unaudited) (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.
Mortgage and asset-backed securities are usually issued as separate tranches, or classes, of securities within each package of 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
26
Brandes Separately Managed Account Reserve Trust
NOTES TO FINANCIAL STATEMENTS — (Unaudited) (continued)
similar valuation techniques and inputs as described above are categorized as Level 2 of the fair value hierarchy.
Common stocks, exchange-traded fund 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, or, in the case of futures contracts or options contracts, the settlement price determined by the relevant exchange. To the extent these securities are actively traded and valuation adjustments are not applied, they are categorized as Level 1 of the fair value hierarchy.
Valuation adjustments may be applied to certain securities that are solely traded on a foreign exchange to account for the market movement between the close of the foreign market and the close of the New York Stock Exchange (“NYSE.”) These securities are generally valued using pricing service providers that consider the correlation of the trading patterns of the foreign security to the intraday trading in the U.S. markets for investments. Securities using these valuation adjustments are categorized as Level 2 of the fair value hierarchy.
Investments in registered open-end management investment companies are valued based upon the net asset value (“NAVs”) of such investments and are categorized as Level 1 of the fair value hierarchy. Investments in privately held investment funds are valued based upon the NAVs of such investments and are categorized as Level 2 of the fair value hierarchy.
Short-term investments having a maturity of 60 days or less are generally valued at amortized cost which approximates fair market value. These investments are categorized as Level 2 of the fair value hierarchy.
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. The securities fair valued by the Valuation Committee are indicated on the Schedule of Investments. These securities are classified as Level 3.
27
Brandes Separately Managed Account Reserve Trust
NOTES TO FINANCIAL STATEMENTS — (Unaudited) (continued)
The following is a summary of the levels of inputs used, as of March 31, 2012, involving the Fund’s assets carried at fair 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 | |||||||||||||
Investments in Securities | |||||||||||||||||
SMART Fund | |||||||||||||||||
Equities | $ | 688,243 | $ | 1,135,592 | $ | — | $ | 1,823,835 | |||||||||
Asset Backed Securities | — | 6,944,040 | — | 6,944,040 | |||||||||||||
Corporate Bonds | — | 110,830,478 | — | 110,830,478 | |||||||||||||
Government Securities | — | 10,774,162 | — | 10,774,162 | |||||||||||||
Mortgage Backed Securities | — | 12,400,516 | — | 12,400,516 | |||||||||||||
Repurchase Agreements | — | 2,671,179 | — | 2,671,179 | |||||||||||||
Total Investments in Securities | $ | 688,243 | $ | 144,755,967 | $ | — | $ | 145,444,210 |
There were no significant transfers into and out of Level 1 and 2 during the period presented.
Below is a reconciliation that details the activity of securities in Level 3 during the six months ended March 31, 2012, using market values of the Level 3 securities at March 31, 2012:
Beginning Balance – October 1, 2011 | $ | — | ||
Net purchases/(sales) | — | |||
Transfers in/(out) of Level 3 | — | |||
Total realized and unrealized gains | — | |||
Total realized and unrealized losses | — | |||
Ending Balance – March 31, 2012 | — |
The realized and unrealized gains and losses from Level 3 transactions are included with the net realized gains and losses on investments and the net unrealized depreciation on investments, respectively on the Statement of Assets and Liabilities. As of March 31, 2012, the Fund had $863,486 of unrealized losses from Level 3 securities.
28
Brandes Separately Managed Account Reserve Trust
NOTES TO FINANCIAL STATEMENTS — (Unaudited) (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 services under the Investment Advisory Agreement, the Advisor benefits from its relationships with the sponsors of wrap-fee programs for which the Fund is an investment option. |
B. | Administration Fee. U.S. Bancorp Fund Services, LLC, (the “Administrator”) acts as administrator for the Fund. The Administrator prepares various federal and state regulatory filings; prepares reports and materials to be supplied to the Trustees; monitors the activities of the Fund’s custodian, transfer agent and accountant; coordinates the preparation and payment of Fund expenses; and prepares several Fund reports. For its services, the Administrator receives an annual fee at the rate of 0.03% of the Trust’s average daily net assets for the first $1 billion in net assets and 0.02% in excess of $1 billion of the Trust’s average daily net assets, subject to a minimum of $50,000 per series of the Trust per annum which is allocated among the series based on their average net assets. The Advisor compensates the Administrator on behalf of the Fund for the services the Administrator performs for the Fund. |
C. | Distribution and Servicing 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. |
Certain officers and Trustees of the Trust are also officers of the Advisor.
29
Brandes Separately Managed Account Reserve Trust
NOTES TO FINANCIAL STATEMENTS — (Unaudited) (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 six months ended March 31, 2012:
U.S. Government | Other | |||||||||||
Purchases | Sales | Purchases | Sales | |||||||||
$ 15,329,842 | $ | 8,681,266 | $ | 6,328,750 | $ | 15,470,838 |
NOTE 5 – CAPITAL STOCK TRANSACTIONS
The Fund’s capital stock activity in shares and dollars during the six months ended March 31, 2012, and the year ended September 30, 2011, was as follows (shares and dollar amounts in thousands):
Six Months Ended 3/31/12 | Year Ended 9/30/11 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Shares Sold | 1,314 | $ | 11,211 | 2,551 | $ | 22,052 | ||||||||||
Issued on Reinvestment of Distributions | 149 | 1,269 | 346 | 2,989 | ||||||||||||
Shares Redeemed | (1,832 | ) | (15,503 | ) | (4,520 | ) | (39,118 | ) | ||||||||
Net Increase/(Decrease) Resulting from Fund Share Transactions | (369 | ) | $ | (3,023 | ) | (1,623 | ) | $ | (14,072 | ) |
NOTE 6 – FEDERAL INCOME TAX MATTERS
As of September 30, 2011, the Fund’s components of distributable earnings on a tax basis were as follows:
Cost of investments for tax purposes | $ | 147,667,263 | ||
Gross tax unrealized appreciation | 8,966,675 | |||
Gross tax unrealized depreciation | (16,549,944 | ) | ||
Net tax unrealized appreciation/depreciation on investments and foreign currency | (7,583,269 | ) | ||
Distributable ordinary income | 429,911 | |||
Distributable long-term capital gains | — | |||
Total distributable earnings | 429,911 | |||
Other accumulated gains/losses | (25,863,051 | ) | ||
Total accumulated earnings | $ | (33,016,409 | ) |
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
30
Brandes Separately Managed Account Reserve Trust
NOTES TO FINANCIAL STATEMENTS — (Unaudited) (continued)
unrealized depreciation on investments and foreign currency is due primarily to timing differences resulting from wash sale transactions.
As of September 30, 2011, the Fund had capital losses expiring on September 30, 2016, 2017, 2018 and 2019 in the amounts of $152,724, $12,360,303, $6,084,748 and $6,501,831, respectively.
The tax composition of dividends for the period ended September 30, 2011 for the Fund was as follows:
Ordinary Income Total | Long Term Capital Gains Total | Return of Capital | ||||||
$ 9,522,282 | $ | — | $ | — |
At September 30, 2011, the Fund had net realized losses on investments and foreign currencies of $763,445 which are deferred for tax purposes and were recognized on October 1, 2011.
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, 2011, as a result of its reclassifications the Fund’s undistributed net investment income/loss was increased by $539,865 and accumulated net realized gain/loss was decreased by $539,865.
NOTE 7 – SUBSEQUENT EVENTS
In preparing these financial statements, the Fund has evaluated events and transactions for potential recognition or disclosure through the date the financial statements were available to be issued.
NOTE 8 – RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In May 2011, the FASB issued an update to requirements relating to Fair Value Measurement which represents amendments to achieve common fair value measurement and disclosure requirements in US Generally Accepted Accounting Principles, (“GAAP”) and International Financial Reporting Standards (“IFRS.”) The amendments are of two types: (i) those that clarify the Board’s intent about the application of existing fair value measurement and disclosure requirements and (ii) those that change a particular principle or requirement for measuring fair value or for disclosing information about fair value measurements.
The amendments that change a particular principle or requirement for measuring fair value or disclosing information about fair value measurements relate to (i) measuring the fair value of the financial instruments that are managed within a portfolio; (ii) application of premium and discount in a fair value measurement; and (iii)
31
Brandes Separately Managed Account Reserve Trust
NOTES TO FINANCIAL STATEMENTS — (Unaudited) (continued)
additional disclosures about fair value measurements. The update is effective for interim and annual periods beginning after December 15, 2011. Management is currently evaluating the impact this update will have on the Funds’ financial statements.
BOARD CONSIDERATION AND CONTINUATION OF INVESTMENT ADVISORY AGREEMENT
In November 2011 the Board of Trustees of the Trust, including the independent Trustees, unanimously approved renewal of the Investment Advisory Agreement (the “Agreement”) between the Trust and Brandes Investment Partners, L.P. (the “Advisor”) with respect to the SMART Fund (the “Fund”) for an additional one-year term.
Information Reviewed
During the course of each year, Board members review a wide variety of materials relating to the nature, extent and quality of the services provided to the Fund by the Advisor, including reports on the Fund’s investment results, portfolio composition, portfolio trading practices, and other matters. In addition, in connection with its annual review of the Agreement with respect to the Fund, the Board requested and reviewed supplementary information that included materials regarding the Fund’s investment results, advisory fee and expense comparisons, financial and profitability information regarding the Advisor, descriptions of various functions such as compliance monitoring and portfolio trading practices, and information about the personnel providing investment management and administrative services to the Fund.
In connection with its reviews, the Board received assistance and advice regarding legal and industry standards from counsel to the Trust and the independent Trustees. The independent Trustees discussed the approval of the Agreement with respect to the Fund with representatives of the Advisor and in private sessions with counsel at which no representatives of the Advisor were present. In deciding to recommend approval of the Agreement with respect to the Fund, the Board and the independent Trustees did not identify any single or particular piece of information that, in isolation, was the controlling factor. This summary describes the most important, but not all, of the factors considered by the Board and the independent Trustees.
Nature, Extent and Quality of Services
With respect to the nature, extent and quality of services provided by the Advisor to the Fund, the Trustees reviewed among other things the quality and depth of the Advisor’s investment management staff, its regulatory compliance procedures, the day-to-day administrative services provided by the Advisor to the Fund and the investment results of the Fund.
The Trustees noted that the Fund’s investment results gross of fees (which are paid by the Advisor) were in the first quartile of the results of a peer group of funds
32
Brandes Separately Managed Account Reserve Trust
NOTES TO FINANCIAL STATEMENTS — (Unaudited) (continued)
identified by Morningstar Associates (“Morningstar”) for the three-year period ended September 30, 2011, and were in the first quartile of the larger group of funds in its Morningstar category for four of the last six calendar years, although they were in the fourth quartile of the peer group for the one-year, five-year and since-inception periods ended on that date. They also noted that the Fund’s investment results were above its benchmark index for the one-year and three-year periods. They considered that choosing a peer group for the Fund is difficult because the Fund’s organization, expense structure and function as a portion of a broader investment program of the Advisor are relatively unique. They concluded that the Fund’s performance was satisfactory.
Advisory Fees, Total Expenses, Profitability and Ancillary Benefits
The Trustees noted that the Fund does not incur any advisory fees or other expenses, all of which are paid by the Advisor, and as a result the Advisor’s relationship with the Fund alone is not profitable. The Board also considered ancillary benefits to the Advisor as a result of its relationship with the Fund. They noted that these were primarily related to the Advisor’s receipt of wrap account fees from Fund shareholders through various broker-dealer sponsors that are not affiliated with either the Fund or the Advisor, and the benefit of research provided by broker-dealers executing portfolio transactions on behalf of the Fund (as the Adviser does not obtain third-party research or other services in return for allocating the Fund’s brokerage).
Conclusions
Based on their review, including consideration of each of the factors referred to above, the Board and the independent Trustees concluded that the Agreement is fair and reasonable to the Fund and its shareholders, that the Fund’s shareholders receive reasonable value from the Advisor’s services, that each of the factors discussed above supported renewal of the Agreement, and that renewal of the Agreement was in the best interests of the Fund and its shareholders.
33
Brandes Separately Managed Account Reserve Trust
ADDITIONAL INFORMATION – (Unaudited)
PROXY VOTING PROCEDURES
The Advisor votes proxies relating to the Fund’s 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 its 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.
34
Brandes Separately Managed Account Reserve Trust
TRUSTEE AND OFFICER INFORMATION – (Unaudited)
The Board of Trustees is responsible for the overall management of the Trust’s business. The Board approves all significant agreements between the Trust and persons or companies furnishing services to the Trust, including the Trust’s agreements with the Advisor, Administrator, Custodian and Transfer Agent. The Board of Trustees delegates the day-to-day operations of the Fund 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:
Name, Address and Age | Position(s) Held with Trust | Term of Office and Length of Time Served(1) | Principal Occupation During Past 5 Years | Number of Trust Series Overseen by Trustee | Other Directorships/ Trusteeships Held by Trustee | |||||
Independent Trustees(2) | ||||||||||
DeWitt F. Bowman, CFA 11988 El Camino Real, Suite 500 San Diego, CA 92130 (Age 81) | Trustee | Since February 1995 | Investment Fund Director. | 7 | Pacific Gas and Electric Nuclear Decommissioning Trust; PCG Private Equity Fund; Forward Funds; RREEF America III REIT. | |||||
J. Michael Gaffney, CFA 11988 El Camino Real, Suite 500 San Diego, CA 92130 (Age 70) | Trustee | Since June 2004 | Independent Consultant, NATIXIS Global Asset Management, North America, from 2004 to 2011. | 7 | None | |||||
Karin B. Bonding, CFA 11988 El Camino Real, Suite 500 San Diego, CA 92130 (Age 72) | Trustee | Since May 2006 | Lecturer, University of Virginia, since 1996. President of Capital Markets Institute, Inc. serving as fee-only financial planner and investment advisor since 1996. | 7 | The Endowment Fund and the Salient Partners Absolute Return Fund. | |||||
Jean E. Carter 11988 El Camino Real Suite 500 San Diego, CA 92130 (Age 54) | Trustee | Since April 2008 | Retired since 2005; Director, Investment Management of Russell Investment Group from 2000 to 2005. | 7 | None | |||||
Robert M. Fitzgerald, CPA 11988 El Camino Real Suite 500 San Diego, CA 92130 (Age 60) | Trustee | Since April 2008 | Retired from 2002 – 2005 and since 2007; Chief Financial Officer of National Retirement Partners from 2005 to 2007. | 7 | Hotchkis and Wiley Mutual Funds. | |||||
Craig Wainscott 11988 El Camino Real, Suite 500 San Diego, CA 92130 (Age: 50) | Trustee | Since February 2012 | Retired since 2006; Managing Director and other positions, US Mutual Funds; Russell Investments from 1982 to 2006; currently Partner with The Paradigm Project and advisor to early-stage companies. | 7 | None |
35
Brandes Separately Managed Account Reserve Trust
TRUSTEE AND OFFICER INFORMATION – (Unaudited)
Name, Address and Age | Position(s) Held with Trust | Term of Office and Length of Time Served(1) | Principal Occupation During Past 5 Years | Number of Trust Series Overseen by Trustee | Other Directorships/ Trusteeships Held by Trustee | |||||
“Interested” Trustees(3) | ||||||||||
Oliver Murray 11988 El Camino Real, Suite 500 San Diego, CA 92130 (Age 49) | Trustee | Since February 2012 | CEO, Brandes Investment Partners & Co.; Managing Director – PMCP of Brandes Investment Partners, L.P., the investment advisor to the Fund (the “Advisor”). | 7 | None | |||||
Jeff Busby 11988 El Camino Real, Suite 500 San Diego, CA 92130 (Age 51) | Trustee and President | Since July 2006 | Executive Director of the Advisor. | 7 | None | |||||
Officers of the Trust | ||||||||||
Thomas M. Quinlan 11988 El Camino Real, Suite 500 San Diego, CA 92130 (Age 41) | Secretary | Since June 2003 | Associate General Counsel of the Advisor since January 2006; Counsel of the Advisor from July 2000 to January 2006. | N/A | N/A | |||||
Gary Iwamura 11988 El Camino Real, Suite 500 San Diego, CA 92130 (Age 55) | Treasurer | Since September 1997 | Finance Director of the Advisor. | N/A | N/A | |||||
George Stevens 11988 El Camino Real, Suite 500 San Diego, CA 92130 (Age 61) | Chief Compliance Officer | Since January 2010 | Vice President, Citi Fund Services, September 1996 to March 2008; Director, Beacon Hill Fund Services, Inc., March 2008 to present. | N/A | N/A |
(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. |
36
Brandes Separately Managed Account Reserve Trust
TRUSTEE AND OFFICER INFORMATION – (Unaudited)
PRIVACY NOTICE
Brandes Investment Partners, L.P. and the Brandes Investment Trust collect nonpublic information about you from the following sources:
• | Information we receive about you on applications or other forms; |
• | Information you give us orally; and |
• | Information about your transactions with us or others. |
We do not disclose any nonpublic personal information about our customers or former customers without the customer’s authorization, except as permitted by law or in response to inquires from governmental authorities. We restrict access to your personal and account information to those personnel who need to know that information to provide products and services to you. We also may disclose that information to unaffiliated third parties (such as to brokers or custodians) only as permitted by law and only as needed for us to provide agreed services to you. We maintain physical, electronic and procedural safeguards to guard your nonpublic personal information.
37
Advisor
Brandes Investment Partners, L.P.
11988 El Camino Real, Suite 500
San Diego, California 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
350 South Grand Avenue, 49th Floor
Los Angeles, CA 92071
Legal Counsel
Bingham McCutchen LLP
355 South Grand Ave., 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.
INSTITUTIONAL INTERNATIONAL
EQUITY FUND
INSTITUTIONAL GLOBAL
EQUITY FUND
INSTITUTIONAL EMERGING
MARKETS FUND
INTERNATIONAL
SMALL CAP EQUITY FUND
INSTITUTIONAL CORE PLUS FIXED
INCOME FUND
CREDIT FOCUS YIELD FUND
SEMI-ANNUAL REPORT
For the periods ended
March 31, 2012
Brandes Institutional International Equity Fund
Dear Shareholder:
The Brandes Institutional International Equity Fund (“the Fund”) advanced 14.02% during the six months ending March 31, 2012. For the same period, the MSCI EAFE Index gained 14.56%.
Below I discuss the industry, country, and stock-specific factors that affected the Fund’s performance during this period and describe changes in the Fund’s composition. In addition, I’ll review current market conditions and our investment philosophy, and discuss how we believe the Fund is well positioned for future performance.
The Markets
Extending a familiar theme for much of 2011, investors remained preoccupied with macroeconomic and geopolitical issues in the fourth quarter, with Europe’s sovereign debt crisis dominating headlines and raising worries over how it may effect global economic growth. These factors resulted in depressed valuations that made select companies appear attractive from a long-term investment perspective.
At the start of 2012, world equity markets looked fairly grim. Europe appeared on the verge of a meltdown, many questioned whether the United States was on a sustainable path to recovery, Japan was still recovering from the Tohoku earthquake and tsunami, concern was being raised of a hard landing in China, and fixed income had trounced equities in 2011. General market sentiment quickly changed as the European Central Bank implemented the first phase of its Long Term Refinancing Operation (LTRO) to help stabilize the European banking system. Global markets responded with enthusiasm and the MSCI EAFE Index gained 10.9% in the first quarter.
The Fund
While achieving solid gains during the six month period ending March 31, 2012, the Fund’s slight underperformance relative to the index was primarily driven by stock selection and our overweight in the diversified telecommunication services industry, as well as an underweight position in Germany. At the same time, individual issue selection in the United Kingdom and our allocation in Mexico positively impacted returns compared to the MSCI EAFE.
Looking at overall returns for the Fund, positions in the oil, gas & consumable fuels and construction materials industries had a positive impact on performance. Securities based in these industries, such as ENI S.p.A.(Italy — oil, gas & consumable fuels), Total S.A. (France — oil, gas & consumable fuels), Cemex S.A.B. (Mexico — construction materials), and CRH PLC (Ireland — construction materials), posted strong results that helped drive performance. While most industries registered gains during the period, holdings in the diversified telecommunication services industry tended to decline, including Portugal Telecom (Portugal) and France Telecom (France).
From a country perspective, securities based in the United Kingdom, Japan, and the Netherlands had the most positive impact on performance on an absolute basis. Some of the positions from these countries experiencing the strongest share price apprecia-
1
Brandes Institutional International Equity Fund
tion included BP PLC (United Kingdom — oil gas & consumable fuels), Toyota Motor Corp. (Japan — automobiles), and Aegon N.V. (Netherlands — insurance).
During the six-month period ending March 31, 2012, we sold select positions as their market prices neared our estimates of their fair values or in order to pursue more attractive opportunities. Among the positions we sold were Mizuho Financial (Japan — commercial banks), Nokia (Finland — communications equipment), and Wolseley (United Kingdom — trading companies & distributors). We also purchased shares of new holdings at prices that we consider attractive, including Posco (South Korea — metals & mining) and Lukoil (Russia — oil gas & consumable fuels).
Our Outlook
In all market environments, we consistently seek to take advantage of market irrationality and short-term security mispricing by buying securities that we believe are undervalued and offer attractive total return potential. Our investment philosophy continues to focus on rigorous, independent company analysis with a long-term perspective, while also taking into account the dynamic macroeconomic landscape. As such, our analysts focus not only on company fundamentals but on the stress factors that are imposed from a broader economic or financial perspective. We realize that many of the macro issues and concerns are keeping valuations at attractive levels and we have folded very conservative assumptions into our estimates of intrinsic values to reflect this. As part of our process, we are highly focused on the value/price relationship and believe valuations and company fundamentals drive future returns over the long term. In our view, the current environment provides us with the opportunity to build a high-quality and defensive portfolio at attractive valuations.
As of March 31, 2012, the Fund’s most substantial country weighting was in Japan and, its most substantial industry weighting was in the diversified telecommunication services industry.
As we look beyond the current clouds of uncertainty toward the future, we remain focused on a singular goal: to build wealth for our clients over the long term. And as true believers in value investing, we believe that your patience will be rewarded. As always, thank you for your continued trust.
Sincerely yours,
Jeffrey A. Busby, CFA
President
Brandes Investment Trust
2
Brandes Institutional International Equity Fund
Past performance does not guarantee future results.
Foreign investments involve additional risks, including currency fluctuations, political instability, differences in financial reporting standards and less stringent regulation of securities markets. Emerging market countries involve greater risks, such as immature economic structures, national policies restricting investments by foreigners, and different legal systems.
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. Current and future portfolio holdings are subject to risk.
The foregoing reflects the thoughts and opinions of Brandes Investment Partners® exclusively and is subject to change without notice.
Brandes Investment Partners® is a registered trademark of Brandes Investment Partners, L.P. in the United States and Canada.
Must be preceded or accompanied by a prospectus.
Index Guide
The MSCI EAFE (Europe, Australasia, Far East) Index with net dividends is an unmanaged, free float-adjusted market capitalization index that is designed to measure the equity market performance of developed markets, excluding the US & Canada. The MSCI EAFE Index consists of 22 developed market country indices. This index often is used as a benchmark for international equity portfolios and includes dividends and distributions net of withholding taxes, but does not reflect fees, brokerage commissions, or other expenses of investing. Please note that all indices are unmanaged and are not available for direct investment.
The Brandes Institutional International Equity Fund is distributed by Quasar Distributors LLC
3
Brandes Institutional International Equity Fund
The following chart compares the value of a hypothetical $1,000,000 investment in the Brandes Institutional International Equity Fund — Class I from March 31, 2002 to March 31, 2012 and in the Morgan Stanley Capital International EAFE Index for the same period.
Value of $1,000,000 vs Morgan Stanley Capital
International EAFE (Europe, Australasia and Far East) Index
Average Annual Total Return Periods Ended March 31, 2012 (Unaudited) | ||||||||||||||||
One Year | Three Years | Five Years | Ten Years | |||||||||||||
Brandes Institutional International Equity Fund | ||||||||||||||||
Class I | -5.11 | % | 13.59 | % | -4.46 | % | 5.59 | % | ||||||||
Class E | -5.23 | % | 13.51 | % | N/A | N/A | ||||||||||
Class S | -5.29 | % | N/A | N/A | N/A | |||||||||||
Morgan Stanley Capital International EAFE Index* | -5.77 | % | 17.13 | % | -3.51 | % | 5.70 | % |
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.
4
Brandes Institutional International Equity 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. Currently, the expense level has not been exceeded.
Sector Allocation as a Percentage of Total Investments as of March 31, 2012
(Unaudited)
The sector classifications represented in the chart above are in accordance with the Global Industry Classification Standard (GICS®), which was developed by and/or is the exclusive property of MSCI, Inc. and Standard & Poor Financial Services LLC.
5
Brandes Institutional Global Equity Fund
Dear Shareholder:
The Brandes Institutional Global Equity Fund (“the Fund”) advanced 16.76% during the six-month period ending March 31, 2012. For the same period, the MSCI World Index grew 20.03%.
Below I discuss the industry, country, and stock-specific factors that affected the Fund’s performance during this period and describe changes in the Fund’s composition. In addition, I’ll review current market conditions and our investment philosophy, and discuss how we believe the Fund is well positioned for future performance.
The Markets
Extending a familiar theme for much of 2011, investors remained preoccupied with macroeconomic and geopolitical issues in the fourth quarter, with Europe’s sovereign debt crisis dominating headlines and raising worries over how it may effect global economic growth. These factors resulted in depressed valuations that made select companies appear attractive from a long-term investment perspective.
At the start of 2012, world equity markets looked fairly grim. Europe appeared on the verge of a meltdown, many questioned whether the United States was on a sustainable path to recovery, Japan was still recovering from the Tohoku earthquake and tsunami, concern was being raised of a hard landing in China, and fixed income had trounced equities in 2011. General market sentiment quickly changed as the European Central Bank implemented the first phase of its Long Term Refinancing Operation (LTRO) to help stabilize the European banking system. Global markets responded with enthusiasm and the MSCI World Index gained 11.6% in the first quarter.
The Fund
While registering sound performance in the six months ending March 31, 2012, the Fund underperformed the MSCI World Index. Stock selection and our overweight positions in both the Diversified Telecommunication Services and Pharmaceutical industries were the primary drivers of the relative performance shortfall. On the other hand, individual issue selection in the United States, Japan, Switzerland and Italy all had positive impacts to relative performance.
Looking at overall returns for the Fund, positions in the commercial banks and oil, gas & consumable fuels industries positively impacted performance. Returns for securities based in these industries, such as Wells Fargo & Co (United States — commercial banks), ENI S.p.A. (Italy — oil, gas & consumable fuels) and Valero Energy Corp (United States — oil gas & consumable fuels) helped drive performance. Holdings in the pharmaceuticals, food & staples retailing, and automobiles industries also tended to add value during the period. Top-performers from these industries included Pfizer (United States — pharmaceuticals), Safeway Inc (United States — food & staples retailing), and Toyota Motor Co (Japan — automobiles). While most industries registered gains during the period, holdings in the diversified telecommunication services industry tended to decline, including France Telecom (France).
6
Brandes Institutional Global Equity Fund
From a country perspective, securities based in the United States had the most positive impact on overall performance. Some of the key contributors from the United States were Microsoft Corp (software) and Western Digital Corp (computers & peripherals). In addition, positions in Japan tended to advance, including Honda Motor Co (automobiles).
During the six months period ending March 31, 2012, we sold select positions as their market prices neared our estimates of their fair values or in order to pursue more attractive opportunities. Among the positions we sold were Lowe’s Cos (United States — specialty retail), Nokia (Finland — communications equipment), and Mizuho Financial Group (Japan — commercial banks). We also purchased shares of new holdings at prices that we consider attractive, including America Movil SAB (Mexico — wireless telecommunication services) and State Street Corporation (United States — capital markets).
Our Outlook
In all market environments, we consistently seek to take advantage of market irrationality and short-term security mispricing by buying securities that we believe are undervalued and offer attractive total return potential. Our investment philosophy continues to focus on rigorous, independent company analysis with a long-term perspective, while also taking into account the dynamic macroeconomic landscape. As such, our analysts focus not only on company fundamentals but on the stress factors that are imposed from a broader economic or financial perspective. We realize that many of the macro issues and concerns are keeping valuations at attractive levels and we have folded very conservative assumptions into our estimates of intrinsic values to reflect this. As part of our process, we are highly focused on the value/price relationship and believe valuations and company fundamentals drive future returns over the long term. In our view, the current environment provides us with the opportunity to build a high-quality and defensive portfolio at attractive valuations.
As of March 31, 2012, the Fund’s most substantial country weighting was in Japan and its most substantial industry weighting was in the diversified telecommunication services industry.
As we look beyond the current clouds of uncertainty toward the future, we remain focused on a singular goal: to build wealth for our clients over the long term. And as true believers in value investing, we believe that your patience will be rewarded. As always, thank you for your continued trust.
Sincerely yours,
Jeffrey A. Busby, CFA
President
Brandes Investment Trust
7
Brandes Institutional Global Equity Fund
Past performance does not guarantee future results.
Foreign investments involve additional risks, including currency fluctuations, political instability, differences in financial reporting standards and less stringent regulation of securities markets. Emerging market countries involve greater risks, such as immature economic structures, national policies restricting investments by foreigners, and different legal systems.
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. Current and future portfolio holdings are subject to risk.
The foregoing reflects the thoughts and opinions of Brandes Investment Partners® exclusively and is subject to change without notice.
Brandes Investment Partners® is a registered trademark of Brandes Investment Partners, L.P. in the United States and Canada.
Must be preceded or accompanied by a prospectus.
Index Guide
The MSCI World Index with net dividends is an unmanaged, free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed markets. The MSCI World Index consists of 24 developed market country indices. This index includes dividends and distributions net of withholding taxes, but does not reflect fees, brokerage commissions, or other expenses of investing. Please note that all indices are unmanaged and are not available for direct investment.
The Brandes Institutional Global Equity Fund is distributed by Quasar Distributors LLC.
8
Brandes Institutional Global Equity Fund
The following chart compares the value of a hypothetical $1,000,000 investment in the Brandes Institutional Global Equity Fund — Class I from its inception (October 6, 2008) to March 31, 2012 and in the Morgan Stanley Capital International World Index for the same period.
Value of $1,000,000 vs Morgan Stanley Capital International World Index
Average Annual Total Return Periods Ended March 31, 2012 (Unaudited) | ||||||||||||
One Year | Three Years | Since Inception | ||||||||||
Brandes Institutional Global Equity Fund | ||||||||||||
Class I | -1.88 | % | 16.51 | % | 6.07 | % | ||||||
Class E | -2.20 | % | 16.31 | % | 5.90 | % | ||||||
Class S | -2.09 | % | N/A | 0.17 | % | |||||||
Morgan Stanley Capital International World Index* | 0.56 | % | 20.24 | % | 8.29 | % |
* The Morgan Stanley Capital International World Index since inception return shown is from the inception date of the Brandes Institutional Global Equity Fund — Class I and E (October 6, 2008). The return from the inception of the Brandes Institutional Global Equity Fund — Class S (January 31, 2011) is 2.62%.
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.
9
Brandes Institutional Global Equity Fund
The returns shown do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. The Advisor has a fee waiver arrangement in place to limit the Fund's annual operating expenses.
Sector Allocation as a Percentage of Total Investments as of March 31, 2012
(Unaudited)
The sector classifications represented in the chart above are in accordance with the Global Industry Classification Standard (GICS®), which was developed by and/or is the exclusive property of MSCI, Inc. and Standard & Poor Financial Services LLC.
10
Brandes Institutional Emerging Markets Fund
Dear Shareholder:
The Brandes Institutional Emerging Markets Fund (“the Fund”) advanced 21.86% during the six months ended March 31, 2012. For the same period, the MSCI Emerging Markets Index (MSCI EM) gained 19.22%.
Below I discuss the industry, country, and stock-specific factors that affected the Fund’s performance during this period and describe changes in the Fund’s composition. In addition, I’ll review current market conditions, our investment philosophy, and discuss how we believe the Fund is well positioned for future performance.
The Markets
Global consumer sentiment is improving now that the perceived risks of 2011 have waned. Fears of economic deterioration, rising inflation, a Chinese “hard landing” and a spillover of the sovereign debt crisis facing Europe have dissipated to some extent. In the first quarter of 2012, optimism crept back into emerging markets. The MSCI Emerging Markets Index experienced over 14% gains in the quarter and the Brandes Institutional Emerging Markets Equity Fund performed strongly as well, returning 17.25% for the period.
It was an impressive period for emerging markets and the Brandes Emerging Markets Equity Fund; absolute returns were positive for nearly every sector and country.
The Fund
The Fund delivered strong absolute gains during the six months ending March 31, 2012. Stock selection in the electric utilities industry was the primary contributor to positive performance on an absolute as well as relative basis. In addition, stock selection in Mexico and India helped relative returns. The primary drivers of relative underperformance for the period included stock selection in commercial banks and wireless telecommunication services, as well as the Fund’s overweighting in the diversified telecommunication services industry.
Looking at overall returns for the Fund, positions in the electric utilities, commercial banks, and semiconductors & semiconductor equipment industries contributed the most to absolute performance. Among the better-performing securities in these industries were Reliance Infrastructure Ltd. (India — electric utilities), Banco Latinoamericano de Comercio Exterior. (Panama — commercial banks), and Samsung Electronics Co. (South Korea — semiconductors & semiconductor equipment). Among the other top-performing holdings were Cemex (Mexico — construction materials), Companhia de Saneamento Basico do Estado de Sao Paulo (Brazil — water utilities), and Novatek Microelectronics Corp (Taiwan — semiconductors & semiconductor equipment). Select holdings that declined during the period included Turkiye Vakiflar Bankasi (Turkey — commercial banks), Erste Group Bank (Austria — commercial banks), and Chaoda Modern Agriculture (China — food products).
From a country perspective, securities based in the Brazil, South Korea, and Mexico had the most positive impact on performance on an absolute basis. Some of the positions from these countries experiencing the strongest share price appreciation
11
Brandes Institutional Emerging Markets Fund
included Embraer (Brazil — aerospace & defense), Hana Financial Group (South Korea — commercial banks), and Gruma (Mexico — food products).
During the six-months ending March 31, 2012, we sold select positions as their market prices neared our estimates of their fair values or in order to pursue more attractive opportunities. Among the positions we sold were Lucky Cement (Pakistan — construction materials), CIA Saneamento Basico (Brazil — water utilities), and SK Telecom (South Korea — wireless telecommunication services). We also purchased shares of new holdings at prices that we consider attractive, including PhosAgro OAO (Russia — chemicals).
Our Outlook
In all market environments, we consistently seek to take advantage of market irrationality and short-term security mispricing by buying securities that we believe are undervalued and offer attractive total return potential. Our investment philosophy continues to focus on rigorous, independent company analysis with a long-term perspective, while also taking into account the dynamic macroeconomic landscape. As such, our analysts focus not only on company fundamentals but on the stress factors that are imposed from a broader economic or financial perspective. We realize that many of the macro issues and concerns are keeping valuations at attractive levels and we have folded very conservative assumptions into our estimates of intrinsic values to reflect this. As part of our process, we are highly focused on the value/price relationship and believe valuations and company fundamentals drive future returns over the long term. In our view, the current environment provides us with the opportunity to build a high-quality and defensive portfolio at attractive valuations.
As of March 31, 2012, the Fund’s most substantial country weighting was in Japan and its most substantial industry weighting was in the diversified telecommunication services industry.
As we look beyond the current clouds of uncertainty toward the future, we remain focused on a singular goal: to build wealth for our clients over the long term. And as true believers in value investing, we believe that your patience will be rewarded. As always, thank you for your continued trust.
Sincerely yours,
Jeffrey A. Busby, CFA
President
Brandes Investment Trust
12
Brandes Institutional Emerging Markets Fund
Past performance does not guarantee future results.
Foreign investments involve additional risks, including currency fluctuations, political instability, differences in financial reporting standards and less stringent regulation of securities markets. Emerging market countries involve greater risks, such as immature economic structures, national policies restricting investments by foreigners, and different legal systems.
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. Current and future portfolio holdings are subject to risk.
The foregoing reflects the thoughts and opinions of Brandes Investment Partners® exclusively and is subject to change without notice.
Brandes Investment Partners® is a registered trademark of Brandes Investment Partners, L.P. in the United States and Canada.
Must be preceded or accompanied by a prospectus.
Index Guide
The MSCI Emerging Markets Index with gross dividends is an unmanaged, free float-adjusted market capitalization index that is designed to measure equity market performance of emerging markets. The MSCI Emerging Markets Index consists of 21 emerging market country indices. This index includes dividends and distributions, but does not reflect fees, brokerage commissions, withholding taxes, or other expenses of investing. Please note that all indices are unmanaged and are not available for direct investment.
The Brandes Institutional Emerging Markets Fund is distributed by Quasar Distributors LLC.
13
Brandes Institutional Emerging Markets Fund
The following chart compares the value of a hypothetical $1,000,000 investment in the Brandes Institutional Emerging Markets Fund — Class I from March 31, 2002 to March 31, 2012 and in the Morgan Stanley Emerging Markets Index for the same period.
Value of $1,000,000 vs Morgan Stanley Capital Emerging Markets Index
Average Annual Total Return Periods Ended March 31, 2012* (Unaudited) | ||||||||||||||||
One Year | Three Years | Five Years | Ten Years | |||||||||||||
Brandes Institutional Emerging Markets Fund | ||||||||||||||||
Class I | -7.46 | % | 34.70 | % | 7.58 | % | 15.62 | % | ||||||||
Class S | -7.68 | % | 34.41 | % | 7.35 | % | 15.41 | % | ||||||||
Morgan Stanley Capital International Emerging Markets Index | -8.52 | % | 25.42 | % | 4.97 | % | 14.47 | % |
* 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 Institutional Emerging Markets Fund. The performance information shown for the Class I shares for periods before January 31, 2011 is that of the private investment fund and reflects the net expenses of the private investment fund. The performance of the private investment fund prior to January 31, 2011 is based on calculations that are different than the standardized method of calculations specified by the SEC. The performance information shown for the Class S shares has been adjusted to reflect the differences in the net expense ratios between the Class I and S 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, diversifi-
14
Brandes Institutional Emerging Markets Fund
cation requirements, and other restrictions imposed by the 1940 Act and the Internal Revenue Code of 1986, which, if applicable, may have adversely affected its performance.
Performance data quoted represents past performance; past performance does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance of the Fund may be lower or higher than the performance quoted. Performance data current to the most recent month end may be obtained by calling 800-331-2979.
The returns shown do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. The Advisor has a fee waiver arrangement in place to limit the Fund's annual operating expenses.
Sector Allocation as a Percentage of Total Investments as of March 31, 2012
(Unaudited)
The sector classifications represented in the chart above are in accordance with the Global Industry Classification Standard (GICS®), which was developed by and/or is the exclusive property of MSCI, Inc. and Standard & Poor Financial Services LLC.
15
Brandes International Small Cap Equity Fund
Dear Shareholder:
The Brandes International Small Cap Equity Fund (“the Fund”) advanced 12.47%* during the six months ended March 31, 2012. For the same period, the S&P Developed ex-U.S. Small Cap Index gained 15.04%.
Below I discuss the industry, country, and stock-specific factors that affected the Fund’s performance during this period and describe changes in the Fund’s composition. In addition, I’ll review current market conditions, our investment philosophy, and discuss how the Fund is positioned for the future.
*The fund return for the 6-month period is inclusive of performance returns of the international small cap pooled trust account, which was reorganized into the Fund on February 1st, 2012. Please see the Fund prospectus for further details.
The Markets
The broad-based rebound in global equity prices that began in the fourth quarter of 2011 continued into the first quarter of 2012. While the euro area remained in a mild recession during the first quarter, investors turned optimistic amid easing financial worries in Europe and news of Greece’s debt restructuring. The economic outlook in Europe, however, remains uncertain; while the German economy showed signs of resilience, conditions in Italy, Spain, Portugal, Ireland and Greece were less positive. At the one-year anniversary of the massive earthquake and tsunami in Japan, there were signs the nation’s economy is on the mend. Monetary easing by the Bank of Japan has caused the yen to weaken, boosting the share prices of many of the country’s exporters. While investors appear to be regaining confidence, escalating geopolitical tensions in the Middle East have heightened fears that potential oil supply disruptions could forestall the U.S.-led global economic recovery.
The Fund**
The Fund delivered sound absolute gains during the six months ending March 31, 2012 (12.47%), albeit underperforming the S&P Developed non-U.S. Small Cap Index over the same period (15.04%). Holdings in the commercial banks, semiconductors & semiconductor equipment and auto components industries were the primary contributors to positive performance on an absolute as well as relative basis. In addition, positions in both Switzerland and Canada as well as the Fund’s overweight allocation to Panama helped relative returns. The primary drivers of relative underperformance for the period included Chinese holdings as well as the Fund’s overweight allocation to Japan.
Looking at overall returns for the Fund, positions in the commercial banks, semiconductors & semiconductor equipment and auto componenets industries contributed the most to absolute performance. Among the better-performing securities in these industries were Banco Latinamericano de Comercio Exterior (Panama — commercial banks), Micronas Semiconductor Holding (Switzerland — semiconductors & semiconductor equipment), and Linamar Corp. (Canada — auto components). Among the other top-performing holdings were Teleperformance (France — professional services), Panalpina Welttransport (Switzerland — Air Freight & Logistics),
16
Brandes International Small Cap Equity Fund
and Travis Perkins (United Kingdom — trading companies & distributors). Select holdings that declined during the period included Chofu Seisakusho Co. (Japan — household durables), Chudenko Corp. (Japan — Construction & Engineering), and Praktiker AG (Germany — specialty retail).
From a country perspective, the United Kingdom, Canada and Switzerland experienced strong gains for the period. Top performing securities within these countries included Debenhams PLC (United Kingdom — multiline retail), Dorel Industries (Canada — Household Durables), and Micronas Semiconductor Holding (Switzerland — semiconductors & semiconductor equipment).
As of March 31, 2012, the Fund’s most substantial country weighting was in Japan and the most substantial industry weighting was in the food products industry.
** The fund return for the 6-month period is inclusive of performance returns of the international small cap pooled trust account, which was reorganized into the Fund on February 1st, 2012. Please see the Fund prospectus for further details.
Our Outlook
In all market environments, we consistently seek to take advantage of market irrationality and short-term security mispricing by buying securities that we believe are undervalued and offer attractive total return potential. Our investment philosophy continues to focus on rigorous, independent company analysis with a long-term perspective, while also taking into account the dynamic macroeconomic landscape. As such, our analysts focus not only on company fundamentals but on the stress factors that are imposed from a broader economic or financial perspective. We realize that many of the macro issues and concerns are keeping valuations at attractive levels and we have folded very conservative assumptions into our estimates of intrinsic values to reflect this. As part of our process, we are highly focused on the value/price relationship and believe valuations and company fundamentals drive future returns over the long term. In our view, the current environment provides us with the opportunity to build a high-quality and defensive portfolio at attractive valuations.
As we look beyond the current clouds of uncertainty toward the future, we remain focused on a singular goal: to build wealth for our clients over the long term. And as true believers in value investing, we believe that your patience will be rewarded. As always, thank you for your continued trust.
Sincerely yours,
Jeffrey A. Busby, CFA
President
Brandes Investment Trust
17
Brandes International Small Cap Equity Fund
Past performance does not guarantee future results.
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.
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. Current and future portfolio holdings are subject to risk.
The foregoing reflects the thoughts and opinions of Brandes Investment Partners® exclusively and is subject to change without notice.
Brandes Investment Partners® is a registered trademark of Brandes Investment Partners, L.P. in the United States and Canada.
Must be preceded or accompanied by a prospectus.
Index Guide
The S&P Developed Ex-U.S. SmallCap Index with gross dividends is an unmanaged, float-adjusted market capitalization weighted index that measures the equity performance of small capitalization companies from developed markets around the world, excluding the United States. This index includes dividends and distributions but does not reflect fees, brokerage commissions, withholding taxes, or other expenses of investing.
The Brandes International Small Cap Equity Fund is distributed by Quasar Distributors LLC.
18
Brandes International Small Cap Equity Fund
The following chart compares the value of a hypothetical $1,000,000 investment in the Brandes International Small Cap Equity Fund — Class I from March 31, 2002 to March 31, 2012 and in the S&P Developed SmallCap — Excluding the U.S. Index (“S&P Developed SmallCap — Ex. U.S. Index”) for the same period.
Value of $1,000,000 vs S&P Developed SmallCap — Ex. U.S. Index
Average Annual Total Return Periods Ended March 31, 2012* (Unaudited) | ||||||||||||||||
One Year | Three Years | Five Years | Ten Years | |||||||||||||
Brandes International Small Cap Fund | ||||||||||||||||
Class I | -7.28 | % | 36.92 | % | 2.19 | % | 11.20 | % | ||||||||
Class S | -7.19 | % | 36.96 | % | 2.21 | % | 11.21 | % | ||||||||
S&P Developed SmallCap — Ex. U.S. Index | -6.99 | % | 24.40 | % | -1.97 | % | 10.20 | % |
* 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 Equity Fund. The performance information shown for the periods before February 1, 2012 is that of the private investment fund and reflects the net expenses of the private investment fund. The performance of the private investment fund prior to February 1, 2012 is based on calculations that are different than the standardized method of calculations specified by the SEC. The private investment fund was not registered under the 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.
19
Brandes International Small Cap Equity Fund
Performance data quoted represents past performance; past performance does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance of the Fund may be lower or higher than the performance quoted. Performance data current to the most recent month end may be obtained by calling 800-331-2979.
The returns shown do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. The Advisor has a fee waiver arrangement in place to limit the Fund's annual operating expenses.
Sector Allocation as a Percentage of Total Investments as of March 31, 2012
(Unaudited)
The sector classifications represented in the chart above are in accordance with the Global Industry Classification Standard (GICS®), which was developed by and/or is the exclusive property of MSCI, Inc. and Standard & Poor Financial Services LLC.
20
Brandes Institutional Core Plus Fixed Income Fund
Dear Shareholder:
The Brandes Institutional Core Plus Fixed Income Fund (“the Fund”) gained 4.82% for the 6-month period ending March 31, 2012. The Barclays Capital U.S. Aggregate Bond Index gained 1.43% for the same 6-month period.
In this letter, I will examine the sector and security-specific factors that affected the Fund’s performance and describe changes in the Fund’s composition for the 6-month period ending March 31, 2012. I will also discuss how the Fund is positioned for the future.
The Markets
The great Yogi Berra once said: “It’s like déjà-vu, all over again.” This quote could accurately be applied to the fixed income markets during the six months ended March 31, 2012, relative to the 6- month period ending March 31, 2011. One year ago at this time, economic measures were largely pointing toward a moderate expansion, risk assets rallied meaningfully and inflation fears began festering as both crude oil and gasoline prices were rising sharply. European debt concerns persisted, but the U.S. markets showed increasing signs of decoupling. A fast forward to the end of the first quarter 2012 reads like a carbon copy of the market environment 12 months ago: U.S economic data has continued its growth trajectory, risk assets staged a significant rally and gasoline prices have risen above $4.00/gallon throughout most of the country. Finally, the market’s perception of the euro zone debt crisis has ebbed somewhat; or more specifically, the market’s perception of the overall “tail risk” associated with a negative outcome to the ongoing euro zone crisis appreciably declined during the quarter.
The Fund
During the 6-month period, positive relative performance was led by the corporate bond sector. More specifically, within the corporate sector, returns were led by banks and the homebuilding/building product industries. The Fund’s holdings in non-agency mortgage backed securities were also a positive factor in performance. Finally, the Fund benefited from an underweight position in U.S. Treasury securities as well as a modest underweight of duration relative to the benchmark. The Fund’s yield premium to the benchmarks was once again a positive factor in relative performance. As of March 31, 2012, the Fund’s most substantial weighting was in the corporate bonds sector, particularly the industrials industry.
U.S financials experienced considerable spread tightening during the period. The financials component of the Index posted an excess return of 13.11%, which was greater than the 11.94% excess return of the Barclays Capital U.S. Corporate High-Yield Bond Index. It appears that the market finally began to catch up with the fundamental strengthening of bank balance sheets since the credit crisis of 2008.
21
Brandes Institutional Core Plus Fixed Income Fund
Since the credit crisis, the banking industry has aggressively written down (or off) problem loans, raised additional capital and changed lending practices to make new loans on much stricter terms.
In fact, during the fourth quarter the Fed released its annual stress test of the banking system, also referred to as the Comprehensive Capital Analysis and Review. The stress test was applied to the 19 largest bank holding companies and assumed a peak unemployment rate of 13%, a 50% decrease in equities and a 21% decline in housing prices. The net result was that if planned dividends and share repurchases were excluded, 18 of the 19 banks were able to maintain a minimum tier I capital ratio of 5%. Underscoring the overall health of the financial system post-credit crisis, according to the Fed, the 19 banks have raised their aggregate capital by nearly $340 billion since the first quarter of 2009. The Brandes Core Plus fund has been overweight financials for some time as we have consistently felt that market technical factors have overshadowed and overwhelmed the dramatic fundamental improvement that banks have undertaken. We still believe that the yield spreads offered by banks are attractive relative to their risk profiles.
The outperformance of homebuilding/building products bonds and non-agency mortgage-backed securities was largely due to better feelings about the state of the U.S. housing market. It would be difficult to fashion an argument that the arrow on the housing market is now pointing upward, but given the data received on building permits, new housing starts and existing home sales, not to mention an absence of downright pessimism in public comments from the largest homebuilders, it appears that the housing market may have (hopefully) found a bottom. If the market has indeed found a bottom, this bodes well for the homebuilders who have largely done an admirable job of managing their balance sheets through the crisis by concentrating on maintaining liquidity through terming out their debt maturities and focusing on maintaining positive cash flow until the market shows signs of life again. A bottoming of the housing market should also benefit non-agency mortgage-backed securities as previous calamitous assumptions regarding defaults and recoveries on underlying loans may prove to be unduly conservative.
During the 6-month period, notable purchases in the Fund consisted of corporate bonds issued by Eastman Kodak, Edison Mission Energy and Chesapeake Energy Corp. The Fund added to its holdings of Marks & Spencer and Regions Financial. The Fund sold its position in a corporate bond issued by Chiquita Brands. The Fund also sold one ABS security backed by subprime loans.
Our Outlook
As we move into the second quarter of 2012 credit and mortgage yield spreads have experienced appreciable tightening year to date but remain wide of their historical averages. If yield spreads are examined in the context of aggregate leverage—which is at or near 25-year bests—yield spreads still appear to offer compelling value.
22
Brandes Institutional Core Plus Fixed Income Fund
Certainly, the market remains fraught with risks that astute investors need to keep their eyes on. While Europe appears calm for now, there is some concern that the sizeable liquidity provided to European banks by the ECB through the Long Term Refinance Operation is masking the continent’s true fundamental debt and growth problems. We remain cautious on the euro zone and feel we have not heard the last of Greece, not to mention the possibility of problems escalating in Portugal, Spain or even Italy.
Closer to home, the fundamental U.S economic picture continues to improve but we feel the economic recovery remains susceptible to exogenous shocks, which could take the form of a re-escalation of euro zone stress, high energy prices derailing the economic expansion or another unexpected leg down in the housing market. What these concerns mean to us is that we feel the myriad of unknowns places a premium on fundamental research and deliberative security selection. There is a number of securities today whose yield spreads are more a function of macro and technical factors than the underlying credit fundamentals. We believe that thoughtful research, bottom-up security selection and a patient, long-term approach are paramount in the current environment where technical factors—both positive and negative—can overwhelm and temporarily mask true credit fundamentals.
Sincerely yours,
Jeffrey A. Busby, CFA
President
Brandes Investment Trust
Past performance does not guarantee future results.
Market conditions may impact performance. The performance results presented were achieved in particular market conditions which may not be repeated. Moreover, the current market volatility and uncertain regulatory environment may have a negative impact on future performance.
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
23
Brandes Institutional Core Plus Fixed Income Fund
agreements, involves risks different from, or possibly greater than, the risks associated with investing directly in securities and other more traditional investments.
Unlike bonds issued or guaranteed by the U.S. government or its agencies, stocks and other bonds are not backed by the full faith and credit of the United States. Stock and bond prices will experience market fluctuations. Please note that the value of government securities and bonds in general have an inverse relationship to interest rates. Bonds carry the risk of default, or the risk than an issuer will be unable to make income or principal payment. There is no assurance that private guarantors or insurers will meet their obligations. The credit quality of the investments in the portfolio is no guarantee of the safety or stability of the portfolio. Investments in asset-backed and mortgage-backed securities include additional risks that investors should be aware of such as credit risk, prepayment risk, possible illiquidity and default, as well as increased susceptibility to adverse economic developments.
Please refer to the Schedule of Investments in the report for complete holdings information. Fund holdings, geographic allocations and/or sector allocations are subject to change at any time and are not a recommendation to buy or sell any security.
Investment performance reflects fee waivers and/or reimbursement of expenses. In the absence of such waivers/reimbursements, total return would be reduced.
The foregoing reflects the thoughts and opinions of Brandes Investment Partners® exclusively and is subject to change without notice.
Brandes Investment Partners® is a registered trademark of Brandes Investment Partners, L.P. in the United States and Canada.
Must be preceded or accompanied by a prospectus.
Index Guide
The Barclays Capital 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.
Barclays Capital U.S. Corporate High-Yield Bond Index: The Barclays Capital U.S. Corporate High-Yield Bond Index is an unmanaged index consisting of U.S. dollar-denominated, non-investment grade, fixed-rate, taxable corporate bonds. The U.S.
24
Brandes Institutional Core Plus Fixed Income Fund
Corporate High-Yield Index measures the market of USD-denominated, non-investment grade, fixed-rate, taxable corporate bonds. Securities are classified as high yield if the middle rating of Moody’s, Fitch, and S&P is Ba1/BB+/BB+ or below. The index excludes emerging market debt. It was created in 1986, with history backfilled to July 1, 1983. The U.S. Corporate High-Yield Index is part of the U.S. Universal and Global High-Yield Indices. The index is a total return index which reflects the price changes and interest of each bond in the index.
Please note that all indices are unmanaged are not available for direct investment.
Cash Flow: Measures the cash generating capability of a company by adding non-cash charges (e.g. depreciation) and interest expense to pretax income.
The Brandes Institutional Core Plus Fixed Income Fund is distributed by Quasar Distributors, LLC.
25
Brandes Institutional Core Plus Fixed Income Fund
The following chart compares the value of a hypothetical $1,000,000 investment in the Brandes Institutional Core Plus Fixed Income Fund — Class I from its inception (December 28, 2007) to March 31, 2012 and in the Barclays Capital U.S. Aggregate Index for the same period.
Value of $1,000,000 vs Barclays Capital U.S. Aggregate Index
Average Annual Total Return Periods Ended March 31, 2012 (Unaudited) | ||||||||||||
One Year | Three Years | Since Inception | ||||||||||
Brandes Institutional Core Plus Fixed Income Fund | ||||||||||||
Class I | 6.32 | % | 12.15 | % | 4.98 | % | ||||||
Class E | 6.23 | % | 12.00 | % | 4.85 | % | ||||||
Barclays Capital U.S. Aggregate Index* | 7.71 | % | 6.83 | % | 6.14 | % |
* The Barclays Capital U.S. Aggregate Index since inception return shown is from the inception date of the Brandes Institutional Core Plus Fixed Income Fund — Class I (December 28, 2007). The return from the inception date of the Brandes Institutional Core Plus Fixed Income Fund — Class E (May 28, 2008) is 6.40%.
Performance data quoted represents past performance; past performance does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance of the Fund may be lower or higher than the performance quoted. Performance data current to the most recent month end may be obtained by calling 800-331-2979.
26
Brandes Institutional Core Plus Fixed Income Fund
Sector Allocation as a Percentage of Total Investments as of March 31, 2012
(Unaudited)
27
Brandes Credit Focus Yield Fund
Dear Shareholder:
The Brandes Institutional Credit Focus Yield Fund (“the Fund”) gained 6.90%* for the 6-month period ending March 31, 2012. The Barclays Capital U.S. Intermediate Credit Bond Index gained 3.66% for the same time period.
In this letter, I will examine the sector and security-specific factors that affected the Fund’s performance and describe changes in the Fund’s composition for the 6-month period ending March 31, 2012. I will also discuss how the Fund is positioned for the future.
*The fund return for the 6-month period is inclusive of performance returns of the private investment fund, which was reorganized into the Fund on February 1st, 2012. Please see the Fund prospectus for further details.
The Markets
The great Yogi Berra once said: “It’s like déjà-vu, all over again.” This quote could accurately be applied to the fixed income markets during the six months ended March 31, 2012, relative to the 6- month period ending March 31, 2011. One year ago at this time, economic measures were largely pointing toward a moderate expansion, risk assets rallied meaningfully and inflation fears began festering as both crude oil and gasoline prices were rising sharply. European debt concerns persisted, but the U.S. markets showed increasing signs of decoupling. A fast forward to the end of the first quarter 2012 reads like a carbon copy of the market environment 12 months ago: U.S economic data has continued its growth trajectory, risk assets staged a significant rally and gasoline prices have risen above $4.00/gallon throughout most of the country. Finally, the market’s perception of the euro zone debt crisis has ebbed somewhat; or more specifically, the market’s perception of the overall “tail risk” associated with a negative outcome to the ongoing euro zone crisis appreciably declined during the quarter.
The Fund**
During the six month period, positive relative performance was led by the corporate bond sector. More specifically, within the corporate sector, returns were led by banks and the homebuilding/building product industries. The Fund’s holdings in non-agency mortgage backed securities were also a positive factor in performance. Finally, the Fund benefited from a modest underweight of duration relative to the benchmark. The Fund’s yield premium to the benchmarks was once again a positive factor in relative performance. As of March 31, 2012 the Fund’s most substantial weighting was in the corporate bonds sector, particularly the industrials industry.
U.S financials experienced considerable spread tightening during the period. The financials component of the Index posted an excess return of 13.11%, which was greater than the 11.94% excess return of the Barclays Capital U.S. Corporate High-Yield Bond Index. It appears that the market finally began to catch up with the
28
Brandes Credit Focus Yield Fund
fundamental strengthening of bank balance sheets since the credit crisis of 2008. Since the credit crisis, the banking industry has aggressively written down (or off) problem loans, raised additional capital and changed lending practices to make new loans on much stricter terms.
In fact, during the quarter the Fed released its annual stress test of the banking system, also referred to as the Comprehensive Capital Analysis and Review (CCAR). The stress test was applied to the 19 largest bank holding companies and assumed a peak unemployment rate of 13%, a 50% decrease in equities, and a 21% decline in housing prices. The net result was that if planned dividends and share repurchases were excluded, 18 of the 19 banks were able to maintain a minimum tier I capital ratio of 5%. Underscoring the overall health of the financial system post-credit crisis, according to the Fed, the 19 banks have raised their aggregate capital by nearly $340 billion since the first quarter of 2009. The Brandes Fixed Income Portfolios have been overweight financials for some time as we have consistently felt that market technical factors have overshadowed and overwhelmed the dramatic fundamental improvement that banks have undertaken. We still believe that the yield spreads offered by banks are attractive relative to their risk profiles.
The outperformance of homebuilding/building products bonds and non-agency mortgage-backed securities was largely due to better feelings about the state of the U.S. housing market. It would be difficult to fashion an argument that the arrow on the housing market is now pointing upward, but given the data received on building permits, new housing starts and existing home sales, not to mention an absence of downright pessimism in public comments from the largest homebuilders, it appears that the housing market may have (hopefully) found a bottom. If the market has indeed found a bottom, this bodes well for the homebuilders who have largely done an admirable job of managing their balance sheets through the crisis by concentrating on maintaining liquidity through terming out their debt maturities and focusing on maintaining positive cash flow until the market shows signs of life again. A bottoming of the housing market also benefits non-agency mortgage-backed securities as previous calamitous assumptions regarding defaults and recoveries on underlying loans may prove to be unduly conservative.
During the 6-month period, notable purchases in the Fund consisted of corporate bonds issued by Eastman Kodak, Edison Mission Energy, and Chesapeake Energy Corp. The Fund added to its holdings of Marks & Spencer, U.S. Bancorp and Regions Financial. The Fund sold its position in a corporate bond issued by Chiquita Brands. The Fund also sold one ABS security backed by subprime loans.
**The fund return for the 6-month period is inclusive of performance returns of the private investment fund, which was reorganized into the Fund on February 1st, 2012. Please see the Fund prospectus for further details.
29
Brandes Credit Focus Yield Fund
Our Outlook
As we move into the second quarter of 2012, credit and mortgage yield spreads have experienced appreciable tightening year to date, but remain wide of their historical averages. If yield spreads are examined in the context of aggregate leverage—which is at or near 25-year bests—yield spreads still appear to offer compelling value.
Certainly, the market remains fraught with risks that astute investors need to keep their eyes on. While Europe appears calm for now, there is some concern that the sizeable liquidity provided to European banks by the ECB through the Long Term Refinance Operation (LTRO) is masking the continent’s true fundamental debt and growth problems. We remain cautious on the euro zone and feel we have not heard the last of Greece, not to mention the possibility of problems escalating in Portugal, Spain or even Italy.
Closer to home, the fundamental U.S economic picture continues to improve but we feel the economic recovery remains susceptible to exogenous shocks, which could take the form of a re-escalation of euro zone stress, high energy prices derailing the economic expansion or another unexpected leg down in the housing market. What these concerns mean to us is that we feel the myriad of unknowns places a premium on fundamental research and deliberative security selection. There are a number of securities today whose yield spread is more a function of macro and technical factors than the underlying credit fundamentals. We believe that thoughtful research, bottom-up security selection and a patient, long-term approach are paramount in the current environment where technical factors—both positive and negative—can overwhelm and temporarily mask true credit fundamentals.
Sincerely yours,
Jeffrey A. Busby, CFA
President
Brandes Investment Trust
Past performance does not guarantee future results.
Market conditions may impact performance. The performance results presented were achieved in particular market conditions which may not be repeated. Moreover, the current market volatility and uncertain regulatory environment may have a negative impact on future performance.
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.
30
Brandes Credit Focus Yield Fund
International and emerging markets investing is subject to certain risks such as currency fluctuations and social and political changes; such risks may result in greater share price volatility. Emerging market countries involve greater risks, such as immature economic structures, national policies restricting investments by foreigners, and different legal systems. Below investment grade debt securities are speculative and involve a greater risk of default and price change due to changes in the issuer’s creditworthiness. The Fund’s use of derivative instruments, such as options contracts, futures contracts or swap agreements, involves risks different from, or possibly greater than, the risks associated with investing directly in securities and other more traditional investments.
Unlike bonds issued or guaranteed by the U.S. government or its agencies, stocks and other bonds are not backed by the full faith and credit of the United States. Stock and bond prices will experience market fluctuations. Please note that the value of government securities and bonds in general have an inverse relationship to interest rates. Bonds carry the risk of default, or the risk than an issuer will be unable to make income or principal payment. There is no assurance that private guarantors or insurers will meet their obligations. The credit quality of the investments in the portfolio is no guarantee of the safety or stability of the portfolio. Investments in asset-backed and mortgage-backed securities include additional risks that investors should be aware of such as credit risk, prepayment risk, possible illiquidity and default, as well as increased susceptibility to adverse economic developments.
Please refer to the Schedule of Investments in the report for complete holdings information. Fund holdings, geographic allocations and/or sector allocations are subject to change at any time and are not a recommendation to buy or sell any security.
Investment performance reflects fee waivers and/or reimbursement of expenses. In the absence of such waivers/reimbursements, total return would be reduced.
The foregoing reflects the thoughts and opinions of Brandes Investment Partners® exclusively and is subject to change without notice.
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.
31
Brandes Credit Focus Yield Fund
Index Guide
The Barclays Capital U.S. Intermediate Credit Bond Index is an unmanaged index consisting of U.S. dollar-denominated, publicly issued, fixed-rate corporate securities. The index includesSecurities 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.
Barclays Capital U.S. Corporate High-Yield Bond Index: The Barclays Capital U.S. Corporate High-Yield Bond Index is an unmanaged index consisting of U.S. dollar-denominated, non-investment grade, fixed-rate, taxable corporate bonds. The U.S. Corporate High-Yield Index measures the market of USD-denominated, non-investment grade, fixed-rate, taxable corporate bonds. Securities are classified as high yield if the middle rating of Moody’s, Fitch, and S&P is Ba1/BB+/BB+ or below. The index excludes emerging market debt. It was created in 1986, with history backfilled to July 1, 1983. The U.S. Corporate High-Yield Index is part of the U.S. Universal and Global High-Yield Indices. The index is a total return index which reflects the price changes and interest of each bond in the index.
Cash Flow: Measures the cash generating capability of a company by adding non-cash charges (e.g. depreciation) and interest expense to pretax income.
The Brandes Credit Focus Yield Fund is distributed by Quasar Distributors, LLC.
Brandes Investment Partners, L.P.
11988 El Camino Real | Suite 500 | P.O. Box 919048 | San Diego, CA 92191-9048
858.755.0239 | 800.237.7119 | Fax 858.755.0916
www.brandes.com | info@brandes.com
32
Brandes Credit Focus Yield Fund
The following chart compares the value of a hypothetical $1,000,000 investment in the Brandes Credit Focus Yield Fund — Class I from March 31, 2002 to March 31, 2012 and in the Barclays Capital U.S. Intermediate Credit Index for the same period.
Value of $1,000,000 vs Barclays Capital U.S. Intermediate Credit Index
Average Annual Total Return Periods Ended March 31, 2012* (Unaudited) | ||||||||||||||||
One Year | Three Years | Five Years | Ten Years | |||||||||||||
Brandes Credit Focus Yield Fund | ||||||||||||||||
Class I | 7.20 | % | 19.26 | % | 4.54 | % | 6.78 | % | ||||||||
Class S** | 7.10 | % | 19.22 | % | 4.52 | % | 6.77 | % | ||||||||
Barclays Capital U.S. Intermediate Credit Index | 6.95 | % | 10.52 | % | 6.38 | % | 6.07 | % |
* 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 periods before February 1, 2012 is that of the private investment fund and reflects the net expenses of the private investment fund. The performance of the private investment fund prior to February 1, 2012 is based on calculations that are different than the standardized method of calculations specified by the SEC. The private investment fund was not registered under the 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.
33
Brandes Credit Focus Yield Fund
** Class S shares commenced operation on March 2, 2012. Performance shown for the Class S shares for the period of February 1, 2012 to March 2, 2012 reflects the performance of the Class I shares adjusted to reflect Class S expenses.
Performance data quoted represents past performance; past performance does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance of the Fund may be lower or higher than the performance quoted. Performance data current to the most recent month end may be obtained by calling 800-331-2979.
Sector Allocation as a Percentage of Total Investments as of March 31, 2012
(Unaudited)
34
Brandes Investment Trust
Expense Example (Unaudited)
As a shareholder of a Fund, you incur ongoing costs, including investment advisory and administrative fees and other fund expenses. The examples below are intended to help you understand your ongoing costs (in dollars) of investing in the Funds and to compare these costs with ongoing costs of investing in other mutual funds.
The examples are based on an investment of $1,000 invested at the beginning of the period and held for the entire period from October 1, 2011 to March 31, 2012 (the “Period”).
Actual Expenses
This section provides information about actual account values and actual expenses. The “Ending Account Value” shown is derived from the Fund’s actual return. You may use the information in this section, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number given for the Fund under the heading “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Class I | ||||||||||||||||
Fund | Beginning Account Value | Ending Account Value | Annual Expense Ratio | Expenses Paid During Period | ||||||||||||
Institutional International Equity Fund | $ | 1,000.00 | $ | 1,140.20 | 1.20 | % | $ | 6.42* | ||||||||
Institutional Global Equity Fund | $ | 1,000.00 | $ | 1,167.60 | 1.00 | % | $ | 5.42* | ||||||||
Institutional Emerging Markets Fund | $ | 1,000.00 | $ | 1,218.60 | 1.12 | % | $ | 6.21* | ||||||||
Institutional Core Plus Fixed Income Fund | $ | 1,000.00 | $ | 1,048.20 | 0.50 | % | $ | 2.56* | ||||||||
International Small Cap Equity Fund | $ | 1,000.00 | $ | 1,124.70 | 1.15 | % | $ | 1.97** | ||||||||
Credit Focus Yield Fund | $ | 1,000.00 | $ | 1,069.00 | 1.12 | % | $ | 1.87** |
35
Brandes Investment Trust
Class E | ||||||||||||||||
Beginning Account Value | Ending Account Value | Annual Expense Ratio | Expenses Paid During Period* | |||||||||||||
Institutional International Equity Fund | $ | 1,000.00 | $ | 1,139.80 | 1.25 | % | $ | 6.69 | ||||||||
Institutional Global Equity Fund | $ | 1,000.00 | $ | 1,165.70 | 1.25 | % | $ | 6.77 | ||||||||
Institutional Core Plus Fixed Income Fund | $ | 1,000.00 | $ | 1,047.30 | 0.70 | % | $ | 3.58 |
Class S | ||||||||||||||||
Beginning Account Value | Ending Account Value | Annual Expense Ratio | Expenses Paid During Period | |||||||||||||
Institutional International Equity Fund | $ | 1,000.00 | $ | 1,138.70 | 1.45 | % | $ | 7.75* | ||||||||
Institutional Global Equity Fund | $ | 1,000.00 | $ | 1,166.40 | 1.25 | % | $ | 6.77* | ||||||||
Institutional Emerging Markets Fund | $ | 1,000.00 | $ | 1,217,20 | 1.37 | % | $ | 7.59* | ||||||||
International Small Cap Equity Fund | $ | 1,000.00 | $ | 1,125.70 | 1.40 | % | $ | 2.40** | ||||||||
Credit Focus Yield Fund | $ | 1,000.00 | $ | 1,003.46 | 1.37 | % | $ | 1.09** |
Hypothetical Example for Comparison Purposes
This section provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratios and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account value 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.
36
Brandes Investment Trust
Class I | ||||||||||||||||
Fund | Beginning Account Value | Ending Account Value | Annual Expense Ratio | Expenses Paid During Period | ||||||||||||
Institutional International Equity Fund | $ | 1,000.00 | $ | 1,019.00 | 1.20 | % | $ | 6.06* | ||||||||
Institutional Global Equity Fund | $ | 1,000.00 | $ | 1,020.00 | 1.00 | % | $ | 5.05* | ||||||||
Institutional Emerging Markets Fund | $ | 1,000.00 | $ | 1,019.40 | 1.12 | % | $ | 5.65* | ||||||||
Institutional Core Plus Fixed Income Fund | $ | 1,000.00 | $ | 1,022.50 | 0.50 | % | $ | 2.53* | ||||||||
International Small Cap Equity Fund | $ | 1,000.00 | $ | 1,006.21 | 1.15 | % | $ | 1.86** | ||||||||
Credit Focus Yield Fund | $ | 1,000.00 | $ | 1,006.25 | 1.12 | % | $ | 1.81** |
Class E | ||||||||||||||||
Beginning Account Value | Ending Account Value | Annual Expense Ratio | Expenses Paid During Period* | |||||||||||||
Institutional International Equity Fund | $ | 1,000.00 | $ | 1,018.75 | 1.25 | % | $ | 6.31 | ||||||||
Institutional Global Equity Fund | $ | 1,000.00 | $ | 1,018.75 | 1.25 | % | $ | 6.31 | ||||||||
Institutional Core Plus Fixed Income Fund | $ | 1,000.00 | $ | 1,021.50 | 0.70 | % | $ | 3.54 |
Class S | ||||||||||||||||
Beginning Account Value | Ending Account Value | Annual Expense Ratio | Expenses Paid During Period | |||||||||||||
Institutional International Equity Fund | $ | 1,000.00 | $ | 1,017.75 | 1.45 | % | $ | 7.31* | ||||||||
Institutional Global Equity Fund | $ | 1,000.00 | $ | 1,018.75 | 1.25 | % | $ | 6.31* | ||||||||
Institutional Emerging Markets Fund | $ | 1,000.00 | $ | 1,018.15 | 1.37 | % | $ | 6.91* | ||||||||
International Small Cap Equity Fund | $ | 1,000.00 | $ | 1,005.80 | 1.40 | % | $ | 2.26** | ||||||||
Credit Focus Yield Fund | $ | 1,000.00 | $ | 1,002.88 | 1.37 | % | $ | 2.21** |
* | Expenses are equal to the Fund’s expense ratio for the period, multiplied by the average account value over the period, multiplied by 183/366 (to reflect the one-half year period). |
** | Expenses are equal to the Fund’s expense ratio for the period, multiplied by the average account value over the period, multiplied by 59/366 (to reflect the period since commencement). |
37
Brandes Institutional International Equity Fund
SCHEDULE OF INVESTMENTS — March 31, 2012 (Unaudited)
Shares | Value | ||||||||
COMMON STOCKS – 96.56% | |||||||||
Brazil – 2.48% | |||||||||
198,354 | Banco do Brasil SA | $ | 2,817,562 | ||||||
267,800 | Banco Santander Brasil SA – ADR | 2,455,726 | |||||||
497,330 | Centrais Electricas Brasileiras SA – ADR | 4,655,009 | |||||||
13,408 | Oi SA – ADR | 84,873 | |||||||
30,066 | Tim Participacoes SA – ADR | 969,929 | |||||||
10,983,099 | |||||||||
France – 12.28% | |||||||||
390,776 | Carrefour SA | 9,366,075 | |||||||
778,804 | France Telecom SA | 11,550,400 | |||||||
150,700 | GDF Suez | 3,895,387 | |||||||
924,548 | Natixis | 3,562,240 | |||||||
55,100 | Renault SA | 2,906,301 | |||||||
117,335 | Sanofi | 9,104,249 | |||||||
276,784 | Total SA | 14,138,083 | |||||||
54,522,735 | |||||||||
Germany – 3.91% | |||||||||
57,225 | Deutsche Bank AG | 2,849,196 | |||||||
319,600 | Deutsche Post AG | 6,151,989 | |||||||
695,200 | Deutsche Telekom AG | 8,375,929 | |||||||
17,377,114 | |||||||||
Ireland – 2.02% | |||||||||
438,543 | CRH Plc | 8,984,794 | |||||||
Italy – 7.82% | |||||||||
683,415 | ENI SpA | 16,016,021 | |||||||
1,949,178 | Intesa Sanpaolo SpA | 3,493,716 | |||||||
971,300 | Intesa Sanpaolo SpA Savings Shares | 1,499,112 | |||||||
422,400 | Italcementi SpA Savings Shares | 1,372,005 | |||||||
4,166,774 | Telecom Italia SpA | 4,959,728 | |||||||
7,522,450 | Telecom Italia SpA Savings Shares | 7,386,526 | |||||||
34,727,108 | |||||||||
Japan – 26.33% | |||||||||
156,400 | Astellas Pharma, Inc. | 6,441,970 | |||||||
124,100 | Canon, Inc. | 5,936,456 | |||||||
407,400 | Dai Nippon Printing Co. Ltd. | 4,192,540 | |||||||
326,202 | Daiichi Sankyo Co. Ltd. | 5,962,616 | |||||||
288,000 | FUJIFILM Holdings Corp. | 6,817,243 | |||||||
154,400 | Honda Motor Co. Ltd. | 5,946,592 | |||||||
936 | Japan Tobacco, Inc. | 5,298,188 | |||||||
1,070,200 | Mitsubishi UFJ Financial Group, Inc. | 5,370,659 | |||||||
229,899 | MS&AD Insurance Group Holdings | 4,756,234 | |||||||
251,200 | Nippon Telegraph & Telephone Corp. | 11,385,425 | |||||||
174,100 | Nissan Motor Co. Ltd. | 1,871,930 | |||||||
219,000 | NKSJ Holdings, Inc. | 4,933,906 | |||||||
61,800 | Ono Pharmaceutical Co. Ltd. | 3,443,284 | |||||||
55,600 | Rohm Co. Ltd. | 2,758,925 | |||||||
222,500 | Seven & I Holdings Co. Ltd. | 6,634,829 | |||||||
196,400 | Sony Corp. | 4,108,312 | |||||||
126,398 | Sumitomo Mitsui Financial Group, Inc. | 4,183,488 | |||||||
703,000 | Sumitomo Mitsui Trust Holdings, Inc. | 2,264,048 | |||||||
40,800 | Taisho Pharmaceutical Co. Ltd. | 3,306,542 | |||||||
171,700 | Takeda Pharmaceutical Co. Ltd. | 7,565,708 | |||||||
249,500 | Tokio Marine Holdings, Inc. | 6,906,453 | |||||||
157,000 | Toyota Motor Corp. | 6,831,400 | |||||||
116,916,748 | |||||||||
Mexico – 2.16% | |||||||||
260,998 | America Movil SAB de CV – ADR | 6,480,581 | |||||||
403,685 | Cemex SAB de CV – ADR(a) | 3,132,598 | |||||||
9,613,179 | |||||||||
Netherlands – 8.65% | |||||||||
1,235,762 | Aegon NV | 6,869,015 | |||||||
41,600 | Akzo Nobel NV | 2,457,336 | |||||||
489,052 | Koninklijke Ahold NV | 6,776,366 | |||||||
933,900 | STMicroelectronics NV | 7,646,183 | |||||||
258,004 | Unilever NV | 8,778,479 | |||||||
310,272 | Wolters Kluwer NV | 5,878,057 | |||||||
38,405,436 |
The accompanying notes are an integral part of these Schedules of Investments.
38
Brandes Institutional International Equity Fund
SCHEDULE OF INVESTMENTS — March 31, 2012 (Unaudited) (continued)
Shares | Value | ||||||||
Portugal – 0.92% | |||||||||
754,817 | Portugal Telecom SGPS SA | 4,100,782 | |||||||
Russia – 1.23% | |||||||||
89,500 | Lukoil OAO – ADR | 5,441,600 | |||||||
Singapore – 0.76% | |||||||||
469,000 | Flextronics International Ltd.(a) | 3,390,870 | |||||||
South Korea – 2.89% | |||||||||
354,400 | Korea Electric Power Corp. – ADR(a) | 3,448,312 | |||||||
16,409 | POSCO | 5,502,569 | |||||||
279,200 | SK Telecom Co. Ltd. – ADR | 3,883,672 | |||||||
12,834,553 | |||||||||
Spain – 1.09% | |||||||||
295,501 | Telefonica SA | 4,848,162 | |||||||
Sweden – 1.26% | |||||||||
542,200 | Telefonaktiebolaget LM Ericsson | 5,610,366 | |||||||
Switzerland – 6.67% | |||||||||
149,020 | Swiss Re AG | 9,516,374 | |||||||
16,800 | Swisscom AG | 6,793,871 | |||||||
176,472 | TE Connectivity Ltd. | 6,485,346 | |||||||
483,137 | UBS AG | 6,771,052 | |||||||
29,566,643 | |||||||||
United Kingdom – 16.09% | |||||||||
180,255 | AstraZeneca Plc | 8,011,954 | |||||||
1,471,121 | Barclays Plc | 5,543,818 | |||||||
1,326,190 | BP Plc | 9,876,442 | |||||||
273,720 | GlaxoSmithKline Plc | 6,119,190 | |||||||
406,000 | HSBC Holdings Plc | 3,606,153 | |||||||
3,752,300 | ITV Plc | 5,307,458 | |||||||
1,194,000 | J. Sainsbury Plc | 5,941,960 | |||||||
1,257,800 | Kingfisher Plc | 6,171,149 | |||||||
1,400,919 | Marks & Spencer Group Plc | 8,490,031 | |||||||
2,229,500 | Vodafone Group Plc | 6,149,683 | |||||||
1,304,111 | Wm. Morrison Supermarkets Plc | 6,216,678 | |||||||
71,434,516 | |||||||||
TOTAL COMMON STOCKS (Cost $471,429,368) | $ | 428,757,705 | |||||||
PREFERRED STOCKS – 2.14% | |||||||||
Brazil – 2.14% | |||||||||
23,640 | Oi SA | $ | 375,876 | ||||||
256,680 | Petroleo Brasileiro SA | 6,560,740 | |||||||
92,800 | Tele Norte Leste Participacoes SA – ADR | 1,053,280 | |||||||
49,463 | Telefonica Brasil SA | 1,515,052 | |||||||
TOTAL PREFERRED STOCKS (Cost $12,121,298) | $ | 9,504,948 |
Principal Amount | Value | ||||||||
SHORT TERM INVESTMENTS – .88% | |||||||||
Repurchase Agreement – 0.88% | |||||||||
State Street Bank and Trust Repurchase Agreement, (Dated 3/31/12), due 4/2/12, 0.01%, [Collateralized by $3,878,300 United States Treasury Bill, 7/31/16, (Market Value $3,988,627)] (proceeds $3,910,619) | $ | 3,910,616 | $ | 3,910,616 | |||||
TOTAL SHORT TERM INVESTMENTS (Cost $3,910,616) | $ | 3,910,616 | |||||||
Total Investments (Cost $487,461,282) – 99.58% | $ | 442,173,269 | |||||||
Other Assets in Excess of Liabilities – 0.42% | 1,859,231 | ||||||||
TOTAL NET ASSETS – 100.00% | $ | 444,032,500 |
ADR | American Depository Receipt |
(a) | Non-income producing security. |
The accompanying notes are an integral part of these Schedules of Investments.
39
Brandes Institutional International Equity Fund
SCHEDULE OF INVESTMENTS BY INDUSTRY — March 31, 2012 (Unaudited)
Air Freight & Logistics | 1.38 | % | ||
Automobiles | 3.95 | % | ||
Capital Markets | 2.17 | % | ||
Chemicals | 0.55 | % | ||
Commercial Banks | 7.84 | % | ||
Commercial Services & Supplies | 0.94 | % | ||
Communications Equipment | 1.26 | % | ||
Construction Materials | 3.04 | % | ||
Diversified Telecommunication Services | 13.40 | % | ||
Electric Utilities | 1.82 | % | ||
Electronic Equipment, Instruments & Components | 3.76 | % | ||
Food & Staples Retailing | 7.87 | % | ||
Food Products | 1.98 | % | ||
Household Durables | 0.93 | % | ||
Insurance | 7.43 | % | ||
Media | 2.52 | % | ||
Metals & Mining | 1.24 | % | ||
Multiline Retail | 1.91 | % | ||
Multi-Utilities | 0.88 | % | ||
Office Electronics | 1.34 | % | ||
Oil, Gas & Consumable Fuels | 10.24 | % | ||
Pharmaceuticals | 11.25 | % | ||
Semiconductors & Semiconductor Equipment | 2.34 | % | ||
Specialty Retail | 1.39 | % | ||
Tobacco | 1.19 | % | ||
Wireless Telecommunication Services | 3.94 | % | ||
COMMON STOCKS | 96.56 | % | ||
Diversified Telecommunication Services | 0.66 | % | ||
Oil, Gas & Consumable Fuels | 1.48 | % | ||
PREFERRED STOCKS | 2.14 | % | ||
SHORT TERM INVESTMENTS | 0.88 | % | ||
TOTAL INVESTMENTS | 99.58 | % | ||
Other Assets in Excess of Liabilities | 0.42 | % | ||
TOTAL NET ASSETS | 100.00 | % |
The accompanying notes are an integral part of these Schedules of Investments.
40
Brandes Institutional Global Equity Fund
SCHEDULE OF INVESTMENTS — March 31, 2012 (Unaudited)
Shares | Value | ||||||||
COMMON STOCKS – 94.79% | |||||||||
Automobiles – 3.45% | |||||||||
11,900 | Honda Motor Co. Ltd. | $ | 458,319 | ||||||
16,900 | Toyota Motor Corp. | 735,354 | |||||||
1,193,673 | |||||||||
Beverages – 2.43% | |||||||||
12,690 | Pepsico, Inc. | 841,982 | |||||||
Building Products – 0.98% | |||||||||
25,400 | Masco Corp. | 339,598 | |||||||
Capital Markets – 0.54% | |||||||||
4,148 | State Street Corp. | 188,734 | |||||||
Commercial Banks – 6.90% | |||||||||
9,800 | BB&T Corp. | 307,622 | |||||||
77,256 | Intesa Sanpaolo SpA | 138,474 | |||||||
118,900 | Intesa Sanpaolo SpA Savings Shares | 183,511 | |||||||
20,300 | KeyCorp | 172,550 | |||||||
71,600 | Mitsubishi UFJ Financial Group, Inc. | 359,315 | |||||||
3,920 | PNC Financial Services Group, Inc. | 252,801 | |||||||
10,076 | Sumitomo Mitsui Financial Group, Inc. | 333,493 | |||||||
18,869 | Wells Fargo & Co. | 644,188 | |||||||
2,391,954 | |||||||||
Communications Equipment – 1.30% | |||||||||
43,500 | Telefonaktiebolaget LM Ericsson | 450,112 | |||||||
Computers & Peripherals – 3.21% | |||||||||
21,064 | Hewlett Packard Co. | 501,955 | |||||||
14,740 | Western Digital Corp.(a) | 610,089 | |||||||
1,112,044 | |||||||||
Diversified Financial Services – 2.41% | |||||||||
45,532 | Bank of America Corp. | 435,741 | |||||||
10,936 | Citigroup, Inc. | 399,711 | |||||||
835,452 | |||||||||
Diversified Telecommunication Services – 10.84% | |||||||||
16,100 | AT&T, Inc. | 502,803 | |||||||
49,200 | Deutsche Telekom AG | 592,773 | |||||||
45,563 | France Telecom SA | 675,742 | |||||||
15,300 | Nippon Telegraph & Telephone Corp. | 693,459 | |||||||
38,800 | Portugal Telecom SGPS SA | 210,793 | |||||||
875,400 | Telecom Italia SpA Savings Shares | 859,583 | |||||||
13,400 | Telefonica SA | 219,848 | |||||||
3,755,001 | |||||||||
Electric Utilities – 0.65% | |||||||||
24,100 | Centrais Electricas Brasileiras SA – ADR | 225,576 | |||||||
Electronic Equipment, Instruments & Components – 4.25% | |||||||||
37,790 | Corning, Inc. | 532,084 | |||||||
17,300 | FUJIFILM Holdings Corp. | 409,508 | |||||||
14,400 | TE Connectivity Ltd. | 529,200 | |||||||
1,470,792 | |||||||||
Food & Staples Retailing – 9.01% | |||||||||
21,100 | Carrefour SA | 505,721 | |||||||
86,000 | J. Sainsbury Plc | 427,980 | |||||||
31,800 | Koninklijke Ahold NV | 440,625 | |||||||
24,650 | Safeway, Inc. | 498,177 | |||||||
14,900 | Seven & I Holdings Co. Ltd. | 444,310 | |||||||
17,700 | The Kroger Co. | 428,871 | |||||||
79,000 | Wm. Morrison Supermarkets Plc | 376,592 | |||||||
3,122,276 | |||||||||
Food Products – 2.00% | |||||||||
20,400 | Unilever NV | 694,102 | |||||||
Health Care Equipment & Supplies – 0.93% | |||||||||
53,600 | Boston Scientific Corp.(a) | 320,528 | |||||||
Household Durables – 0.71% | |||||||||
11,800 | Sony Corp. | 246,833 | |||||||
Industrial Conglomerates – 1.49% | |||||||||
25,810 | General Electric Co. | 518,007 | |||||||
Insurance – 7.02% | |||||||||
67,200 | Aegon NV | 373,533 |
The accompanying notes are an integral part of these Schedules of Investments.
41
Brandes Institutional Global Equity Fund
SCHEDULE OF INVESTMENTS — March 31, 2012 (Unaudited) (continued)
Shares | Value | ||||||||
11,791 | Marsh & McLennan Companies, Inc. | $ | 386,627 | ||||||
16,000 | MS&AD Insurance Group Holdings | 331,014 | |||||||
15,200 | NKSJ Holdings, Inc. | 342,445 | |||||||
9,900 | Swiss Re AG | 632,210 | |||||||
13,300 | Tokio Marine Holdings, Inc. | 368,160 | |||||||
2,433,989 | |||||||||
Media – 1.98% | |||||||||
34,900 | News Corp. | 687,181 | |||||||
Multiline Retail – 1.30% | |||||||||
74,400 | Marks & Spencer Group Plc | 450,889 | |||||||
Office Electronics – 2.81% | |||||||||
11,400 | Canon, Inc. | 545,331 | |||||||
52,900 | Xerox Corp. | 427,432 | |||||||
972,763 | |||||||||
Oil, Gas & Consumable Fuels – 10.63% | |||||||||
79,400 | BP Plc | 591,310 | |||||||
22,090 | Chesapeake Energy Corp. | 511,825 | |||||||
3,948 | Chevron Corp. | 423,384 | |||||||
36,800 | ENI SpA | 862,418 | |||||||
15,378 | Total SA | 785,506 | |||||||
19,709 | Valero Energy Corp. | 507,901 | |||||||
3,682,344 | |||||||||
Pharmaceuticals – 13.09% | |||||||||
9,600 | Astellas Pharma, Inc. | 395,415 | |||||||
13,500 | AstraZeneca Plc | 600,047 | |||||||
19,300 | Daiichi Sankyo Co. Ltd. | 352,783 | |||||||
12,500 | Eli Lilly & Co. | 503,375 | |||||||
25,300 | GlaxoSmithKline Plc | 565,598 | |||||||
11,999 | Merck & Co., Inc. | 460,762 | |||||||
30,254 | Pfizer, Inc. | 685,555 | |||||||
8,200 | Sanofi | 636,253 | |||||||
7,600 | Takeda Pharmaceutical Co. Ltd. | 334,883 | |||||||
4,534,671 | |||||||||
Semiconductors & Semiconductor Equipment – 2.42% | |||||||||
12,000 | Intel Corp. | 337,320 | |||||||
61,200 | STMicroelectronics NV | 501,067 | |||||||
838,387 | |||||||||
Software – 3.20% | |||||||||
34,400 | Microsoft Corp. | 1,109,400 | |||||||
Wireless Telecommunication Services – 1.24% | |||||||||
17,300 | America Movil SAB de CV – ADR | 429,559 | |||||||
TOTAL COMMON STOCKS (Cost $30,286,806) | $ | 32,845,847 |
Principal Amount | Value | ||||||||
SHORT TERM INVESTMENTS – 5.29% | |||||||||
Repurchase Agreement – 5.29% | |||||||||
State Street Bank and Trust Repurchase Agreement, (Dated 3/31/12), due 4/2/12, 0.01% [Collateralized by $1,815,600 United States Treasury Bill, 7/31/16, (Market Value $1,867,2490)] proceeds $1,830,685) | $ | 1,830,683 | $ | 1,830,683 | |||||
TOTAL SHORT TERM INVESTMENTS (Cost $1,830,683) | $ | 1,830,683 | |||||||
Total Investments (Cost $32,117,489) – 100.08% | $ | 34,676,530 | |||||||
Liabilities in Excess of Other Assets – (0.08%) | (27,131) | ||||||||
TOTAL NET ASSETS – 100.00% | $ | 34,649,399 |
Percentages are stated as a percent of net assets.
(a) | Non-income producing security. |
ADR | American Depository Receipt |
The accompanying notes are an integral part of these Schedules of Investments.
42
Brandes Institutional Global Equity Fund
SCHEDULE OF INVESTMENTS — March 31, 2012 (Unaudited) (continued)
Brazil | 0.65 | % | ||
France | 7.51 | % | ||
Germany | 1.71 | % | ||
Italy | 5.90 | % | ||
Japan | 18.33 | % | ||
Mexico | 1.24 | % | ||
Netherlands | 5.80 | % | ||
Portugal | 0.61 | % | ||
Spain | 0.63 | % | ||
Sweden | 1.30 | % | ||
Switzerland | 3.35 | % | ||
United Kingdom | 8.69 | % | ||
United States | 39.07 | % | ||
COMMON STOCKS | 94.79 | % | ||
SHORT TERM INVESTMENTS | 5.29 | % | ||
TOTAL INVESTMENTS | 100.08 | % | ||
Liabilities in Excess of Other Assets | -0.08 | % | ||
TOTAL NET ASSETS | 100.00 | % |
The accompanying notes are an integral part of these Schedules of Investments.
43
Brandes Institutional Emerging Markets Fund
SCHEDULE OF INVESTMENTS — March 31, 2012 (Unaudited)
Shares | Value | ||||||||
COMMON STOCKS – 81.76% | |||||||||
Argentina – 0.16% | |||||||||
67,028 | Grupo Clarin SA – GDR(a)(d) | $ | 275,539 | ||||||
Austria – 1.45% | |||||||||
112,569 | Erste Group Bank AG | 2,601,219 | |||||||
Brazil – 11.41% | |||||||||
165,450 | Banco do Brasil SA | 2,350,170 | |||||||
353,505 | Banco Santander Brasil SA – ADR | 3,241,641 | |||||||
214,515 | Centrais Electricas Brasileiras SA – ADR | 2,007,860 | |||||||
58,940 | Cia Paranaense de Energia | 1,123,620 | |||||||
143,454 | Embraer SA – ADR | 4,587,659 | |||||||
125,200 | Itau Unibanco Holding SA | 2,126,161 | |||||||
247,542 | Marfrig Alimentos SA | 1,559,469 | |||||||
49,531 | Oi SA – ADR | 313,531 | |||||||
29,690 | Tele Norte Leste Participacoes SA | 412,793 | |||||||
34,735 | Tim Participacoes SA – ADR | 1,120,551 | |||||||
1,200,533 | Viver Incorporadora e Construtora SA(a) | 1,677,044 | |||||||
20,520,499 | |||||||||
China – 10.36% | |||||||||
3,433,934 | Chaoda Modern Agriculture Holdings Ltd.(c) | 446,411 | |||||||
411,000 | China Mobile Ltd. | 4,525,759 | |||||||
1,528,409 | China Resources Power Holdings Co. Ltd. | 2,831,520 | |||||||
79,780 | China Yuchai International Ltd. | 1,266,109 | |||||||
5,082,519 | People's Food Holdings Ltd.(a) | 2,304,631 | |||||||
161,700 | PetroChina Co. Ltd. | 227,697 | |||||||
10,502,350 | Sinotrans Ltd. | 1,964,881 | |||||||
3,098,877 | Weiqiao Textile Co. | 1,601,620 | |||||||
1,643,450 | Xinhua Winshare Publishing and Media Co. Ltd. | 868,016 | |||||||
2,311,000 | Yingde Gases | 2,621,821 | |||||||
18,658,465 | |||||||||
Czech Republic – 1.40% | |||||||||
120,260 | Telefonica Czech Republic AS | 2,523,541 | |||||||
Hong Kong – 2.36% | |||||||||
208,228 | Dickson Concepts International Ltd. | 114,705 | |||||||
3,724,899 | First Pacific Co. Ltd. | 4,130,554 | |||||||
4,245,259 | |||||||||
Hungary – 1.93% | |||||||||
1,329,334 | Magyar Telekom Telecommunications Plc | 3,480,958 | |||||||
India – 4.87% | |||||||||
562,125 | Indian Oil Corp. Ltd. | 2,903,774 | |||||||
508,760 | Reliance Infrastructure Ltd. | 5,863,673 | |||||||
8,767,447 | |||||||||
Israel – 1.05% | |||||||||
269,300 | Bezeq The Israeli Telecommunication Corp. Ltd. | 445,131 | |||||||
132,778 | Partner Communications Co. Ltd. | 1,021,287 | |||||||
40,050 | Syneron Medical Ltd.(a) | 429,336 | |||||||
1,895,754 | |||||||||
Kuwait – 0.51% | |||||||||
117,500 | National Mobile Telecommunication Co. KSC | 921,900 | |||||||
Luxembourg – 0.36% | |||||||||
27,740 | Ternium SA – ADR | 656,883 | |||||||
Mexico – 6.94% | |||||||||
126,290 | America Movil SAB de CV – ADR | 3,135,781 | |||||||
462,502 | Cemex SAB de CV – ADR(a) | 3,589,020 | |||||||
1,322,742 | Fibra Uno Administracion SA de CV | 2,605,410 | |||||||
538,728 | Gruma SAB de CV | 1,435,901 | |||||||
397,613 | Grupo Televisa SAB | 1,729,123 | |||||||
12,495,235 |
The accompanying notes are an integral part of these Schedules of Investments.
44
Brandes Institutional Emerging Markets Fund
SCHEDULE OF INVESTMENTS — March 31, 2012 (Unaudited) (continued)
Shares | Value | ||||||||
Pakistan – 0.33% | |||||||||
962,360 | Nishat Mills Ltd. | $ | 585,721 | ||||||
Panama – 2.01% | |||||||||
171,791 | Banco Latinoamericano de Comercio Exterior SA | 3,626,508 | |||||||
Philippines – 0.71% | |||||||||
841,300 | First Philippine Holdings Corp. | 1,272,358 | |||||||
Russia – 6.92% | |||||||||
661,000 | Federal Hydrogenerating Co. JSC – ADR | 2,425,870 | |||||||
384,528 | Gazprom OAO – ADR(a) | 4,756,611 | |||||||
71,500 | Lukoil OAO – ADR | 4,347,200 | |||||||
85,070 | PhosAgro OAO – ADR(a) | 924,311 | |||||||
12,453,992 | |||||||||
Singapore – 2.66% | |||||||||
594,244 | Flextronics International Ltd.(a) | 4,296,384 | |||||||
101,100 | Haw Par Corp. Ltd. | 484,458 | |||||||
South Africa – 3.27% | |||||||||
242,000 | MTN Group Ltd. | 4,267,260 | |||||||
111,370 | Standard Bank Group Ltd. | 1,618,698 | |||||||
5,885,958 | |||||||||
South Korea – 11.73% | |||||||||
78,160 | Hana Financial Group, Inc. | 2,961,310 | |||||||
69,770 | KB Financial Group, Inc. | 2,558,969 | |||||||
25,337 | KB Financial Group, Inc. – ADR(a) | 929,290 | |||||||
57,350 | Korea Electric Power Corp. | 795,846 | |||||||
80,820 | Korea Electric Power Corp. – ADR(a) | 1,121,540 | |||||||
2,420 | Lotte Chilsung Beverage Co. Ltd. | 2,602,276 | |||||||
8,400 | POSCO | 1,354,232 | |||||||
18,868 | POSCO – ADR | 3,041,863 | |||||||
2,869 | Samsung Electronics Co. Ltd. | 3,236,389 | |||||||
50,640 | Shinhan Financial Group Co. Ltd.(a) | 2,205,943 | |||||||
7,279 | Shinhan Financial Group Co. Ltd. – ADR(a) | 317,083 | |||||||
21,124,741 | |||||||||
Taiwan – 4.21% | |||||||||
3,448,000 | Compal Electronic | 3,877,157 | |||||||
1,214,000 | Novatek Microelectronics Corp. | 3,709,725 | |||||||
7,586,882 | |||||||||
Turkey – 5.20% | |||||||||
697,566 | Dogus Otomotiv Servis ve Ticaret AS(a) | 2,021,590 | |||||||
1,066,021 | Selcuk Ecza Deposu Ticaret ve Sanayi AS | 1,071,938 | |||||||
941,390 | Turkiye Garanti Bankasi AS | 3,731,523 | |||||||
1,339,200 | Turkiye Vakiflar Bankasi Tao | 2,542,245 | |||||||
9,367,296 | |||||||||
United Arab Emirates – 1.92% | |||||||||
17,601,673 | Air Arabia PJSC | 3,457,303 | |||||||
TOTAL COMMON STOCKS (Cost $152,987,550) | $ | 147,184,300 | |||||||
PARTICIPATORY NOTES – 2.69% | |||||||||
Saudi Arabia – 2.69% | |||||||||
280,260 | Etihad Etisalat Co.(a)(b)(c) | $ | 4,838,093 | ||||||
TOTAL PARTICIPATORY NOTES (Cost $4,726,669) | $ | 4,838,093 |
The accompanying notes are an integral part of these Schedules of Investments.
45
Brandes Institutional Emerging Markets Fund
SCHEDULE OF INVESTMENTS — March 31, 2012 (Unaudited) (continued)
Shares | Value | ||||||||
PREFERRED STOCKS – 8.43% | |||||||||
Argentina – 0.19% | |||||||||
16,356 | Nortel Inversora SA(a) | $ | 341,186 | ||||||
Brazil – 5.75% | |||||||||
45,850 | Cia Energetica do Ceara | 992,376 | |||||||
39,350 | Companhia Paranaense de Energia | 925,119 | |||||||
83,671 | Oi SA | 1,330,369 | |||||||
206,202 | Petroleo Brasileiro SA | 5,270,523 | |||||||
60,011 | Telefonica Brasil SA | 1,838,137 | |||||||
10,356,524 | |||||||||
South Korea – 2.49% | |||||||||
74,562 | Hyundai Motor Co. | 4,479,049 | |||||||
TOTAL PREFERRED STOCKS (Cost $15,335,740) | $ | 15,176,759 |
Principal Amount | Value | ||||||||
SHORT TERM INVESTMENTS – 5.95% | |||||||||
Money Market Fund – 5.95% | |||||||||
Northern Institutional Treasury Portfolio, 0.010% | $ | 10,710,406 | $ | 10,710,406 | |||||
TOTAL SHORT TERM INVESTMENTS (Cost $10,710,406) | $ | 10,710,406 | |||||||
Total Investments (Cost $183,760,365) – 98.83% | $ | 177,909,558 | |||||||
Other Assets in Excess of Liabilities – 1.17% | 2,106,307 | ||||||||
TOTAL NET ASSETS – 100.00% | $ | 180,015,865 |
ADR | American Depository Receipt |
GDR | Global Depository Receipt |
(a) | Non-income producing security. |
(b) | Represents the underlying security of a participatory note with HSBC Bank Plc. The note has a maturity date of March 30, 2015. |
(c) | The price for this security was derived from an estimate of fair market value pursuant to procedures approved by the Fund’s Board of Trustees. This security represent $4,838,093 or 2.69% of the Fund’s net assets. |
(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 $275,539, which represents 0.15% of total net assets. |
The accompanying notes are an integral part of these Schedules of Investments.
46
Brandes Institutional Emerging Markets Fund
SCHEDULE OF INVESTMENTS BY INDUSTRY — March 31, 2012 (Unaudited)
Aerospace & Defense | 2.54 | % | ||
Air Freight & Logistics | 1.08 | % | ||
Airlines | 1.92 | % | ||
Beverages | 1.45 | % | ||
Chemicals | 1.97 | % | ||
Commercial Banks | 17.12 | % | ||
Computers & Peripherals | 2.15 | % | ||
Construction Materials | 1.99 | % | ||
Distributors | 1.61 | % | ||
Diversified Financial Services | 2.29 | % | ||
Diversified Telecommunication Services | 3.99 | % | ||
Electric Utilities | 8.12 | % | ||
Electronic Equipment, Instruments & Components | 2.39 | % | ||
Food Products | 3.19 | % | ||
Health Care Equipment & Supplies | 0.24 | % | ||
Health Care Providers & Services | 0.60 | % | ||
Household Durables | 0.93 | % | ||
Independent Power Producers & Energy Traders | 1.57 | % | ||
Industrial Conglomerates | 0.27 | % | ||
Machinery | 0.70 | % | ||
Media | 1.11 | % | ||
Metals & Mining | 2.81 | % | ||
Oil, Gas & Consumable Fuels | 6.80 | % | ||
Real Estate Investment Trust | 1.45 | % | ||
Semiconductors & Semiconductor Equipment | 3.86 | % | ||
Specialty Retail | 0.06 | % | ||
Textiles, Apparel & Luxury Goods | 1.22 | % | ||
Wireless Telecommunication Services | 8.33 | % | ||
COMMON STOCKS | 81.76 | % | ||
Wireless Telecommunication Services | 2.69 | % | ||
PARTICIPATORY NOTES | 2.69 | % | ||
Automobiles | 2.49 | % | ||
Diversified Telecommunication Services | 1.95 | % | ||
Electric Utilities | 1.07 | % | ||
Oil, Gas & Consumable Fuels | 2.92 | % | ||
PREFERRED STOCKS | 8.43 | % | ||
SHORT TERM INVESTMENTS | 5.95 | % | ||
TOTAL INVESTMENTS | 98.83 | % | ||
Other Assets in Excess of Liabilities | 1.17 | % | ||
TOTAL NET ASSETS | 100.00 | % |
The accompanying notes are an integral part of these Schedules of Investments.
47
Brandes International Small Cap Equity Fund
SCHEDULE OF INVESTMENTS — March 31, 2012 (Unaudited)
Shares | Value | ||||||||
COMMON STOCKS – 95.70% | |||||||||
Argentina – 0.10% | |||||||||
6,250 | Grupo Clarin SA – GDR(a)(b) | $ | 25,693 | ||||||
Australia – 0.07% | |||||||||
55,152 | Australian Vintage Ltd. | 19,733 | |||||||
Bermuda – 0.99% | |||||||||
8,916 | Argo Group International Holdings Ltd. | 266,321 | |||||||
Brazil – 1.56% | |||||||||
299,190 | Viver Incorporadora e Construtora SA(a) | 417,943 | |||||||
Canada – 9.06% | |||||||||
30,480 | Dorel Industries, Inc.(a) | 869,373 | |||||||
916 | E-L Financial Corp. Ltd.(a) | 358,153 | |||||||
36,790 | Linamar Corp.(a) | 794,483 | |||||||
52,643 | Sierra Wireless, Inc.(a) | 385,347 | |||||||
9,310 | Supremex, Inc.(a) | 19,134 | |||||||
2,426,490 | |||||||||
China – 4.15% | |||||||||
1,407,000 | People's Food Holdings Ltd.(a) | 637,993 | |||||||
1,213,000 | Sinotrans Ltd. | 226,940 | |||||||
477,500 | Weiqiao Textile Co. | 246,791 | |||||||
1,111,724 | |||||||||
France – 5.77% | |||||||||
11,870 | Bongrain SA | 819,705 | |||||||
25,420 | Teleperformance SA | 726,529 | |||||||
1,546,234 | |||||||||
Germany – 0.09% | |||||||||
9,410 | Praktiker AG | 23,054 | |||||||
Greece – 1.71% | |||||||||
13,126 | Folli Follie Group(a) | 136,855 | |||||||
46,650 | Sarantis SA(a) | 118,213 | |||||||
10,940 | Titan Cement Co. SA | 201,839 | |||||||
456,907 | |||||||||
Hong Kong – 2.49% | |||||||||
462,000 | Dickson Concepts International Ltd. | 254,498 | |||||||
371,600 | First Pacific Co. Ltd. | 412,069 | |||||||
666,567 | |||||||||
Ireland – 1.68% | |||||||||
108,242 | Grafton Group Plc(a) | 448,743 | |||||||
Israel – 0.89% | |||||||||
22,250 | Syneron Medical Ltd.(a) | 238,520 | |||||||
Italy – 3.36% | |||||||||
127,350 | Italcementi SpA Savings Shares | 413,648 | |||||||
22,553 | Italmobiliare SpA | 357,952 | |||||||
46,746 | Natuzzi SpA – ADR(a) | 128,084 | |||||||
899,684 | |||||||||
Japan – 26.54% | |||||||||
6,000 | Alpine Electronics, Inc. | 81,570 | |||||||
24,800 | Chudenko Corp. | 254,499 | |||||||
25,100 | Fuji Machine Manufacturing Co. Ltd. | 503,155 | |||||||
46,500 | Hibiya Engineering Ltd. | 512,212 | |||||||
13,100 | Makita Corp. | 531,755 | |||||||
53,600 | Noritsu Koki Co. Ltd. | 278,710 | |||||||
307 | Okinawa Cellular Telephone Co. | 630,905 | |||||||
24,100 | Otsuka Kagu Ltd. | 258,849 | |||||||
17,500 | San-A Co. Ltd. | 664,127 | |||||||
53,900 | Shin-etsu Polymer Co. Ltd. | 283,103 | |||||||
40,400 | Tenma Corporation | 471,394 | |||||||
6,000 | The Yamanashi Chuo Bank Ltd. | 26,728 | |||||||
28,500 | Torii Pharmaceutical Co. Ltd. | 536,255 | |||||||
72,500 | TSI Holdings Co. Ltd. | 458,960 | |||||||
20,300 | Tsutsumi Jewelry Co. Ltd. | 540,362 | |||||||
42,400 | Yamaha Corp. | 443,873 | |||||||
28,300 | Yamaha Motor Co. Ltd.(a) | 382,930 |
The accompanying notes are an integral part of these Schedules of Investments.
48
Brandes International Small Cap Equity Fund
SCHEDULE OF INVESTMENTS — March 31, 2012 (Unaudited) (continued)
Shares | Value | ||||||||
57,000 | Yodogawa Steel Works Ltd. | $ | 249,816 | ||||||
7,109,203 | |||||||||
Mexico – 2.04% | |||||||||
277,000 | Fibra Uno Administracion SA de CV | 545,608 | |||||||
Norway – 2.03% | |||||||||
41,260 | Cermaq ASA | 543,588 | |||||||
Panama – 2.96% | |||||||||
37,509 | Banco Latinoamericano de Comercio Exterior SA | 791,815 | |||||||
Philippines – 1.03% | |||||||||
87,200 | First Philippine Holdings Corp. | 131,879 | |||||||
2,263,000 | Pepsi-Cola Products Philippines, Inc.(a) | 144,419 | |||||||
276,298 | |||||||||
Singapore – 5.04% | |||||||||
74,650 | Flextronics International Ltd.(a) | 539,720 | |||||||
141,000 | Haw Par Corp. Ltd. | 675,654 | |||||||
439,000 | HTL International Holdings Ltd. | 136,468 | |||||||
1,351,842 | |||||||||
South Korea – 4.29% | |||||||||
590 | Lotte Chilsung Beverage Co. Ltd. | 634,440 | |||||||
380 | Namyang Dairy Products Co. Ltd.(a) | 246,167 | |||||||
3,210 | Samchully Co. Ltd.(a) | 269,057 | |||||||
1,149,664 | |||||||||
Switzerland – 4.53% | |||||||||
4,740 | Lonza Group AG | 244,983 | |||||||
23,397 | Micronas Semiconductor Holding AG(a) | 264,089 | |||||||
6,600 | Panalpina Welttransport Holding AG | 705,715 | |||||||
1,214,787 | |||||||||
Turkey – 1.88% | |||||||||
502,100 | Selcuk Ecza Deposu Ticaret ve Sanayi A.S. | 504,887 | |||||||
United Kingdom – 13.58% | |||||||||
182,933 | Chime Communications Plc | 643,718 | |||||||
14,570 | Clarkson Plc | 306,455 | |||||||
338,757 | Debenhams Plc(a) | 437,945 | |||||||
159,140 | Home Retail Group Plc | 290,300 | |||||||
203,410 | ITV Plc | 287,714 | |||||||
389,641 | Mcbride Plc(a) | 766,568 | |||||||
52,490 | Travis Perkins Plc | 907,041 | |||||||
3,639,741 | |||||||||
TOTAL COMMON STOCKS (Cost $24,812,181) | $ | 25,675,046 | |||||||
PREFERRED STOCKS – 0.65% | |||||||||
Argentina – 0.44% | |||||||||
5,640 | Nortel Inversora SA(a) | $ | 117,650 | ||||||
Brazil – 0.21% | |||||||||
1,814 | Telefonica Brasil SA | 55,563 | |||||||
TOTAL PREFERRED STOCKS (Cost $194,218) | $ | 173,213 |
The accompanying notes are an integral part of these Schedules of Investments.
49
Brandes International Small Cap Equity Fund
SCHEDULE OF INVESTMENTS — March 31, 2012 (Unaudited) (continued)
Principal Amount | Value | |||||||
SHORT TERM INVESTMENTS – 3.65% | ||||||||
Repurchase Agreement – 3.65% | ||||||||
State Street Bank and Trust Repurchase Agreement, (Dated 3/31/12), due 4/2/12, 0.01%, [Collateralized by $978,247 United States Treasury Bill, 7/31/16 (Market Value $997,800)] (proceeds $978,248) | $ | 978,247 | $ | 978,247 | ||||
TOTAL SHORT TERM INVESTMENTS (Cost $978,247) | $ | 978,247 | ||||||
Total Investments (Cost $25,984,646) – 100.14% | $ | 26,826,506 | ||||||
Liabilities in Excess of Other Assets – (0.14%) | (36,885) | |||||||
TOTAL NET ASSETS – 100.00% | $ | 26,789,621 |
ADR | American Depository Receipt |
GDR | Global Depository Receipt |
(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 value of this security totals $25,693, which represents 0.10% of total net assets. |
The accompanying notes are an integral part of these Schedules of Investments.
50
Brandes International Small Cap Equity Fund
SCHEDULE OF INVESTMENTS BY INDUSTRY — March 31, 2012 (Unaudited)
Air Freight & Logistics | 3.48 | % | ||
Auto Components | 2.98 | % | ||
Automobiles | 1.44 | % | ||
Beverages | 2.98 | % | ||
Chemicals | 2.82 | % | ||
Commercial Banks | 3.06 | % | ||
Communications Equipment | 1.44 | % | ||
Construction & Engineering | 2.86 | % | ||
Construction Materials | 3.64 | % | ||
Diversified Financial Services | 1.54 | % | ||
Electric Utilities | 0.49 | % | ||
Electronic Equipment, Instruments & Components | 2.01 | % | ||
Food & Staples Retailing | 2.48 | % | ||
Food Products | 8.39 | % | ||
Gas Utilities | 1.00 | % | ||
Health Care Equipment & Supplies | 0.89 | % | ||
Health Care Providers & Services | 1.88 | % | ||
Household Durables | 6.10 | % | ||
Household Products | 2.86 | % | ||
Industrial Conglomerates | 2.52 | % | ||
Insurance | 2.33 | % | ||
Internet & Catalog Retail | 1.08 | % | ||
Leisure Equipment & Products | 2.70 | % | ||
Life Sciences Tools & Services | 0.91 | % | ||
Machinery | 3.86 | % | ||
Marine | 1.14 | % | ||
Media | 3.57 | % | ||
Metals & Mining | 0.93 | % | ||
Multiline Retail | 1.63 | % | ||
Paper & Forest Products | 0.07 | % | ||
Personal Products | 0.44 | % | ||
Pharmaceuticals | 2.00 | % | ||
Professional Services | 2.71 | % | ||
Real Estate Investment Trust | 2.04 | % | ||
Semiconductors & Semiconductor Equipment | 0.99 | % | ||
Specialty Retail | 4.53 | % | ||
Textiles, Apparel & Luxury Goods | 2.63 | % | ||
Trading Companies & Distributors | 5.06 | % | ||
Wireless Telecommunication Services | 2.36 | % | ||
COMMON STOCKS | 95.84 | % | ||
Diversified Telecommunication Services | 0.65 | % | ||
PREFERRED STOCKS | 0.65 | % | ||
SHORT TERM INVESTMENTS | 3.65 | % | ||
TOTAL INVESTMENTS | 100.14 | % | ||
Liabilities in Excess of Other Assets | (0.14 | )% | ||
TOTAL NET ASSETS | 100.00 | % |
The accompanying notes are an integral part of these Schedules of Investments.
51
Brandes Institutional Core Plus Fixed Income Fund
SCHEDULE OF INVESTMENTS — March 31, 2012 (Unaudited)
Principal Amount | Value | ||||||||
FEDERAL AND FEDERALLY SPONSORED CREDITS – 12.75% | |||||||||
Federal National Mortgage Association – 7.72% | |||||||||
Pool #MA0918, 4.000%, 12/01/2041 | 1,069,204 | $ | 1,122,254 | ||||||
Pool #934124, 5.500%, 07/01/2038 | 637,238 | 694,914 | |||||||
Pool #254631, 5.000%, 02/01/2018 | 466,653 | 506,529 | |||||||
2,323,697 | |||||||||
Fannie Mae Interest Only Strip – 0.65% | |||||||||
5.500%, 01/01/2036 | 627,772 | 93,402 | |||||||
6.000%, 06/01/2036 | 641,654 | 102,444 | |||||||
195,846 | |||||||||
Freddie Mac Mortgage – 4.38% | |||||||||
Pool #G0-6018, 6.500%, 04/01/2039 | 394,305 | 442,413 | |||||||
Pool #A9-3505, 4.500%, 08/01/2040 | 825,856 | 876,198 | |||||||
1,318,611 | |||||||||
TOTAL FEDERAL AND FEDERALLY SPONSORED CREDITS (Cost $3,826,229) | $ | 3,838,154 | |||||||
OTHER MORTGAGE RELATED SECURITIES – 11.28% | |||||||||
Collateralized Mortgage Obligations – 2.33% | |||||||||
Wells Fargo Mortgage Backed Securities Trust | |||||||||
Series 2004-DD, 2.616%, 01/25/2035 | 775,000 | $ | 695,484 | ||||||
Series 2006-AR14, 5.861%, 10/25/2036 | 5,029 | 4,726 | |||||||
700,210 | |||||||||
Near Prime Mortgage – 7.11% | |||||||||
Banc of America Funding Corp. | |||||||||
Series 2006-H, 2.811%, 09/20/2046 | 78,234 | 56,222 | |||||||
Bear Stearns Adjustable Rate Mortgage Trust | |||||||||
Series 2005-10, 2.689%, 10/25/2035 | 854,999 | 686,924 | |||||||
Bear Stearns Alt-A Trust | |||||||||
Series 2004-11, 0.582%, 11/25/2034 | 416,320 | 335,372 | |||||||
Series 2005-7, 0.512%, 08/25/2035 | 450,930 | 341,849 | |||||||
Countrywide Home Loan Mortgage Pass Through Trust | |||||||||
Series 2006-HYB1, 2.818%, 03/20/2036 | 58,223 | 30,233 | |||||||
Merrill Lynch Mortgage Investors, Inc. | |||||||||
Series 2005-A9, 2.572%, 12/25/2035 | 221,487 | 175,576 | |||||||
Opteum Mortgage Acceptance Corp. | |||||||||
Series 2005-3, 0.532%, 07/25/2035 | 350,738 | 289,216 | |||||||
WaMu Mortgage Pass Through Certificates | |||||||||
Series 2007-HY2, 2.635%, 11/25/2036 | 74,354 | 58,757 |
The accompanying notes are an integral part of these Schedules of Investments.
52
Brandes Institutional Core Plus Fixed Income Fund
SCHEDULE OF INVESTMENTS — March 31, 2012 (Unaudited) (continued)
Principal Amount | Value | |||||||
Wells Fargo Alternative Loan Trust | ||||||||
Series 2007-PA5, 6.000%, 11/25/2022 | 109,896 | 109,685 | ||||||
Series 2007-PA5, 6.250%, 11/25/2037 | 62,568 | 57,019 | ||||||
2,140,853 | ||||||||
Sub-Prime Mortgages – 1.84% | ||||||||
Accredited Mortgage Loan Trust | ||||||||
Series 2006-2, 0.392%, 09/25/2036 | 510,049 | 436,051 | ||||||
Countrywide Asset-Backed Certificates | ||||||||
Series 2004-10, 1.292%, 12/25/2034 | 115,013 | 21,113 | ||||||
JP Morgan Mortgage Acquisition Corp. | ||||||||
Series 2006-NC1, 0.412%, 04/25/2036 | 145,323 | 97,948 | ||||||
555,112 | ||||||||
TOTAL OTHER MORTGAGE RELATED SECURITIES (Cost $3,260,510) | $ | 3,396,175 | ||||||
US GOVERNMENTS – 19.44% | ||||||||
Sovereign – 19.44% | ||||||||
United States Treasury Bond | $ | 475,000 | $ | 601,172 | ||||
United States Treasury Note | ||||||||
4.250%, 08/15/2014 | 190,000 | 207,056 | ||||||
4.500%, 02/15/2016 | 840,000 | 959,962 | ||||||
3.375%, 11/15/2019 | 3,130,000 | 3,494,350 | ||||||
2.000%, 11/15/2021 | 600,000 | 590,672 | ||||||
5,252,040 | ||||||||
TOTAL US GOVERNMENTS (Cost $5,611,557) | $ | 5,853,212 |
Shares | Value | ||||||||
COMMON STOCKS – 0.04% | |||||||||
Paper & Forest Products – 0.04% | |||||||||
AbitibiBowater, Inc.(a) | 632 | $ | 9,025 | ||||||
Abitibi-Consolidated(a)(c) | 80,000 | — | |||||||
Quad/Graphics, Inc. | 226 | 3,141 | |||||||
Quebecor World(a)(c) | 140,000 | — | |||||||
12,166 | |||||||||
Semiconductors – 0.00% | |||||||||
Magnachip Semiconductor Corp.(a) | 22 | 264 | |||||||
TOTAL COMMON STOCKS (Cost $67,097) | $ | 12,430 |
The accompanying notes are an integral part of these Schedules of Investments.
53
Brandes Institutional Core Plus Fixed Income Fund
SCHEDULE OF INVESTMENTS — March 31, 2012 (Unaudited) (continued)
Shares | Value | ||||||||
PREFERRED STOCKS – 0.04% | |||||||||
Consumer Finance – 0.04% | |||||||||
Ally Financial, Inc., 7.000%(b) | 16 | $13,331 | |||||||
TOTAL PREFERRED STOCKS (Cost $0) | $ | 13,331 |
Principal Amount | Value | |||||||
ASSET BACKED SECURITIES – 4.27% | ||||||||
Student Loan – 4.27% | ||||||||
National Collegiate Student Loan Trust | ||||||||
Series A-4, 0.547%, 10/25/2033 | $ | 410,000 | $ | 186,679 | ||||
SLM Student Loan Trust | ||||||||
Series 2004-B, 0.804%, 03/15/2024 | 260,000 | 206,901 | ||||||
Series 2004-B, 0.904%, 09/15/2033 | 300,000 | 186,519 | ||||||
Series 2005-A, 0.784%, 12/15/2038 | 400,000 | 260,648 | ||||||
Series 2006-A, 0.764%, 06/15/2039 | 275,000 | 217,725 | ||||||
Series 2007-A, 0.714%, 12/15/2041 | 350,000 | 227,760 | ||||||
TOTAL ASSET BACKED SECURITIES (Cost $1,473,147) | $ | 1,286,232 | ||||||
CORPORATE BONDS – 48.34% | ||||||||
Advertising – 0.93% | ||||||||
The Interpublic Group of Companies, Inc. | ||||||||
6.250%, 11/15/2014 | $ | 255,000 | $ | 277,950 | ||||
Automobile Parts & Equipment – 0.23% | ||||||||
American Axle & Manufacturing, Inc. | ||||||||
5.250%, 02/11/2014 | 65,000 | 66,788 | ||||||
Banks & Thrifts – 11.97% | ||||||||
Ally Financial, Inc. | ||||||||
7.500%, 12/31/2013 | 15,000 | 15,938 | ||||||
6.750%, 12/01/2014 | 650,000 | 680,874 | ||||||
8.000%, 12/31/2018 | 18,000 | 19,125 | ||||||
Banco Santander Chile | ||||||||
7.375%, 07/18/2012 | 23,700 | 24,069 | ||||||
Citigroup, Inc. | ||||||||
6.125%, 11/21/2017 | 235,000 | 262,298 | ||||||
6.875%, 03/05/2038 | 235,000 | 271,331 |
The accompanying notes are an integral part of these Schedules of Investments.
54
Brandes Institutional Core Plus Fixed Income Fund
SCHEDULE OF INVESTMENTS — March 31, 2012 (Unaudited) (continued)
Principal Amount | Value | |||||||
Fifth Third Bancorp | ||||||||
8.250%, 03/01/2038 | 175,000 | 232,304 | ||||||
First Horizon National Corp. | ||||||||
5.375%, 12/15/2015 | 130,000 | 138,118 | ||||||
JP Morgan Chase & Co. | ||||||||
7.900%, 04/30/2099 | 540,000 | 591,581 | ||||||
KeyCorp | ||||||||
6.500%, 05/14/2013 | 110,000 | 116,063 | ||||||
M&I Marshall & Ilsley Bank | ||||||||
5.000%, 01/17/2017 | 450,000 | 484,169 | ||||||
National City Corp. | ||||||||
4.900%, 01/15/2015 | 235,000 | 257,782 | ||||||
Regions Financial Corp. | ||||||||
5.750%, 06/15/2015 | 360,000 | 377,100 | ||||||
The Goldman Sachs Group, Inc. | ||||||||
7.500%, 02/15/2019 | 115,000 | 131,392 | ||||||
3,602,144 | ||||||||
Building Materials – 3.77% | ||||||||
CRH America, Inc. | ||||||||
6.000%, 09/30/2016 | 160,000 | 174,249 | ||||||
Masco Corp. | ||||||||
6.125%, 10/03/2016 | 305,000 | 322,409 | ||||||
Mohawk Industries, Inc. | ||||||||
6.375%, 01/15/2016 | 255,000 | 281,775 | ||||||
Owens Corning | ||||||||
6.500%, 12/01/2016 | 125,000 | 138,871 | ||||||
USG Corp. | ||||||||
6.300%, 11/15/2016 | 230,000 | 215,050 | ||||||
1,132,354 | ||||||||
Chemical – 0.69% | ||||||||
Lyondell Chemical Co. | ||||||||
11.000%, 05/01/2018 | 187,162 | 206,814 | ||||||
Consumer Products – 1.03% | ||||||||
Spectrum Brands Holdings, Inc. | ||||||||
9.500%, 06/15/2018 | 275,000 | 310,063 |
The accompanying notes are an integral part of these Schedules of Investments.
55
Brandes Institutional Core Plus Fixed Income Fund
SCHEDULE OF INVESTMENTS — March 31, 2012 (Unaudited) (continued)
Principal Amount | Value | |||||||||||
Containers & Packaging – 0.73% | ||||||||||||
Sealed Air Corp. | ||||||||||||
7.875%, 06/15/2017 | 205,000 | 221,060 | ||||||||||
Diversified Financial Services – 5.78% | ||||||||||||
American International Group, Inc. | ||||||||||||
6.400%, 12/15/2020 | 300,000 | 339,518 | ||||||||||
Bank of America Corp. | ||||||||||||
3.750%, 07/12/2016 | 180,000 | 180,897 | ||||||||||
Countrywide Financial Corp. | ||||||||||||
5.800%, 06/07/2012 | 455,000 | 458,593 | ||||||||||
Ford Motor Credit Co. LLC | ||||||||||||
7.000%, 10/01/2013 | 250,000 | 266,569 | ||||||||||
International Lease Finance Corp. | ||||||||||||
6.625%, 11/15/2013 | 285,000 | 290,700 | ||||||||||
SLM Corp. | ||||||||||||
5.000%, 10/01/2013 | 200,000 | 204,500 | ||||||||||
1,740,777 | ||||||||||||
Electric Utilities – 8.39% | ||||||||||||
Ameren Corp. | ||||||||||||
8.875%, 05/15/2014 | 300,000 | 340,272 | ||||||||||
Arizona Public Service Co. | ||||||||||||
8.750%, 03/01/2019 | 340,000 | 440,965 | ||||||||||
Commonwealth Edison Co. | ||||||||||||
5.900%, 03/15/2036 | 175,000 | 212,347 | ||||||||||
EDP Finance BV | ||||||||||||
4.900%, 10/01/2019(b) | 400,000 | 325,160 | ||||||||||
FirstEnergy Corp. | ||||||||||||
7.375%, 11/15/2031 | 430,000 | 529,358 | ||||||||||
Nisource Finance Corp. | ||||||||||||
5.250%, 09/15/2017 | 285,000 | 316,667 | ||||||||||
Oncor Electric Delivery Co. LLC | ||||||||||||
6.375%, 01/15/2015 | 30,000 | 33,962 | ||||||||||
7.000%, 09/01/2022 | 175,000 | 212,366 | ||||||||||
PPL Energy Supply LLC | ||||||||||||
6.500%, 05/01/2018 | 100,000 | 115,565 | ||||||||||
2,526,662 |
The accompanying notes are an integral part of these Schedules of Investments.
56
Brandes Institutional Core Plus Fixed Income Fund
SCHEDULE OF INVESTMENTS — March 31, 2012 (Unaudited) (continued)
Principal Amount | Value | |||||||||||
Energy – 0.74% | ||||||||||||
Valero Energy Corp. | ||||||||||||
9.375%, 03/15/2019 | 170,000 | 222,672 | ||||||||||
Equipment – 0.13% | ||||||||||||
Continental Airlines 2007-1 Class A Pass Through Trust | ||||||||||||
Series 2007-1, 5.983%, 04/19/2022 | 37,179 | 40,313 | ||||||||||
Food, Beverage & Tobacco – 1.84% | ||||||||||||
Altria Group, Inc. | ||||||||||||
9.700%, 11/10/2018 | 150,000 | 203,824 | ||||||||||
Pilgrims Pride Corp. | ||||||||||||
7.875%, 12/15/2018 | 130,000 | 129,675 | ||||||||||
Tyson Foods, Inc. | ||||||||||||
6.850%, 04/01/2016 | 195,000 | 221,325 | ||||||||||
554,824 | ||||||||||||
Homebuilders – 3.73% | ||||||||||||
Centex Corp. | ||||||||||||
6.500%, 05/01/2016 | 80,000 | 86,000 | ||||||||||
Lennar Corp. | ||||||||||||
5.600%, 05/31/2015 | 290,000 | 303,050 | ||||||||||
Pulte Group, Inc. | ||||||||||||
5.200%, 02/15/2015 | 440,000 | 448,799 | ||||||||||
Toll Brothers Finance Corp. | ||||||||||||
5.150%, 05/15/2015 | 270,000 | 285,674 | ||||||||||
1,123,523 | ||||||||||||
Industrial – 0.50% | ||||||||||||
Eastman Kodak Co. | ||||||||||||
9.750%, 03/01/2018(b) | 175,000 | 150,938 | ||||||||||
Insurance – 1.32% | ||||||||||||
CNA Financial Corp. | ||||||||||||
7.350%, 11/15/2019 | 125,000 | 145,918 | ||||||||||
5.875%, 08/15/2020 | 110,000 | 117,919 | ||||||||||
Marsh & McLennan Cos, Inc. | ||||||||||||
5.750%, 09/15/2015 | 120,000 | 134,592 | ||||||||||
398,429 |
The accompanying notes are an integral part of these Schedules of Investments.
57
Brandes Institutional Core Plus Fixed Income Fund
SCHEDULE OF INVESTMENTS — March 31, 2012 (Unaudited) (continued)
Principal Amount | Value | |||||||||||
Leisure Time – 0.43% | ||||||||||||
Royal Caribbean Cruises Ltd. | ||||||||||||
7.000%, 06/15/2013 | 125,000 | 130,625 | ||||||||||
Media – 0.62% | ||||||||||||
The McGraw Hill Cos, Inc. | ||||||||||||
5.900%, 11/15/2017 | 15,000 | 17,552 | ||||||||||
Virgin Media Finance Plc | ||||||||||||
9.500%, 08/15/2016 | 150,000 | 169,125 | ||||||||||
186,677 | ||||||||||||
Oil & Gas – 3.43% | ||||||||||||
Anadarko Petroleum Corp. | ||||||||||||
5.950%, 09/15/2016 | 435,000 | 501,509 | ||||||||||
Chesapeake Energy Corp. | ||||||||||||
6.625%, 08/15/2020 | 145,000 | 147,538 | ||||||||||
El Paso Corp. | ||||||||||||
7.000%, 06/15/2017 | 90,000 | 100,219 | ||||||||||
Transocean, Inc. | ||||||||||||
5.250%, 03/15/2013 | 275,000 | 284,567 | ||||||||||
1,033,833 | ||||||||||||
Retail – 0.98% | ||||||||||||
Marks & Spencer Plc | ||||||||||||
7.125%, 12/01/2037(b) | 285,000 | 294,618 | ||||||||||
Technology, Equipment & Services – 0.36% | ||||||||||||
Unisys Corp. | ||||||||||||
12.500%, 01/15/2016 | 103,000 | 109,566 | ||||||||||
Telecommunications – 0.30% | ||||||||||||
Telecom Italia Capital SA | ||||||||||||
6.999%, 06/04/2018 | 85,000 | 90,525 | ||||||||||
Utilities – 0.44% | ||||||||||||
Edison Mission Energy | ||||||||||||
7.000%, 05/15/2017 | 210,000 | 132,300 | ||||||||||
TOTAL CORPORATE BONDS (Cost $12,948,757) | $ | 14,553,455 |
The accompanying notes are an integral part of these Schedules of Investments.
58
Brandes Institutional Core Plus Fixed Income Fund
SCHEDULE OF INVESTMENTS — March 31, 2012 (Unaudited) (continued)
Contracts | Value | ||||||||
WARRANTS – 0.00% | |||||||||
Semiconductors – 0.00% | |||||||||
MagnaChip Semiconductor Corp. | |||||||||
Expiration Date: November 2014, Exercise Price: $1.97(c) | 870 | $ | — | ||||||
TOTAL WARRANTS (Cost $8,748) | $ | — |
Principal Amount | Value | |||||||
SHORT TERM INVESTMENTS – 3.84% | ||||||||
Repurchase Agreements – 3.84% | ||||||||
State Street Bank and Trust Repurchase Agreement, (Dated 3/31/12), due 4/2/12, 0.01%, [Collateralized by $1,145,200 United States Treasury Bill, 7/31/16, (Market Value $1,177,778)] (proceeds $1,154,679) | $ | 1,154,678 | $ | 1,154,678 | ||||
TOTAL SHORT TERM INVESTMENTS (Cost $1,154,678) | $ | 1,154,678 | ||||||
Total Investments (Cost $28,350,723) – 100.00% | $ | 30,107,667 | ||||||
Assets in Excess of Other Liabilities – (0.00%) | 1,095 | |||||||
TOTAL NET ASSETS – 100.00% | $ | 30,108,762 |
Percentages are stated as a percent of net assets.
(a) | Non-income producing security. |
(b) | Securities were 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 $784,047, which represents 2.60% of total net assets. |
(c) | The prices for these securities were derived from an estimate of fair market value pursuant to procedures approved by the Fund's Board of Trustees. These securities represent $0 or 0.00% of the Fund's net assets. The accompanying notes are an integral part of these Schedules of Investments. |
The accompanying notes are an integral part of these Schedules of Investments.
59
Brandes Credit Focus Yield Fund
SCHEDULE OF INVESTMENTS — March 31, 2012 (Unaudited)
Principal Amount | Value | ||||||||
FEDERAL AND FEDERALLY SPONSORED CREDITS – 0.21% | |||||||||
Fannie Mae Interest Only Strip – 0.21% | |||||||||
Fannie Mae Interest Only Strip | |||||||||
6.000%, 06/01/2036 | $ | 158,760 | $ | 25,347 | |||||
TOTAL FEDERAL AND FEDERALLY SPONSORED CREDITS (Cost $22,838) | $ | 25,347 | |||||||
OTHER MORTGAGE RELATED SECURITIES – 9.03% | |||||||||
Near Prime Mortgage – 5.24% | |||||||||
Bear Stearns Adjustable Rate Mortgage Trust | |||||||||
Series 2005-10, 4.650%, 10/25/2035 | $ | 283,750 | $ | 227,971 | |||||
Merrill Lynch Mortgage Investors, Inc. | |||||||||
Series 2005-A9, 2.572%, 12/25/2035 | 185,161 | 146,780 | |||||||
Wells Fargo Alternative Loan Trust | |||||||||
Series 2007-PA5, 6.000%, 11/25/2022 | 263,450 | 262,942 | |||||||
637,693 | |||||||||
Sub-Prime Mortgages – 3.79% | |||||||||
Accredited Mortgage Loan Trust | |||||||||
Series 2006-2, 0.392%, 09/25/2036 | 425,041 | 363,376 | |||||||
Countrywide Asset-Backed Certificates | |||||||||
Series 2004-13, 1.092%, 04/25/2035 | 50,000 | 30,488 | |||||||
Structured Asset Investment Loan Trust | |||||||||
Series A3, 0.622%, 07/25/2035 | 77,190 | 69,024 | |||||||
462,888 | |||||||||
TOTAL OTHER MORTGAGE RELATED SECURITIES (Cost $1,055,652) | $ | 1,100,581 | |||||||
US GOVERNMENTS – 10.3% | |||||||||
Sovereign – 10.3% | |||||||||
United States Treasury Note | |||||||||
2.000%, 11/15/2021 | $ | 1,275,000 | $ | 1,255,178 | |||||
TOTAL US GOVERNMENTS (Cost $1,268,248) | $ | 1,255,178 |
The accompanying notes are an integral part of these Schedules of Investments.
60
Brandes Credit Focus Yield Fund
SCHEDULE OF INVESTMENTS — March 31, 2012 (Unaudited) (continued)
Shares | Value | |||||||
COMMON STOCKS – 0.29% | ||||||||
Paper & Forest Products – 0.28% | ||||||||
AbitibiBowater, Inc. (a) | 1,620 | 23,133 | ||||||
Abitibi-Consolidated (a)(b) | 205,000 | — | ||||||
Quad/Graphics, Inc. | 695 | 9,661 | ||||||
Quebecor World (a)(b) | 430,000 | — | ||||||
32,794 | ||||||||
Semiconductors – 0.01% | ||||||||
Magnachip Semiconductor Corp. (a) | 97 | 1,164 | ||||||
TOTAL COMMON STOCKS (Cost $31,937) | $ | 33,958 |
Principal Amount | Value | ||||||||
ASSET BACKED SECURITIES – 5.22% | |||||||||
Student Loan – 5.22% | |||||||||
National Collegiate Student Loan Trust | |||||||||
Series A-4, 0.547%, 10/25/2033 | $ | 400,000 | $ | 182,126 | |||||
SLM Student Loan Trust | |||||||||
Series 2004-B, 0.804%, 03/15/2024 | 325,000 | 258,626 | |||||||
Series 2007-A, 0.714%, 12/15/2041 | 300,000 | 195,223 | |||||||
TOTAL ASSET BACKED SECURITIES (Cost $617,523) | $ | 635,975 | |||||||
CORPORATE BONDS – 72.83% | |||||||||
Advertising – 1.75% | |||||||||
The Interpublic Group of Companies, Inc. | |||||||||
6.250%, 11/15/2014 | $ | 195,000 | $ | 212,550 | |||||
Automobile Parts & Equipment – 1.18% | |||||||||
American Axle & Manufacturing, Inc. | |||||||||
5.250%, 02/11/2014 | 140,000 | 143,850 | |||||||
Banks & Thrifts – 18.56% | |||||||||
Ally Financial, Inc. | |||||||||
6.750%, 12/01/2014 | 250,000 | 261,875 | |||||||
Banco Santander Chile | |||||||||
7.375%, 07/18/2012 | 135,000 | 137,101 | |||||||
Citigroup, Inc. | |||||||||
6.125%, 11/21/2017 | 190,000 | 212,071 | |||||||
Fifth Third Bancorp | |||||||||
8.250%, 03/01/2038 | 65,000 | 86,284 | |||||||
First Horizon National Corp. | |||||||||
5.375%, 12/15/2015 | 75,000 | 79,683 |
The accompanying notes are an integral part of these Schedules of Investments.
61
Brandes Credit Focus Yield Fund
SCHEDULE OF INVESTMENTS — March 31, 2012 (Unaudited) (continued)
Principal Amount | Value | ||||||||
JP Morgan Chase & Co. | |||||||||
7.900%, 04/30/2099 | 335,000 | 367,000 | |||||||
KeyCorp | |||||||||
6.500%, 05/14/2013 | 60,000 | 63,307 | |||||||
M&I Marshall & Ilsley Bank | |||||||||
5.000%, 01/17/2017 | 205,000 | 220,566 | |||||||
National City Corp. | |||||||||
4.900%, 01/15/2015 | 245,000 | 268,751 | |||||||
Regions Financial Corp. | |||||||||
5.750%, 06/15/2015 | 210,000 | 219,975 | |||||||
The Goldman Sachs Group, Inc. | |||||||||
7.500%, 02/15/2019 | 65,000 | 74,265 | |||||||
USB Capital IX | |||||||||
6.189%, 04/15/2011 | 350,000 | 269,808 | |||||||
2,260,686 | |||||||||
Building Materials – 5.18% | |||||||||
CRH America, Inc. | |||||||||
6.000%, 09/30/2016 | 90,000 | 98,015 | |||||||
Masco Corp. | |||||||||
6.125%, 10/03/2016 | 150,000 | 158,562 | |||||||
Mohawk Industries, Inc. | |||||||||
6.625%, 01/15/2016 | 145,000 | 160,225 | |||||||
Owens Corning | |||||||||
6.500%, 12/01/2016 | 75,000 | 83,323 | |||||||
USG Corp. | |||||||||
6.300%, 11/15/2016 | 140,000 | 130,900 | |||||||
631,025 | |||||||||
Chemical – 1.13% | |||||||||
Lyondell Chemical Co. | |||||||||
11.000%, 05/01/2018 | 124,775 | 137,876 | |||||||
Consumer Products – 1.57% | |||||||||
Spectrum Brands Holdings, Inc. | |||||||||
9.500%, 06/15/2018 | 170,000 | 191,675 | |||||||
Containers & Packaging – 0.88% | |||||||||
Sealed Air Corp. | |||||||||
7.875%, 06/15/2017 | 100,000 | 107,834 |
The accompanying notes are an integral part of these Schedules of Investments.
62
Brandes Credit Focus Yield Fund
SCHEDULE OF INVESTMENTS — March 31, 2012 (Unaudited) (continued)
Principal Amount | Value | ||||||||
Diversified Financial Services – 12.76% | |||||||||
American International Group, Inc. | |||||||||
6.400%, 12/15/2020 | 190,000 | 215,029 | |||||||
Bank of America Corp. | |||||||||
3.750%, 07/12/2016 | 115,000 | 115,573 | |||||||
Countrywide Financial Corp. | |||||||||
5.800%, 06/07/2012 | 185,000 | 186,461 | |||||||
Ford Motor Credit Co. LLC | |||||||||
7.000%, 10/01/2013 | 245,000 | 261,237 | |||||||
General Motors Acceptance Corp. | |||||||||
6.750%, 12/01/2014 | 325,000 | 338,250 | |||||||
International Lease Finance Corp. | |||||||||
6.625%, 11/15/2013 | 215,000 | 219,300 | |||||||
SLM Corp. | |||||||||
5.000%, 10/01/2013 | 215,000 | 219,838 | |||||||
1,555,688 | |||||||||
Electric Utilities – 8.39% | |||||||||
Ameren Corp. | |||||||||
8.875%, 05/15/2014 | 120,000 | 136,109 | |||||||
Arizona Public Service Co. | |||||||||
8.750%, 03/01/2019 | 160,000 | 207,513 | |||||||
Commonwealth Edison Co. | |||||||||
5.950%, 08/15/2016 | 110,000 | 129,722 | |||||||
FirstEnergy Corp. | |||||||||
7.375%, 11/15/2031 | 175,000 | 215,437 | |||||||
Nisource Finance Corp. | |||||||||
5.250%, 09/15/2017 | 65,000 | 72,222 | |||||||
Oncor Electric Delivery Co. LLC | |||||||||
6.375%, 01/15/2015 | 90,000 | 101,887 | |||||||
7.000%, 09/01/2022 | 45,000 | 54,608 | |||||||
PPL Energy Supply LLC | |||||||||
6.500%, 05/01/2018 | 90,000 | 104,008 | |||||||
1,021,506 | |||||||||
Energy – 0.97% | |||||||||
Valero Energy Corp. | |||||||||
9.375%, 03/15/2019 | 90,000 | 117,885 | |||||||
Equipment – 0.83% | |||||||||
Continental Airlines 2007-1 Class A Pass Through Trust | |||||||||
Series 2007-1, 5.983%, 10/19/2023 | 92,948 | 100,783 |
The accompanying notes are an integral part of these Schedules of Investments.
63
Brandes Credit Focus Yield Fund
SCHEDULE OF INVESTMENTS — March 31, 2012 (Unaudited) (continued)
Principal Amount | Value | ||||||||
Food, Beverage & Tobacco – 3.26% | |||||||||
Altria Group, Inc. | |||||||||
9.700%, 11/10/2018 | 125,000 | 169,853 | |||||||
Tyson Foods, Inc. | |||||||||
7.850%, 04/01/2016 | 200,000 | 227,000 | |||||||
396,853 | |||||||||
Homebuilders – 5.85% | |||||||||
Centex Corp. | |||||||||
6.500%, 05/01/2016 | 155,000 | 166,625 | |||||||
Lennar Corp. | |||||||||
5.600%, 05/31/2015 | 195,000 | 203,775 | |||||||
Pulte Group, Inc. | |||||||||
5.200%, 02/15/2015 | 170,000 | 173,400 | |||||||
Toll Brothers Finance Corp. | |||||||||
5.150%, 05/15/2015 | 160,000 | 169,288 | |||||||
713,088 | |||||||||
Insurance – 1.84% | |||||||||
CNA Financial Corp. | |||||||||
7.350%, 11/15/2019 | 70,000 | 81,714 | |||||||
5.875%, 08/15/2020 | 60,000 | 64,320 | |||||||
Marsh & McLennan Cos, Inc. | |||||||||
5.750%, 09/15/2015 | 70,000 | 78,512 | |||||||
224,546 | |||||||||
Leisure Time – 0.73% | |||||||||
Royal Caribbean Cruises Ltd. | |||||||||
7.000%, 06/15/2013 | 85,000 | 88,825 | |||||||
Media – 1.31% | |||||||||
The McGraw Hill Cos, Inc. | |||||||||
5.900%, 11/15/2017 | 40,000 | 46,804 | |||||||
Virgin Media Finance Plc | |||||||||
9.500%, 08/15/2016 | 100,000 | 112,750 | |||||||
159,554 |
The accompanying notes are an integral part of these Schedules of Investments.
64
Brandes Credit Focus Yield Fund
SCHEDULE OF INVESTMENTS — March 31, 2012 (Unaudited) (continued)
Principal Amount | Value | ||||||||
Oil & Gas – 4.28% | |||||||||
Anadarko Petroleum Corp. | |||||||||
5.950%, 09/15/2016 | 260,000 | 299,753 | |||||||
El Paso Corp. | |||||||||
7.000%, 06/15/2017 | 50,000 | 55,677 | |||||||
Transocean, Inc. | |||||||||
5.250%, 03/15/2013 | 160,000 | 165,566 | |||||||
520,996 | |||||||||
Oil, Gas & Consumable Fuels – 0.75% | |||||||||
Chesapeake Energy Corp. | |||||||||
6.625%, 08/15/2020 | 90,000 | 91,575 | |||||||
Technology, Equipment & Services – 0.52% | |||||||||
Unisys Corp. | |||||||||
12.500%, 01/15/2016 | 60,000 | 63,825 | |||||||
Telecommunications – 0.44% | |||||||||
Telecom Italia Capital SA | |||||||||
6.999%, 06/04/2018 | 50,000 | 53,250 | |||||||
Utilities – 0.65% | |||||||||
Edison Mission Energy | |||||||||
7.000%, 05/15/2017 | 125,000 | 78,750 | |||||||
TOTAL CORPORATE BONDS (Cost $8,777,510) | $ | 8,872,620 |
Shares | Value | ||||||||
WARRANTS – 0.00% | |||||||||
Semiconductors – 0.00% | |||||||||
Magnachip Semiconductor Corp. | |||||||||
Expiration Date: November 2014, Exercise Price: $1.97 (b) | 3,900 | $ | — | ||||||
TOTAL WARRANTS (Cost $0) | $ | — |
Principal Amount | Value | ||||||||
SHORT TERM INVESTMENT – 0.55% | |||||||||
Repurchase Agreement – 0.55% | |||||||||
State Street Bank and Trust Repurchase Agreement, (Dated 3/31/12), due 4/2/12, 0.01%, [Collateralized by $66,900 United States Treasury Bill, 7/31/16, (Market Value $68,803)] (proceeds $67,412) | $ | 67,412 | $ | 67,412 | |||||
TOTAL SHORT TERM INVESTMENTS (Cost $67,412) | $ | 67,412 | |||||||
Total Investments (Cost $11,841,120) – 98.43% | $ | 11,991,071 | |||||||
Other Assets in Excess of Liabilities – 1.57% | 191,275 | ||||||||
TOTAL NET ASSETS – 100.00% | $ | 12,182,346 |
The accompanying notes are an integral part of these Schedules of Investments.
65
Brandes Credit Focus Yield Fund
SCHEDULE OF INVESTMENTS — March 31, 2012 (Unaudited) (continued)
Percentages are stated as a percent of net assets.
(a) | Non-income producing security. |
(b) | The prices for these securities were derived from an estimate of fair market value pursuant to procedures approved by the Fund's Board of Trustees. These securities represent $0 or 0.00% of the Fund's net assets. |
The accompanying notes are an integral part of these Schedules of Investments.
66
Brandes Investment Trust
STATEMENTS OF ASSETS AND LIABILITIES — March 31, 2012 (Unaudited)
Brandes Institutional International Equity Fund | Brandes Institutional Global Equity Fund | Brandes Institutional Emerging Markets Fund | |||||||||||
ASSETS | |||||||||||||
Investments in securities, at value(1) | $ | 442,173,269 | $ | 34,676,530 | $ | 177,909,558 | |||||||
Foreign currency(1) | 553,795 | 36,252 | 2,277 | ||||||||||
Receivables: | |||||||||||||
Securities sold | — | — | 552,846 | ||||||||||
Fund shares sold | 710,825 | 5,068 | 2,472,561 | ||||||||||
Dividends and interest | 4,457,103 | 161,896 | 2,508,062 | ||||||||||
Tax reclaims | 866,870 | 15,550 | 2,978 | ||||||||||
Due from Advisor | — | — | — | ||||||||||
Prepaid expenses and other assets | 64,420 | 26,386 | 59,417 | ||||||||||
Total Assets | 448,826,282 | 34,921,682 | 183,507,699 | ||||||||||
LIABILITIES | |||||||||||||
Payables: | |||||||||||||
Securities purchased | 2,633,892 | 90,942 | 3,260,557 | ||||||||||
Fund shares redeemed | 1,620,864 | 119,231 | 44,239 | ||||||||||
Due to advisor | 377,195 | 4,310 | 116,558 | ||||||||||
12b-1 fee | — | 11 | 12,056 | ||||||||||
Trustee fees | 8,054 | 10,454 | 12,206 | ||||||||||
Dividends payable | — | — | — | ||||||||||
Accrued expenses | 142,572 | 47,217 | 46,218 | ||||||||||
Total Liabilities | 4,782,577 | 272,165 | 3,491,834 | ||||||||||
NET ASSETS | $ | 444,043,705 | $ | 34,649,517 | $ | 180,015,865 | |||||||
COMPONENTS OF NET ASSETS | |||||||||||||
Paid-in capital | $ | 599,544,382 | $ | 32,620,528 | $ | 181,586,969 | |||||||
Undistributed net investment income | 720,311 | 210,374 | 156,096 | ||||||||||
Accumulated net realized gain (loss) on investments and foreign currency | (111,023,940 | ) | (740,853 | ) | 4,120,768 | ||||||||
Net unrealized appreciation (depreciation) on: | |||||||||||||
Investments | (45,285,259 | ) | 2,559,056 | (5,850,579 | ) | ||||||||
Foreign currency | 88,211 | 412 | 2,611 | ||||||||||
Total Net Assets | $ | 444,043,705 | $ | 34,649,517 | $ | 180,015,865 | |||||||
Net asset value, offering price and redemption proceeds per share | |||||||||||||
Class I Shares | |||||||||||||
Net Assets | $ | 438,485,895 | $ | 34,290,713 | $ | 116,704,754 | |||||||
Shares outstanding (unlimited shares authorized without par value) | 31,097,670 | 1,656,786 | 12,436,402 | ||||||||||
Offering and redemption price | $ | 14.10 | $ | 20.70 | $ | 9.38 | |||||||
Class E Shares | |||||||||||||
Net Assets | $ | 5,557,716 | $ | 249,132 | N/A | ||||||||
Shares outstanding (unlimited shares authorized without par value) | 394,436 | 12,115 | N/A | ||||||||||
Offering and redemption price | $ | 14.09 | $ | 20.56 | N/A | ||||||||
Class S Shares | |||||||||||||
Net Assets | $ | 94 | $ | 109,672 | $ | 63,311,111 | |||||||
Shares outstanding (unlimited shares authorized without par value) | 7 | 5,307 | 6,753,843 | ||||||||||
Offering and redemption price | $ | 14.11* | $ | 20.67 | $ | 9.37 | |||||||
(1) Cost of: | |||||||||||||
Investments in securities | $ | 487,461,282 | $ | 32,117,489 | $ | 183,760,365 | |||||||
Foreign currency | 551,040 | 36,236 | 2,047 |
* | Differences in the calculation of the offering and redemption prices are due to rounding of the Net Assets and the shares outstanding. |
The accompanying notes to financial statements are an integral part of this statement.
67
Brandes Investment Trust
STATEMENTS OF ASSETS AND LIABILITIES — March 31, 2012 (Unaudited) (continued)
Brandes International Small Cap Equity Fund | Brandes Institutional Core Plus Fixed Income Fund | Brandes Credit Focus Yield Fund | ||||||||||
ASSETS | ||||||||||||
Investments in securities, at value(1) | $ | 26,826,506 | $ | 30,107,667 | $ | 11,991,071 | ||||||
Foreign currency(1) | 1,534 | — | — | |||||||||
Receivables: | ||||||||||||
Securities sold | 95,079 | — | 885,633 | |||||||||
Fund shares sold | 8,149 | 1,000 | — | |||||||||
Dividends and interest | 275,061 | 323,364 | 178,730 | |||||||||
Tax reclaims | — | — | — | |||||||||
Due from Advisor | — | 9,121 | 14,391 | |||||||||
Prepaid expenses and other assets | 136 | 23,107 | 950 | |||||||||
Total Assets | 27,206,465 | 30,464,259 | 13,070,775 | |||||||||
LIABILITIES | ||||||||||||
Payables: | ||||||||||||
Securities purchased | 375,778 | 287,517 | 848,091 | |||||||||
Fund shares redeemed | — | 1,027 | — | |||||||||
Due to advisor | 4,239 | — | — | |||||||||
12b-1 fee | 1 | — | — | |||||||||
Trustee fees | 10,157 | 10,338 | 10,157 | |||||||||
Dividends payable | — | 19,393 | 1,315 | |||||||||
Accrued expenses | 26,669 | 37,222 | 28,592 | |||||||||
Total Liabilities | 416,844 | 355,497 | 888,155 | |||||||||
NET ASSETS | $ | 26,789,621 | $ | 30,108,762 | $ | 12,182,620 | ||||||
COMPONENTS OF NET ASSETS | ||||||||||||
Paid-in capital | $ | 25,749,407 | $ | 28,279,848 | $ | 12,054,843 | ||||||
Undistributed net investment income | 50,763 | (36,408 | ) | 3,184 | ||||||||
Accumulated net realized gain (loss) on investments and foreign currency | 147,720 | 108,378 | (25,358 | ) | ||||||||
Net unrealized appreciation (depreciation) on: | ||||||||||||
Investments | 841,865 | 1,756,944 | 149,951 | |||||||||
Foreign currency | (134 | ) | — | — | ||||||||
Total Net Assets | $ | 26,789,621 | $ | 30,108,762 | $ | 12,182,620 | ||||||
Net asset value, offering price and redemption proceeds per share | ||||||||||||
Class I Shares | ||||||||||||
Net Assets | $ | 26,752,903 | $ | 24,601,028 | $ | 12,182,519 | ||||||
Shares outstanding (unlimited shares authorized without par value) | 2,534,891 | 2,636,606 | 1,205,394 | |||||||||
Offering and redemption price | $ | 10.55 | $ | 9.33 | $ | 10.11 | ||||||
Class E Shares | ||||||||||||
Net Assets | N/A | $ | 5,507,734 | N/A | ||||||||
Shares outstanding (unlimited shares authorized without par value) | N/A | 589,784 | N/A | |||||||||
Offering and redemption price | N/A | $ | 9.34 | N/A | ||||||||
Class S Shares | ||||||||||||
Net Assets | $ | 36,718 | N/A | $ | 100 | |||||||
Shares outstanding (unlimited shares authorized without par value) | 3,476 | N/A | 10 | |||||||||
Offering and redemption price | $ | 10.56 | N/A | $ | 10.11 | * | ||||||
(1) Cost of: | ||||||||||||
Investments in securities | $ | 25,984,646 | $ | 28,350,723 | $ | 11,841,120 | ||||||
Foreign currency | 1,529 | — | — |
* | Differences in the calculation of the offering and redemption prices are due to rounding of the Net Assets and the shares outstanding. |
The accompanying notes to financial statements are an integral part of this statement.
68
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69
Brandes Investment Trust
STATEMENT OF OPERATIONS — For the Periods Ended March 31, 2012 (Unaudited)
Brandes Institutional International Equity Fund | ||||
INVESTMENT INCOME | ||||
Income | ||||
Dividend income | $ | 5,886,374 | ||
Less: foreign taxes withheld | (554,133 | ) | ||
Interest income | 355 | |||
Income from securities lending | 310,355 | |||
Miscellaneous income | — | |||
Total income | 5,642,951 | |||
Expenses | ||||
Advisory fees (Note 3) | 2,251,166 | |||
Custody fees | 36,448 | |||
Administration fees (Note 3) | 76,752 | |||
Insurance expense | 26,511 | |||
Legal fees | 15,926 | |||
Printing fees | 26,751 | |||
Miscellaneous | 55,836 | |||
Registration expense | 30,745 | |||
Trustee fees | 32,049 | |||
Transfer agent fees | 75,906 | |||
12b-1 Fees – Class S | — | |||
Shareholder Service Fees – Class E | 1,181 | |||
Shareholder Service Fees – Class I | — | |||
Accounting fees | 57,143 | |||
Auditing fees | 14,468 | |||
Organizational costs | — | |||
Total expenses | 2,700,882 | |||
Less reimbursement / waiver | — | |||
Total expenses net of reimbursement / waiver | 2,700,882 | |||
Net investment income | 2,942,069 | |||
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS | ||||
Net realized gain (loss) on: | ||||
Investments | (25,680,278 | ) | ||
Less: foreign taxes withheld | — | |||
Foreign currency transactions | (82,246 | ) | ||
Net realized gain (loss) | (25,762,524 | ) | ||
Net change in unrealized appreciation on: | ||||
Investments | 80,489,302 | |||
Foreign currency transactions | 35,780 | |||
Net unrealized appreciation | 80,525,082 | |||
Net realized and unrealized loss on investments and foreign currency transactions | 54,762,558 | |||
Net increase (decrease) in net assets resulting from operations | $ | 57,704,627 |
* | Commenced operations on January 31, 2012. |
The accompanying notes to financial statements are an integral part of this statement.
70
Brandes Investment Trust
STATEMENT OF OPERATIONS — For the Periods Ended March 31, 2012 (Unaudited) (continued)
Brandes Institutional Global Equity Fund | Brandes Institutional Emerging Markets Fund | Brandes International Small Cap Equity Fund* | Brandes Institutional Core Plus Fixed Income Fund | Brandes Credit Focus Yield Fund* | ||||||||||||||||
INVESTMENT INCOME | ||||||||||||||||||||
Income | ||||||||||||||||||||
Dividend income | $ | 452,152 | $ | 1,638,527 | $ | 105,242 | $ | 658 | $ | 174 | ||||||||||
Less: foreign taxes withheld | (26,556 | ) | (136,172 | ) | (7,460 | ) | — | — | ||||||||||||
Interest income | 68 | 334 | 68 | 740,993 | 94,284 | |||||||||||||||
Income from securities lending | — | — | — | — | — | |||||||||||||||
Miscellaneous income | — | 102 | 70 | 1,619 | 967 | |||||||||||||||
Total income | 425,664 | 1,502,791 | 97,920 | 743,270 | 95,425 | |||||||||||||||
Expenses | ||||||||||||||||||||
Advisory fees (Note 3) | 149,123 | 672,010 | 38,956 | 49,462 | 9,732 | |||||||||||||||
Custody fees | 2,829 | 30,141 | 241 | 1,736 | 201 | |||||||||||||||
Administration fees (Note 3) | 6,066 | 19,242 | 519 | 4,294 | 724 | |||||||||||||||
Insurance expense | 1,647 | 2,936 | 51 | 915 | 102 | |||||||||||||||
Legal fees | 15,960 | 14,839 | 5,259 | 15,952 | 5,259 | |||||||||||||||
Printing fees | 3,200 | 6,463 | 890 | 2,578 | 842 | |||||||||||||||
Miscellaneous | 4,881 | 13,519 | 647 | 3,632 | 593 | |||||||||||||||
Registration expense | 24,997 | 29,475 | 5,790 | 16,444 | 5,710 | |||||||||||||||
Trustee fees | 30,031 | 29,032 | 10,200 | 30,133 | 10,200 | |||||||||||||||
Transfer agent fees | 25,863 | 58,563 | 5,790 | 17,589 | 5,790 | |||||||||||||||
12b-1 Fees – Class S | 23 | 57,095 | 1 | — | — | |||||||||||||||
Shareholder Service Fees – Class E | — | — | — | 5,796 | — | |||||||||||||||
Shareholder Service Fees – Class I | — | — | — | 1,874 | — | |||||||||||||||
Accounting fees | 16,554 | 21,279 | 1,214 | 12,620 | 1,416 | |||||||||||||||
Auditing fees | 14,971 | 15,044 | 7,466 | 14,971 | 7,434 | |||||||||||||||
Organizational costs | — | 6,354 | 3,309 | — | 3,357 | |||||||||||||||
Total expenses | 296,145 | 975,992 | 80,333 | 177,996 | 51,360 | |||||||||||||||
Less reimbursement / waiver | (109,445 | ) | (126,633 | ) | (33,176 | ) | (102,699 | ) | (37,735 | ) | ||||||||||
Total expenses net of reimbursement / waiver | 186,700 | 849,359 | 47,157 | 75,297 | 13,625 | |||||||||||||||
Net investment income | 238,964 | 653,432 | 50,763 | 667,973 | 81,800 | |||||||||||||||
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS | ||||||||||||||||||||
Net realized gain (loss) on: | ||||||||||||||||||||
Investments | (697,538 | ) | 1,956,573 | 162,499 | 108,378 | (25,358 | ) | |||||||||||||
Less: foreign taxes withheld | — | (35,142 | ) | — | — | — | ||||||||||||||
Foreign currency transactions | (19,439 | ) | (18,644 | ) | (14,779 | ) | — | — | ||||||||||||
Net realized gain (loss) | (716,977 | ) | 1,902,787 | 147,720 | 108,378 | (25,358 | ) | |||||||||||||
Net change in unrealized appreciation on: | ||||||||||||||||||||
Investments | 6,181,113 | 23,970,107 | 841,865 | 547,504 | 149,951 | |||||||||||||||
Foreign currency transactions | 920 | 36,616 | (134 | ) | — | — | ||||||||||||||
Net unrealized depreciation | 6,182,033 | 24,006,723 | 841,731 | 547,504 | 149,951 | |||||||||||||||
Net realized and unrealized loss on investments and foreign currency transactions | 5,465,056 | 25,909,510 | 989,451 | 655,882 | 124,593 | |||||||||||||||
Net increase (decrease) in net assets resulting from operations | $ | 5,704,020 | $ | 26,562,942 | $ | 1,040,214 | $ | 1,323,855 | $ | 206,393 |
The accompanying notes to financial statements are an integral part of this statement.
71
Brandes Investment Trust
STATEMENTS OF CHANGES IN NET ASSETS
Brandes Institutional International Equity Fund | Brandes Institutional Global Equity Fund | ||||||||||||||||
Six Months Ended March 31, 2012 (Unaudited) | Year Ended September 30, 2011 | Six Months Ended March 31, 2012 (Unaudited) | Year Ended September 30, 2011 | ||||||||||||||
INCREASE (DECREASE) IN NET ASSETS FROM: | |||||||||||||||||
OPERATIONS | |||||||||||||||||
Net investment income | $ | 2,942,069 | $ | 18,702,099 | $ | 238,964 | $ | 983,840 | |||||||||
Net realized gain (loss) on: | |||||||||||||||||
Investments | (25,680,278 | ) | (35,480,644 | ) | (697,538 | ) | 2,361,126 | ||||||||||
In-kind redemptions | — | — | — | — | |||||||||||||
Payments by Affiliate | |||||||||||||||||
Foreign currency transactions | (82,246 | ) | 215,418 | (19,439 | ) | 12,007 | |||||||||||
Net unrealized appreciation (depreciation) on: | |||||||||||||||||
Investments | 80,489,302 | (36,115,793 | ) | 6,181,113 | (5,398,488 | ) | |||||||||||
Foreign currency transactions | 35,780 | (2,175 | ) | 920 | (1,811 | ) | |||||||||||
Net increase (decrease) in net assets resulting from operations | 57,704,627 | (52,681,095 | ) | 5,704,020 | (2,043,326 | ) | |||||||||||
DISTRIBUTIONS TO SHAREHOLDERS | |||||||||||||||||
From net investment income | |||||||||||||||||
Class E | (208,815 | ) | (50,227 | ) | (4,752 | ) | (3,136 | ) | |||||||||
Class I | (21,348,284 | ) | (17,285,049 | ) | (884,851 | ) | (792,321 | ) | |||||||||
Class S | (4 | ) | — | (249 | ) | — | |||||||||||
From net realized gains | |||||||||||||||||
Class E | — | — | (11,450 | ) | (7,671 | ) | |||||||||||
Class I | — | — | (2,132,185 | ) | (1,937,987 | ) | |||||||||||
Class S | — | — | (634 | ) | — | ||||||||||||
Decrease in net assets from distributions | (21,557,103 | ) | (17,335,276 | ) | (3,034,121 | ) | (2,741,115 | ) | |||||||||
CAPITAL SHARE TRANSACTIONS | |||||||||||||||||
Proceeds from shares sold | 42,504,118 | 143,394,173 | 4,574,827 | 4,364,262 | |||||||||||||
Net asset value of shares issued on reinvestment of distributions | 19,458,722 | 16,171,707 | 2,952,953 | 2,710,026 | |||||||||||||
Cost of shares redeemed | (113,121,917 | ) | (403,096,490 | ) | (12,159,990 | ) | (6,755,970 | ) | |||||||||
Net increase (decrease) in net assets from capital share transactions | (51,159,077 | ) | (243,530,610 | ) | (4,632,210 | ) | 318,318 | ||||||||||
Total Increase (Decrease) in net assets | (15,011,553 | ) | (313,546,981 | ) | (1,962,311 | ) | (4,466,123 | ) | |||||||||
NET ASSETS | |||||||||||||||||
Beginning of the Period | 459,055,258 | 772,602,239 | 36,611,828 | 41,077,951 | |||||||||||||
End of the Period | $ | 444,043,705 | $ | 459,055,258 | $ | 34,649,517 | $ | 36,611,828 | |||||||||
Undistributed net investment income | $ | 720,311 | $ | 19,335,345 | $ | 210,374 | $ | 861,262 |
* | Commenced operations on January 31, 2012. |
The accompanying notes to financial statements are an integral part of this statement.
72
Brandes Investment Trust
STATEMENTS OF CHANGES IN NET ASSETS (continued)
Brandes Institutional Emerging Markets Fund | Brandes International Small Cap Equity Fund* | Brandes Institutional Core Plus Fixed Income Fund | Brandes Credit Focus Yield Fund* | |||||||||||||||||||||
Six Months Ended March 31, 2012 (Unaudited) | Year Ended September 30, 2011 | Period Ended March 31, 2012 (Unaudited) | Six Months Ended March 31, 2012 (Unaudited) | Year Ended September 30, 2011 | Period Ended March 31, 2012 (Unaudited) | |||||||||||||||||||
INCREASE (DECREASE) IN NET ASSETS FROM: | ||||||||||||||||||||||||
OPERATIONS | ||||||||||||||||||||||||
Net investment income | $ | 653,432 | $ | 1,511,038 | $ | 50,763 | $ | 667,973 | $ | 1,376,013 | $ | 81,800 | ||||||||||||
Net realized gain (loss) on: | ||||||||||||||||||||||||
Investments | 1,921,431 | (194,805 | ) | 162,499 | 108,378 | 831,675 | (25,358 | ) | ||||||||||||||||
In-kind redemptions | — | (942,195 | ) | — | — | — | — | |||||||||||||||||
Payments by Affiliate | — | 5,862 | — | — | — | — | ||||||||||||||||||
Foreign currency transactions | (18,644 | ) | (279,291 | ) | (14,779 | ) | — | — | — | |||||||||||||||
Net unrealized appreciation (depreciation) on: | ||||||||||||||||||||||||
Investments | 23,970,107 | (29,820,686 | ) | 841,865 | 547,504 | (1,142,879 | ) | 149,951 | ||||||||||||||||
Foreign currency transactions | 36,616 | (34,005 | ) | (134 | ) | — | — | — | ||||||||||||||||
Net increase (decrease) in net assets resulting from operations | 26,562,942 | (29,754,082 | ) | 1,040,214 | 1,323,855 | 1,064,809 | 206,393 | |||||||||||||||||
DISTRIBUTIONS TO SHAREHOLDERS | ||||||||||||||||||||||||
From net investment income | ||||||||||||||||||||||||
Class E | N/A | N/A | N/A | (127,280 | ) | (130,917 | ) | N/A | ||||||||||||||||
Class I | (1,004,514 | ) | — | — | (672,683 | ) | (1,269,592 | ) | (78,616 | ) | ||||||||||||||
Class S | (407,118 | ) | — | — | N/A | N/A | — | |||||||||||||||||
From net realized gains | ||||||||||||||||||||||||
Class E | N/A | N/A | N/A | (93,990 | ) | (52,278 | ) | N/A | ||||||||||||||||
Class I | (901,535 | ) | — | — | (480,064 | ) | (438,040 | ) | — | |||||||||||||||
Class S | (415,797 | ) | — | — | N/A | N/A | — | |||||||||||||||||
Decrease in net assets from distributions | (2,728,964 | ) | — | — | (1,374,017 | ) | (1,890,827 | ) | (78,616 | ) | ||||||||||||||
CAPITAL SHARE TRANSACTIONS | ||||||||||||||||||||||||
Proceeds from shares sold | 55,478,548 | 204,933,462 | 25,749,520 | 3,410,914 | 6,116,803 | 11,977,543 | ||||||||||||||||||
Net asset value of share issued on reinvestment of distributions | 2,608,174 | — | — | 1,179,332 | 1,633,598 | 77,300 | ||||||||||||||||||
Cost of shares redeemed | (12,184,033 | ) | (64,900,182 | ) | (113 | ) | (1,536,298 | ) | (7,360,668 | ) | — | |||||||||||||
Net increase (decrease) in net assets from capital share transactions | 45,902,689 | 140,033,280 | 25,749,407 | 3,053,948 | 389,733 | 12,054,843 | ||||||||||||||||||
Total Increase (Decrease) in net assets | 69,736,667 | 110,279,198 | 26,789,621 | 3,003,786 | (436,285 | ) | 12,182,620 | |||||||||||||||||
NET ASSETS | ||||||||||||||||||||||||
Beginning of the Period | 110,279,198 | — | — | 27,104,976 | 27,541,261 | — | ||||||||||||||||||
End of the Period | $ | 180,015,865 | $ | 110,279,198 | $ | 26,789,621 | $ | 30,108,762 | $ | 27,104,976 | $ | 12,182,620 | ||||||||||||
Undistributed net investment income | $ | 156,096 | $ | 914,297 | $ | 50,763 | $ | (36,408 | ) | $ | 95,583 | $ | 3,184 |
The accompanying notes to financial statements are an integral part of this statement.
73
Brandes Investment Trust
FINANCIAL HIGHLIGHTS For a capital share outstanding for the periods ended:
Net asset value, beginning of period | Net investment income | Net realized and unrealized gain/(loss) on investments | Net increase from payments by affiliates | Total from investment operations | Dividends from net investment income | Dividends from net realized gains | |||||||||||||||||||||||
Brandes Institutional International Equity Fund | |||||||||||||||||||||||||||||
Class I | |||||||||||||||||||||||||||||
3/31/2012 (Unaudited) | $ | 12.99 | 0.09 | (5) | 1.68 | — | 1.77 | (0.66 | ) | — | |||||||||||||||||||
9/30/2011 | $ | 14.92 | 0.40 | (5) | (1.98 | ) | — | (1.58 | ) | (0.35 | ) | — | |||||||||||||||||
9/30/2010 | $ | 15.24 | 0.32 | (5) | (0.38 | ) | — | (0.06 | ) | (0.26 | ) | — | |||||||||||||||||
9/30/2009 | $ | 17.43 | 0.26 | (0.80 | ) | — | (0.54 | ) | (0.47 | ) | (1.18 | ) | |||||||||||||||||
9/30/2008 | $ | 26.51 | 0.61 | (5.95 | ) | — | (5.34 | ) | (0.45 | ) | (3.29 | ) | |||||||||||||||||
9/30/2007 | $ | 24.73 | 0.40 | 3.98 | — | 4.38 | (0.32 | ) | (2.28 | ) | |||||||||||||||||||
Class E | |||||||||||||||||||||||||||||
3/31/2012 (Unaudited) | $ | 12.97 | 0.08 | (5) | 1.68 | — | 1.76 | (0.64 | ) | — | |||||||||||||||||||
9/30/2011 | $ | 14.91 | 0.37 | (5) | (1.96 | ) | — | (1.59 | ) | (0.35 | ) | — | |||||||||||||||||
9/30/2010 | $ | 15.24 | 0.33 | (5) | (0.40 | ) | — | (0.07 | ) | (0.26 | ) | — | |||||||||||||||||
10/6/2008(3) – 9/30/2009 | $ | 16.03 | 0.32 | 0.54 | — | 0.86 | (0.47 | ) | (1.18 | ) | |||||||||||||||||||
Class S | |||||||||||||||||||||||||||||
3/31/2012 (Unaudited) | $ | 13.00 | 0.08 | (5) | 1.67 | — | 1.75 | (0.64 | ) | — | |||||||||||||||||||
1/31/2011(3) – 9/30/2011 | $ | 15.74 | 0.26 | (5) | (3.00 | ) | — | (2.74 | ) | — | — | ||||||||||||||||||
Brandes Institutional Global Equity Fund | |||||||||||||||||||||||||||||
Class I | |||||||||||||||||||||||||||||
3/31/2012 (Unaudited) | $ | 19.22 | 0.13 | (5) | 2.95 | — | 3.08 | (0.47 | ) | (1.13 | ) | ||||||||||||||||||
9/30/2011 | $ | 21.76 | 0.51 | (5) | (1.53 | ) | — | (1.02 | ) | (0.44 | ) | (1.08 | ) | ||||||||||||||||
9/30/2010 | $ | 21.24 | 0.42 | (5) | 0.48 | — | 0.90 | (0.38 | ) | — | |||||||||||||||||||
10/6/2008(3) – 9/30/2009 | $ | 20.00 | 0.39 | 0.94 | — | 1.33 | (0.09 | ) | — | ||||||||||||||||||||
Class E | |||||||||||||||||||||||||||||
3/31/2012 (Unaudited) | $ | 19.13 | 0.12 | (5) | 2.91 | — | 3.03 | (0.47 | ) | (1.13 | ) | ||||||||||||||||||
9/30/2011 | $ | 21.73 | 0.51 | (5) | (1.59 | ) | — | (1.08 | ) | (0.44 | ) | (1.08 | ) | ||||||||||||||||
9/30/2010 | $ | 21.25 | 0.37 | (5) | 0.50 | — | 0.87 | (0.39 | ) | — | |||||||||||||||||||
10/6/2008(3) – 9/30/2009 | $ | 20.00 | 0.40 | 0.94 | — | 1.34 | (0.09 | ) | — | ||||||||||||||||||||
Class S | |||||||||||||||||||||||||||||
3/31/2012 (Unaudited) | $ | 19.19 | 0.11 | (5) | 2.94 | — | 3.05 | (0.44 | ) | (1.13 | ) | ||||||||||||||||||
1/31/2011(3) – 9/30/2011 | $ | 22.34 | 0.29 | (5) | (3.44 | ) | — | (3.15 | ) | — | — | ||||||||||||||||||
Brandes Institutional Emerging Markets Fund | |||||||||||||||||||||||||||||
Class I | |||||||||||||||||||||||||||||
3/31/2012 (Unaudited) | $ | 7.86 | 0.04 | (5) | 1.65 | — | 1.69 | (0.09 | ) | (0.08 | ) | ||||||||||||||||||
1/31/2011(3) – 9/30/2011 | $ | 10.00 | 0.15 | (5) | (2.29 | ) | — | (7) | (2.14 | ) | — | — | |||||||||||||||||
Class S | |||||||||||||||||||||||||||||
3/31/2012 (Unaudited) | $ | 7.85 | 0.03 | (5) | 1.65 | — | 1.68 | (0.08 | ) | (0.08 | ) | ||||||||||||||||||
1/31/2011(3) – 9/30/2011 | $ | 10.00 | 0.14 | (5) | (2.29 | ) | — | (7) | (2.15 | ) | — | — |
(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) | Includes a voluntary reimbursement by the Advisor that did not impact the total return. See Note 2K in the Notes to Financial Statements. |
(7) | Amount is less than $0.01 per share. |
74
Brandes Investment Trust
FINANCIAL HIGHLIGHTS For a capital share outstanding for the periods ended:
Net asset value, end of period | Total return | Net assets, end of period (millions) | Ratio of net expenses to average net assets (4) | Ratio of net investment income to average net assets (4) | Ratio of expenses (prior to reimburse- ments) to average net assets | Ratio of net investment income (prior to reimburse- ments) to average net assets | Portfolio turnover rate | ||||||||||||||||||||||||||
Brandes Institutional International Equity Fund | |||||||||||||||||||||||||||||||||
Class I | |||||||||||||||||||||||||||||||||
3/31/2012 (Unaudited) | $ | 14.10 | 14.02 | %(1) | $ | 438.5 | 1.20 | %(2) | 1.31 | %(2) | 1.20 | %(2) | 1.31 | %(2) | 7.23 | %(1) | |||||||||||||||||
9/30/2011 | $ | 12.99 | (10.95 | )% | $ | 454.7 | 1.14 | % | 2.58 | % | 1.14 | % | 2.58 | % | 4.99 | % | |||||||||||||||||
9/30/2010 | $ | 14.92 | (0.37 | )% | $ | 771.7 | 1.13 | % | 2.19 | % | 1.13 | % | 2.19 | % | 29.15 | % | |||||||||||||||||
9/30/2009 | $ | 15.24 | (0.88 | )% | $ | 867.0 | 1.16 | % | 2.27 | % | 1.16 | % | 2.27 | % | 19.86 | % | |||||||||||||||||
9/30/2008 | $ | 17.43 | (23.42 | )% | $ | 764.4 | 1.13 | % | 2.76 | % | 1.13 | % | 2.76 | % | 26.40 | % | |||||||||||||||||
9/30/2007 | $ | 26.51 | 18.65 | % | $ | 1,067.4 | 1.12 | %(2) | 1.61 | %(2) | 1.12 | %(2) | 1.61 | %(2) | 29.06 | %(1) | |||||||||||||||||
Class E | |||||||||||||||||||||||||||||||||
3/31/2012 (Unaudited) | $ | 14.09 | 13.98 | %(1) | $ | 5.6 | 1.25 | %(2) | 1.26 | %(2) | 1.25 | %(2) | 1.26 | %(2) | 7.23 | %(1) | |||||||||||||||||
9/30/2011 | $ | 12.97 | (11.04 | )% | $ | 4.4 | 1.32 | % | 2.40 | % | 1.32 | % | 2.40 | % | 4.99 | % | |||||||||||||||||
9/30/2010 | $ | 14.91 | (0.44 | )% | $ | 0.9 | 1.19 | % | 2.33 | % | 1.19 | % | 2.33 | % | 29.15 | % | |||||||||||||||||
10/6/2008(3) – 9/30/2009 | $ | 15.24 | 7.78 | %(1) | $ | 0.1 | 1.16 | %(2) | 2.35 | %(2) | 1.16 | %(2) | 2.35 | %(2) | 19.86 | %(1) | |||||||||||||||||
Class S | |||||||||||||||||||||||||||||||||
3/31/2012 (Unaudited) | $ | 14.11 | 13.87 | %(1) | $ | — | 1.45 | %(2) | 1.24 | %(2) | 1.45 | %(2) | 1.24 | %(2) | 7.23 | %(1) | |||||||||||||||||
1/31/2011(3) – 9/30/2011 | $ | 13.00 | (17.41 | )%(1) | $ | — | 1.30 | %(2) | 2.54 | %(2) | 1.30 | %(2) | 2.54 | %(2) | 4.99 | %(1) | |||||||||||||||||
Brandes Institutional Global Equity Fund | |||||||||||||||||||||||||||||||||
Class I | |||||||||||||||||||||||||||||||||
3/31/2012 (Unaudited) | $ | 20.70 | 16.76 | %(1) | $ | 34.2 | 1.00 | %(2) | 1.28 | %(2) | 1.59 | %(2) | 0.69 | %(2) | 8.33 | %(1) | |||||||||||||||||
9/30/2011 | $ | 19.22 | (5.51 | )% | $ | 36.4 | 1.00 | % | 2.30 | % | 1.44 | % | 1.86 | % | 23.94 | % | |||||||||||||||||
9/30/2010 | $ | 21.76 | 4.28 | % | $ | 41.0 | 1.00 | % | 2.00 | % | 1.41 | % | 1.58 | % | 16.87 | % | |||||||||||||||||
10/6/2008(3) – 9/30/2009 | $ | 21.24 | 6.72 | %(1) | $ | 37.4 | 1.00 | %(2) | 2.45 | %(2) | 1.80 | %(2) | 1.66 | %(2) | 4.05 | %(1) | |||||||||||||||||
Class E | |||||||||||||||||||||||||||||||||
3/31/2012 (Unaudited) | $ | 20.56 | 16.57 | %(1) | $ | 0.2 | 1.25 | %(2) | 1.04 | %(2) | 1.59 | %(2) | 0.70 | %(2) | 8.33 | %(1) | |||||||||||||||||
9/30/2011 | $ | 19.13 | (5.80 | )% | $ | — | 1.25 | % | 2.05 | % | 1.69 | % | 1.62 | % | 23.94 | % | |||||||||||||||||
9/30/2010 | $ | 21.73 | 4.08 | % | $ | 0.1 | 1.20 | % | 1.77 | % | 1.41 | % | 1.56 | % | 16.87 | % | |||||||||||||||||
10/6/2008(3) – 9/30/2009 | $ | 21.25 | 6.77 | %(1) | $ | 0.1 | 1.20 | %(2) | 2.29 | %(2) | 1.83 | %(2) | 1.67 | %(2) | 4.05 | %(1) | |||||||||||||||||
Class S | |||||||||||||||||||||||||||||||||
3/31/2012 (Unaudited) | $ | 20.67 | 16.64 | %(1) | $ | 0.1 | 1.25 | %(2) | 1.10 | %(2) | 1.86 | %(2) | 0.50 | %(2) | 8.33 | %(1) | |||||||||||||||||
1/31/2011(3) – 9/30/2011 | $ | 19.19 | (14.10 | )%(1) | $ | — | 1.25 | %(2) | 2.05 | %(2) | 1.69 | %(2) | 1.61 | %(2) | 23.94 | %(1) | |||||||||||||||||
Brandes Institutional Emerging Markets Income Fund | |||||||||||||||||||||||||||||||||
Class I | |||||||||||||||||||||||||||||||||
3/31/2012 (Unaudited) | $ | 9.38 | 21.86 | %(1) | $ | 116.7 | 1.12 | %(2) | 1.00 | %(2) | 1.30 | %(2) | 0.83 | %(2) | 15.28 | %(1) | |||||||||||||||||
1/31/2011(3) – 9/30/2011 | $ | 7.86 | (21.40 | )%(1)(6) | $ | 71.9 | 1.12 | %(2) | 2.38 | %(2) | 1.36 | %(2) | 2.13 | %(2) | 94.70 | %(1) | |||||||||||||||||
Class S | |||||||||||||||||||||||||||||||||
3/31/2012 (Unaudited) | $ | 9.37 | 21.72 | %(1) | $ | 63.3 | 1.37 | %(2) | 0.75 | %(2) | 1.55 | %(2) | 0.58 | %(2) | 15.28 | %(1) | |||||||||||||||||
1/31/2011(3) – 9/30/2011 | $ | 7.85 | (21.50 | )%(1)(6) | $ | 38.4 | 1.37 | %(2) | 2.13 | %(2) | 1.61 | %(2) | 1.88 | %(2) | 94.70 | %(1) |
75
Brandes Investment Trust
FINANCIAL HIGHLIGHTS For a capital share outstanding for the periods ended:
Net asset value, beginning of period | Net investment income | Net realized and unrealized gain/(loss) on investments | Net increase from payments by affiliates | Total from investment operations | Dividends from net investment income | Dividends from net realized gains | |||||||||||||||||||||||
Brandes International Small Cap Equity Fund | |||||||||||||||||||||||||||||
Class I | |||||||||||||||||||||||||||||
2/1/2012(3) – 3/31/2012 (Unaudited) | $ | 10.00 | 0.02 | (5) | 0.53 | — | 0.55 | — | — | ||||||||||||||||||||
Class S | |||||||||||||||||||||||||||||
2/1/2012(3) – 3/31/2012 (Unaudited) | $ | 10.00 | 0.02 | (5) | 0.54 | — | 0.56 | — | — | ||||||||||||||||||||
Brandes Institutional Core Plus Fixed Income Fund | |||||||||||||||||||||||||||||
Class I | |||||||||||||||||||||||||||||
3/31/2012 (Unaudited) | $ | 9.35 | 0.22 | (5) | 0.22 | — | 0.44 | (0.27 | ) | (0.19 | ) | ||||||||||||||||||
9/30/2011 | $ | 9.65 | 0.49 | (5) | (0.12 | ) | — | 0.37 | (0.50 | ) | (0.17 | ) | |||||||||||||||||
9/30/2010 | $ | 8.95 | 0.56 | (5) | 0.64 | — | 1.20 | (0.50 | ) | — | |||||||||||||||||||
9/30/2009 | $ | 8.69 | 0.49 | 0.25 | — | 0.74 | (0.48 | ) | — | ||||||||||||||||||||
12/28/2007(3) – 9/30/2008 | $ | 10.00 | 0.44 | (1.33 | ) | 0.02 | (0.87 | ) | (0.44 | ) | — | ||||||||||||||||||
Class E | |||||||||||||||||||||||||||||
3/31/2012 (Unaudited) | $ | 9.36 | 0.21 | (5) | 0.22 | — | 0.43 | (0.26 | ) | (0.19 | ) | ||||||||||||||||||
9/30/2011 | $ | 9.66 | 0.47 | (5) | (0.12 | ) | — | 0.35 | (0.48 | ) | (0.17 | ) | |||||||||||||||||
9/30/2010 | $ | 8.96 | 0.54 | (5) | 0.64 | — | 1.18 | (0.48 | ) | — | |||||||||||||||||||
9/30/2009 | $ | 8.70 | 0.47 | 0.25 | — | 0.72 | (0.46 | ) | — | ||||||||||||||||||||
5/28/2008(3) – 9/30/2008 | $ | 9.99 | 0.24 | (1.31 | ) | 0.02 | (1.05 | ) | (0.24 | ) | — | ||||||||||||||||||
Brandes Credit Focus Yield Fund | |||||||||||||||||||||||||||||
Class I | |||||||||||||||||||||||||||||
2/1/2012(3) – 3/31/2012 (Unaudited) | $ | 10.00 | 0.07 | (5) | 0.69 | — | 0.76 | (0.65 | ) | — | |||||||||||||||||||
Class S | |||||||||||||||||||||||||||||
3/2/2012(3) – 3/31/2012 (Unaudited) | $ | 10.10 | — | (5) | 0.25 | — | 0.25 | (0.24 | ) | — |
(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 Fund's total return includes a voluntary reimbursement by the Advisor for a realized investment loss on a transaction not meeting the Fund's investment guidelines. The return for the Core Fund, Class I and E shares would have been (9.21)% and (10.82)%, respectively. See Note 2K in the Notes to Financial Statements. |
(7) | Amount is less than $0.01 per share. |
76
Brandes Investment Trust
FINANCIAL HIGHLIGHTS For a capital share outstanding for the periods ended:
Net asset value, end of period | Total return | Net assets, end of period (millions) | Ratio of net expenses to average net assets (4) | Ratio of net investment income to average net assets (4) | Ratio of expenses (prior to reimburse- ments) to average net assets | Ratio of net investment income (prior to reimburse- ments) to average net assets | Portfolio turnover rate | ||||||||||||||||||||||||||
Brandes International Small Cap Equity Fund | |||||||||||||||||||||||||||||||||
Class I | |||||||||||||||||||||||||||||||||
2/1/2012(3) – 3/31/2012 (Unaudited) | $ | 10.55 | 6.37 | %(1) | $ | 26.8 | 1.15 | %(2) | 1.24 | %(2) | 1.96 | %(2) | 0.43 | %(2) | 7.29 | %(1) | |||||||||||||||||
Class S | |||||||||||||||||||||||||||||||||
2/1/2012(3) – 3/31/2012 (Unaudited) | $ | 10.56 | 6.37 | %(1) | $ | — | 1.40 | %(2) | 1.30 | %(2) | 2.08 | %(2) | 0.61 | %(2) | 7.29 | %(1) | |||||||||||||||||
Brandes Institutional Core Plus Fixed Income Fund | |||||||||||||||||||||||||||||||||
Class I | |||||||||||||||||||||||||||||||||
3/31/2012 (Unaudited) | $ | 9.33 | 4.82 | %(1) | $ | 24.6 | 0.50 | %(2) | 4.76 | %(2) | 1.22 | %(2) | 4.04 | %(2) | 17.33 | %(1) | |||||||||||||||||
9/30/2011 | $ | 9.35 | 3.94 | % | $ | 23.2 | 0.50 | % | 5.11 | % | 1.25 | % | 4.53 | % | 91.18 | % | |||||||||||||||||
9/30/2010 | $ | 9.65 | 13.73 | % | $ | 24.8 | 0.50 | % | 5.97 | % | 1.25 | % | 5.22 | % | 150.89 | % | |||||||||||||||||
9/30/2009 | $ | 8.95 | 9.07 | % | $ | 23.9 | 0.50 | % | 5.97 | % | 2.20 | % | 4.27 | % | 22.06 | % | |||||||||||||||||
12/28/2007(3) – 9/30/2008 | $ | 8.69 | (9.00 | )%(1),(6) | $ | 4.7 | 0.50 | %(2) | 6.04 | %(2) | 7.93 | %(2) | (1.39 | )%(2) | 404.25 | %(1) | |||||||||||||||||
Class E | |||||||||||||||||||||||||||||||||
3/31/2012 (Unaudited) | $ | 9.34 | 4.73 | %(1) | $ | 5.5 | 0.70 | %(2) | 4.56 | %(2) | 1.45 | %(2) | 3.81 | %(2) | 17.33 | %(1) | |||||||||||||||||
9/30/2011 | $ | 9.36 | 3.72 | % | $ | 3.8 | 0.70 | % | 4.90 | % | 1.48 | % | 4.12 | % | 91.18 | % | |||||||||||||||||
9/30/2010 | $ | 9.66 | 13.47 | % | $ | 2.7 | 0.70 | % | 5.77 | % | 1.48 | % | 4.99 | % | 150.89 | % | |||||||||||||||||
9/30/2009 | $ | 8.96 | 8.86 | % | $ | 1.0 | 0.70 | % | 5.95 | % | 1.84 | % | 4.81 | % | 22.06 | % | |||||||||||||||||
5/28/2008(3) – 9/30/2008 | $ | 8.70 | (10.62 | )%(1),(6) | $ | 0.0 | 0.70 | %(2) | 8.54 | %(2) | 7.19 | %(2) | 2.05 | %(2) | 404.25 | %(1) | |||||||||||||||||
Brandes Credit Focus Yield Fund | |||||||||||||||||||||||||||||||||
Class I | |||||||||||||||||||||||||||||||||
2/1/2012(3) – 3/31/2012 (Unaudited) | $ | 10.11 | 6.12 | %(1) | $ | 12.1 | 0.70 | %(2) | 4.20 | %(2) | 2.64 | %(2) | 2.26 | %(2) | 337.04 | %(1) | |||||||||||||||||
Class S | |||||||||||||||||||||||||||||||||
3/2/2012(3) – 3/31/2012 (Unaudited) | $ | 10.11 | 0.34 | %(1) | $ | — | 0.95 | %(2) | 4.32 | %(2) | 1.09 | %(2) | 4.18 | %(2) | 337.04 | %(1) |
77
Brandes Investment Trust
NOTES TO FINANCIAL STATEMENTS — (Unaudited)
NOTE 1 – ORGANIZATION
The Brandes Institutional International Equity Fund (the “International Fund”), the Brandes Institutional Global Equity Fund (the “Global Fund”), the Brandes Institutional Emerging Markets Fund (the “Emerging Markets Fund), the Brandes International Small Cap Equity Fund (the “International Small Cap Fund”), the Brandes Institutional 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 Funds and International Small Cap Fund began operations on January 2, 1997, October 6, 2008, January 31, 2011 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 International Fund and Global Fund have three classes of shares: Class I, Class E and Class S. The Emerging Markets Fund, International Small Cap Fund and Credit Focus Yield Fund have two classes of shares: Class I and Class S. The Core Plus Fund began operations on December 28, 2007, and has two classes of shares: Class I and Class E. 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.
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 |
78
Brandes Investment Trust
NOTES TO FINANCIAL STATEMENTS — (Unaudited) (continued)
(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, Brandes 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 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 |
79
Brandes Investment Trust
NOTES TO FINANCIAL STATEMENTS — (Unaudited) (continued)
the contract, or if the issuer does not issue the securities due to political, economic, or other factors. |
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. 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 Advisor has established guidelines for monitoring participatory note exposure for the Funds. Prior to investment in a participatory note, the Advisor will complete an analysis of the prospective counterparties and once the note is purchased, will continue to monitor creditworthiness on a quarterly basis. The 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 certain derivative assets in order to appropriately reflect the credit quality of the counterparty. During the periods ended March 31, 2012, the Funds did not make any counterparty credit risk valuation adjustments.
The International, Global and International Small Cap Funds were not invested in any participatory notes at March 31, 2012. The Emerging Markets Fund invested in a participatory note with HSBC Bank Plc in which HSBC Bank Plc is an investment vehicle used to purchase an underlying security, Etihad Etisalat Co. The average monthly market value of this security was $4,159,236 during the period ended March 31, 2012. As a result of the investment in the participation note, the Emerging Markets Fund recognized a net unrealized gain of $111,424 and no realized gain (loss). The market value of the security on March 31, 2012 was $4,838,093 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 evalu- |
80
Brandes Investment Trust
NOTES TO FINANCIAL STATEMENTS — (Unaudited) (continued)
ated on the bases of identified costs. Dividend income and distributions to shareholders are recorded on the ex-dividend dates. Interest is recorded on an accrual basis. Withholding taxes on foreign dividends and capital gains, which are included as a component of net investment income and realized gain (loss) on investments, respectively, have been provided for in accordance with the Trust’s understanding of the applicable country’s tax rules and rates. Each Fund’s investment income, expenses, other than class specific expenses, and realized and unrealized gains and losses are allocated daily to each class of the Fund’s shares based upon the relative net asset values of outstanding shares of each class of shares at the beginning of the day (after adjusting for the current capital shares activity of the respective class). Expenses common to the Funds’ portfolios are allocated among the Funds based upon their relative net asset values or other appropriate allocation methods. The Funds amortize premiums and accrete discounts using the constant yield method. |
F. | Concentration of Risk. As of March 31, 2012, the International, Global, Emerging Markets and International Small Cap Funds held a significant portion of their respective 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. It is the Trust’s policy to monitor these off-balance sheet risks. |
G. | Use of Estimates. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and revenue and expenses and disclosure of contingent assets and liabilities and revenue and expenses at the date of the financial statements. Actual results could differ from those estimates. |
H. | Securities Lending. The Funds may lend their portfolio securities to banks, brokers and dealers. Lending Fund securities exposes the Fund to risks such as the following: (i) the borrower may fail to return the loaned securities, (ii) the borrower may not be able to provide additional 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 |
81
Brandes Investment Trust
NOTES TO FINANCIAL STATEMENTS — (Unaudited) (continued)
loans of foreign securities not denominated in U.S. dollars) of the market value of the loaned securities. As of March 31, 2012, the Funds did not have any securities on loan. |
I. | Indemnification Obligations. Under the Trust’s organizational documents, its current and former officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the Trust. In addition, in the normal course of business, the Trust enters into contracts that contain a variety of representations and warranties and provide general indemnifications. The Funds’ maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Funds that have not yet occurred or that would be covered by other parties. |
J. | Accounting for Uncertainty in Income Taxes. Each Fund has elected to be taxed as a “regulated investment company” and intends to distribute substantially all taxable income to its shareholders and otherwise comply with the provisions of the Internal Revenue Code applicable to regulated investment companies. The Funds may be subject to a nondeductible excise tax calculated as a percentage of certain undistributed amounts of net investment income and net capital gains. The Funds intend to distribute their net investment income and capital gains as necessary to avoid this excise tax. Therefore, no provision for federal income taxes or excise taxes has been made. |
The Trust has adopted financial reporting rules that require the Funds to analyze all open tax years, as defined by the applicable statute of limitations, for all major jurisdictions. Open tax years for the Funds are those that are open for exam by taxing authorities (2008 through 2011). As of March 31, 2012, 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, 2011. The Trust identifies its major tax jurisdictions as U.S. Federal 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.
K. | Payment by Affiliate. During the fiscal year ended September 30, 2008, the Trust’s investment advisor, Brandes Investment Partners, L.P., voluntarily reimbursed the Core Plus Fund $8,946 relating to the Fund’s purchase of a security of an affiliate of the Distributor, which violated the Fund’s investment restrictions. Additionally, during the period ended September 30, |
82
Brandes Investment Trust
NOTES TO FINANCIAL STATEMENTS — (Unaudited) (continued)
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 the period ended September 30, 2011. These reimbursements have been classified on the Financial Highlights as “Net increase from payments by affiliates”. |
L. | Fair Value Measurements. The Trust has adopted US GAAP 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 in changes in valuation techniques and related inputs during the period. These inputs are summarized in the three broad levels listed below: |
Level 1 — Unadjusted quoted market prices in active markets
Level 2 — Quoted prices for similar instruments or inputs derived from observable market data. Directly observable inputs for the life of the financial instrument
Level 3 — Unobservable inputs developed using the reporting entity’s estimates and assumptions, which reflect those that market participants would use
M. | Security Valuation |
Common and preferred stocks, exchange-traded funds and financial derivative instruments, such as futures contracts and options contracts that are traded on a national securities or commodities exchange, are valued at the last reported sales price at the close of regular trading on each day the exchange is open for trading, in the case of common stocks and exchange-traded funds, or, in the case of futures contracts or options contracts, the settlement price determined by the relevant exchange. 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.
Securities traded on an exchange for which there have been no sales on the valuation date, are valued at the mean between last bid and ask price on such day and are categorized as Level 2 on the fair value hierarchy.
Investments in registered open-end management investment companies are valued based upon the net asset value (“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.
83
Brandes Investment Trust
NOTES TO FINANCIAL STATEMENTS — (Unaudited) (continued)
Valuation adjustments may be applied to certain common and preferred stocks that are solely traded on a foreign exchange to account for the market movement between the close of the foreign market and the close of the New York Stock Exchange, (“NYSE”). These securities are generally valued using pricing service providers that consider the correlation of the trading patterns of the foreign security to the intraday trading in the U.S. markets for investments. Securities using these valuation adjustments are categorized as Level 2 of the fair value hierarchy.
As of March 31, 2012, the International Equity Fund, Global Equity Fund, Emerging Markets Fund, International Small Cap Fund, Core Plus Fund and Credit Focus Yield Fund had securities with market values of $385,511,627, $18,125,312, $90,874,176, $17,172,470, $0 and $0 that represents 87.19%, 52.27%, 51.08%, 64.01%, 0.00% and 0.00% of each Fund’s net assets, respectively, that were fair valued using these valuation adjustments.
Fixed income securities (other than short-term investments) including corporate, convertible and municipal bonds and notes, U.S. government agencies, U.S. Treasury obligations, sovereign issues, bank loans, convertible preferred securities, fixed income securities purchased on a delayed-delivery basis and non-U.S. bonds are normally valued on the basis of bid prices obtained from brokers and dealers or independent pricing services or sources. Independent pricing services typically use information provided by market makers or estimates of market values obtained from yield data relating to investments or securities with similar characteristics. The service providers’ internal models use inputs that are observable such as, among other things, issuer details, interest rates, yield curves, prepayment speeds, credit risks/spreads, default rates and quoted prices for similar assets. Securities that use similar valuation techniques and inputs as described above are categorized as Level 2 of the fair value hierarchy.
Mortgage and asset-backed securities are usually issued as separate tranches, or classes, of securities within each package of 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 similar valuation techniques and inputs as described above are categorized as Level 2 of the fair value hierarchy.
84
Brandes Investment Trust
NOTES TO FINANCIAL STATEMENTS — (Unaudited) (continued)
Short-term investments having a maturity of 60 days or less are generally valued at amortized cost which approximates fair market value. These investments are categorized as Level 2 of the fair value hierarchy.
Certain securities may be fair valued in accordance with the fair valuation procedures approved by the Board of Trustees. The Valuation Committee is generally responsible for overseeing the day-to-day valuation processes and reports periodically to the Board. The Valuation Committee is authorized to make all necessary determinations of the fair value of portfolio securities and other assets for which market quotations are not readily available or if it is deemed that the prices obtained from brokers and dealers or independent pricing services are unreliable. The securities fair valued by the Valuation Committee are indicated in the Schedules of Investments and are catergorized as Level 2 or Level 3.
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 of inputs used, as of March 31, 2012, 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.
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Investments in Securities | ||||||||||||||||
International Fund | ||||||||||||||||
Equities | ||||||||||||||||
Consumer Discretionary | $ | — | $ | 47,511,229 | $ | — | $ | 47,511,229 | ||||||||
Consumer Staples | — | 49,012,575 | — | 49,012,575 | ||||||||||||
Energy | 12,002,341 | 40,030,545 | — | 52,032,886 | ||||||||||||
Financials | 5,273,288 | 72,125,464 | — | 77,398,752 | ||||||||||||
Health Care | — | 49,955,514 | — | 49,955,514 | ||||||||||||
Industrials | — | 10,344,529 | — | 10,344,529 | ||||||||||||
Information Technology | 9,876,216 | 28,769,174 | — | 38,645,390 | ||||||||||||
Materials | 3,132,598 | 18,316,705 | — | 21,449,303 | ||||||||||||
Telecommunication Services | 14,363,262 | 65,550,505 | — | 79,913,767 | ||||||||||||
Utilities | 8,103,321 | 3,895,387 | — | 11,998,708 | ||||||||||||
Total Equities | 52,751,026 | 385,511,627 | — | 438,262,653 | ||||||||||||
Repurchase Agreements | — | 3,910,616 | — | 3,910,616 | ||||||||||||
Total Investments in Securities | $ | 52,751,026 | $ | 389,422,243 | $ | — | $ | 442,173,269 |
85
Brandes Investment Trust
NOTES TO FINANCIAL STATEMENTS — (Unaudited) (continued)
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Global Fund | ||||||||||||||||
Equities | ||||||||||||||||
Consumer Discretionary | $ | 687,181 | $ | 1,891,395 | $ | — | $ | 2,578,576 | ||||||||
Consumer Staples | 1,769,029 | 2,889,331 | — | 4,658,360 | ||||||||||||
Energy | 1,443,110 | 2,239,234 | — | 3,682,344 | ||||||||||||
Financials | 2,787,973 | 3,062,155 | — | 5,850,128 | ||||||||||||
Health Care | 1,970,220 | 2,884,979 | — | 4,855,199 | ||||||||||||
Industrials | 857,605 | — | — | 857,605 | ||||||||||||
Information Technology | 4,047,479 | 1,906,019 | — | 5,953,498 | ||||||||||||
Telecommunication Services | 932,362 | 3,252,199 | — | 4,184,561 | ||||||||||||
Utilities | 225,576 | — | — | 225,576 | ||||||||||||
Total Equities | 14,720,535 | 18,125,312 | — | 32,845,847 | ||||||||||||
Repurchase Agreements | — | 1,830,683 | — | 1,830,683 | ||||||||||||
Total Investments in Securities | $ | 14,720,535 | $ | 19,955,995 | $ | — | $ | 34,676,530 | ||||||||
Emerging Fund | ||||||||||||||||
Equities | ||||||||||||||||
Consumer Discretionary | $ | 3,406,167 | $ | 9,946,240 | $ | — | $ | 13,352,407 | ||||||||
Consumer Staples | 5,300,000 | 3,048,687 | — | 8,348,687 | ||||||||||||
Energy | 14,374,334 | 3,131,470 | — | 17,505,804 | ||||||||||||
Financials | 15,440,969 | 22,105,755 | — | 37,546,724 | ||||||||||||
Health Care | 429,336 | 1,071,938 | — | 1,501,274 | ||||||||||||
Industrials | 5,853,768 | 5,906,642 | — | 11,760,410 | ||||||||||||
Information Technology | 4,296,384 | 10,823,271 | — | 15,119,655 | ||||||||||||
Materials | 5,825,155 | 6,362,975 | — | 12,188,130 | ||||||||||||
Telecommunication Services | 11,937,789 | 13,740,395 | — | 25,678,184 | ||||||||||||
Utilities | 8,261,224 | 11,098,560 | — | 19,359,784 | ||||||||||||
Total Equities | 75,125,126 | 87,235,933 | — | 162,361,059 | ||||||||||||
Participatory Notes | — | 4,838,093 | 4,838,093 | |||||||||||||
Short Term Investments | 10,710,406 | — | — | 10,710,406 | ||||||||||||
Total Investments in Securities | $ | 85,835,532 | $ | 92,074,026 | $ | — | $ | 177,909,558 | ||||||||
International Small Cap Fund | ||||||||||||||||
Equities | ||||||||||||||||
Consumer Discretionary | $ | 2,317,966 | $ | 4,025,724 | $ | — | $ | 6,343,690 | ||||||||
Consumer Staples | 2,707,844 | 2,681,593 | — | 5,389,437 | ||||||||||||
Financials | 1,961,897 | 438,797 | — | 2,400,694 | ||||||||||||
Health Care | 238,520 | 1,286,125 | — | 1,524,645 | ||||||||||||
Industrials | 306,455 | 5,492,243 | — | 5,798,698 | ||||||||||||
Information Technology | 925,066 | 264,089 | — | 1,189,155 | ||||||||||||
Materials | 19,134 | 1,977,752 | — | 1,996,886 | ||||||||||||
Telecommunication Services | 173,214 | 630,905 | — | 804,119 | ||||||||||||
Utilities | — | 400,935 | — | 400,935 | ||||||||||||
Total Equities | 8,650,096 | 17,198,163 | — | 25,848,259 | ||||||||||||
Repurchase Agreements | — | 978,247 | — | 978,247 | ||||||||||||
Total Investments in Securities | $ | 8,650,096 | $ | 18,176,410 | $ | — | $ | 26,826,506 | ||||||||
Core Plus Fund | ||||||||||||||||
Equities | $ | 12,430 | $ | 13,331 | $ | — | $ | 25,761 | ||||||||
Asset Backed Securities | — | 1,286,232 | — | 1,286,232 | ||||||||||||
Corporate Bonds | — | 14,553,455 | — | 14,553,455 | ||||||||||||
Government Securities | — | 9,691,366 | — | 9,691,366 | ||||||||||||
Mortgage Backed Securities | — | 3,396,175 | — | 3,396,175 | ||||||||||||
Repurchase Agreements | — | 1,154,678 | — | 1,154,678 | ||||||||||||
Total Investments in Securities | $ | 12,430 | $ | 30,095,237 | $ | — | $ | 30,107,667 |
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Brandes Investment Trust
NOTES TO FINANCIAL STATEMENTS — (Unaudited) (continued)
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Credit Focus Yield Fund | ||||||||||||||||
Equities | $ | 33,958 | $ | — | $ | — | $ | 33,958 | ||||||||
Asset Backed Securities | — | 635,975 | — | 635,975 | ||||||||||||
Corporate Bonds | — | 8,872,620 | — | 8,872,620 | ||||||||||||
Government Securities | — | 1,280,525 | — | 1,280,525 | ||||||||||||
Mortgage Backed Securities | — | 1,100,581 | — | 1,100,581 | ||||||||||||
Repurchase Agreements | — | 67,412 | — | 67,412 | ||||||||||||
Total Investments in Securities | $ | 33,958 | $ | 11,957,113 | $ | — | $ | 11,991,071 |
There were no significant transfers into or out of Levels 1 or 2 during the periods presented for the Core Plus and Credit Focus Funds.
Below are the significant transfers into or out of Levels 1 and 2 during the periods presented for the International Equity, Global Equity and Emerging Markets Funds:
International Equity | Global Equity | Emerging Markets | ||||||||||
Transfers into Level 1 | $ | — | $ | — | $ | 4,159,422 | ||||||
Transfers out of Level 1 | 14,887,034 | 991,526 | 1,579,252 | |||||||||
Net Transfers in and/or out of Level 1 | $ | 14,887,034 | $ | 991,526 | $ | 2,580,170 | ||||||
Transfers into Level 2 | $ | 14,887,034 | $ | 991,526 | $ | 1,579,252 | ||||||
Transfers out of Level 2 | — | — | 4,159,422 | |||||||||
Net Transfers in and/or out of Level 2 | $ | 14,887,034 | $ | 991,526 | $ | (2,580,170 | ) |
The securities transferred from Level 2 to Level 1 due to an increase in observable market data.
The securities transferred from Level 1 to Level 2 due to a decrease in observable market data.
There were no Level 3 securities in the International, Emerging Markets, International Small Cap and Global Equity Funds at the beginning of the periods presented or during the periods presented.
Below is a reconciliation that details the activity of securities in Level 3 in the Core Plus Fund during the period ended March 31, 2012:
Beginning Balance – October 1, 2011 | $ | — | ||
Gross purchases/(sales) | — | |||
Transfers in/(out) of level 3 | — | |||
Total realized and unrealized gains | — | |||
Total realized and unrealized losses | ||||
Ending Balance – March 31, 2012 | — |
The realized and unrealized gains and losses from Level 3 transactions is included with the net realized gains and losses on investments on the Statement of
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Brandes Investment Trust
NOTES TO FINANCIAL STATEMENTS — (Unaudited) (continued)
Assets and Liabilities. As of March 31, 2012 the Core Plus Fund had $8,748 of unrealized losses from Level 3 securities.
M. In-Kind Redemptions. Net capital losses recorded on the Statement of Changes in Net Assets resulting from in-kind redemptions are excluded from the Emerging Markets Fund’s taxable gains and are not distributed to shareholders.
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 at the annual rate of 1.00%, 0.80%, 0.95%, 0.95%, 0.35% and 0.50% based upon the average daily net assets of 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, respectively. For the periods ended March 31, 2012, 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 $2,251,166, $149,123, $672,010, $38,956, $49,462 and $9,732 in advisory fees, respectively.
The Funds are responsible for their own operating expenses. The Advisor has contractually agreed to limit each Fund’s annual operating expenses, including repayment of previous waivers, to the following percentages of the Funds’ average daily net assets attributable to the specific classes through January 31, 2013 (the “Expense Cap Agreement”):
Fund | Class I | Class E | Class S | |||||||||
International Fund | 1.20 | % | 1.45 | % | 1.45 | % | ||||||
Global Fund | 1.00 | % | 1.25 | % | 1.25 | % | ||||||
Emerging Markets Fund | 1.12 | % | N/A | 1.37 | % | |||||||
Core Plus Fund | 0.50 | % | 0.70 | % | N/A | |||||||
International Small Cap Fund | 1.15 | % | N/A | 1.40 | % | |||||||
Credit Focus Yield Fund | 0.70 | % | N/A | 0.95 | % |
Any reimbursements or fee waivers made by the Advisor to a Fund are subject to repayment by the Fund, to the extent that the Fund is able to make the repayment within its Expense Cap Agreement. Under the Expense Cap Agreement, any such repayment must be made before the end of the third full fiscal year after the fiscal year in which the related reimbursement or waiver occurred. For the periods ended March 31, 2012, the Advisor did not waive any expenses for the International Equity Fund, and waived expenses of $109,445, $126,633, $33,176, $102,699 and $37,735 for the Global Equity Fund, Emerging Markets Fund, International Small Cap Fund, Core Plus Fund and Credit Focus Yield Fund, respectively.
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Brandes Investment Trust
NOTES TO FINANCIAL STATEMENTS — (Unaudited) (continued)
Fund | Recovery Expiring September 30, 2012 | Recovery Expiring September 30, 2013 | Recovery Expiring September 30, 2014 | |||||||||
International Fund | $ | — | $ | — | $ | — | ||||||
Global Fund | 209,781 | 158,122 | 187,218 | |||||||||
Emerging Markets Fund | — | — | 163,603 | |||||||||
Core Plus Fund | 225,766 | 192,839 | 204,045 |
For the six months ended March 31, 2012, the Advisor did not recoup any fees previously waived or reimbursed.
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% for 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 series of the Trust per annum which is allocated among the series based on their average net assets. For the periods ended March 31, 2012, the International Fund, Global Fund, Emerging Markets Fund, International Small Cap Fund, Core Plus Fund and Credit Focus Yield Fund incurred $76,752, $6,066, $19,242, $519, $4,294 and $724 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 are 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 S shares. The Plan is designed to reimburse the Distributor or dealers for certain promotional and other sales related costs associated with sales of 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% of the average daily net assets of each Fund’s Class S shares. During the periods ended March 31, 2012, 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 Fund 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 periods ended March 31, 2012, the Global Fund — Class S expensed $23, the Emerging
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Brandes Investment Trust
NOTES TO FINANCIAL STATEMENTS — (Unaudited) (continued)
Markets Fund — Class S expensed $57,095 and the International Small Cap Fund expensed $1 pursuant to the plan.
Class I of the Core Plus Fund and Class E of the International, Global and Core Plus 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 sub-accounting services up to 0.05% and 0.25% of annual net assets attributable to Class I and Class E, respectively (the “Shareholder Service Fee”). For the six months ended March 31, 2012, the effective rate paid by the Funds was the following:
Fund | Class I | Class E | ||||||
International Fund | N/A | 0.04 | % | |||||
Global Fund | 0.00 | % | 0.00 | % | ||||
Core Plus Fund | 0.02 | % | 0.25 | % |
Certain officers and trustees of the Trust are also officers of the Advisor.
NOTE 4 – PURCHASES AND SALES OF SECURITIES
The cost of purchases and the proceeds from sales of securities, excluding short-term investments, were as follows for the periods ended March 31, 2012:
U.S. Government | Other | |||||||||||||||
Fund | Purchases | Sales | Purchases | Sales | ||||||||||||
International Fund | $ | — | $ | — | $ | 31,974,381 | $ | 96,766,559 | ||||||||
Global Fund | $ | — | $ | — | $ | 2,911,223 | $ | 11,658,462 | ||||||||
Emerging Markets Fund | $ | — | $ | — | $ | 51,005,279 | $ | 18,165,767 | ||||||||
International Small Cap Fund | $ | — | $ | — | $ | 21,534,853 | $ | 1,498,357 | ||||||||
Core Plus Fund | $ | 7,162,965 | $ | 3,798,820 | $ | 643,451 | $ | 1,010,763 | ||||||||
Credit Focus Yield Fund | $ | 1,268,225 | $ | 1,384,189 | $ | 228,135 | $ | 119,425 |
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Brandes Investment Trust
NOTES TO FINANCIAL STATEMENTS — (Unaudited) (continued)
NOTE 5 – CAPITAL STOCK TRANSACTIONS
Capital stock activity for each class of shares was as follows (shares and dollar amounts in thousands):
International Fund | Global Fund | |||||||||||||||||||||||||||||||
Six Months Ended 3/31/12 | Year Ended 9/30/11 | Six Months Ended 3/31/12 | Year Ended 9/30/11 | |||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | |||||||||||||||||||||||||
Shares Sold | ||||||||||||||||||||||||||||||||
Class I | 3,041 | $ | 40,659 | 9,012 | $ | 137,842 | 227 | $ | 4,454 | 190 | $ | 4,241 | ||||||||||||||||||||
Class E | 135 | 1,845 | 359 | 5,553 | 1 | 23 | 5 | 110 | ||||||||||||||||||||||||
Class S | — | — | — | — | 5 | 98 | 1 | 13 | ||||||||||||||||||||||||
Issued on Reinvestment of Distributions | ||||||||||||||||||||||||||||||||
Class I | 1,483 | 19,328 | 1,061 | 16,144 | 154 | 2,936 | 124 | 2,699 | ||||||||||||||||||||||||
Class E | 10 | 131 | 2 | 27 | 1 | 16 | — | 11 | ||||||||||||||||||||||||
Class S | — | — | — | — | — | 1 | — | — | ||||||||||||||||||||||||
Shares Redeemed | ||||||||||||||||||||||||||||||||
Class I | (8,421 | ) | (111,972 | ) | (26,811 | ) | (401,805 | ) | (619 | ) | (12,160 | ) | (302 | ) | (6,747 | ) | ||||||||||||||||
Class E | (87 | ) | (1,150 | ) | (86 | ) | (1,292 | ) | — | — | — | (9 | ) | |||||||||||||||||||
Class S | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||
Net Increase/(Decrease) Resulting from Fund Share Transactions | (3,839 | ) | $ | (51,159 | ) | (16,463 | ) | $ | (243,531 | ) | (231 | ) | $ | (4,632 | ) | 18 | $ | 318 |
Emerging Markets Fund | International Small Cap Fund | ||||||||||||||||||||||||||||||||
Six Months Ended 3/31/12 | Year Ended 9/30/11 | Period Ended 3/31/12 | Year Ended 9/30/11 | ||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||||||||||
Shares Sold | |||||||||||||||||||||||||||||||||
Class I | 3,495 | $ | 30,580 | 14,976 | $ | 148,059 | 2,535 | $ | 25,713 | — | $ | — | |||||||||||||||||||||
Class S | 2,792 | 24,899 | 5,735 | 56,875 | 3 | 36 | — | — | |||||||||||||||||||||||||
Issued on Reinvestment of Distributions | |||||||||||||||||||||||||||||||||
Class I | 218 | 1,813 | — | — | — | — | — | — | |||||||||||||||||||||||||
Class S | 96 | 795 | — | — | — | — | — | — | |||||||||||||||||||||||||
Shares Redeemed | |||||||||||||||||||||||||||||||||
Class I | (422 | ) | (3,756 | ) | (5,831 | ) | (57,310 | ) | — | — | — | — | |||||||||||||||||||||
Class S | (1,024 | ) | (8,428 | ) | (845 | ) | (7,591 | ) | — | — | — | — | |||||||||||||||||||||
Net Increase/(Decrease) Resulting from Fund Share Transactions | 5,155 | $ | 45,903 | 14,035 | $ | 140,033 | 2,538 | $ | 25,749 | — | $ | — |
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NOTES TO FINANCIAL STATEMENTS — (Unaudited) (continued)
Core Plus Fund | Credit Focus Yield Fund | ||||||||||||||||||||||||||||||||
Six Months Ended 3/31/12 | Year Ended 9/30/11 | Period Ended 3/31/12 | Year Ended 9/30/11 | ||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||||||||||
Shares Sold | |||||||||||||||||||||||||||||||||
Class I | 151 | $ | 1,402 | 341 | $ | 3,225 | 1,198 | $ | 11,977 | — | $ | — | |||||||||||||||||||||
Class E | 216 | 2,009 | 304 | 2,891 | N/A | N/A | N/A | N/A | |||||||||||||||||||||||||
Class S | N/A | N/A | N/A | N/A | — | — | — | — | |||||||||||||||||||||||||
Issued on Reinvestment of Distributions | |||||||||||||||||||||||||||||||||
Class I | 108 | 994 | 153 | 1,454 | 8 | 78 | — | — | |||||||||||||||||||||||||
Class E | 20 | 185 | 19 | 180 | N/A | N/A | N/A | N/A | |||||||||||||||||||||||||
Class S | N/A | N/A | N/A | N/A | — | — | — | — | |||||||||||||||||||||||||
Shares Redeemed | |||||||||||||||||||||||||||||||||
Class I | (109 | ) | (1,010 | ) | (581 | ) | (5,546 | ) | — | — | — | — | |||||||||||||||||||||
Class E | (57 | ) | (526 | ) | (192 | ) | (1,814 | ) | N/A | N/A | N/A | N/A | |||||||||||||||||||||
Class S | N/A | N/A | N/A | N/A | — | — | — | — | |||||||||||||||||||||||||
Net Increase/(Decrease) Resulting from Fund Share Transactions | 329 | $ | 3,054 | 44 | $ | 390 | 1,206 | $ | 12,055 | — | $ | — |
NOTE 6 – FEDERAL INCOME TAX MATTERS
The International Small Cap and Credit Focus Yield Funds commenced operations on January 31, 2012 and therefore, the following September 30, 2011 tax information is not applicable for these Funds.
As of September 30, 2011, the components of distributable earnings on a tax basis were as follows:
International Fund | Global Fund | Emerging Markets Fund | Core Plus Fund | |||||||||||||
Cost of investments for tax purposes | 582,093,953 | 39,956,244 | 137,703,188 | 26,103,121 | ||||||||||||
Gross tax unrealized appreciation | 28,341,191 | 2,122,444 | 4,109,363 | 1,852,568 | ||||||||||||
Gross tax unrealized depreciation | (158,862,567 | ) | (5,767,779 | ) | (31,712,094 | ) | (642,493 | ) | ||||||||
Net tax unrealized appreciation (depreciation) on investments and foreign currency | (130,521,376 | ) | (3,645,335 | ) | (27,602,731 | ) | 1,210,075 | |||||||||
Distributable ordinary income | 21,557,103 | 949,990 | 1,650,786 | 306,271 | ||||||||||||
Distributable long-term capital gains | — | 2,084,132 | 1,078,155 | 363,367 | ||||||||||||
Total distributable earnings | 21,557,103 | 3,034,122 | 2,728,941 | 669,638 | ||||||||||||
Other accumulated gains/(losses) | (82,679,639 | ) | (29,100 | ) | (531,317 | ) | — | |||||||||
Total accumulated earnings | (191,643,912 | ) | (640,313 | ) | (25,405,107 | ) | 1,879,713 |
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Brandes Investment Trust
NOTES TO FINANCIAL STATEMENTS — (Unaudited) (continued)
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.
The tax composition of dividends for the periods ended September 30, 2011 for the Funds were as follows:
Ordinary Income Total | Long Term Capital Gains Total | |||||||
International Fund | $ | 17,335,276 | $ | — | ||||
Global Fund | $ | 795,457 | $ | 1,945,658 | ||||
Emerging Markets Fund | $ | — | $ | — | ||||
Core Plus Fund | $ | 1,859,640 | $ | 31,187 |
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, 2011.
At September 30, 2011, the International Fund and Emerging Markets Fund had net realized losses on investment and foreign currency transactions between November 1, 2010 and September 30, 2011, of $53,664,854 and $279,291, respectively, which were deferred for tax purposes and recognized on October 1, 2011.
As of September 30, 2011 the Funds had capital losses expiring as indicated below:
Fund | 2017 | 2018 | ||||||
International Fund | $ | — | $ | 29,067,216 | ||||
Global Fund | — | — | ||||||
Emerging Markets Fund | — | — | ||||||
Core Plus 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 year ended September 30, 2011, The International Fund increased undistributed net investment income/loss by $1,972,276, decreased accumulated net realized gain/loss by $1,972,274 and decreased paid in capital by $2, due to certain permanent book and tax differences. The Global Fund increased undistributed net investment income/loss by $12,007 and decreased accumulated net realized gain/loss by $12,007. The Emerging Markets Fund decreased undistributed net investment income/loss by $596,741, increased accumulated net realized gain/loss by $4,945,741 and decreased paid in capital by $4,349,000. The Core Plus Fund increased undistributed net investement income/loss by $91,304, decreased accumulated net realized gain/loss by $194,409 and
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Brandes Investment Trust
NOTES TO FINANCIAL STATEMENTS — (Unaudited) (continued)
increased paid in capital by $103,105. The permanent book and tax differences relate to a reclassification of foreign currency gain/loss.
NOTE 7 – SUBSEQUENT EVENTS
In preparing these financial statements, the Funds have evaluated events and transactions for potential recognition or disclosure through the date the financial statements were available to be issued.
On May 10, 2012 the Board of Trustees to the Brandes Investment Trust approved revisions to the Expense Cap Agreement and the annual Advisor Fee rate of the International Equity Fund as indicated below. These revisions are effective starting on June 1, 2012.
Expense Cap Agreement
Old Expense Cap | New Expense Cap | |||||||
Class I | 1.20 | % | 1.05 | % | ||||
Class E | 1.45 | % | 1.30 | % | ||||
Class S | 1.45 | % | 1.30 | % |
Advisor Fee
For average daily net assets: | Old Rate | New Rate | ||||||
Less than $2.5 billion | 1.00 | % | 1.00 | % | ||||
$2.5 billion – $5.0 billion | 1.00 | % | 0.90 | % | ||||
More than $5.0 billion | 1.00 | % | 0.80 | % |
NOTE 8 – RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In May 2011, the FASB issued an update to requirements relating to Fair Value Measurement which represents amendments to achieve common fair value measurement and disclosure requirements in US Generally Accepted Accounting Principles (“GAAP”) and International Financial Reporting Standards (“IFRS”). The amendments are of two types: (i) those that clarify the Board’s intent about the application of existing fair value measurement and disclosure requirements and (ii) those that change a particular principle or requirement for measuring fair value or for disclosing information about fair value measurements.
The amendments that change a particular principle or requirement for measuring fair value or disclosing information about fair value measurements relate to (i) measuring the fair value of the financial instruments that are managed within a portfolio; (ii) application of premium and discount in a fair value measurement; and (iii) additional disclosures about fair value measurements. The update is effective for interim and annual periods beginning after December 15, 2011. Management is currently evaluating the impact this update will have on the Funds’ financial statements.
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Brandes Investment Trust
NOTES TO FINANCIAL STATEMENTS — (Unaudited) (continued)
NOTE 9 – OWNERSHIP BY AFFILIATED PARTIES
As of March 31, 2012, the Advisor or an affiliate of the Advisor beneficially owned shares of the Funds as follows:
International Equity Fund | Global Equity Fund | International Small Cap Equity Fund | Core Plus Fund | Credit Focus Yield Fund | ||||||||||||||||||||||||||||
Class E | Class S | Class I | Class E | Class I | Class I | Class I | Class S | |||||||||||||||||||||||||
Shares | 25,256 | 7 | 925,104 | 5,938 | 2,289,987 | 513,636 | 1,201,434 | 10 | ||||||||||||||||||||||||
Percent of total outstanding shares | 6.40 | % | 100.00 | % | 55.84 | % | 49.01 | % | 90.34 | % | 19.48 | % | 99.67 | % | 100.00 | % |
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Brandes Investment Trust
NOTES TO FINANCIAL STATEMENTS — (Unaudited) (continued)
BOARD CONSIDERATION AND CONTINUATION OF INVESTMENT ADVISORY AGREEMENT
In November 2011, the Board of Trustees of the Trust, including the independent Trustees, unanimously approved the following actions with respect to the Investment Advisory Agreement (the “Agreement”) between the Trust and Brandes Investment Partners, L.P. (the “Advisor”) for various series of the Trust:
• | Renewal of the Agreement for an additional one-year term with respect to the Brandes Institutional International Equity Fund (the “International Fund”), the Brandes Institutional Core Plus Fixed Income Fund (the “Core Plus Fund”) and the Brandes Institutional Global Equity Fund (the “Global Fund”). The International Fund, Core Plus Fund and Global Fund are collectively referred to below as the “Existing Funds.” |
• | Addition to the Agreement for an initial two-year term of the Brandes International Small Cap Equity Fund (the “Small Cap Fund”) and the Brandes Credit Focus Yield Fund (the “Yield Fund”), newly organized series of the Trust. The Small Cap Fund and Yield Fund are collectively referred to below as the “New Funds.” |
Each of the Existing Funds and the New Funds is referred to below as a “Fund” and they are collectively referred to below as the “Funds.”
Information Reviewed
During the course of each year, Board members review a wide variety of materials relating to the nature, extent and quality of the services provided by the Advisor to the Existing Funds, including reports on each such Fund’s investment results, portfolio composition, portfolio trading practices, and other matters. In addition, in connection with its annual review of the Agreement with respect to the Existing Funds, the Board requested and reviewed supplementary information that included materials regarding those Funds’ investment results, advisory fee and expense comparisons for peer groups and categories of similar funds identified by Morningstar Associates (“Morningstar”); financial and profitability information regarding the Advisor; descriptions of various functions such as compliance monitoring and portfolio trading practices; and information about the personnel providing investment management and administrative services to the Existing Funds.
The Board members received similar information in November 2011 in connection with its approval of the Agreement with respect to the New Funds, including information regarding the investment results of the pooled investment vehicles managed by the Advisor which were proposed to be reorganized into the New Funds to provide the New Funds’ initial assets (each a “Predecessor Fund”).
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Brandes Investment Trust
NOTES TO FINANCIAL STATEMENTS — (Unaudited) (continued)
In connection with its reviews, the Board received assistance and advice regarding legal and industry standards from counsel to the Trust and the independent Trustees. The independent Trustees discussed the approval of the Agreement with respect to each Fund with representatives of the Advisor and in private sessions with counsel at which no representatives of the Advisor were present. In deciding to recommend approval of the Agreement with respect to each Fund, the Board and the independent Trustees did not identify any single or particular piece of information that, in isolation, was the controlling factor. This summary describes the most important, but not all, of the factors considered by the Board and the independent Trustees.
Nature, Extent and Quality of Services
With respect to the nature, extent and quality of services provided by the Advisor to the Existing Funds, and proposed to be provided by the Advisor to the New Funds, the Trustees reviewed among other things the quality and depth of the Advisor’s investment management staff, its regulatory compliance procedures, the day-to-day administrative services provided and proposed to be provided by the Advisor to the Funds, and the investment results of the Existing Funds and the Predecessor Funds.
The Trustees determined that the investment results of the Existing Funds were satisfactory. The independent Trustees noted that for periods ended September 30, 2011:
• | The International Fund’s investment results were above the average results of the funds in its Morningstar peer group for the one-year and ten-year periods, were above the average results of the funds in its larger Morningstar category for the since-inception period, were above its benchmark index for the ten-year period, and were above the average results of the funds in its category for four of the last ten calendar years, although they were below these measures for other periods. The independent Trustees noted the Fund’s long-term investment strategy, and considered that it is not unusual for the performance of funds managed with the Graham and Dodd value strategy to fall below the performance of measurement indices for some periods. |
• | The Global Fund’s investment results were mixed. For the one-year period they were above the average results of the funds in its Morningstar category, but below those of its benchmark index; for the since-inception period they were below the Morningstar average but above the benchmark index. The independent Trustees considered that these relative results were affected by the inclusion in the Morningstar category of growth-leaning funds as well as value-leaning funds, and noted the Fund’s long-term investment strategy. |
• | The Core Plus Fund’s investment results were above the average results of the funds in its Morningstar category and above its benchmark index for the three- |
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Brandes Investment Trust
NOTES TO FINANCIAL STATEMENTS — (Unaudited) (continued)
year period, and were above the average results of the funds in its category for two of the last four calendar years, but were below these measures for the one-year and since-inception periods. |
The Trustees noted that the Advisor proposed to manage each New Fund in substantially the same manner as the Advisor managed its respective Predecessor Fund. They considered that the investment results of the Predecessor Fund were better than those of the proposed benchmark for its respective New Fund for the year-to-date and one-year, three-year, five-year and ten-year periods ended September 30, 2011 (except for the three-year period for the Yield Fund), and for those periods were also above (or, in two instances, near) the average investment results of a group of comparable mutual funds in the same Morningstar category. The Trustees concluded that these investment results indicated that the Advisor’s management of each New Fund for the initial term would benefit the New Fund’s shareholders.
Advisory Fees, Total Expenses, Profitability and Ancillary Benefits
With respect to advisory fees and total expenses of the Existing Funds, the independent Trustees noted that:
• | Although the International Fund’s management fee was in the fourth quartile of the fees of the funds in its Morningstar peer group, the majority of its non-advisory expenses were below the median for its peer group and the Advisor effectively provided fee reductions to the Fund by subsidizing the sub-transfer agency fees charged by administrators of omnibus accounts for maintenance of shareholder records and by retaining an expense cap for the Fund. |
• | The management fees and total expenses for the Core Plus Fund and Global Fund were equal to or less than the median fees and expenses of the funds in their respective Morningstar peer groups. The independent Trustees also noted that the Advisor continues to waive any expenses over stated expense caps for those Funds. |
• | Although the Advisor’s management fee is higher for the Existing Funds than for its similar institutional separate accounts and, in the case of the International Fund, for other mutual funds to which the Advisor provides sub-advisory services, the differences are reasonable in light of the additional responsibilities and expenses that the Advisor incurs in sponsoring and operating the Existing Funds. The independent Trustees noted that although the Advisor’s fees for the Existing Funds do not have breakpoints as those Funds’ assets increase, at current asset levels the management fee structures are adequate to ensure that realized and |
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NOTES TO FINANCIAL STATEMENTS — (Unaudited) (continued)
potential economies of scale are being appropriately shared with the Existing Funds; the independent Trustees asked the Advisor to develop a proposal for adding breakpoints to the International Fund’s fee schedule for future consideration by the Board. |
The Trustees noted that the proposed advisory fee for the new Yield Fund would be below the average advisory fees borne by its Morningstar peer group, and that the proposed fee for the new Small Cap Fund would be slightly above the median of its peer group. They determined that although the proposed advisory fees would be above the fees the Advisor charges to similar institutional separate accounts, the differences would be reasonable in light of the additional responsibilities and expenses that the Advisor would incur in sponsoring and operating the New Funds. They also noted that although the proposed advisory fees did not include breakpoints, as the fees for the projected initial size of the New Funds were reasonable, matters related to potential economies of scale could be reviewed in the future as their assets increased.
In addition, the independent Trustees reviewed an analysis of the profitability to the Advisor of its relationship with the Existing Funds, which they concluded was reasonable, and reviewed similar information with respect to the projected operations of the New Funds, which they concluded would also be reasonable. They reviewed information regarding the Advisor’s financial capability to continue to provide services to the Funds in the future, which they concluded was adequate. They also reviewed the methods used by the Advisor to evaluate and compensate its professional investment personnel. Finally, they considered ancillary benefits to the Advisor as a result of its relationships with the Funds. They noted that these were primarily related to the benefit of research provided by broker-dealers executing portfolio transactions on behalf of the Funds, as the Adviser does not obtain third-party research or other services in return for allocating the Funds’ brokerage.
Conclusions
Based on their review, including consideration of each of the factors referred to above, the Board and the independent Trustees concluded that the Agreement is fair and reasonable to the Existing Funds and their respective shareholders, that the Existing Funds’ shareholders receive reasonable value in return for the advisory fees paid to the Advisor by those Funds, that each of the factors discussed above supported renewal of the Agreement with respect to each of the Existing Funds, and that renewal of the Agreement was in the best interests of each Existing Fund and its shareholders. The Board and independent Trustees reached similar conclusions with respect to the prospective addition of each of the New Funds to the Agreement.
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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.
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Brandes Investment Trust
TRUSTEE AND OFFICER INFORMATION — (Unaudited)
The Board of Trustees is responsible for the overall management of the Trust’s business. The Board approves all significant agreements between the Trust and persons or companies furnishing services to the Trust, including the Trust’s agreements with the Advisor, Administrator, Custodian and Transfer Agent. The Board of Trustees delegates the day-to-day operations of the Trust to its officers, subject to the 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:
Name, Address and Age | Position(s) Held with Trust | Term of Office and Length of Time Served(1) | Principal Occupation During Past 5 Years | Number of Trust Series Overseen by Trustee | Other Directorships/ Trusteeships Held by Trustee | |||||
Independent Trustees(2) | ||||||||||
DeWitt F. Bowman, CFA 11988 El Camino Real, Suite 500 San Diego, CA 92130 (Age 81) | Trustee | Since February 1995 | Investment Fund Director. | 7 | Pacific Gas and Electric Nuclear Decommissioning Trust; PCG Private Equity Fund; Forward Funds; RREEF America III REIT. | |||||
J. Michael Gaffney, CFA 11988 El Camino Real, Suite 500 San Diego, CA 92130 (Age 70) | Trustee | Since June 2004 | Independent Consultant, NATIXIS Global Asset Management, North America from 2004 to 2011. | 7 | None | |||||
Karin B. Bonding, CFA 11988 El Camino Real, Suite 500 San Diego, CA 92130 (Age 72) | Trustee | Since May 2006 | Lecturer, University of Virginia, since 1996. President of Capital Markets Institute, Inc. serving as fee-only financial planner and investment advisor since 1996. | 7 | The Endowment Fund and the Salient Partners Absolute Return Fund. | |||||
Jean E. Carter 11988 El Camino Real Suite 500 San Diego, CA 92130 (Age 54) | Trustee | Since April 2008 | Retired since 2005; Director, Investment Management of Russell Investment Group from 2000 to 2005. | 7 | None | |||||
Robert M. Fitzgerald, CPA 11988 El Camino Real Suite 500 San Diego, CA 92130 (Age 60) | Trustee | Since April 2008 | Retired from 2002 – 2005 and since 2007; Chief Financial Officer of National Retirement Partners from 2005 to 2007. | 7 | Hotchkis and Wiley Mutual Funds. |
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TRUSTEE AND OFFICER INFORMATION — (Unaudited) (continued)
Name, Address and Age | Position(s) Held with Trust | Term of Office and Length of Time Served(1) | Principal Occupation During Past 5 Years | Number of Trust Series Overseen by Trustee | Other Directorships/ Trusteeships Held by Trustee | |||||
Craig Wainscott 11988 El Camino Real Suite 500 San Diego, CA 92130 (Age 50) | Trustee | Since February 2012 | Retired since 2006; Managing Director and other positions, US Mutual Funds, Russell Investments, from 1982 to 2006; currently Partner with The Paradigm Project and advisor to early-stage companies. | 7 | None | |||||
“Interested” Trustees(3) | ||||||||||
Oliver Murray 11988 El Camino Real, Suite 500 San Diego, CA 92130 (Age 49) | Trustee | Since February 2012 | CEO, Brandes Investment Partners & Co.; Managing Director – PMCP of Brandes Investment Partners, L.P., the investment advisor to the Funds (the “Advisor”). | 7 | None | |||||
Jeff Busby 11988 El Camino Real, Suite 500 San Diego, CA 92130 (Age 51) | Trustee and President | Since July 2006 | Executive Director of the Advisor | 7 | None | |||||
Officers of the Trust | ||||||||||
Thomas M. Quinlan 11988 El Camino Real, Suite 500 San Diego, CA 92130 (Age 41) | Secretary | Since June 2003 | Associate General Counsel to the Advisor since January 2006; Counsel to the Advisor from July 2000 to January 2006. | N/A | N/A | |||||
Gary Iwamura 11988 El Camino Real, Suite 500 San Diego, CA 92130 (Age 55) | Treasurer | Since September 1997 | Finance Director of the Advisor. | N/A | N/A | |||||
George Stevens 11988 El Camino Real, Suite 500 San Diego, CA 92130 (Age 61) | Chief Compliance Officer | Since January 2010 | Vice President, Citi Fund Services, September 1996 to March 2008; Director, Beacon Hill Fund Services, Inc., March 2008 to present. | N/A | N/A |
(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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TRUSTEE AND OFFICER INFORMATION — (Unaudited) (continued)
PRIVACY NOTICE
Brandes Investment Partners, L.P. and the Brandes Investment Trust collect nonpublic information about you from the following sources:
• | Information we receive about you on applications or other forms; |
• | Information you give us orally; and |
• | Information about your transactions with us or others. |
We do not disclose any nonpublic personal information about our customers or former customers without the customer’s authorization, except as permitted by law or in response to inquires from governmental authorities.
We restrict access to your personal and account information to those personnel who need to know that information to provide products and services to you. We also may disclose that information to unaffiliated third parties (such as to brokers or custodians) only as permitted by law and only as needed for us to provide agreed services to you. We maintain physical, electronic and procedural safeguards to guard your nonpublic personal information.
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ADVISOR
Brandes Investment Partners, L.P.
11988 El Camino Real, Suite 500
San Diego, California 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
350 South Grand Avenue, 49th Floor
Los Angeles, CA, 92071
LEGAL COUNSEL
Bingham McCutchen LLP
355 South Grand Ave., Suite 4400
Los Angeles, CA 90071
This report is intended for shareholders of the Brandes Institutional International Equity Fund, the Brandes Institutional Global Equity Fund, the Brandes Institutional Emerging Markets Fund, the Brandes International Small Cap Equity Fund and the Brandes Institutional 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.
Item 2. Code of Ethics.
Not applicable for semi-annual reports.
Item 3. Audit Committee Financial Expert.
Not applicable for semi-annual reports.
Item 4. Principal Accountant Fees and Services.
Not applicable for semi-annual reports.
Item 5. Audit Committee of Listed Registrants.
Not applicable to registrants who are not listed issuers (as defined in Rule 10A-3 under the Securities Exchange Act of 1934).
Item 6. Investments.
(a) | Schedule of Investments is included as part of the report to shareholders filed under Item 1 of this Form. |
(b) | Not Applicable. |
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.
Not applicable to open-end investment companies.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
Not applicable to open-end investment companies.
Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers.
Not applicable to open-end investment companies.
Item 10. Submission of Matters to a Vote of Security Holders.
There have been no material changes to the procedures by which shareholders may recommend nominees to the registrant’s board of trustees.
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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) | There were no changes in the Registrant's internal control over financial reporting (as defined in Rule 30a-3(d) under the Act) that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the Registrant's internal control over financial reporting. |
Item 12. Exhibits.
(a) | (1) 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. Not Applicable. |
(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. |
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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 6/6/12
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 6/6/12
By (Signature and Title)* _/s/ Gary Iwamura ______________ _
Gary Iwamura, Treasurer
Date 6/6/12
* Print the name and title of each signing officer under his or her signature.
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