N-CSR/A 1 f16-0598.htm N-CSR/A FILING

United States
Securities and Exchange Commission
Washington, D.C. 20549

FORM N-CSR/A

CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES

 

Investment Company Act file number  811-22538 

 

Advisers Investment Trust

(Exact name of registrant as specified in charter)

 

325 John H. McConnell Blvd., Suite 150, Columbus, OH 43215

(Address of principal executive offices)            (Zip code)

 

Beacon Hill Fund Services, Inc., 325 John H. McConnell Blvd., Suite 150, Columbus, OH 43215

(Name and address of agent for service)

 

Registrant's telephone number, including area code:  (614)-255-5550 

 

Date of fiscal year end:  September 30 

 

Date of reporting period:  September 30, 2015 

 

Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection and policymaking roles.

 

A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget ("OMB") control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549-0609. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. § 3507.

 

 

 

EXPLANATORY NOTE:

The Registrant is filing this amendment to its Form N-CSR for the period ended September 30, 2015, as originally filed with the Securities and Exchange Commission on December 3, 2015 (Accession Number 0001534424-15-000394), to amend Item I “Reports to Shareholders”. The purpose of the amendment is to update the 2015 audit opinion of PricewaterhouseCoopers LLP for the JOHCM Funds to include reference to the applicable 2014 JOHCM Funds’ financial statements. Other than the aforementioned change, this Form N-CSR/A does not reflect events occurring after the filing of the original Form N-CSR or modify or update any other disclosures therein.

 

   
 

 

Item 1. Reports to Stockholders.

 

       
  (FRANCHISE PARTNERS LOGO)  
       
       
    INDEPENDENT FRANCHISE PARTNERS  
    US EQUITY FUND  
       
    ANNUAL REPORT  
    SEPTEMBER 30, 2015  
       

 

This report is submitted for the general information of the shareholders of the Fund. It is not authorized for
the distribution to prospective investors unless preceded or accompanied by an effective prospectus.

 

 
 

 

ADVISERS INVESTMENT TRUST
INDEPENDENT FRANCHISE PARTNERS US EQUITY FUND
TABLE OF CONTENTS
September 30, 2015

 

SHAREHOLDER LETTER   1
     
PORTFOLIO COMMENTARY   2
     
SCHEDULE OF INVESTMENTS   12
     
STATEMENT OF ASSETS & LIABILITIES   14
     
STATEMENT OF OPERATIONS   15
     
STATEMENTS OF CHANGES IN NET ASSETS   16
     
FINANCIAL HIGHLIGHTS   17
     
NOTES TO FINANCIAL STATEMENTS   18
     
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM   24
     
ADDITIONAL INFORMATION   25

 

 
 

 

ADVISERS INVESTMENT TRUST
INDEPENDENT FRANCHISE PARTNERS US EQUITY FUND
SHAREHOLDER LETTER
September 30, 2015

 

Dear Shareholder:

  

We are pleased to present to shareholders the September 2015 Annual Report for the Independent Franchise Partners US Equity Fund (the “Fund”), a series of the Advisers Investment Trust. This report contains the results of Fund operations for the year ended September 30, 2015.

 

We appreciate the trust and confidence you have placed in us by choosing the Fund and its Investment Adviser, Independent Franchise Partners, LLP, and we look forward to continuing to serve your investing needs.

 

Sincerely,

 

-s- Dina A. Tantra   -s- John Kelly-Jones
     
Dina A. Tantra   John Kelly-Jones
President of the Fund and Trustee to the Board   Chief Operating Officer of Independent Franchise Partners, LLP

 

1
 

 

ADVISERS INVESTMENT TRUST
INDEPENDENT FRANCHISE PARTNERS US EQUITY FUND
PORTFOLIO COMMENTARY
September 30, 2015 (Unaudited)

 

Performance Update

Value of a hypothetical $3,000,000 investment in the Fund from inception on December 20, 2011 to September 30, 2015

 

(LINE GRAPH)

 

Total Returns as of September 30, 2015

              
    Independent Franchise
Partners US Equity Fund
(without redemption fee)
   Independent Franchise
Partners US Equity Fund
(with redemption fee)
   Russell 1000 Value Index 
Q4 2014   4.11%  3.85%  4.98%
Q1 2015   2.64%  2.38%  -0.72%
Q2 2015   1.65%  1.39%  0.10%
Q3 2015   -5.57%  -5.81%  -8.40%
Year to Date   -1.49%  -1.73%  -8.97%
1 Year   2.56%  2.31%  -4.44%
3 Years (Annualized)   11.16%  11.07%  11.60%
Since Inception (Annualized)   12.54%  12.47%  14.02%

 

The Fund’s Total Annual Operating Expense, as per the most recent Prospectus, is 0.81%. The Total Annual Operating Expense after fee waivers and expense reimbursements is 0.85%. Contractual fee waivers are in effect through January 30, 2016. The Fund’s performance reflects the reinvestment of dividends as well as the impact of transaction costs (including the Fund’s 0.25% redemption fee unless noted otherwise) and the deduction of fees and expenses.

 

Data as at September 30, 2015. The Inception date of the Fund is December 20, 2011. Performance is shown net of fees and periods greater than one year are annualized. The performance does not reflect taxes that a shareholder would pay on fund distributions or on the redemption of fund shares.

 

The 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. The Fund’s current performance may be lower or higher than the performance data quoted. Investors may obtain performance information current to the most recent month-end, within 7 business days, by calling 855-233-0437 or 312-557-7902.

 

2
 

 

ADVISERS INVESTMENT TRUST
INDEPENDENT FRANCHISE PARTNERS US EQUITY FUND
PORTFOLIO COMMENTARY
September 30, 2015 (Unaudited)

 

The Fund’s benchmark for performance comparison purposes is the Russell 1000 Value (Total Return) Index. The Index is a price return index. The table reflects the theoretical reinvestment of dividends on securities in the Index. The impact of transaction costs and the deduction of expenses associated with a mutual fund, such as investment management and administration fees, are not reflected in the Index calculations. It is not possible to invest directly in an index. Please refer to the Fund’s Prospectus for further information.

 

Portfolio Commentary

 

For the year ended September 30, 2015, the Fund delivered a positive return of 2.56% (assuming no redemption fee). By comparison, the Russell 1000 Value Index fell 4.44% during the same period. This return profile is broadly consistent with what we would expect in challenging market conditions, but we continue to encourage clients to assess returns over a full market cycle; a year is a short period of time in the context of our investment approach.

 

As a reminder, we seek to invest in financially sound and highly cash generative companies that are trading at affordable valuations. This strategy has historically compounded shareholder wealth at attractive rates over the long-term. In doing so, it has tended to preserve capital better than the general market in falling markets, and has tended to lag rising markets. This asymmetric risk profile is deliberate.

 

We have historically found many franchise companies within the consumer staples sector. While perhaps not as significant an exposure as in the past, the weighting to consumer staples remained close to 30% of the Fund’s assets at the end of the period, compared to 7% for the Russell 1000 Value Index. The sector delivered positive returns as the broader market fell, and the Fund’s overweight to consumer staples added to relative returns for the year. In addition, strong returns from companies such as Mondelēz International, Kimberly-Clark, Altria and Nestlé further added to relative returns.

 

We avoid investing in companies with high capital intensity or that are more prone to the commodity cycle. We do not believe these companies can deliver sustainable long-term returns for shareholders. These types of companies are often found in the energy and telecommunication services sectors, both of which lagged the broader market over the last year. In particular, our lack of exposure to the energy sector - which fell over 30% in the 12 months to September 30, 2015 - was positive in relative terms.

 

The information technology sector also lagged the broader market return. The Fund’s overweight to the sector detracted from relative returns, but this was more than offset by strong stock selection within the sector, with stocks such as Apple and Accenture both appearing in the top five contributors to absolute return over the last 12 months, as you will see from the table below.

 

The healthcare sector was the strongest sector over the year, returning almost 7%. The sector represented approximately 27% of the Fund’s assets at the end of the year – around double the weight of the sector in the Russell 1000 Value Index. This overweight was positive for relative returns. However, this was offset by stock selection within the sector. Most notably, GlaxoSmithKline, Johnson & Johnson and Merck detracted from both absolute and relative returns. We discuss these stocks in more detail later in this report.

 

3
 

 

ADVISERS INVESTMENT TRUST
INDEPENDENT FRANCHISE PARTNERS US EQUITY FUND
PORTFOLIO COMMENTARY
September 30, 2015 (Unaudited)

 

Investment Returns and Contribution to Fund Return – 1 Year ending September 30, 2015

                       
US Equity Fund – Stock Returns (%)   US Equity Fund – Contribution to Fund Return (bps)  
Top   Bottom   Top   Bottom  
MSCI +28 % Merck -16 % Accenture +175   Oracle -77  
Mondelēz Int’l +25 % Monsanto -16 % Mondelēz Int’l +157   Johnson & Johnson -76  
Accenture +24 % Oracle -16 % MSCI +137   Merck -75  
General Mills +14 % Time Warner -14 % Zoetis +77   Time Warner -72  
Zoetis +12 % GlaxoSmithKline -12 % Apple +76   GlaxoSmithKline -59  

 

Stock returns reflect total returns and are presented in US Dollars for the period the stock was held during the year ending September 30, 2015. Contribution to fund return reflects contribution to gross return and presented in US Dollars for the period the stocks were held during the year to September 30, 2015. Source: FactSet, Independent Franchise Partners, LLP. For complete attribution and methodology, please contact clientservice@franchisepartners.com.

 

Significant Contributors to Your Fund’s Return

Among the top contributors to the Fund’s return were Accenture, Mondelēz International, MSCI, Zoetis and Apple.

 

Accenture, the global consulting, systems installation and IT integration and outsourcing company, reported good results over the course of the last year. Revenue growth related to digital services such as data analytics and mobile marketing has accelerated while other parts of the business, including business process management as-a-service and application services, continue to perform well. The company’s investments in cloud, analytics, mobile, online marketing and other digital services have translated into meaningful differentiation compared to competitors and continue to generate market share gains. This should support attractive revenue and free cash flow compounding. Its shares trade on an estimated 5.4% free cash flow yield.

 

Mondelēz International remains a well-positioned franchise in the consumer staples sector with attractive brands, categories and geographic exposure. The company has reported improved financial results, demonstrated good progress in improving its margins and presented a coherent strategy to improve revenue growth. In the second quarter of 2015 it also received conditional approval from the European Commission for the planned merger of its coffee business with DE Master Blenders. Mondelēz will receive $5 billion cash and a 49% stake in the new company, which we think are attractive terms. The stock price has also been buoyed by the involvement of two activist investors. Most recently, Pershing Square Capital declared a 7.5% stake in the company, increasing market expectations about the quantum of the company’s cost reduction potential. Mondelēz’s shares trade on an estimated free cash flow yield of just under 5.3%. Given the stock price appreciation and commensurate reduction in the estimated free cash flow yield, we reduced the size of the position earlier in the year.

 

MSCI is the pre-eminent global equity index and ETF licensing business with very high incremental margins and cashflows. The company’s “must have” data businesses command good pricing power and have driven solid revenue and profit growth. Moreover, the company’s continued focus on cost discipline should lead to further margin expansion. The management team’s capital allocation has also improved over the past few years; the company has disposed of lower-margin businesses, such as ISS and CFRA, and returned over $500 million of the $1 billion they committed to return to shareholders by the end of

 

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ADVISERS INVESTMENT TRUST
INDEPENDENT FRANCHISE PARTNERS US EQUITY FUND
PORTFOLIO COMMENTARY
September 30, 2015 (Unaudited)

 

2016. The stock price has appreciated significantly over the last couple of years, in part driven by activist attention, particularly in the first quarter of 2015. This has reduced the estimated free cash flow yield to 4.5% and so we have reduced the position size.

 

Zoetis is the global leader in animal health with leading market shares in most of the categories in which it operates. Like Mondelēz and MSCI, Zoetis has also been subject to activist attention, with Pershing Square Capital taking a 10% stake in the company in the fourth quarter of 2014. In the first quarter of 2015, the company outlined its plans to improve its operating margin and working capital. Zoetis revealed a $300 million cost savings plan together with a rationalisation of its stock keeping units (SKUs) by almost a third, both to be achieved by financial year 2017. Higher operating margin and better working capital management were two of the core tenets of our original investment thesis. We are pleased that the company has announced a credible plan to achieve these two objectives. The company’s shares trade on an estimated free cash flow yield of 5.5%.

 

Apple is an integrated software and hardware company with strong and growing market shares, particularly in developed markets and in the tablet and smart phone categories. Apple also benefits from an “ecosystem effect” of content accessibility and transferability across devices, and demonstrates exceptionally high returns on capital. Over the last year, new product launches have bolstered revenues, margins and cash flow. The market has also come to appreciate the value of the Apple ecosystem and how it underpins the sustainability of cash flows and returns on capital. We are mindful that Apple faces tough comparables for the next couple of quarters due to last year’s launch of the iPhone 6/6+. However, our long-term investment horizon allows us to focus on the secular trends that we think will underpin the Apple ecosystem in the long-term. Apple’s shares trade on an estimated free cash flow yield of 8.6%.

 

Notable Detractors for Your Fund’s Return

Among the significant detractors from the Fund’s return were Oracle, Johnson & Johnson, Merck, Time Warner and GlaxoSmithKline.

 

Three of these stocks – Oracle, Merck and Time Warner – are new positions in the Fund this year and so did not benefit from the generally rising markets in the early part of the reporting period. We discuss each of these new positions in the portfolio changes section of this report below.

 

Johnson & Johnson’s strong market positions across its pharmaceutical, medical device and consumer healthcare divisions provide the company with attractive growth platforms and earnings diversification. The pharmaceutical division continues to deliver impressive growth through an innovative pipeline and strong commercial execution. In addition, the performance of the medical device and consumer health divisions continues to improve. The strong balance sheet and free cash flow generation provide options for management to continue to invest in the business or to return cash to shareholders. The market is, however, concerned about potential biosimilar competition in the US for its largest drug, Remicade. Whilst this is a risk, we believe the company’s diversification and strong portfolio of other compounds should help to sustain its attractive growth profile. Following share price weakness, we have added to the position during the year. Johnson & Johnson’s shares trade on an estimated free cash flow yield of 6.1%.

 

5
 

 

ADVISERS INVESTMENT TRUST
INDEPENDENT FRANCHISE PARTNERS US EQUITY FUND
PORTFOLIO COMMENTARY
September 30, 2015 (Unaudited)

 

GlaxoSmithKline is a leading global pharmaceutical company with strong market shares in a number of key therapeutic categories. The company completed the complex oncology, consumer healthcare and vaccine transactions with Novartis at the beginning of March. However, GlaxoSmithKline has also reduced its revenue and profit guidance for 2015. The poor short-term operational execution is frustrating. Encouragingly, it also outlined a credible roadmap for revenue growth, margin improvement and free cash flow compounding from 2016 onwards. We continue to believe that the company’s strategy of transitioning the business to focus on longer-duration vaccines, consumer OTC products and a portfolio of prescription drugs is sensible. We think the stock’s valuation compensates us for being patient. Glaxo’s shares trade on an estimated free cash flow yield of 6.3% and a 5.9% dividend yield.

 

Significant Portfolio Changes During the Year

During the course of the last year, we initiated positions in Time Warner, Oracle, Merck, Altria and Monsanto, and sold the positions in Halyard Health, PepsiCo, Kellogg, General Mills, PayPal, and Zimmer-Biomet.

 

Initial Purchases

We initiated a position in Time Warner, a leading US media and entertainment company, in January. HBO and Turner Networks account for 80% of company operating profits and are attractive assets with recurring revenue streams. HBO is the number one premium pay TV service in the US with high quality original series and movie studio content. Turner Networks is a critical supplier of pay TV content. It owns three of the top ten cable channels in the US, with leading sports rights including the NBA, MLB, NCAA and NASCAR. The management team has shown good capital allocation discipline, divesting non-core assets and returning 100% of free cash flow to shareholders over the last five years. The key risks include exposure to a potential slowdown in advertising revenue, an over-reliance on a few successful programs at Turner Networks and competition from new pay TV channels. We purchased the shares at an estimated free cash flow yield of just under 6.0%, a valuation which we believe compensates for these risks.

 

Subsequent to our initial purchase, there has been increased investor anxiety that cord-cutting (consumers abandoning cable subscriptions) might threaten Time Warner’s long-term business model. The structural risks from increased consumption of services like Netflix have been around for a number of years. We believe that Time Warner is capable of navigating the changing industry landscape due to its portfolio of leading cable networks, its limited advertising exposure and its ownership of HBO. These assets also make Time Warner potentially attractive to other media companies.

 

In March, we initiated a position in Oracle, the market-leading database management software company. Oracle generates 87% of its operating profit from the sale of enterprise software, boasts a market share in excess of 45% in database management software and benefits from attractive underlying category growth. Oracle’s primary intangible asset is the tight integration of its database software with its clients’ IT infrastructure and business processes. This results in significant switching costs for clients looking to replace the incumbent provider. Further, license sales generate a recurring stream of maintenance revenues, which account for 69% of group operating profit. Capital allocation has been disciplined, with management returning two-thirds of free cash flow to shareholders over the past five years. We

 

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ADVISERS INVESTMENT TRUST
INDEPENDENT FRANCHISE PARTNERS US EQUITY FUND
PORTFOLIO COMMENTARY
September 30, 2015 (Unaudited)

 

acknowledge that there are potential long-term structural risks to Oracle’s business due to the gradual migration of software and services to the cloud and the emergence of new database technologies like Hadoop and NoSQL. We purchased the shares at an estimated free cash flow yield of 6.3%, which we believe adequately compensates for these risks.

 

In April, we initiated a position in Merck, the U.S. based global pharmaceutical company. The company derives 80% of operating profit from a diverse pharma portfolio and the remaining 20% from strong positions in the attractive animal health and vaccines categories. Merck stands to benefit from an improving and potentially transformational drug pipeline over the next 2-3 years. In particular, the company is a leader in immuno-oncology, where its key drug, Keytruda, is being investigated in 30 different tumour types. While success in immuno-oncology is by no means certain, we believe Merck is well-placed to participate in this rapidly emerging category. Merck also has a number of strong pipeline candidates in areas such as hepatitis C and cardiovascular disease. Management has shown good capital discipline, returning over 90% of free cash flow to shareholders over the last five years. We purchased the shares at an estimated 6.5% free cash flow yield and a 3.1% dividend yield.

 

We initiated a position in Altria in July. Altria has a leading presence in the premium US cigarette market with the Marlboro brand and is well diversified across other tobacco segments, including smokeless tobacco, cigars and next generation products. The company is well placed to benefit from an attractive pricing environment over the medium term; relatively low cigarette prices in the US offer an opportunity for price increases while recent consolidation across tobacco manufacturers should support pricing discipline. Altria’s stake in SABMiller accounts for 22% of its market capitalisation and is potentially an additional source of shareholder value. The key risks to the investment are a dependence on the Marlboro brand and significant excise tax increases. However, we believe the valuation compensates for these risks and purchased the shares at an estimated free cash flow yield of 5.5% and dividend yield of 4.2%.

 

We began building a position in Monsanto in late July and completed the purchase in August. We owned Monsanto several years ago and continue to be attracted to its strong market positions in the corn, soybean, cotton and vegetable biotech seed markets. Monsanto’s seeds provide a significant productivity advantage to farmers and help meet the growing global demand for grains and protein. The patent protection that these value-added seeds enjoy helps underpin the company’s franchise. The primary risks to the investment thesis include the cyclicality of soft commodity prices as well as commercial acceptance of Monsanto’s new seed technologies. The company’s strong market positions, healthy ROIC of close to 40% and cash generating capacity were available at an estimated free cash flow yield of 5.5% at the time of the purchase, and we think this represents an attractive risk/reward proposition.

 

Final Sales

We received shares in Halyard Health after the company was spun out of Kimberly-Clark in November and sold them not long after that. While the valuation of the shares was not expensive, the stand-alone business did not meet our franchise quality criteria.

 

We sold the PepsiCo position in early December. We had held the shares since the inception of the US Franchise strategy in June 2005. Over this period, the stock has returned 9.5% per annum compared to the

 

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ADVISERS INVESTMENT TRUST
INDEPENDENT FRANCHISE PARTNERS US EQUITY FUND
PORTFOLIO COMMENTARY
September 30, 2015 (Unaudited)

 

Russell 1000 Value return of 7.5%. The stock performed well in 2014, driven by continued activist pressure and improved operational execution. While we continue to believe that PepsiCo has an attractive category mix and geographic exposure, the estimated free cash flow yield fell below our 4.5% hurdle.

 

We sold the position in Kellogg in January. Since our initial purchase in February 2006 the stock has returned 8.0% per annum compared to the Russell 1000 Value Index return of 6.6% p.a. Parts of our initial investment thesis worked as expected, but we are concerned about the company’s inability to grow volumes in developed markets. Cereal volumes have been weak for several years and have not responded to Kellogg’s innovations or advertising spend. Kellogg’s shares traded on an estimated free cash flow yield of 4.8% at the time of the sale, a valuation that we believed did not provide sufficient margin of safety given the evident challenges.

 

We sold the position in General Mills in May. Since our initial purchase in July 2011, the stock had returned 14.6% per annum compared to the Russell 1000 Value return of 15.3%. Despite management’s efforts, the company has struggled to compound free cash for several years. It has experienced weak revenue growth and margin deterioration, caused principally by a moribund US cereal category and loss of market share in US yoghurt. Given relatively low exposure to both emerging markets and natural/organic foods, we believe it may be difficult for General Mills to grow without transformative M&A. We also believe the company’s ability to expand margins may be constrained by the need for greater brand investment. Notwithstanding these challenges, the company’s share price has been surprisingly resilient and the estimated free cash flow yield fell below our 4.5% hurdle.

 

We sold the position in PayPal following its spin-off from eBay in July. PayPal’s shares were trading on an estimated free cash flow yield below 3.5%. The proceeds were reinvested into eBay. eBay offers compelling free cash flow compounding as a standalone business and warranted a larger position in the portfolio.

 

We completed the final sale of Zimmer-Biomet in August. Since our initial purchase in April 2013 the stock had delivered a total return of 47% in USD terms compared to 35% for the Russell 1000 Value Index. The federal agency that administers Medicare in the US recently announced a new mandatory and far-reaching bundled payment initiative that is likely to cover around one-third of the US population. This was a surprise and threatens to erode the surgeon-sales representative relationship, a key element of Zimmer-Biomet’s franchise. We are also wary of the implications this may have for price deflation in the category. After the strong stock price appreciation, the valuation no longer compensated us for these risks and we sold the position.

 

Following the returns over the last year and the portfolio changes during the course of the year, the Fund offered an estimated free cash flow yield of 6.0% at the end of September 2015. This valuation is now more in line with the strategy’s long-term average. We have also observed signs that some of the compression in valuations that we highlighted earlier in the year may have begun to unwind. We continue to monitor the stocks in our universe carefully so we can take advantage of valuation opportunities as they arise.

 

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ADVISERS INVESTMENT TRUST
INDEPENDENT FRANCHISE PARTNERS US EQUITY FUND
PORTFOLIO COMMENTARY
September 30, 2015 (Unaudited)

 

We remain completely dedicated to investing our clients’ portfolios in keeping with the rigors of the Franchise quality and value criteria. As ever, we measure our success through long-term investment results and enduring client relationships. We look forward to continuing to work with you in the coming years.

 

 -s- Hassan Elmasry

 

Hassan Elmasry, CFA
Lead Portfolio Manager of the Fund and Partner of Independent Franchise Partners, LLP

 

Michael Allison, CFA
Portfolio Manager of the Fund and Partner of Independent Franchise Partners, LLP

 

Jayson Vowles, CFA
Portfolio Manager of the Fund and Partner of Independent Franchise Partners, LLP

 

9
 

 

ADVISERS INVESTMENT TRUST
INDEPENDENT FRANCHISE PARTNERS US EQUITY FUND
PORTFOLIO COMMENTARY
September 30, 2015 (Unaudited)

 

Principal Investment Risks: Fund holdings are subject to change and should not be considered a recommendation to buy or sell any security. All investments carry a certain amount of risk, and the Fund cannot guarantee that it will achieve its investment objective. The value of the Fund’s investments will fluctuate with market conditions, and the value of your investment in the Fund also will vary. You could lose money on your investment in the Fund, or the Fund could perform worse than other investments. Investments in the Fund are not deposits of a bank and are not insured or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency. The main risks of investing in the Fund are set out in the Fund’s Prospectus, which can be obtained at www.franchisepartners.com/funds or by calling 855-233-0437 or 312-557-7902.

 

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ADVISERS INVESTMENT TRUST
INDEPENDENT FRANCHISE PARTNERS US EQUITY FUND
SCHEDULE OF INVESTMENTS
September 30, 2015

                 
   Percentage
of Net
Assets
   Shares   Value  
COMMON STOCKS   95.0%             
Beverages   2.9%             
Anheuser-Busch InBev        257,995   $ 27,363,881  
Chemicals   2.1%             
Monsanto Co.        232,204     19,816,289  
Computers & Peripherals   4.3%             
Apple Inc.        366,675     40,444,252  
Diversified Consumer Services   4.3%             
Moody’s Corp.        120,890     11,871,398  
MSCI Inc.        484,581     28,813,186  
               40,684,584  
Food Products   8.2%             
Mondelez International Inc. - Class A        1,126,419     47,163,163  
Nestle SA - REG        408,809     30,725,692  
               77,888,855  
Health Care Equipment & Supplies   2.2%             
Dentsply International Inc.        409,463     20,706,544  
Household Products   7.4%             
Kimberly Clark Corp.        298,379     32,535,246  
Procter & Gamble        518,534     37,303,336  
               69,838,582  
Internet Software & Services   3.7%             
eBay Inc.(a)        1,421,916     34,751,627  
IT Services   6.8%             
Accenture PLC - Class A        658,672     64,721,111  
Media   8.1%             
McGraw Hill Financial Inc.        402,587     34,823,776  
Time Warner Inc.        609,340     41,892,125  
               76,715,901  
Pharmaceuticals   24.5%             
Abbott Laboratories        771,369     31,024,461  
GlaxoSmithKline PLC        2,087,268     39,974,136  
Johnson & Johnson        701,336     65,469,715  
Merck & Co. Inc.        724,023     35,759,496  
Novartis AG - REG        460,140     42,208,615  

 

See notes to financial statements.

 

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ADVISERS INVESTMENT TRUST

INDEPENDENT FRANCHISE PARTNERS US EQUITY FUND
SCHEDULE OF INVESTMENTS

September 30, 2015

               
   Percentage
of Net
Assets
   Shares     Value  
Zoetis Inc.        409,200   $ 16,850,856  
               231,287,279  
Software   11.7%             
Microsoft Corp.        1,607,516     71,148,658  
Oracle Corp.        1,102,778     39,832,342  
               110,981,000  
Tobacco   8.8%             
Altria Group Inc.        571,331     31,080,406  
Philip Morris International        660,933     52,431,815  
               83,512,221  
TOTAL COMMON STOCKS (Cost $819,668,360)              898,712,126  
TOTAL INVESTMENTS
(Cost $819,668,360)
   95.0%         898,712,126  
NET OTHER ASSETS (LIABILITIES)   5.0%         47,398,369  
NET ASSETS   100.0%       $ 946,110,495  

 

(a)Non-income producing security.

 

At September 30, 2015, the Fund’s investments were concentrated in the following countries:

     
   Percentage
of Net Assets
 
United States(1)   83.1%
Switzerland   7.7 
United Kingdom   4.2 
TOTAL   95.0%

 

(1)The Fund invests in the Belgian line of Anheuser-Busch InBev (ABI). However, consistent with the terms set out in the prospectus, the Fund defines ABI as a US Equity as its principal place of business is in the US.

 

See notes to financial statements.

 

13
 

 

ADVISERS INVESTMENT TRUST
STATEMENT OF ASSETS & LIABILITIES
September 30, 2015

     
   Independent Franchise Partners
US Equity Fund
 
Assets:     
Investments, at value (Cost: $819,668,360)  $898,712,126 
Cash   46,407,118 
Foreign currency (Cost: $5,547)   5,522 
Receivable for dividends   2,351,648 
Reclaims receivable   1,276,377 
Receivable for investments sold   587,939 
Prepaid expenses   11,009 
Total Assets   949,351,739 
Liabilities:     
Securities purchased payable   2,426,817 
Investment advisory fees payable   528,642 
Accounting and Administration fees payable   165,507 
Regulatory and Compliance fees payable   73,284 
Risk Officer fees payable   7,500 
Trustees fees payable   578 
Accrued expenses and other payable   38,916 
Total Liabilities   3,241,244 
Net Assets  $946,110,495 
      
Net Assets  $946,110,495 
Shares of common stock outstanding   64,954,142 
Net asset value per share  $14.57 
Net Assets:     
Paid in capital  $806,072,318 
Accumulated net investment income   11,586,425 
Accumulated net realized gains   49,498,498 
Unrealized appreciation (depreciation)   78,953,254 
Net Assets  $946,110,495 
      

 

See notes to financial statements.

 

14
 

 

ADVISERS INVESTMENT TRUST
STATEMENT OF OPERATIONS

For the year ended September 30, 2015

 

   Independent Franchise Partners
US Equity Fund
 
Investment Income:     
Dividend income (Net of foreign withholding tax of $462,479)  $22,012,695 
Total investment income.   22,012,695 
Operating expenses:     
Investment advisory   6,399,130 
Accounting and Administration   643,601 
Regulatory and Compliance   285,771 
Risk Officer   31,856 
Insurance   40,401 
Trustees   21,200 
Legal   33,594 
Registration   29,298 
Other   49,368 
Total expenses before fee reductions   7,534,219 
Expenses reduced by Service Providers   (4,834)
Total expenses   7,529,385 
Net investment income   14,483,310 
Realized and Unrealized Gains (Losses) From Investment Activities:     
Net realized gains from investment transactions   50,600,930 
Net realized losses from foreign currency transactions   (221,537)
Change in unrealized appreciation (depreciation) on investments   (44,828,119)
Change in unrealized appreciation (depreciation) on foreign currency   (31,157)
Net realized and unrealized gains (losses) from investment activities   5,520,117 
Change in Net Assets Resulting from Operations  $20,003,427 
      

 

See notes to financial statements.

 

15
 

 

ADVISERS INVESTMENT TRUST

STATEMENTS OF CHANGES IN NET ASSETS
For the years ended September 30

         
   Independent Franchise Partners
US Equity Fund
 
   2015   2014 
Increase (decrease) in net assets:          
Operations:          
Net investment income  $14,483,310   $10,113,314 
Net realized gains from investment and foreign currency transactions   50,379,393    17,681,070 
Change in unrealized appreciation (depreciation) on investments and foreign currency   (44,859,276)   60,339,465 
Change in net assets resulting from operations   20,003,427    88,133,849 
Dividends paid to shareholders:          
From net investment income   (10,586,544)   (8,358,015)
From net realized gains   (17,114,376)   (7,648,294)
Total dividends paid to shareholders   (27,700,920)   (16,006,309)
Capital Transactions:          
Proceeds from sale of shares   191,478,692    298,450,000 
Value of shares issued to shareholders in reinvestment of dividends   24,623,929    13,273,672 
Value of shares redeemed   (133,938,935)   (94,224,419)
Change in net assets from capital transactions   82,163,686    217,499,253 
Change in net assets   74,466,193    289,626,793 
Net Assets:          
Beginning of year.   871,644,302    582,017,509 
End of year  $946,110,495   $871,644,302 
Accumulated net investment income  $11,586,425   $7,911,196 
           
Share Transactions:          
Sold   12,621,180    20,574,548 
Reinvested   1,645,984    978,884 
Redeemed   (8,802,390)   (6,747,741)
Change   5,464,774    14,805,691 
           

 

See notes to financial statements.

 

16
 

 

ADVISERS INVESTMENT TRUST
FINANCIAL HIGHLIGHTS

For the years ended September 30, 2015, 2014 and 2013,
and the period December 20, 2011 (commencement of operations) to September 30, 2012

                 
   Independent Franchise Partners
US Equity Fund
 
   2015   2014   2013   2012 
                     
Net asset value, beginning of period  $14.65   $13.03   $11.38   $10.00 
                     
Income (loss) from operations:                    
Net investment income   0.23    0.18    0.21    0.08 
Net realized and unrealized gains (losses) from investments   0.16    1.80    1.60    1.30 
Total from investment operations   0.39    1.98    1.81    1.38 
                     
Less distributions paid:                    
From net investment income   (0.18)   (0.19)   (0.15)    
From net realized gains on investments   (0.29)   (0.17)   (0.01)    
Total distributions paid   (0.47)   (0.36)   (0.16)    
Increase from redemption fees(a)                
Change in net asset value   (0.08)   1.62    1.65    1.38 
Net asset value, end of period  $14.57   $14.65   $13.03   $11.38 
Total return(b)   2.56%   15.37%   16.08%   13.80%
Ratios/Supplemental data:                    
Net assets, end of period (000’s)  $946,110   $871,644   $582,018   $216,041 
Ratio of net expenses to average net assets   0.80%   0.81%   0.84%   0.85%(c)
Ratio of net investment income to average net assets   1.54%   1.59%   1.89%   1.78%(c)
Ratio of gross expenses to average net assets   0.80%(d)   0.81%   0.85%(d)   1.20%(c)(d)
Portfolio turnover rate(b)   45.30%   28.64%   20.70%   13.59%
                     

 

(a)Redemption fees were less than $0.005 per share.

(b)Not annualized for periods less than one year. Total return excludes redemption fees.

(c)Annualized for periods less than one year.

(d)During the period shown, certain fees were reduced. If such fee reductions had not occurred, the ratio would have been as indicated.

 

See notes to financial statements.

 

17
 

 

 
ADVISERS INVESTMENT TRUST
INDEPENDENT FRANCHISE PARTNERS US EQUITY FUND
NOTES TO FINANCIAL STATEMENTS

September 30, 2015

 

The Advisers Investment Trust (the “Trust”) is an open-end registered investment company established under the laws of Ohio by an Agreement and Declaration of Trust dated March 1, 2011 (the “Trust Agreement”). As an investment company, as defined in Financial Accounting Standards Board (“FASB”) Accounting Standards Update 2013-08, the Trust follows accounting and reporting guidance under FASB Accounting Standards Codification Topic 946, “Financial Services-Investment Companies”. The Trust commenced operations on December 20, 2011. The Trust Agreement permits the Board of Trustees (the “Trustees” or “Board”) to authorize and issue an unlimited number of shares of beneficial interest, at no par value, in separate series of the Trust. The Independent Franchise Partners US Equity Fund (the “IFP US Equity Fund” or “Fund”) is a series of the Trust. These financial statements and notes only relate to the IFP US Equity Fund.

 

The Fund is a non-diversified fund, meaning it may invest in a smaller number of companies than a diversified fund, and seeks to achieve an attractive long-term rate of return.

 

Under the Fund’s organizational documents, its officers and Trustees are indemnified against certain liabilities arising out of the performance of their duties to the Fund. In addition, in the normal course of business, the Fund enters into contracts with its vendors and others that provide for 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. 

   
A. Significant accounting policies are as follows:

 

INVESTMENT VALUATION

 

Investments are recorded at fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The valuation techniques employed by the Fund, as described below, maximize the use of observable inputs and minimize the use of unobservable inputs in determining fair value. These inputs are summarized in the following three broad levels:

 

• Level 1 —quoted prices in active markets for identical assets

 

• Level 2 —other significant observable inputs (including quoted prices of similar securities, interest rates, prepayment speeds, credit risk, etc.)

 

• Level 3 —significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments)

 

The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. For example, certain short-term debt securities may be valued using amortized cost. Generally, amortized cost approximates the current value of a security, but since this valuation is not obtained from a quoted price in an active market, such securities would be reflected as Level 2 in the fair value hierarchy.

 

Security prices are generally provided by an independent third party pricing service approved by the Trustees as of the close of the New York Stock Exchange, normally at 4:00 pm EST, each business day on which the share price of the Fund is calculated. Equity securities listed or traded on a primary exchange are valued at the closing price, if available, or the last sales price on the primary exchange. If no sale occurred on the valuation date, the securities will be valued at the latest quotations as of the close of the primary exchange. Investments in other open-end

 

18
 

 

 
ADVISERS INVESTMENT TRUST
INDEPENDENT FRANCHISE PARTNERS US EQUITY FUND
NOTES TO FINANCIAL STATEMENTS

September 30, 2015

 

registered investment companies are valued at their respective net asset value as reported by such companies. In these types of situations, valuations are typically categorized as Level 1 in the fair value hierarchy.

 

Debt and other fixed income securities, if any, are generally valued at an evaluated price provided by an independent pricing source approved by the Trustees. To value debt securities, pricing services may use various pricing techniques which take into account appropriate factors such as market activity, yield, quality, coupon rate, maturity, type of issue, trading characteristics, call features, credit ratings and other data, as well as broker quotes. Short-term debt securities of sufficient credit quality that mature within sixty days may be valued at amortized cost, which approximates fair value. In each of these situations, valuations are typically categorized as Level 2 in the fair value hierarchy.

 

When the price of a security is not readily available or deemed unreliable (e.g., an approved pricing service does not provide a price, a furnished price is in error, certain stale prices, or an event occurs that materially affects the furnished price), the Fund’s Fair Value Committee may in good faith establish a fair value for that security in accordance with procedures established by and under the general supervision of the Trustees. In addition, fair value pricing may be used if events materially affecting the value of foreign securities occur between the time when the exchange on which they are traded closes and the time when the Fund’s net asset value is calculated. The Fund identifies possible fluctuations in international securities by monitoring the increase or decrease in the value of a designated benchmark index. In the event of an increase or decrease greater than predetermined levels, the Fund may use a systematic valuation model provided by an independent third party pricing service to fair value its’ international equity securities.

 

In the fair value situations as noted above, while the Trust’s valuation policy is intended to result in a calculation of the Fund’s net asset value that fairly reflects security values as of the time of pricing, the Trust cannot ensure that fair values determined pursuant to these guidelines would accurately reflect the price that the Fund could obtain for a security if it were to dispose of that security as of the time of pricing (for instance, in a forced or distressed sale). The prices used by the Fund may differ from the value that would be realized if the securities were sold, and these differences could be material to the financial statements. Depending on the source and relative significance of the valuation inputs in these instances, the instruments may be classified as Level 2 or Level 3 in the fair value hierarchy.

 

The following is a summary of the valuation inputs used as of September 30, 2015 in valuing the Fund’s investments based upon the three fair value levels defined above: 

                     
        Level 2 -   Level 3 -      
   Level 1 -   Other Significant   Significant      
Porfolio  Quoted Prices   Observable Inputs   Unobservable Inputs   Total 
IFP US Equity Fund                    
Common Stocks (1)  $898,712,126   $   $   $898,712,126 
Total Investments  $898,712,126   $   $   $898,712,126 
                     

 

(1) See investment industries in the Schedule of Investments.

 

19
 

  

 
ADVISERS INVESTMENT TRUST
INDEPENDENT FRANCHISE PARTNERS US EQUITY FUND
NOTES TO FINANCIAL STATEMENTS

September 30, 2015

 

As of September 30, 2015, there were no Level 2 or Level 3 securities held by the Fund. The Fund’s policy is to disclose transfers between levels based on valuations at the end of the reporting period. There were no transfers between Levels 1, 2 or 3 during the year ended September 30, 2015.

 

CURRENCY TRANSACTIONS

 

The Fund may engage in spot currency transactions for the purpose of foreign security settlement and operational processes. Changes in foreign currency exchange rates will affect the value of the Fund’s securities and the price of the Fund’s shares. Generally, when the value of the U.S. dollar rises in value relative to a foreign currency, an investment in that country loses value because that currency is worth fewer U.S. dollars. Devaluation of a currency by a country’s government or banking authority also may have a significant impact on the value of any investments denominated in that currency. Currency markets generally are not as regulated as securities markets.

 

INVESTMENT TRANSACTIONS AND INCOME

 

Investment transactions are accounted for no later than one business day after trade date. For financial reporting purposes, investments are reported as of the trade date. The Fund determines the gain or loss realized from investment transactions by using an identified cost basis method. Dividend income is recognized on the ex-dividend date. Dividends from foreign securities are recorded on the ex-dividend date, or as soon as the information is available.

 

EXPENSE ALLOCATIONS

 

Expenses directly attributable to a fund in the Trust are charged to that fund, while expenses that are attributable to more than one fund in the Trust are allocated among the applicable funds on a pro-rata basis to each adviser’s series of funds, based on relative net assets or another reasonable basis.

 

DIVIDENDS AND DISTRIBUTIONS

 

The Fund intends to distribute substantially all of its net investment income as dividends to shareholders on an annual basis. The Fund intends to distribute its net realized long-term capital gains and its net realized short-term capital gains at least once a year.

 

Distributions from net investment income and from net realized capital gain are determined in accordance with Federal income tax regulations, which may differ from accounting principles generally accepted in the United States of America (“GAAP”). These “book/tax” differences are either considered temporary or permanent in nature. To the extent these differences are permanent in nature (e.g. treatment of certain dividend distributions, gains/losses, return of capital etc), such amounts are reclassified within the composition of net assets based on their federal tax-basis treatment; temporary differences do not require reclassification. Distributions to shareholders that exceed net investment income and net realized capital gains for tax purposes are reported as return of capital.

 

REDEMPTION FEES

 

The Fund will charge a redemption fee of 0.25% of the total redemption amount if you sell your shares, regardless of the length of time you have held your shares and subject to certain exceptions and limitations described in the prospectus. The redemption fee is paid directly to the Fund and is intended to encourage long-term investment in the Fund, to facilitate portfolio management and to avoid (or compensate the Fund for the impact of) transaction and

 

20
 

 

 
ADVISERS INVESTMENT TRUST
INDEPENDENT FRANCHISE PARTNERS US EQUITY FUND
NOTES TO FINANCIAL STATEMENTS

September 30, 2015

 

other Fund expenses incurred as a result of shareholder redemptions. Redemption fees charged for the year were $304,760 and are reflected within the capital activity of the Fund.

 

FEDERAL INCOME TAX INFORMATION

 

No provision is made for Federal income taxes as the Fund intends to qualify each year as a “regulated investment company” under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”), and distribute substantially all of its net investment income and net realized capital gain in accordance with the Code.

 

As of September 30, 2015, the Fund did not have uncertain tax positions that would require financial statement recognition or disclosure based on an evaluation of all open tax years for all major tax jurisdictions. The Fund’s federal tax returns filed for the tax years ended September 30, 2012, 2013 and 2014 remain subject to examination by the Internal Revenue Service. Interest or penalties incurred, if any, on future unknown, uncertain tax positions taken by the Fund will be recorded as interest expense on the Statement of Operations.

 

Management is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will change materially in the next 12 months.

 

USE OF ESTIMATES

 

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.

 

B. Fees and Transactions with Affiliates and Other Parties  

 

The Trust, on behalf of the Fund, has entered into an Investment Advisory Agreement (the “Agreement”) with Independent Franchise Partners, LLP (the “Adviser”) to provide investment management services to the Fund. Under the terms of the Agreement, the Fund pays the Adviser a monthly fee based on the Fund’s daily net assets at the following annualized rates: 

              
Advisor’s Assets   Scale Discount for        Effective Overall Annual
Under Management (1)   Assets in each Range (1)    Annualized Rate (1)   Fee (1)
First $1 billion       0.88%  0.88%
$1 - 2 billion   0.10%   0.78%  at $2 billion - 0.83%
$2 - 3 billion   0.20%   0.68%  at $3 billion - 0.78%
$3 - 4 billion   0.30%   0.58%  at $4 billion - 0.73%
$4 - 5 billion   0.40%   0.48%  at $5 billion - 0.68%
Above $5 billion          0.68%

 

(1) The Adviser’s total assets under management at the end of each calendar quarter are used to calculate the effective annual fee to be applied during the next calendar quarter. During the year ended September 30,

 

21
 

 

 
ADVISERS INVESTMENT TRUST
INDEPENDENT FRANCHISE PARTNERS US EQUITY FUND
NOTES TO FINANCIAL STATEMENTS

September 30, 2015

 

2015, the effective annualized rate was 0.68% given the Adviser’s total assets under management were in excess of $5 billion during the period.

 

BHIL Distributors, Inc. (“Distributor”) provides distribution services to the Fund pursuant to a distribution agreement with the Trust. Under its agreement with the Trust, the Distributor acts as an agent of the Trust in connection with the offering of the shares of the Fund on a continuous basis. The Adviser, at its own expense, pays the Distributor an annual $5,000 fee for these services and reimbursement for certain expenses incurred on behalf of the Fund.

 

The Northern Trust Company (“Northern Trust”) serves as the financial administrator, transfer agent, custodian and fund accounting agent for the Fund pursuant to written agreements between the Fund and Northern Trust. The Fund has agreed to pay Northern Trust a tiered basis-point fee based on the Fund’s daily net assets, subject to a minimum annual fee of $150,000 relating to these services, and reimburse for certain expenses incurred on behalf of the Fund. Total fees paid to Northern Trust pursuant to these agreements are reflected as “Accounting and Administration” fees on the Statement of Operations. For the year ended September 30, 2015, Northern Trust has agreed to voluntarily waive certain fees of $4,834. The waiver agreement may be terminated at any time and the waivers are not subject to recoupment.

 

Beacon Hill Fund Services, Inc. (“Beacon Hill”) provides Compliance Services, Financial Control Services and Business Management and Governance Services for the Fund pursuant to written agreements between the Fund and Beacon Hill, including providing the President, Treasurer, Chief Compliance Officer and Secretary to the Fund and performing certain regulatory administrative services. The Fund pays Beacon Hill a tiered basis-point fee based on the Fund’s daily net assets and reimburses for certain expenses incurred on behalf of the Fund. Total fees paid to Beacon Hill pursuant to these agreements are reflected as “Regulatory and Compliance” fees on the Statement of Operations.

 

Carne Global Financial Services (US) LLC (“Carne”) provides Risk Management and Oversight Services for the Fund pursuant to a written agreement between the Fund and Carne, including providing the Risk Officer to the Fund to administer the fund risk program and oversee the analysis of investment performance and performance of service providers. The Fund has agreed to pay Carne an annual fee of $30,000 for these services, and reimburse for certain expenses incurred on behalf of the Fund. Total fees paid to Carne pursuant to these agreements are reflected as “Risk Officer” fees on the Statement of Operations.

 

Certain officers and Trustees of the Trust are affiliated with Beacon Hill, Northern Trust, Carne or the Distributor and receive no compensation directly from the Fund for serving in their respective roles. Through March 31, 2015, the Trust paid each Independent Trustee compensation for their services based on an annual retainer of $22,000 and reimbursement for certain expenses. Effective April 1, 2015, the Trust pays an annual retainer of $30,000 and reimbursement for certain expenses. If there are more than six meetings in a year, additional meeting fees may apply. For the year ended September 30, 2015, the aggregate Trustee compensation paid by the Trust was $79,500. The amount of total Trustee compensation and reimbursement of out-of-pocket expenses allocated from the Trust to the Fund is reflected as “Trustees” expenses on the Statement of Operations.

 

The Adviser has contractually agreed to waive fees or reimburse expenses to the extent necessary to limit total annual fund operating expenses (exclusive of brokerage costs, interest, taxes, dividends on short positions, litigation and indemnification expenses, expenses associated with investments in underlying investment companies and extraordinary expenses) to 0.85% of the average daily net assets of the Fund. For the year ended September 30, 2015, there were no expenses reduced by the Adviser. The current agreement with the Adviser to waive fees and/or

 

22
 

 

 
ADVISERS INVESTMENT TRUST
INDEPENDENT FRANCHISE PARTNERS US EQUITY FUND
NOTES TO FINANCIAL STATEMENTS

September 30, 2015

 

reimburse expenses cannot be terminated prior to January 30, 2016, at which time the Adviser will determine whether to renew or revise the agreement. Any fees waived or expenses reimbursed during a fiscal year are not subject to repayment from the Fund to the Adviser in subsequent fiscal years.

 

C. Investment Transactions

 

For the year ended September 30, 2015, the aggregate costs of purchases and proceeds from sales of securities (excluding short-term investments) for the Fund were as follows:

 

Cost of Purchases Proceeds from Sales
$471,188,178 $405,343,263

  

D. Federal Income Tax  

 

As of September 30, 2015, the cost, gross unrealized appreciation and gross unrealized depreciation on securities, for federal income tax purposes, were as follows: 

                     
                  Net Unrealized 
        Tax Unrealized   Tax Unrealized   Appreciation 
   Tax Cost   Appreciation   (Depreciation)   (Depreciation) 
IFP US Equity Fund  $824,050,164   $113,413,985   $(38,752,023)  $74,661,962 

 

The tax character of distributions paid to shareholders during the years ended September 30, 2015 and September 30, 2014 for the Fund were as follows: 

                                 
          Net Long   Total Taxable   Tax Return   Total Distributions  
    Ordinary Income   Term Gains   Distributions   of Capital   Paid  
2015   $ 18,342,985   $ 9,357,935   $ 27,700,920   $   $ 27,700,920  
2014     13,257,795     2,748,514     16,006,309         16,006,309  

 

As of the latest tax year ended September 30, 2015, the components of accumulated earnings on a tax basis were as follows: 

                                                           
      Undistributed
Ordinary Income
    Undistributed Long-Term Capital
Gains
    Accumulated
Earnings
    Distributions
Payable
    Accumulated Capital and
Other Losses
    Unrealized
Appreciation
    Total Accumulated
Earnings
 
IFP US Equity Fund     $ 35,622,802     $ 29,843,925     $ 65,466,727     $     $     $ 74,571,450     $ 140,038,177  


At September 30, 2015, the latest tax year end, the Fund had no capital loss carry-forwards available to offset future net capital gains.

 

23
 

 

 
ADVISERS INVESTMENT TRUST

INDEPENDENT FRANCHISE PARTNERS US EQUITY FUND
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

September 30, 2015 

 

Report of Independent Registered Public Accounting Firm

 

To the Board of Trustees and Shareholders of Advisers Investment Trust:

 

In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of the Independent Franchise Partners US Equity Fund (one of the portfolios included in Advisers Investment Trust, hereafter referred to as the “Fund”) at September 30, 2015, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the periods presented, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at September 30, 2015 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.

 

PricewaterhouseCoopers LLP
Chicago, Illinois
November 24, 2015

 

24
 

 

 
ADVISERS INVESTMENT TRUST

INDEPENDENT FRANCHISE PARTNERS US EQUITY FUND
ADDITIONAL INFORMATION
September 30, 2015 (Unaudited) 

 

A. Other Federal Tax Information

 

Under the Jobs and Growth Tax Relief Reconciliation Act of 2003 (the “Act”), the following percentages of ordinary dividends paid during the fiscal year ended September 30, 2015 are designated as “qualified dividend Income”, as defined in the Act, subject to reduced tax rates in 2015:

 

Fund   QDI Percentage 
IFP US Equity Fund   44.43%

 

A percentage of the dividends distributed during the fiscal year for the Fund qualify for the dividends-received deduction for corporate shareholders:

 

    Corporate 
Fund   DRD Percentage 
IFP US Equity Fund   30.67%

 

B. Summary of Fund Holdings

      
Market Exposure
      
Equity Securities   % of Net Assets 
Pharmaceuticals   24.5%
Software   11.7 
Food Products   8.2 
Media   8.1 
Household Products   7.4 
IT Services   6.8 
Tobacco   8.8 
Diversified Consumer Services   4.3 
Computers & Peripherals   4.3 
Internet Software & Services   3.7 
Beverages   2.9 
Health Care Equipment & Supplies   2.2 
Chemicals   2.1 
Total   95.0%
 
Largest Equity Positions
 
Issuer   % of Net Assets 
Microsoft Corp.   7.5%
Johnson & Johnson   6.9 
Accenture PLC   6.8 
Philip Morris International   5.6 
Mondelez International Inc.   5.0 
Total   31.8%


 

25
 

 

 
ADVISERS INVESTMENT TRUST

INDEPENDENT FRANCHISE PARTNERS US EQUITY FUND
ADDITIONAL INFORMATION
September 30, 2015 (Unaudited) 

 

C. Expense Examples

 

As a Fund shareholder, you may incur two types of costs: (1) transaction costs, including redemption fees; and (2) ongoing costs, including management 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. Please note that the expenses shown in the tables are meant to highlight your ongoing costs only and do not reflect any transactional costs. Therefore, the examples are useful in comparing ongoing costs only and will not help you determine the relative total cost of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.

 

The examples below are based on an investment of $1,000 invested at April 1, 2015 and held for the entire period through September 30, 2015.

 

The Actual Expense Example below provides information about actual account values and actual expenses. You may use this information, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the table under the heading entitled “Expenses Paid” to estimate the expenses you paid on your account during this period.

 

The Hypothetical Expense Example below provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. 

                           
    Expense
Ratio
  Beginning Account Value
4/1/2015
  Ending Account Value
9/30/2015
  * Expenses Paid
4/1/15-9/30/15
 
Actual     0.80 % $ 1,000.00   $ 959.80   $ 3.93  
Hypothetical     0.80 % $ 1,000.00   $ 1,021.06   $ 4.05  

 

* Expenses are calculated using the annualized expense ratio as disclosed in the table, multiplied by the average account value for the period, multiplied by the number of days in the most recent half fiscal year (183), and divided by the number of days in the current year (365).

 

D. Board Approval of Investment Advisory Agreement

 

Section 15 of the Investment Company Act of 1940 (the “1940 Act”) requires that the Investment Advisory Agreement between Advisers Investment Trust (the “Trust”) and Independent Franchise Partners, LLP (the “Adviser”) with respect to the Independent Franchise Partners US Equity Fund (“Fund”) be approved and renewed, at least annually, by a majority the Board of Trustees (“Board”), including a majority of the Trustees who are not “interested persons,” as that term is defined in the Investment Company Act of 1940, as amended (“Independent Trustees”). It is the duty of the Board to request as much information as is reasonably necessary to evaluate the terms of the Investment Advisory Agreement to determine whether the agreement is fair to the Fund and its shareholders. The Board considered and approved the Investment Advisory Agreement for the Fund at an in-person meeting held on June 18, 2015.

 

26
 

 

 
ADVISERS INVESTMENT TRUST

INDEPENDENT FRANCHISE PARTNERS US EQUITY FUND
ADDITIONAL INFORMATION
September 30, 2015 (Unaudited) 

 

The Board requested, and the Adviser provided, information and data relating to: (i) the investment performance of the Fund (ii) the nature, extent and quality of the services provided by the Adviser to the Fund; (iii) the cost of the services provided and the profits realized by the Adviser and its affiliates from the relationship with the Fund; (iv) the extent to which economies of scale will be realized as the Fund grows; (v) whether the fee levels will reflect these economies of scale to the benefit of the Fund’s shareholders; (vi) the advisory fees paid by other comparable accounts advised by the Adviser or by a different investment adviser (the “Peer Group”); (vii) the Fund’s expense ratio and the expense ratios of funds in the Peer Group; and (viii) the effect of any fee waivers and expense reimbursements made by the Adviser and other service providers.

 

The Trustees reviewed the materials regarding the Fund supplied by the Adviser and gave careful consideration to the nature and quality of the services provided by the Adviser. A representative of the Adviser gave an overview of the Adviser’s advisory business and reviewed the Adviser’s personnel and organizational structure, highlighting anticipated additions and departures. A representative of the Adviser also discussed succession planning at the Adviser, particularly with respect to the role of the Chief Operating Officer. He also reviewed the various service providers that provide support services to the Adviser, noting that the Adviser reviews these relationships every three years, but would do so sooner should a situation arise that would warrant an earlier review.

 

A representative of the Adviser reviewed the Adviser’s investment philosophy and portfolio construction process, and key risks associated with the Fund and ways in which those risks are mitigated. He noted that the portfolio currently holds 23 positions, down from the usual 30 average. The Board noted that the Adviser’s best execution, allocation and counterparty selection policy was included in the Board materials.

 

A representative of the Adviser reviewed the Adviser’s compliance program, with particular emphasis on investment guideline monitoring. He noted that there have been no material compliance issues/concerns raised or encountered since the last renewal of the advisory contract and no regulatory examinations or investigations since the inception of the firm in 2009. A representative of the Adviser also reviewed a summary of the Adviser’s insurance coverage, noting there have been no litigation or administrative actions since the inception of the firm. He then reviewed the Adviser’s business continuity/disaster recovery plan, highlighting certain enhancements, and addressed questions from the Board. A representative of the Adviser also discussed the Adviser’s information security protocols, including privacy, record retention, and cybersecurity. The Board noted that a copy of the Adviser’s Form ADV, Code of Ethics, and Report and Financial Statements as of December 31, 2013, were included in the Board materials. Taking into account the personnel involved in servicing the Fund, as well as the materials and services described above, the Board expressed satisfaction with the quality of the services received from the Adviser.

 

The Board reviewed the Fund’s performance for periods from inception through March 31, 2015, comparing the performance (with and without a redemption fee) to the Russell 1000 Value Index. The Board noted that the Fund generally outperformed the index for the shorter time periods but underperformed for the longer periods. The Board also reviewed the performance of the Fund in relation to the Adviser’s US franchise equity composite (“Composite”) and in relation to the Peer Group for periods from inception through March 31, 2015, noting that the Fund’s performance is within the range of the Peer Group and in-line with the Composite for the periods reported. The Board also reviewed the performance of the Fund in relation to the Composite, the Irish Variable Capital Company, and the Russell 1000 Value Index, noting the consistent returns across the portfolios managed by the Adviser.

 

The Board reviewed the advisory fee paid by the Fund and the total operating expenses of the Fund. A representative of the Adviser noted that the Adviser receives a management fee of 0.68% of average daily net assets, well below the maximum contractual rate of 0.88% of average daily net assets. The Trustees noted that the Fund

 

27
 

 

 
ADVISERS INVESTMENT TRUST

INDEPENDENT FRANCHISE PARTNERS US EQUITY FUND
ADDITIONAL INFORMATION
September 30, 2015 (Unaudited) 

 

shareholders realize a substantial benefit from breakpoints that take into account the total assets under management at the Adviser and are not limited only to those assets in the Fund. A representative of the Adviser reminded the Trustees that so long as total assets under management for the Adviser’s global and US franchise strategies remain over $5 billion, the Fund’s advisory fee will be 0.68%. The Board reviewed the investment advisory fees paid by the Peer Group, noting that the Fund’s management fee is within the Peer Group, which range from 0.55% to 1.00%.

 

With respect to total operating expenses, the Board noted that the Adviser has contractually agreed to waive fees and/or reimburse expenses to the extent necessary to limit the Fund’s total annual operating expenses (exclusive of brokerage costs, interest, taxes, litigation and indemnification expenses, expenses associated with investments in underlying investment companies, and extraordinary expenses) to 0.85% of average daily net assets. A representative of the Adviser reported that this agreement to waive fees and/or reimburse expenses cannot be terminated prior to January 30, 2016, at which time the Adviser will determine whether to renew or revise the agreement. A representative of the Adviser said that the Fund’s total annual operating expenses as shown in the most recent prospectus are 0.81%, which is near the bottom of the Peer Group, which range from 0.52% to 1.30%. After considering the comparative data as described above, and the anticipated renewal of the Expense Limitation Agreement at the December 2015 Board meeting for the period to end January 30, 2017, the Board concluded that the advisory fees and expense ratios were reasonable.

 

In reviewing the profits to be realized by the Adviser in connection with its management of the Fund, the Board reviewed the information supplied by the Adviser in the Board materials, including the Adviser’s audited financial statements for the calendar year 2013 and revenues and expenses for calendar year 2014. The Board noted that the indicative operating margin for the Fund for calendar year 2014 is just within the indicative operating range set forth in the Board materials and initially provided to the Board in July 2011, which is still applicable. A representative of the Adviser explained that profit is largely a function of volume and that while the current level of profit is at the high end of the range, he does not feel that this calls for a reappraisal of pricing. The representative stated that the level of profitability is indicative of profitability across the firm. The Board noted that the Adviser’s relationship with the Fund was profitable even though the Adviser was operating under an Expense Limitation Agreement with the Trust and the Fund shareholders were benefiting from the Adviser’s scaled discount fee schedule, set forth in the Board materials. The Board also noted that the Adviser’s level of profitability was indicative across the firm, and all US franchise strategy clients pay the same management fee, regardless of mandate type or size, and that the Adviser is investing its profits back into its business. After considering the data provided, and considering all of the factors as a whole, the Board concluded that the level of profit was reasonable.

 

With respect to economies of scale, the Trustees considered the Fund’s marketing and distribution plans, capacity, and breakeven point. The Board noted that the Fund is targeted solely at institutional investors, shareholders benefit from the Adviser’s scaled discount fee schedule, and the Fund has already achieved its break-even point based on assets under management. A representative of the Adviser discussed the capacity of the Fund and the Adviser’s intention to hard close the Fund when it reaches maximum capacity. A representative of the Adviser confirmed that other than the advisory fee, the Adviser derives no other fees/benefits from the Fund, does not charge Rule 12b-1 fees, uses commission sharing arrangements to segregate execution decisions from research decisions, and does not use soft dollars as a consideration for broker selection.

 

E. Other Information

 

A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities is available (i) without charge, upon request, by writing to the Trust at Independent Franchise Partners Funds c/o The Northern Trust Company, P.O. Box 4766, Chicago, Illinois 60680-4766 or by calling the Trust at

 

28
 

 

 
ADVISERS INVESTMENT TRUST

INDEPENDENT FRANCHISE PARTNERS US EQUITY FUND
ADDITIONAL INFORMATION
September 30, 2015 (Unaudited) 

 

855-233-0437; and (ii) on the Securities and Exchange Commission’s website at www.sec.gov. Information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available (i) without charge, by calling the Trust at 855-233-0437; and (ii) on the Commission’s website at www.sec.gov.

 

The Fund files a complete Schedule of Portfolio Holdings with the Commission for the first and third quarters of each fiscal year on Form N-Q and is available without charge on the Commission’s website at www.sec.gov, or may be reviewed and copied at the Commission’s Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 800-SEC-0330.

 

F. Trustees and Officers

 

The following table provides information regarding each Trustee who is not an “interested person” of the Trust, as defined in the 1940 Act.

 

Name, Address and
Year of Birth1
Position(s)
Held with
the Trust2
Term of
Office/Length of
Time Served
Principal Occupation(s) During
Past 5 Years
Number of
Portfolios in the
Trust Overseen
by Trustee 2
Other
Directorships
Held by Trustee
During Past 5
Years
D’Ray Moore Rice
Year of Birth: 1959
Trustee Indefinite/July
2011 to present
Independent Trustee, Diamond Hill Funds 2007 to present 12 Diamond Hill
Funds
Steven R. Sutermeister
Year of Birth: 1954
Trustee Indefinite/July
2011 to present
President, Vadar Capital LLC, 2008 to present; Director, First Franklin Corp. 2009 to 2011 12 First Franklin
Corp.
Michael M. Van
Buskirk
Year of Birth: 1947
Trustee Indefinite/July
2011 to present
Retired; President and CEO of the Ohio Bankers League 1991 to 2013; Independent Trustee, Boston Trust & Walden Funds 1992 to present; Independent Trustee, Coventry Funds Trust 1997 to 2013 12 Boston Trust
& Walden
Funds and
Coventry
Funds Trust

 

1 The mailing address of each Trustee is 325 John H. McConnell Blvd, Suite 150, Columbus, Ohio 43215.
2 The Trust consists of the various series of Advisers Investment Trust.

 

The following table provides information regarding each Trustee who is an “interested person” of the Trust, as defined in the 1940 Act, and each officer of the Trust.

 

29
 

 

 
ADVISERS INVESTMENT TRUST

INDEPENDENT FRANCHISE PARTNERS US EQUITY FUND
ADDITIONAL INFORMATION
September 30, 2015 (Unaudited) 

 

Name, Address and
Year of Birth1
Position(s)
Held with
the Trust
Term of Office/
Length of Time
Served
Principal Occupation(s) During
Past 5 Years
Number of
Portfolios in the
Trust Overseen
by Trustee2
Other
Directorships
Held by Trustee
During Past 5
Years
Dina A. Tantra
Year of Birth: 1969
Trustee and
President
Indefinite/
September 2012
to present
Director, Secretary and General Counsel, Beacon Hill Fund Services, Inc., 2008 to present; Secretary and General Counsel, BHIL Distributors, Inc., 2008 to present 12 None
Peter B. Cherecwich
Year of Birth: 1964
Trustee Indefinite/ May
2013 to present
Executive Vice President of The Northern Trust Company, 2008 to present 12 None
Scott Craven Jones
Year of Birth: 1962
Risk Officer Indefinite/July
2014 to present
Director, Carne Global Financial Services, Inc., 2013 to present; Adviser, Wanzenburg Partners LLC, 2012 to 2013; Chief Operating Officer and Chief Financial Officer, Aurora Investment Management, 2010 to 2012 N/A N/A
Rodney Ruehle
Year of Birth: 1968
Chief
Compliance
Officer
Indefinite/July
2011 to present
Director, Beacon Hill Fund Services, Inc. 2008 to present; Chief Compliance Officer, Asset Management Funds, November 2009 to present; Chief Compliance Officer of Tributary Funds, Inc., December 2009 to present; Chief Compliance Officer, Penn Series Funds, Inc., February 2012 to present N/A N/A

 

30
 

 

 
ADVISERS INVESTMENT TRUST

INDEPENDENT FRANCHISE PARTNERS US EQUITY FUND
ADDITIONAL INFORMATION
September 30, 2015 (Unaudited) 

 

Name, Address and
Year of Birth1
Position(s)
Held with
the Trust
Term of Office/
Length of Time
Served
Principal Occupation(s) During
Past 5 Years
Number of
Portfolios in the
Trust Overseen
by Trustee2
Other
Directorships
Held by Trustee
During Past 5
Years
Troy Sheets
Year of Birth: 1971
Treasurer Indefinite/ July
2011 to present
Director, Beacon Hill Fund Services, Inc. 2009 to present N/A N/A
Trent Statczar
Year of Birth: 1971
Assistant
Treasurer
Indefinite/July
2011 to present
Director, Beacon Hill Fund Services Inc. 2008 to present N/A N/A
Dana Gentile
Year of Birth: 1962
Secretary Indefinite/
December 2013
to present
Director, Beacon Hill Fund Services, Inc. 2013 to present; Senior Vice President, Citi Fund Services 1987 to 2013 N/A N/A
Lori K. Cramer
Year of Birth: 1967
Assistant
Secretary
Indefinite/
July 2014 to
present
Director, Beacon Hill Fund Services, 2014 to present; Paralegal, Nationwide Financial Services, Inc., 2002 to 2014 N/A N/A
Barbara J. Nelligan
Year of Birth: 1969
Vice
President
Indefinite/
December 2012
to present
Senior Vice President, Global Fund Services Product Management, The Northern Trust Company, 1991 to present N/A N/A

 

1 The mailing address of each officer is 325 John H. McConnell Blvd, Suite 150, Columbus, Ohio 43215.
2 The Trust consists of the various series of Advisers Investment Trust.

 

The Fund’s Statement of Additional Information includes additional information about the Trust’s Trustees and Officers. To receive your free copy of the Statement of Additional Information, call toll-free 855-233-0437.

 

31
 

 

Independent Franchise Partners US Equity Fund 

Privacy Policy

 

SAFEGUARDING PRIVACY

 

We recognize and respect the privacy expectations of each of our investors and we believe the confidentiality and protection of investor information is one of our fundamental responsibilities. New technologies have dramatically changed the way information is gathered and used, but our continuing commitment to preserving the security and confidentiality of investor information has remained a core value of the Advisers Investment Trust.

 

INFORMATION WE COLLECT AND SOURCES OF INFORMATION

 

We may collect information about our customers to help identify you, evaluate your application, service and manage your account and offer services and products you may find valuable. We collect this information from a variety of sources including: 

     
  · Information we receive from you on applications or other forms (e.g. your name, address, date of birth, social security number and investment information);  
     
  · Information about your transactions and experiences with us and our affiliates (e.g. your account balance, transaction history and investment selections); and
     
  · Information we obtain from third parties regarding their brokerage, investment advisory, custodial or other relationship with you (e.g. your account number, account balance and transaction history.

 

INFORMATION WE SHARE WITH SERVICE PROVIDERS

 

We may disclose all non-public personal information we collect, as described above, to companies (including affiliates) that perform services on our behalf, including those that assist us in responding to inquiries, processing transactions, preparing and mailing account statements and other forms of shareholder services provided they use the information solely for these purposes and they enter into a confidentiality agreements regarding the information.

 

INFORMATION WE MAY SHARE WITH AFFILIATES

 

If we have affiliates which are financial service providers that offer investment advisory, brokerage and other financial services, we may (subject to Board approval) share information among our affiliates to better assist you in achieving your financial goals.

 

SAFEGUARDING CUSTOMER INFORMATION

 

We will safeguard, according to federal standards of security and confidentiality, any non-public personal information our customers share with us.

 

We will limit the collection and use of non-public customer information to the minimum necessary to deliver superior service to our customers which includes advising our customers about our products and services and to administer our business.

 

We will permit only authorized employees who are trained in the proper handling of non-public customer information to have access to that information.

 

We will not reveal non-public customer information to any external organization unless we have previously informed the customer in disclosures or agreements, have been authorized by the customer or are required by law or our regulators.

 

We value you as a customer and take your personal privacy seriously. We will inform you of our policies for collecting, using, securing and sharing nonpublic personal information the first time we do business and every year that you are a customer of the Advisers Investment Trust or anytime we make a material change to our privacy policy.

 

 
 

 

THIS PAGE INTENTIONALLY LEFT BLANK  

 

 
 

 

Investment Adviser
Independent Franchise Partners, LLP
Level 1, 10 Portman Square
London, W1H 6AZ
United Kingdom
 
Custodian
The Northern Trust Company
50 South LaSalle Street
Chicago, Illinois 60603
 
Independent Registered Public
Accounting Firm
PricewaterhouseCoopers LLP
One North Wacker Drive
Chicago, Illinois 60606
 
Legal Counsel
Thompson Hine LLP
41 South High Street, Suite 1700
Columbus, Ohio 43215-6101
 
Distributor
BHIL Distributors, Inc.
325 John H. McConnell Boulevard, Suite 150
Columbus, Ohio 43215
 
For Additional Information, call
855-233-0437 or 312-557-7902

 

 
 

 

 (VONTOBEL LOGO)

 

 

 

VONTOBEL FUNDS

 

ANNUAL REPORT

 

September 30, 2015

 

 

 

This report is submitted for the general information of the shareholders of the Funds. It is not authorized for the distribution to prospective investors unless preceded or accompanied by an effective prospectus.

 

 

 

 

ADVISERS INVESTMENT TRUST
VONTOBEL FUNDS
TABLE OF CONTENTS
September 30, 2015

 

PORTFOLIO COMMENTARY   1
     
SCHEDULES OF INVESTMENTS   19
     
STATEMENTS OF ASSETS AND LIABILITIES   29
     
STATEMENTS OF OPERATIONS   30
     
STATEMENTS OF CHANGES IN NET ASSETS   31
     
FINANCIAL HIGHLIGHTS   32
     
NOTES TO FINANCIAL STATEMENTS   35
     
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM   46
     
ADDITIONAL INFORMATION   47

 

 

 

 

ADVISERS INVESTMENT TRUST
VONTOBEL FUNDS
PORTFOLIO COMMENTARY
September 30, 2015 (Unaudited)

 

Vontobel Global Emerging Markets Equity Institutional Fund

 

Performance Update

 

Value of a hypothetical $1,000,000 investment in the Fund Class I shares from inception on May 22, 2013 to September 30, 2015

 

(LINE GRAPH)

 

Average Annual Total Returns as of September 30, 2015

 

    One Year   Since Inception
Vontobel Global Emerging Markets Equity Institutional Fund – Class I   -11.49%   -5.62%
MSCI Emerging Markets Index   -19.28%   -8.86%

 

The Fund’s Class I Total Annual Operating Expense, as per the most recent Prospectus, is 1.00%.

 

Data as at September 30, 2015. The Inception date of the Fund is May 22, 2013. The Fund’s performance reflects the reinvestment of dividends as well as the impact of transaction costs and the deduction of fees and expenses. The performance does not reflect taxes that a shareholder would pay on fund distributions or on the redemption of fund shares.

 

The 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. The Fund’s current performance may be lower or higher than the performance data quoted. Investors may obtain performance information current to the most recent month-end, within 7 business days, by calling 866-252-5393 or 312-630-6583.

 

 1

 

 

ADVISERS INVESTMENT TRUST
VONTOBEL FUNDS
PORTFOLIO COMMENTARY
September 30, 2015 (Unaudited)

 

The Fund’s benchmark for performance comparison purposes is the MSCI Emerging Markets Index. The Index is an unmanaged index based on share prices of a select group of global emerging market stocks that are available to global investors. The table reflects the theoretical reinvestment of dividends on securities in the Index. The impact of transaction costs and the deduction of expenses associated with a mutual fund, such as investment management and administration fees, are not reflected in the Index calculations. It is not possible to invest directly in an index.

 

Portfolio Commentary

 

For the one-year period ending September 30, 2015, the Vontobel Global Emerging Markets Equity Institutional Fund outperformed its benchmark, the MSCI Emerging Markets Index (Total Return Net Dividends). On the sector level, an overweight to Consumer Staples, combined with stock selection in the sector, was the leading contributor to relative returns. Our stock selection in the Financials sector also contributed to relative results. Our stock selection in the Information Technology and Consumer Discretionary sectors detracted from relative performance.

 

Leading contributors to Fund absolute performance during the period were HDFC Bank, Wal-Mart de Mexico, Housing Development Finance Corporation, Power Assets Holdings, and Axis Bank.

 

HDFC Bank is a high-quality Indian private sector bank which has been a cornerstone investment in the portfolio for many years. HDFC Bank released solid F1Q2016 results. We believe that its cutting its benchmark (base rate) lending rate will likely accelerate its market share gains. HDFC Bank is the largest privately owned retail bank in India with a network of 3,659 branches and 11,633 ATMs (many outside of branches) across 2,287 towns and cities nationwide at calendar year end 2014. The bank has delivered solid growth while maintaining high credit and underwriting standards. HDFC Bank has a strong deposit franchise and powerful technology backbone that has allowed it to significantly grow earnings over the past 10 years.

 

Wal-Mart de Mexico (Walmex) reported 4Q14 results that were above consensus expectations and a higher dividend payment than expected. There is also excitement about a potentially better environment for the Mexican consumer. Wal-Mart de Mexico is the premier Mexican retailer. Unlike Wal-Mart in the United States, which offers cheap prices but not the best shopping environment, Walmex offers both low prices and a better shopping experience than most stores in the country. The company has no net debt, effective working capital management and generates strong cash flow.

 

Housing Development Finance Corporation released solid F1Q2016 results. It also has agreed to sell approximate 9% stake in the life insurance joint venture HDFC Standard Life to Standard Life. The company is well-placed for long-term growth as it is the leader in mortgage lending in India, with margins supported by industry-leading low costs from both efficient operations and low borrowing costs due to its excellent credit history. The company also provides home loans, deposit products, lease finance facilities to the corporate sector for plant machinery, and property-related services nationwide. The company has been around since 1977 and is usually considered a “gold standard” in terms of corporate governance and risk management.

 

Power Assets Holdings (PAH) performed well over the period as Cheung Kong Infrastructure (CKI) made an offer to PAH’s minority shareholders to merge both companies. There seems to be consensus that CKI’s offer undervalues the stake of minority shareholders in PAH, which we agree. Outside the offer, there has been no fundamental change in the value of the company; however, the recent outperformance may be related to a speculative position of some investors that CKI may be forced to improve the terms of the offer to complete the deal. Power Assets Holdings generates roughly 50% of earnings

 

 2

 

 

ADVISERS INVESTMENT TRUST
VONTOBEL FUNDS
PORTFOLIO COMMENTARY
September 30, 2015 (Unaudited)

 

from Hong Kong Electric, the integrated utility in Hong Kong. The other 50% comes from utility assets, mostly in developed markets like Australia, Canada and mainly the UK. Power Assets, as a part of a consortium, acquired a 40% stake in the Electricite de France’s UK distribution network. The track record of Power Assets Holding, in our view, is positive. The company’s strong local base and its regionally diversified business model should allow the company to grow over the long term.

 

Axis Bank is an Indian private sector bank. Our longer term view on Axis Bank is that it has a long runway of high-quality earnings growth. It has built a distribution network that gives it low-cost deposits, as well as a platform to grow its retail business. The company has a culture that is a meritocracy and is focused on productivity. With a good branch network, Axis Bank should be able to protect its net interest margins over time.

 

Leading detractors from Fund absolute performance during the period were Baidu, Sands China, Cielo, Ambev, and Alibaba.

 

Baidu disappointed with continued weakness in margins as the company is spending heavily on marketing to drive adoption of its Online-to-Offline (O2O) platforms. We agree that longer term O2O is the right strategy as it allows Baidu to take a higher share of revenues from completed transactions in local services areas, such as food delivery. Longer term, as search revenue slows down, we think O2O transactions will become a more important growth driver for the company; however, shorter term the investment required is impacting margins. The majority of these investments, we believe, are discretionary and will be pulled back over the years. The core search business continues to perform well with revenue growth in the 30-35% range as the investments the company has made in promoting mobile search are coming to fruition. However, the O2O strategy is not driving incremental revenue growth for the near term and intense competition for the O2O markets continues to be strong. This is necessitating Baidu spend more aggressively on marketing and promotion to try to win market share, which is not value added from a shareholders prospective, and continues to drag down margins.

 

Sands China, and other Macau-exposed gaming stocks, continued to be weak due to the onslaught of incrementally bad news from a macroeconomic and policy standpoint. Macau is still under pressure as the Chinese government crackdown on corruption as well as the economic weakness on the mainland has hurt visitation growth and gambling appetite. In the third quarter, there has been new negative news out of the junket space in Macau. Junkets are a key facilitator to the VIP business, which has already contracted meaningfully. Now, we have seen news of some higher profile weakness in the junket space - junkets closing or reducing operations. This does not shock us or change our investment thesis. In the coming year, we expect to see a turn in the underlying market performance as it lacks the previous year’s extreme weakness. We think the news regarding the crackdown on corruption and economic weakness in China will continue. We have, therefore, marginally reduced our exposure on the back of the inevitability of the ongoing pressure and have reallocated capital to better near-term opportunities. However, as we have detailed before, our conviction in the Macau space has not changed over the long term, even while the near and medium term horizon has been cloudy. We still believe it presents tremendous opportunities for highly profitable growth and strong cash returns for shareholders. In our opinion, continued patience, and the passage of time, is all that is needed here.

 

 3

 

 

ADVISERS INVESTMENT TRUST
VONTOBEL FUNDS
PORTFOLIO COMMENTARY
September 30, 2015 (Unaudited)

 

Cielo declined as the Central Bank of Brazil is actively looking to end Cielo and Redecard’s exclusivity for capturing transactions of the smaller card brands, such as Amex, Elo and Hypermarcas. Cielo has the exclusivity in the first two brands. This decision does not come as a surprise to us; it is consistent with the end of exclusivity of Visa and MasterCard back in 2012. The end of exclusivity will improve the competitiveness of the smaller acquirers. It is hard to determine the impact, but we estimate that Cielo should lose share over time, from 50% to 45%. This is in-line with our original forecast. Cielo, Brazil’s leading provider of payment card services, manages the network for the acceptance of multi-brand credit and debit cards in Brazil, as well as for the processing and settlement of credit and debit card transactions. Apart from the traditional electronic payment products and services, the company has a track record of providing innovative business that builds on its core franchise, including a correspondent banking network, prepaid mobile phone credits, electronic vouchers and cash back. The market opportunity for the penetration of cards in Brazil is large and will continue to expand for years. This business is very cash generative and Cielo returns the cash to shareholders in the form of dividends.

 

Ambev was a bottom contributor. Despite the macro issues plaguing Brazil at the moment, the company is performing well. Unfortunately, the Brazilian real devaluation is hurting reported stock performance. From our experience, we believe that strong emerging market companies tend to exit country crises in an even stronger position than when their countries entered the crises. While competitors have to cut back on advertising, innovation, and promotions, the strong companies continue to invest. Longer term, we continue to believe that Ambev will provide excellent shareholder returns. Ambev is the dominant Brazilian brewer and has a strong presence in non-alcoholic beverages. It also has high market share in other Latin American countries as well as Canada. It has very high margins, which should continue to improve over time. The company generates significant cash, pays out a hefty dividend and is not levered.

 

Alibaba underperformed due to two main reasons. First, there has been an adjustment downwards for shorter term Gross Merchandise Value (GMV) growth by about 300-500bps for the third quarter. While overall GMV growth should still be healthy in the low 30% range, the market has been concerned about whether this is the beginning of signs that the overall macro slowdown is having a negative impact on more discretionary segments, such as Computers, Apparel and Household Goods. The weaker-than-expected GMV growth has also been helped by the clean-up of counterfeit sellers on the platform, which came under scrutiny earlier in the year. We trimmed our exposure as we look to determine the type of impact the macro slowdown will have on GMV growth. On the positive side, the monetization rate may potentially improve as the momentum on mobile monetization is improving as ad loads and cost per click trends are heading in the right direction. Second, there has been overhang concerns regarding the lock up expiry which took place on the 20th of September, which covers around 1.6 billion or two thirds of outstanding shares. While the majority of those shares have been pledged to be held long term by key management and Softbank, there is a concern regarding the impact on Yahoo’s 15% stake. Yahoo’s stake will be spun off into a separate entity (Aabaco), though there could still be selling pressure indirectly to Alibaba shares depending on what the shareholders of Aabaco do.

 

 4

 

 

ADVISERS INVESTMENT TRUST
VONTOBEL FUNDS
PORTFOLIO COMMENTARY
September 30, 2015 (Unaudited)

 

Thank you for your investment in the Vontobel Global Emerging Markets Equity Institutional Fund. We are confident that the superior earnings profiles of companies we seek will leave us well- positioned to achieve our long-term performance goals. We continue to focus on underlying growth drivers, profitability and earnings potential, as we pursue our objective: outperformance over full market cycles. We appreciate that you have chosen us to manage your assets, and we remain focused on achieving the Fund’s investment goals.

 

-s- Rajiv Jain 

 

Rajiv Jain 

Chief Investment Officer

Portfolio Manager 

 

Vontobel Asset Management, Inc.

 

 5

 

 

ADVISERS INVESTMENT TRUST
VONTOBEL FUNDS
PORTFOLIO COMMENTARY
September 30, 2015 (Unaudited)

 

Performance Disclosure

 

Past performance is not indicative of future results. Any companies described in this commentary may or may not currently represent a position in our client portfolios. Also, any sector and industry weights described in the commentary may or may not have changed since the writing of this commentary. The information and methodology described in this commentary should not be construed as a recommendation to purchase or sell securities. Please contact a Vontobel representative for more information.

 

Any projections, forecasts or estimates contained in this commentary are based on a variety of estimates and assumptions. There can be no assurance that the estimates or assumptions made will prove accurate, and actual results may differ materially. The inclusion of projections or forecasts should not be regarded as an indication that Vontobel considers the projections or forecasts to be reliable predictors of future events, and they should not be relied upon as such.

 

In the event a company described in this commentary is a position in client portfolios, the securities identified and described do not represent all of the securities purchased, sold or recommended. The reader should not assume that an investment in any securities identified was or will be profitable or that investment recommendations or investment decisions we make in the future will be profitable.

 

For information about how contribution was calculated for any such securities, or to obtain a list showing the contribution of each holding to overall performance, please contact a Vontobel representative.

 

Risk Disclosure

 

The market price of equity securities may be affected by financial market, industry, or issuer-specific events. Focus on a particular style or on small or medium sized companies may enhance that risk. A fund that focuses its investments in a particular industry or sector will be more sensitive to conditions that affect that industry or sector than a non-concentrated fund. Investing internationally, especially in emerging markets, involves additional risks such as currency, political, accounting, economic, and market risk. A fund that focuses its investments in a particular geographic location will be highly sensitive to financial, economic, political, and other developments affecting the fiscal stability of that location.

 

 6

 

 

ADVISERS INVESTMENT TRUST
VONTOBEL FUNDS
PORTFOLIO COMMENTARY
September 30, 2015 (Unaudited)

 

Vontobel Global Equity Institutional Fund

 

Performance Update

 

Value of a hypothetical $1,000,000 investment in the Fund Class I shares from inception on January 2, 2015 to September 30, 2015

 

 (LINE GRAPH)

 

Cumulative Total Returns as of September 30, 2015

 

    Since Inception
Vontobel Global Equity Institutional Fund – Class I   1.50%
MSCI All Country World Index   -6.78%

 

The Fund’s Class I Total Gross and Net Annual Operating Expense Ratio, as per the most recent Prospectus, is 0.97% and 0.90%, respectively. The Adviser has entered into a contractual expense limitation agreement with respect to the Fund until January 28, 2016.

 

Data as at September 30, 2015. The Inception date of the Fund is January 2, 2015. The Fund’s performance reflects the reinvestment of dividends as well as the impact of transaction costs and the deduction of fees and expenses. The performance does not reflect taxes that a shareholder would pay on fund distributions or on the redemption of fund shares.

 

The 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. The Fund’s current performance may be lower or higher than the performance data quoted. Investors may obtain performance information current to the most recent month-end, within 7 business days, by calling 866-252-5393 or 312-630-6583.

 

 7

 

 

ADVISERS INVESTMENT TRUST
VONTOBEL FUNDS
PORTFOLIO COMMENTARY
September 30, 2015 (Unaudited)

 

The Fund’s benchmark for performance comparison purposes is the MSCI All Country World Index. The Index is an unmanaged market capitalization weighted index that is designed to measure the equity market performance of developed and emerging markets. The table reflects the theoretical reinvestment of dividends on securities in the Index. The impact of transaction costs and the deduction of expenses associated with a mutual fund, such as investment management and administration fees, are not reflected in the Index calculations. It is not possible to invest directly in an index.

 

Portfolio Commentary

 

Since inception, January 2, 2015, through September 30, 2015, the Vontobel Global Equity Institutional Fund outperformed its benchmark, the MSCI All Country World Index (Total Return Net Dividends). On the sector level, stock selection in Consumer Staples, combined with an overweight to the sector, was the leading contributor to relative returns. Our stock selection in the Financials sector also contributed to relative results. Our underweight to the Consumer Discretionary sector and lack of exposure to the Telecommunication Services sector detracted from relative performance.

 

Leading contributors to Fund absolute performance during the period were Altria Group, HDFC Bank, MasterCard, Reckitt Benckiser and British American Tobacco.

 

Altria Group was a top performer during the period. It was helped by strong second quarter results, driven by strong U.S. cigarette fundamentals. With unemployment down, a lack of currency risk in its main business, and increasing consolidation, these are good times for tobacco manufacturers. Additionally, Altria owns 27% of SABMiller, the second largest global brewer, which Anheuser-Busch Inbev (ABI) is actively pursuing. Altria is the largest tobacco company in the United States. It has leading positions in cigarettes, smokeless tobacco and machine made cigars. In all three of these categories, it has top brands such as Marlboro, L&M, Parliament and Virginia Slims in cigarettes, Copenhagen and Skoal in smokeless, and John Middleton’s in cigars. The company also has a wine business. The company’s long term goal, which we believe is achievable, is to consistently grow earnings 7-9% and use the majority of its hefty free cash flow as dividends and the rest for buybacks.

 

HDFC Bank is a high-quality Indian private sector bank which has been a cornerstone investment in the portfolio for many years. HDFC Bank released solid F1Q2016 results. We believe that its cutting its benchmark (base rate) lending rate will likely accelerate its market share gains. HDFC Bank is the largest privately owned retail bank in India with a network of 3,659 branches and 11,633 ATMs (many outside of branches) across 2,287 towns and cities nationwide at calendar year end 2014. The bank has delivered solid growth while maintaining high credit and underwriting standards. HDFC Bank has a strong deposit franchise and powerful technology backbone that has allowed it to significantly grow earnings over the past 10 years.

 

MasterCard is the second largest global payment network and is gaining share in a secularly growing industry. Global payments volume has grown at greater than 10 percent annually for more than 5 years and MasterCard may be capable of growing its volume at a 10-12 percent rate annually for the next several years. Global card penetration relative to cash and check transactions had been about 36 percent in the recent past and may grow to 45-50 percent by 2018. Certainly the trend of consumers buying more and more goods on line is a strong impetus for the continued preference of cards over cash. MasterCard continued to show strong underlying growth throughout the period and concerns over any regulatory issues directly related to the company have faded for the time being.

 

 8

 

 

ADVISERS INVESTMENT TRUST
VONTOBEL FUNDS
PORTFOLIO COMMENTARY
September 30, 2015 (Unaudited)

 

Reckitt Benckiser helped performance over the period, as the shares were relatively stable in a weak market, and the company released strong first half results. Reckitt Benckiser is a global consumer goods company focused on home, health and hygiene products. The company has strong brands, good operational controls, and excels at transactions. Strategically, management is intent on growing the consumer health business, an area of consumer goods that lacks large, focused competition. This business has stronger margins than the rest of the business, helping Reckitt’s profit mix as it grows.

 

British American Tobacco (BAT) was a top contributor to performance, partially due to its stability in a rocky environment. This was highlighted when the company released solid results for the first half of 2015, despite a challenging operating environment. We believe the company’s underlying performance should improve into the remainder of the year, although F/X pressures will continue to weigh on the stock. BAT was further strengthened by the consummation of the Reynolds/Lorillard deal at the end of the second quarter, as BAT owns 42% of that entity. Investors are increasingly excited about the positives that should come out of this deal for Reynolds. British American Tobacco is one of the world’s largest tobacco companies with market leadership in more than 50 of the 180 markets in which it operates. Nearly 60% of the company’s revenue and over 70% of volumes are generated from emerging markets. It has great global brands including Dunhill, Kent, Lucky Strike, Pall Mall and Rothmans. The company should be able to deliver consistent high single-digit earnings growth in constant currencies as it has strong pricing power, and opportunities to increase margins through cost saves, while paying a very hefty dividend.

 

Leading detractors from Fund absolute performance during the period were Baidu, PayPal, Enbridge, Alibaba and ICICI Bank.

 

Baidu disappointed with continued weakness in margins as the company is spending heavily on marketing to drive adoption of its Online-to-Offline (O2O) platforms. We agree that longer term O2O is the right strategy as it allows Baidu to take a higher share of revenues from completed transactions in local services areas, such as food delivery. Longer term, as search revenue slows down, we think O2O transactions will become a more important growth driver for the company; however, shorter term the investment required is impacting margins. The majority of these investments, we believe, are discretionary and will be pulled back over the years. The core search business continues to perform well with revenue growth in the 30-35% range as the investments the company has made in promoting mobile search are coming to fruition. However, the O2O strategy is not driving incremental revenue growth for the near term and intense competition for the O2O markets continues to be strong. This is necessitating Baidu spend more aggressively on marketing and promotion to try to win market share, which is not value added from a shareholders prospective, and continues to drag down margins.

 

PayPal has established itself as the dominant on-line digital payments business, operating in a space where many competitors have come and gone over the years. It has 165 million users globally, a critical mass in size and user base. It operates in over 200 countries and in over 100 currencies. In 2014, PayPal facilitated over $230 billion in total payment volume. There is a long, highly visible secular tailwind of businesses moving from off-line to on-line, and PayPal is participating in that growth with a strong competitive advantage. As a technology company, it has grown its user base and increased frequency of use among that base. We still see meaningful upside potential to the stock. PayPal has also made many savvy acquisitions, such as Braintree, Paydient and Xoom. We do not see a clear, fundamental reason why the stock has declined. In our opinion, it is largely down because of technical factors. As a heavily owned name, it has decreased as part of the overall market correction. In fact, we see this as a good opportunity to increase exposure at a better price.

 9

 

 

ADVISERS INVESTMENT TRUST
VONTOBEL FUNDS
PORTFOLIO COMMENTARY
September 30, 2015 (Unaudited)

 

Enbridge is the largest liquid pipeline in Canada. It is the backbone system to move oil from the Alberta region to Eastern Canada and the United States. We think that the recent underperformance of the stock reflects the sharp correction in oil prices. In a scenario of long-term low oil prices, there is risk that oil producers in Canada will need to start cutting production targets. And, this will have a negative impact on Enbridge’s long-term growth trajectory.

 

Alibaba underperformed due to two main reasons. First, there has been an adjustment downwards for shorter term Gross Merchandise Value (GMV) growth by about 300-500bps for the third quarter. While overall GMV growth should still be healthy in the low 30% range, the market has been concerned about whether this is the beginning of signs that the overall macro slowdown is having a negative impact on more discretionary segments, such as Computers, Apparel and Household Goods. The weaker-than-expected GMV growth has also been helped by the clean-up of counterfeit sellers on the platform, which came under scrutiny earlier in the year. We trimmed our exposure as we look to determine the type of impact the macro slowdown will have on GMV growth. On the positive side, the monetization rate may potentially improve as the momentum on mobile monetization is improving as ad loads and cost per click trends are heading in the right direction. Second, there has been overhang concerns regarding the lock up expiry which took place on the 20th of September, which covers around 1.6 billion or two thirds of outstanding shares. While the majority of those shares have been pledged to be held long term by key management and Softbank, there is a concern regarding the impact on Yahoo’s 15% stake. Yahoo’s stake will be spun off into a separate entity (Aabaco), though there could still be selling pressure indirectly to Alibaba shares depending on what the shareholders of Aabaco do.

 

ICICI Bank is a leading nationwide private sector bank in India. Despite some exposure to a few large corporations, its balance sheet has gone through a significant revamp in recent years. The bank has a strong retail banking franchise with a diverse fee income stream. Its strong capital position and operating efficiency has allowed management to deliver an improving return profile over the last several years.

 

Thank you for your investment in the Vontobel Global Equity Institutional Fund. We are confident that the superior earnings profiles of companies we seek will leave us well- positioned to achieve our long-term performance goals. We continue to focus on underlying growth drivers, profitability and earnings potential, as we pursue our objective: outperformance over full market cycles. We appreciate that you have chosen us to manage your assets, and we remain focused on achieving the Fund’s investment goals.

 

-s- Rajiv Jain 

 

Rajiv Jain

Chief Investment Officer

Portfolio Manager

 

Vontobel Asset Management, Inc.

 

 10

 

 

ADVISERS INVESTMENT TRUST
VONTOBEL FUNDS
PORTFOLIO COMMENTARY
September 30, 2015 (Unaudited)

 

Performance Disclosure

 

Past performance is not indicative of future results. Any companies described in this commentary may or may not currently represent a position in our client portfolios. Also, any sector and industry weights described in the commentary may or may not have changed since the writing of this commentary. The information and methodology described in this commentary should not be construed as a recommendation to purchase or sell securities. Please contact a Vontobel representative for more information.

 

Any projections, forecasts or estimates contained in this commentary are based on a variety of estimates and assumptions. There can be no assurance that the estimates or assumptions made will prove accurate, and actual results may differ materially. The inclusion of projections or forecasts should not be regarded as an indication that Vontobel considers the projections or forecasts to be reliable predictors of future events, and they should not be relied upon as such.

 

In the event a company described in this commentary is a position in client portfolios, the securities identified and described do not represent all of the securities purchased, sold or recommended. The reader should not assume that an investment in any securities identified was or will be profitable or that investment recommendations or investment decisions we make in the future will be profitable.

 

For information about how contribution was calculated for any such securities, or to obtain a list showing the contribution of each holding to overall performance, please contact a Vontobel representative.

 

Risk Disclosure

 

The market price of equity securities may be affected by financial market, industry, or issuer-specific events. Focus on a particular style or on small or medium sized companies may enhance that risk. Larger companies value may not rise as much as smaller companies and larger companies may be unable to respond quickly to competitive challenges. A fund that focuses its investments in a particular industry or sector will be more sensitive to conditions that affect that industry or sector than a non-concentrated fund. Investing internationally, especially in emerging markets, involves additional risks such as currency, political, accounting, economic, and market risk. A fund that focuses its investments in a particular geographic location will be highly sensitive to financial, economic, political, and other developments affecting the fiscal stability of that location.

 

 11

 

 

THE PAGE INTENTIONALLY LEFT BLANK

 

 12

 

 

ADVISERS INVESTMENT TRUST
VONTOBEL FUNDS
PORTFOLIO COMMENTARY
September 30, 2015 (Unaudited)

 

Vontobel International Equity Institutional Fund

 

Performance Update

 

Value of a hypothetical $1,000,000 investment in the Fund Class I shares from inception on January 2, 2015 to September 30, 2015

 

(LINE GRAPH) 

 

Cumulative Total Returns as of September 30, 2015

 

    Since Inception
Vontobel International Equity Institutional Fund – Class I   1.40%
MSCI All Country World ex-US Index   -8.10%

 

The Fund’s Class I Total Gross and Net Annual Operating Expense Ratio, as per the most recent Prospectus, is 1.02 % and 0.95%, respectively. The Adviser has entered into a contractual expense limitation agreement with respect to the Fund until January 28, 2016.

 

Data as at September 30, 2015. The Inception date of the Fund is January 2, 2015. The Fund’s performance reflects the reinvestment of dividends as well as the impact of transaction costs and the deduction of fees and expenses. The performance does not reflect taxes that a shareholder would pay on fund distributions or on the redemption of fund shares.

 

The 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. The Fund’s current performance may be lower or higher than the performance data quoted. Investors may obtain performance information current to the most recent month-end, within 7 business days, by calling 866-252-5393 or 312-630-6583.

 

 13

 

 

 

ADVISERS INVESTMENT TRUST
VONTOBEL FUNDS
PORTFOLIO COMMENTARY
September 30, 2015 (Unaudited)

 

The Fund’s benchmark for performance comparison purposes is the MSCI All Country World ex-US Index. The Index is an unmanaged market capitalization weighted index that is designed to measure the equity market performance of developed (excluding US) and emerging markets. The table reflects the theoretical reinvestment of dividends on securities in the Index. The impact of transaction costs and the deduction of expenses associated with a mutual fund, such as investment management and administration fees, are not reflected in the Index calculations. It is not possible to invest directly in an index.

 

Portfolio Commentary

 

Since inception, January 2, 2015, through September 30, 2015, the Vontobel International Equity Institutional Fund outperformed its benchmark, the MSCI All Country World ex U.S. Index (Total Return Net Dividends). On the sector level, an overweight to Consumer Staples, combined with stock selection in the sector, was the leading contributor to relative returns. Our stock selection in the Financials sector also contributed to relative results. Our stock selection in the Information Technology and Industrials sectors detracted from relative performance.

 

Leading contributors to Fund absolute performance during the period were Novo Nordisk, Reckitt Benckiser, British American Tobacco, HDFC Bank and Paddy Power.

 

Novo Nordisk performed well over the period. In late March, the company announced it will resubmit Tresiba, its new long-acting insulin, for approval in the United States. This product was not previously approved by the FDA because of concerns about potential cardiovascular side effects. Subsequently, Novo has been conducting a cardiovascular safety study and has made the decision to resubmit based on the interim results - the decision to proceed with the resubmission indicates that the FDA likely does not have significant concerns (i.e. high chance of approval). The uncertainty regarding Tresiba in the US (already been approved in most other markets) had been the biggest near-term issue for the stock. Novo’s management has said that their ability to meet the key targets (10% revenue growth and 15% operating profit growth) is contingent on Tresiba’s approval. Tresiba should help to support pricing for long-acting insulins; in the absence of Tresiba, Novo’s older long-acting insulin Levemir was expected to face biosimilar competition. Novo Nordisk is a world leader in fast-growing diabetes care. The company has a full range of insulin products (short-acting, long-acting, and pre-mix), and a leading GLP-1 agonist (called Victoza), which works by stimulating production of insulin. Novo has excellent management, which is shareholder-oriented, and has helped create significant shareholder value over many years.

 

Reckitt Benckiser helped performance over the period, as the shares were relatively stable in a weak market, and the company released strong first half 2015 results. Reckitt Benckiser is a global consumer goods company focused on home, health and hygiene products. The company has strong brands, good operational controls, and excels at transactions. Strategically, management is intent on growing the consumer health business, an area of consumer goods that lacks large, focused competition. This business has stronger margins than the rest of the business, helping Reckitt’s profit mix as it grows.

 

British American Tobacco (BAT) was a top contributor to performance, partially due to its stability in a rocky environment. This was highlighted when the company released solid results for the first half of 2015, despite a challenging operating environment. We believe the company’s underlying performance should improve into the remainder of the year, although F/X pressures will continue to weigh on the stock. BAT was further strengthened by the consummation of the Reynolds/Lorillard deal at the end of the second quarter, as BAT owns 42% of that entity. Investors are increasingly excited about the positives that should come out of this deal for Reynolds. British American Tobacco is one of the world’s largest tobacco companies with market leadership in more than 50 of the 180 markets in which it operates. Nearly 60% of the

 

 14

 

 

ADVISERS INVESTMENT TRUST
VONTOBEL FUNDS
PORTFOLIO COMMENTARY
September 30, 2015 (Unaudited)

 

company’s revenue and over 70% of volumes are generated from emerging markets. It has great global brands including Dunhill, Kent, Lucky Strike, Pall Mall and Rothmans. The company should be able to deliver consistent high single-digit earnings growth in constant currencies as it has strong pricing power, and opportunities to increase margins through cost saves, while paying a very hefty dividend.

 

HDFC Bank is a high-quality Indian private sector bank which has been a cornerstone investment in the portfolio for many years. HDFC Bank released solid F1Q2016 results. We believe that its cutting its benchmark (base rate) lending rate will likely accelerate its market share gains. HDFC Bank is the largest privately owned retail bank in India with a network of 3,659 branches and 11,633 ATMs (many outside of branches) across 2,287 towns and cities nationwide at calendar year end 2014. The bank has delivered solid growth while maintaining high credit and underwriting standards. HDFC Bank has a strong deposit franchise and powerful technology backbone that has allowed it to significantly grow earnings over the past 10 years.

 

Paddy Power, an Irish gaming company, has been a long-held and successful position in our strategies. It is predominantly a technology company as much of gambling has moved on-line. The company has a powerful brand and a fun, innovative and edgy image. Its business footprint currently spans only jurisdictions where it can operate legally, which is a rarity in the global online gaming marketplace. Most competitors in the online space have been happy to cross into geographies where gambling is not legal, tempted by the short-term buck to be made. Paddy Power has consistently kept its gaming nose clean and mainly operates in Ireland, the United Kingdom, France, Italy and Australia through direct or business-to-business operating ventures. Specifically, Paddy Power has been extremely successful in Australia and, by far, has become the market leader there. Paddy Power’s stock performed well as it released 1H2015 results that exceeded expectations and announced that it has reached an agreement on the key terms of a merger with Betfair, which would create one the world’s largest public on-line betting and gaming companies. In our view, the merger brings together two very strong businesses to create an even stronger business. And, since Betfair is currently managed by many former Paddy Power employees, it is a good cultural fit. We believe the combined company will be a long-term industry winner in on-line gaming, particularly in the UK. In our view, Paddy Power has a bright future as penetration to on-line continues to grow and the company is growing its on-line business with existing customers.

 

Leading detractors from Fund absolute performance during the period were Baidu, Enbridge, PayPal, Alibaba and ICICI Bank.

 

Baidu disappointed with continued weakness in margins as the company is spending heavily on marketing to drive adoption of its Online-to-Offline (O2O) platforms. We agree that longer term O2O is the right strategy as it allows Baidu to take a higher share of revenues from completed transactions in local services areas, such as food delivery. Longer term, as search revenue slows down, we think O2O transactions will become a more important growth driver for the company; however, shorter term the investment required is impacting margins. The majority of these investments, we believe, are discretionary and will be pulled back over the years. The core search business continues to perform well with revenue growth in the 30-35% range as the investments the company has made in promoting mobile search are coming to fruition. However, the O2O strategy is not driving incremental revenue growth for the near term and intense competition for the O2O markets continues to be strong. This is necessitating Baidu spend more aggressively on marketing and promotion to try to win market share, which is not value added from a shareholders prospective, and continues to drag down margins.

 

 15

 

 

ADVISERS INVESTMENT TRUST
VONTOBEL FUNDS
PORTFOLIO COMMENTARY
September 30, 2015 (Unaudited)

 

Enbridge is the largest liquid pipeline in Canada. It is the backbone system to move oil from the Alberta region to Eastern Canada and the United States. We think that the recent underperformance of the stock reflects the sharp correction in oil prices. In a scenario of long-term low oil prices, there is risk that oil producers in Canada will need to start cutting production targets. And, this will have a negative impact on Enbridge’s long-term growth trajectory.

 

PayPal has established itself as the dominant on-line digital payments business, operating in a space where many competitors have come and gone over the years. It has 165 million users globally, a critical mass in size and user base. It operates in over 200 countries and in over 100 currencies. In 2014, PayPal facilitated over $230 billion in total payment volume. There is a long, highly visible secular tailwind of businesses moving from off-line to on-line, and PayPal is participating in that growth with a strong competitive advantage. As a technology company, it has grown its user base and increased frequency of use among that base. We still see meaningful upside potential to the stock. PayPal has also made many savvy acquisitions, such as Braintree, Paydient and Xoom. We do not see a clear, fundamental reason why the stock has declined. In our opinion, it is largely down because of technical factors. As a heavily owned name, it has decreased as part of the overall market correction. In fact, we see this as a good opportunity to increase exposure at a better price.

 

Alibaba underperformed due to two main reasons. First, there has been an adjustment downwards for shorter term Gross Merchandise Value (GMV) growth by about 300-500bps for the third quarter. While overall GMV growth should still be healthy in the low 30% range, the market has been concerned about whether this is the beginning of signs that the overall macro slowdown is having a negative impact on more discretionary segments, such as Computers, Apparel and Household Goods. The weaker-than-expected GMV growth has also been helped by the clean-up of counterfeit sellers on the platform, which came under scrutiny earlier in the year. We trimmed our exposure as we look to determine the type of impact the macro slowdown will have on GMV growth. On the positive side, the monetization rate may potentially improve as the momentum on mobile monetization is improving as ad loads and cost per click trends are heading in the right direction. Second, there has been overhang concerns regarding the lock up expiry which took place on the 20th of September, which covers around 1.6 billion or two thirds of outstanding shares. While the majority of those shares have been pledged to be held long term by key management and Softbank, there is a concern regarding the impact on Yahoo’s 15% stake. Yahoo’s stake will be spun off into a separate entity (Aabaco), though there could still be selling pressure indirectly to Alibaba shares depending on what the shareholders of Aabaco do.

 

ICICI Bank is a leading nationwide private sector bank in India. Despite some exposure to a few large corporations, its balance sheet has gone through a significant revamp in recent years. The bank has a strong retail banking franchise with a diverse fee income stream. Its strong capital position and operating efficiency has allowed management to deliver an improving return profile over the last several years.

 

 16

 

 

ADVISERS INVESTMENT TRUST
VONTOBEL FUNDS
PORTFOLIO COMMENTARY
September 30, 2015 (Unaudited)

 

Thank you for your investment in the Vontobel International Equity Institutional Fund. We are confident that the superior earnings profiles of companies we seek will leave us well- positioned to achieve our long-term performance goals. We continue to focus on underlying growth drivers, profitability and earnings potential, as we pursue our objective: outperformance over full market cycles. We appreciate that you have chosen us to manage your assets, and we remain focused on achieving the Fund’s investment goals.

 

-s- Rajiv Jain 

 

Rajiv Jain 

Chief Investment Officer
Portfolio Manager

 

Vontobel Asset Management, Inc.

 

 17

 

 

ADVISERS INVESTMENT TRUST
VONTOBEL FUNDS
PORTFOLIO COMMENTARY
September 30, 2015 (Unaudited)

 

Performance Disclosure

 

Past performance is not indicative of future results. Any companies described in this commentary may or may not currently represent a position in our client portfolios. Also, any sector and industry weights described in the commentary may or may not have changed since the writing of this commentary. The information and methodology described in this commentary should not be construed as a recommendation to purchase or sell securities. Please contact a Vontobel representative for more information.

 

Any projections, forecasts or estimates contained in this commentary are based on a variety of estimates and assumptions. There can be no assurance that the estimates or assumptions made will prove accurate, and actual results may differ materially. The inclusion of projections or forecasts should not be regarded as an indication that Vontobel considers the projections or forecasts to be reliable predictors of future events, and they should not be relied upon as such.

 

In the event a company described in this commentary is a position in client portfolios, the securities identified and described do not represent all of the securities purchased, sold or recommended. The reader should not assume that an investment in any securities identified was or will be profitable or that investment recommendations or investment decisions we make in the future will be profitable.

 

For information about how contribution was calculated for any such securities, or to obtain a list showing the contribution of each holding to overall performance, please contact a Vontobel representative.

 

Risk Disclosure

 

The market price of equity securities may be affected by financial market, industry, or issuer-specific events. Focus on a particular style or on small or medium sized companies may enhance that risk. Larger companies value may not rise as much as smaller companies and larger companies may be unable to respond quickly to competitive challenges. A fund that focuses its investments in a particular industry or sector will be more sensitive to conditions that affect that industry or sector than a non-concentrated fund. Investing internationally, especially in emerging markets, involves additional risks such as currency, political, accounting, economic, and market risk. A fund that focuses its investments in a particular geographic location will be highly sensitive to financial, economic, political, and other developments affecting the fiscal stability of that location.

 

 18

 

 

ADVISERS INVESTMENT TRUST  
VONTOBEL GLOBAL EMERGING MARKETS EQUITY INSTITUTIONAL FUND
SCHEDULE OF INVESTMENTS
September 30, 2015

                     
   Percentage
of Net
Assets
   Shares   Value  
COMMON STOCKS   93.5%           
Consumer Discretionary   5.8%           
Grupo Televisa S.A.B. - ADR        343,500   $ 8,937,870  
Kangwon Land, Inc.        16,247   576,337  
Matahari Department Store Tbk PT        3,432,200   3,781,384  
Naspers Ltd. - Class N        194,038   24,346,592  
Sands China Ltd.        4,486,030   13,644,230  
Vipshop Holdings Ltd. - ADR(a)        318,592   5,352,346  
Westlife Development Ltd.(a)        190,153   754,671  
             57,393,430  
Consumer Staples   35.8%           
Ambev S.A. - ADR        6,434,415   31,528,633  
Amorepacific Corp.        35,544   11,601,064  
British American Tobacco Malaysia Bhd.        278,784   3,831,450  
British American Tobacco PLC (Johannesburg Exchange)        1,020,812   56,141,848  
British American Tobacco PLC (London Exchange)        261,574   14,456,320  
China Resources Enterprise Ltd.        1,102,458   2,053,453  
Colgate-Palmolive India Ltd.        345,464   5,072,302  
CP ALL PCL - REG        10,291,800   13,539,977  
Fomento Economico Mexicano S.A.B. de C.V. - ADR        374,244   33,401,277  
Hindustan Unilever Ltd.        1,340,101   16,658,489  
ITC Ltd.        8,602,505   43,316,439  
LG Household & Health Care Ltd.        16,125   11,648,314  
Nestle India Ltd.        42,049   4,083,242  
Orion Corp.        4,303   3,434,493  
President Chain Store Corp.        1,391,268   8,675,008  
SABMiller PLC        701,285   39,536,167  
Souza Cruz S.A.        1,842,852   12,457,670  
Thai Beverage PCL        19,858,500   9,591,039  
Tsingtao Brewery Co. Ltd. - Class H        697,311   3,066,432  
Unilever Indonesia Tbk PT        3,640,211   9,448,323  
Unilever N.V. - CVA        25,100   1,010,132  
Wal-Mart de Mexico S.A.B. de C.V.        8,225,645   20,198,080  
             354,750,152  
Energy   0.5%           
Ultrapar Participacoes S.A.        288,632   4,863,316  
Financials   21.8%           
Bangkok Bank PCL - REG        1,737,510   7,674,790  
                 

 

See notes to financial statements.

 

19
 

 

ADVISERS INVESTMENT TRUST
VONTOBEL GLOBAL EMERGING MARKETS EQUITY INSTITUTIONAL FUND
SCHEDULE OF INVESTMENTS
September 30, 2015

                     
   Percentage
of Net
Assets
   Shares   Value  
Bank Central Asia Tbk PT        17,432,543   $ 14,637,239  
BB Seguridade Participacoes S.A.        918,674   5,749,099  
BM&FBovespa S.A. - Bolsa de Valores Mercadorias e Futuros        1,933,554   5,403,904  
CETIP S.A. - Mercados Organizados        351,460   2,916,644  
Habib Bank Ltd.        3,046,988   5,772,294  
HDFC Bank Ltd.        281,682   4,596,158  
HDFC Bank Ltd. - ADR        728,117   44,480,668  
Housing Development Finance Corp. Ltd.        2,939,114   54,452,018  
Kasikornbank PCL - REG        1,652,100   7,789,506  
Kotak Mahindra Bank Ltd.        931,958   9,222,486  
Link REIT        2,625,854   14,474,184  
Malayan Banking Bhd.        2,888,160   5,637,771  
Public Bank Bhd.        1,724,700   6,882,372  
Remgro Ltd.        872,303   15,902,713  
Samsung Fire & Marine Insurance Co. Ltd.        47,143   11,062,642  
             216,654,488  
Health Care   4.7%           
Bangkok Dusit Medical Services PCL - REG        7,687,500   3,918,412  
Cipla Ltd.        1,253,524   12,175,988  
Dr. Reddy’s Laboratories Ltd.        22,939   1,455,499  
Dr. Reddy’s Laboratories Ltd. - ADR        14,686   938,582  
Sun Pharmaceutical Industries Ltd.        2,151,203   28,535,754  
             47,024,235  
Industrials   0.1%           
Airports of Thailand PCL - REG        154,743   1,198,038  
Information Technology   14.4%           
Alibaba Group Holding Ltd. - ADR(a)        108,957   6,425,194  
Autohome, Inc. - ADR(a)        73,438   2,388,938  
Baidu, Inc. - ADR(a)        45,873   6,303,409  
Bitauto Holdings Ltd. - ADR(a)        62,592   1,863,364  
Cielo S.A.        2,214,015   20,473,147  
HCL Technologies Ltd.        1,015,738   15,231,594  
Infosys Ltd.        257,802   4,595,127  
Infosys Ltd. - ADR        919,552   17,554,248  
NetEase, Inc. - ADR        89,348   10,732,482  
                 

 

See notes to financial statements.

 

20
 

 

ADVISERS INVESTMENT TRUST
VONTOBEL GLOBAL EMERGING MARKETS EQUITY INSTITUTIONAL FUND
SCHEDULE OF INVESTMENTS
September 30, 2015

                 
   Percentage
of Net
Assets
   Shares   Value  
Taiwan Semiconductor Manufacturing Co. Ltd.        2,195,330   $ 8,760,476  
Taiwan Semiconductor Manufacturing Co. Ltd. - ADR        574,459   11,920,024  
Tata Consultancy Services Ltd.        500,232   19,745,622  
Tencent Holdings Ltd.        984,325   16,554,904  
             142,548,529  
Materials   2.2%           
Industrias Penoles S.A.B. de C.V.        584,455   7,966,682  
Randgold Resources Ltd.        117,720   6,929,204  
Randgold Resources Ltd. - ADR        119,593   7,066,751  
             21,962,637  
Telecommunication Services   4.8%           
Advanced Info Service PCL - REG        2,219,800   13,822,146  
Bharti Airtel Ltd.        723,384   3,733,153  
MTN Group Ltd.        987,542   12,713,785  
Telekomunikasi Indonesia Persero Tbk PT        96,226,666   17,289,937  
             47,559,021  
Utilities   3.4%           
CLP Holdings Ltd.        47,100   401,677  
Power Assets Holdings Ltd.        3,521,857   33,399,162  
             33,800,839  
TOTAL COMMON STOCKS (Cost $984,443,277)            927,754,685  
SHORT-TERM INVESTMENTS   2.6%           
Northern Institutional                
U.S. Government Select Portfolio, 0.01%        25,556,805   25,556,805  
TOTAL SHORT-TERM INVESTMENTS (Cost $25,556,805)            25,556,805  
TOTAL INVESTMENTS
(Cost $1,010,000,082)
   96.1%       953,311,490  
NET OTHER ASSETS (LIABILITIES)   3.9%       38,833,222  
NET ASSETS   100.0%       $ 992,144,712  

 

(a)Non-income producing security.

 

See notes to financial statements.

 

21
 

 

ADVISERS INVESTMENT TRUST
VONTOBEL GLOBAL EMERGING MARKETS EQUITY INSTITUTIONAL FUND
SCHEDULE OF INVESTMENTS
September 30, 2015
   

 

At September 30, 2015, the Vontobel Global Emerging Markets Equity Institutional Fund’s investments (excluding short-term investments) were domiciled in the following countries:

         
CONCENTRATION BY COUNTRY   % OF NET ASSETS  
India     28.9 %
United Kingdom     11.2  
Brazil     8.4  
Mexico     7.1  
Thailand     5.8  
South Africa     5.3  
China     5.3  
Hong Kong     5.1  
Indonesia     4.5  
South Korea     3.9  
Taiwan     3.0  
All other countries less than 2%     5.0  
Total     93.5 %

 

See notes to financial statements.

 

22
 

 

ADVISERS INVESTMENT TRUST
VONTOBEL GLOBAL EQUITY INSTITUTIONAL FUND
SCHEDULE OF INVESTMENTS
September 30, 2015

                     
   Percentage
of Net
Assets
   Shares   Value  
COMMON STOCKS   96.1%           
Consumer Discretionary   5.0%           
Naspers Ltd. - Class N        1,150   $ 144,294  
Priceline Group (The), Inc.(a)        264   326,531  
TJX (The) Cos., Inc.        3,600   257,112  
             727,937  
Consumer Staples   33.3%           
Alimentation Couche-Tard, Inc. - Class B        3,980   183,029  
Altria Group, Inc.        11,590   630,496  
British American Tobacco PLC        13,409   741,071  
Coca-Cola (The) Co.        11,241   450,989  
Hershey (The) Co.        2,708   248,811  
ITC Ltd.        53,885   271,329  
Nestle S.A. - REG        6,439   484,898  
Philip Morris International, Inc.        8,805   698,501  
Reckitt Benckiser Group PLC        5,127   465,383  
Reynolds American, Inc.        8,106   358,853  
Unilever N.V. - CVA        8,761   352,580  
             4,885,940  
Energy   1.6%           
Enbridge, Inc.        6,226   231,172  
Financials   20.7%           
American Tower Corp.        3,046   267,987  
Berkshire Hathaway, Inc. - Class B(a)        3,215   419,236  
CME Group, Inc.        3,128   290,091  
HDFC Bank Ltd.        1,014   16,545  
HDFC Bank Ltd. - ADR        8,520   520,487  
Housing Development Finance Corp. Ltd.        28,780   533,198  
JPMorgan Chase & Co.        3,468   211,444  
Progressive (The) Corp.        8,014   245,549  
Wells Fargo & Co.        10,439   536,042  
             3,040,579  
Health Care   16.8%           
Abbott Laboratories        4,845   194,866  
Becton Dickinson and Co.        532   70,575  
Biogen, Inc.(a)        495   144,446  
Bristol-Myers Squibb Co.        5,415   320,568  
Celgene Corp.(a)        3,752   405,854  

 

See notes to financial statements.

 

23
 

 

ADVISERS INVESTMENT TRUST
VONTOBEL GLOBAL EQUITY INSTITUTIONAL FUND
SCHEDULE OF INVESTMENTS
September 30, 2015

                     
   Percentage
of Net
Assets
   Shares   Value  
CR Bard, Inc.        758   $ 141,223  
Medtronic PLC        2,740   183,416  
Novo Nordisk A/S - Class B        5,230   281,501  
Roche Holding A.G. (Genusschein)        1,958   517,605  
UnitedHealth Group, Inc.        1,700   197,217  
             2,457,271  
Information Technology   17.0%           
Apple, Inc.        2,713   299,244  
Cognizant Technology Solutions Corp. - Class A(a)        3,824   239,420  
Google, Inc. - Class C(a)        800   486,736  
MasterCard, Inc. - Class A        8,215   740,336  
PayPal Holdings, Inc.(a)        7,700   239,008  
Visa, Inc. - Class A        7,015   488,665  
             2,493,409  
Materials   1.7%           
Martin Marietta Materials, Inc.        1,664   252,845  
TOTAL COMMON STOCKS (Cost $14,109,336)            14,089,153  
                 
SHORT-TERM INVESTMENTS   4.4%           
Northern Institutional                 
U.S. Government Select Portfolio, 0.01%        644,746   644,746  
TOTAL SHORT-TERM INVESTMENTS (Cost $644,746)            644,746  
TOTAL INVESTMENTS
(Cost $14,754,082)
   100.5%       14,733,899  
NET OTHER ASSETS (LIABILITIES)   (0.5)%       (71,481 )
NET ASSETS   100.0%       $ 14,662,418  

 

(a)Non-income producing security.

 

See notes to financial statements.

 

24
 

 

ADVISERS INVESTMENT TRUST
VONTOBEL GLOBAL EQUITY INSTITUTIONAL FUND  
SCHEDULE OF INVESTMENTS
September 30, 2015
 

 

At September 30, 2015, the Vontobel Global Equity Institutional Fund’s investments (excluding short-term investments) were domiciled in the following countries:

         
CONCENTRATION BY COUNTRY   % OF NET ASSETS  
United States     62.5 %
United Kingdom     10.6  
India     9.2  
Switzerland     6.8  
Canada     2.8  
All other countries less than 2%     4.2  
Total     96.1 %

 

See notes to financial statements.

 

25
 

 

ADVISERS INVESTMENT TRUST
VONTOBEL INTERNATIONAL EQUITY INSTITUTIONAL FUND
SCHEDULE OF INVESTMENTS
September 30, 2015

                     
   Percentage
of Net
Assets
   Shares   Value  
COMMON STOCKS   81.3%           
Consumer Discretionary   7.8%           
Domino’s Pizza Group PLC        22,808   $ 307,097  
Hermes International        786   286,162  
Naspers Ltd. - Class N        2,568   322,216  
Paddy Power PLC        2,513   289,195  
Persimmon PLC(a)        14,808   451,192  
Priceline Group (The), Inc.(a)        409   505,876  
             2,161,738  
Consumer Staples   33.5%           
Alimentation Couche-Tard, Inc. - Class B        9,285   426,992  
Amorepacific Corp.        318   103,791  
British American Tobacco PLC        27,220   1,504,358  
Chocoladefabriken Lindt & Spruengli A.G. (Participation Certificate)        71   417,008  
Diageo PLC        13,178   354,626  
Imperial Tobacco Group PLC        10,896   563,957  
ITC Ltd.        105,300   530,220  
L’Oreal S.A.        1,896   329,690  
Nestle S.A. - REG        15,263   1,149,403  
Philip Morris International, Inc.        14,053   1,114,825  
Reckitt Benckiser Group PLC        10,948   993,762  
SABMiller PLC        13,442   761,711  
Unicharm Corp.        12,585   223,317  
Unilever N.V. - CVA        19,655   791,002  
             9,264,662  
Energy   1.9%           
Enbridge, Inc.        13,997   519,709  
Financials   13.1%           
Banco Bilbao Vizcaya Argentaria S.A.        30,319   257,157  
Daito Trust Construction Co. Ltd.        2,520   256,337  
HDFC Bank Ltd.        1,593   25,993  
HDFC Bank Ltd. - ADR        16,240   992,102  
Housing Development Finance Corp. Ltd.        62,975   1,166,718  
Link REIT        43,577   240,204  
                 

 

See notes to financial statements.

 

26
 

  

ADVISERS INVESTMENT TRUST
VONTOBEL INTERNATIONAL EQUITY INSTITUTIONAL FUND
SCHEDULE OF INVESTMENTS
September 30, 2015

                   
   Percentage
of Net
Assets
   Shares   Value  
Lloyds Banking Group PLC        235,791   $ 268,795  
UBS Group A.G. - REG        22,579   418,414  
             3,625,720  
Health Care   15.9%           
Bayer A.G. - REG        4,184   534,750  
Coloplast A/S - Class B        2,119   150,332  
CSL Ltd.        8,028   505,852  
Essilor International S.A.        3,563   435,213  
Fresenius Medical Care A.G. & Co. KGaA        2,927   228,238  
Grifols S.A.        8,457   349,814  
Novo Nordisk A/S - Class B        13,305   716,132  
Ramsay Health Care Ltd.        9,166   377,311  
Roche Holding A.G. (Genusschein)        3,792   1,002,430  
Sonic Healthcare Ltd.        7,846   100,726  
             4,400,798  
Industrials   1.7%           
Bureau Veritas S.A.        16,816   354,771  
DKSH Holding A.G.(a)        1,652   104,682  
             459,453  
Information Technology   5.4%           
Accenture PLC - Class A        1,563   153,581  
Google, Inc. - Class C(a)        767   466,658  
PayPal Holdings, Inc.(a)        15,858   492,232  
SAP S.E.        6,030   390,119  
             1,502,590  
Materials   1.1%           
Air Liquide S.A.        2,586   306,437  
Utilities   0.9%           
Cheung Kong Infrastructure Holdings Ltd.        27,738   248,805  
TOTAL COMMON STOCKS (Cost $22,641,296)            22,489,912  
                 

 

See notes to financial statements.

 

27
 

 

ADVISERS INVESTMENT TRUST
VONTOBEL INTERNATIONAL EQUITY INSTITUTIONAL FUND
SCHEDULE OF INVESTMENTS
September 30, 2015

                    
   Percentage
of Net
Assets
   Shares   Value  
SHORT-TERM INVESTMENTS   3.8%             
Northern Institutional                  
U.S. Government Select Portfolio, 0.01%        1,041,314   $ 1,041,314  
TOTAL SHORT-TERM INVESTMENTS (Cost $1,041,314)              1,041,314  
TOTAL INVESTMENTS                  
(Cost $23,682,610)   85.1%         23,531,226  
NET OTHER ASSETS (LIABILITIES)   14.9%         4,122,107  
NET ASSETS   100.0%       $ 27,653,333  

 

(a)Non-income producing security.

 

At September 30, 2015, the Vontobel International Equity Institutional Fund’s investments (excluding short-term investments) were domiciled in the following countries:

       
CONCENTRATION BY COUNTRY  % OF NET ASSETS 
United Kingdom   21.7%
Switzerland   11.2 
India   9.8 
United States   9.3 
France   6.2 
Germany   4.2 
Australia   3.6 
Canada   3.4 
Denmark   3.1 
Spain   2.2 
All other countries less than 2%   6.6 
Total   81.3%

 

See notes to financial statements.

 

28
 

 

ADVISERS INVESTMENT TRUST
VONTOBEL FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
September 30, 2015

                   
   Vontobel
Global Emerging Markets
Equity Institutional Fund(a)
  

Vontobel

Global Equity

Institutional Fund

  

Vontobel

International Equity

Institutional Fund

 
Assets:               
Investments, at value (Cost: $1,010,000,082, $14,754,082, $23,682,610, respectively)  $953,311,490   $14,733,899   $23,531,226 
Cash   6,610,299         
Foreign currency (Cost: $9,203,016, $12,466, $26,198, respectively)   9,200,500    12,485    26,255 
Receivable for dividends and interest   2,638,598    35,956    55,124 
Reclaims receivable       5,319    18,719 
Receivable for investments sold   19,768,793        102,853 
Receivable for capital shares sold   2,226,950    200,000    4,175,937 
Prepaid expenses   10,724    69    77 
Total Assets   993,767,354    14,987,728    27,910,191 
Liabilities:               
Securities purchased payable   263,853    286,853    209,072 
Capital shares redeemed payable   101,000         
Investment advisory fees payable   684,054    2,268    9,431 
Accounting and Administration fees payable   366,021    31,507    31,507 
Regulatory and Compliance fees payable   69,279    941    1,458 
Trustees fees payable   557    8    12 
Deferred foreign capital gains taxes payable   21,365         
Accrued expenses and other payable   116,513    3,733    5,378 
Total Liabilities   1,622,642    325,310    256,858 
                
Net Assets  $992,144,712   $14,662,418   $27,653,333 
Class I Shares:               
Net assets  $992,144,712   $14,662,418   $27,653,333 
Shares of common stock outstanding   116,753,083    1,444,236    2,727,355 
Net asset value per share  $8.50   $10.15   $10.14 
Net Assets:               
Paid in capital  $1,136,249,442   $14,643,706   $28,028,946 
Accumulated net investment income (loss)   2,518,628    127,272    303,372 
Accumulated net realized gains (losses)   (89,908,654)   (88,374)   (530,893)
Unrealized appreciation (depreciation)   (56,714,704)   (20,186)   (148,092)
Net assets  $992,144,712   $14,662,418   $27,653,333 
                

 

(a)Formerly the AIT Global Emerging Markets Opportunity Fund. See organizational note within the Notes to the Financial Statements.

 

See notes to financial statements.

 

29
 

 

ADVISERS INVESTMENT TRUST
VONTOBEL FUNDS
STATEMENTS OF OPERATIONS
For the year ended September 30, 2015

                   
   Vontobel
Global Emerging Markets
Equity Institutional Fund(a)
   Vontobel
Global Equity
Institutional Fund(b)
   Vontobel
International Equity
Institutional Fund(b)
 
Investment Income:               
Dividend income (Net of foreign withholding tax of $946,800, $6,284, $23,215, respectively)  $22,822,589   $200,827   $394,995 
Interest income   6,288    17    49 
Total investment income   22,828,877    200,844    395,044 
Operating expenses:               
Investment advisory   8,191,320    64,406    105,056 
Accounting and Administration   1,363,240    92,123    92,123 
Regulatory and Compliance   261,667    2,318    3,521 
Insurance   39,764    386    386 
Trustees   20,752    170    276 
Legal   31,877    9,823    12,752 
Registration   69,501    30,553    28,253 
Other   174,966    8,931    9,727 
Total expenses   10,153,087    208,710    252,094 
Expenses reduced by Investment Adviser       (125,708)   (118,672)
Net expenses   10,153,087    83,002    133,422 
Net investment income (loss)   12,675,790    117,842    261,622 
Realized and Unrealized Gains (Losses) from Investment Activities:               
Net realized gains (losses) from investment transactions   (72,061,056)   (88,374)   (529,103)
Net realized gains (losses) from foreign currency transactions   (906,230)   1,442    31,072 
Change in unrealized appreciation (depreciation) on investments (net of the change in deferred foreign capital gains taxes of $1,673,623, $— , $— , respectively)   (77,045,297)   (20,183)   (151,384)
Change in unrealized appreciation (depreciation) on foreign currency   (33,316)   (3)   3,292 
Net realized and unrealized gains (losses) from  investment activities   (150,045,899)   (107,118)   (646,123)
Change in Net Assets Resulting from Operations  $(137,370,109)  $10,724   $(384,501)
                

 

(a)Formerly the AIT Global Emerging Markets Opportunity Fund. See organizational note within the Notes to the Financial Statements.

(b)For the period January 2, 2015, commencement of operations, to September 30, 2015.

 

See notes to financial statements.

 

30
 

 

ADVISERS INVESTMENT TRUST
VONTOBEL FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended September 30, 2015 and 2014

                         
   Vontobel
Global Emerging Markets
Equity Institutional Fund(a)
   Vontobel
Global Equity
Institutional Fund
   Vontobel
International Equity
Institutional Fund
 
   September 30,
2015
   September 30,
2014
   September 30,
2015(b)
   September 30,
2015(b)
 
Increase (decrease) in net assets:                    
Operations:                    
Net investment income (loss)  $12,675,790   $10,711,781   $117,842   $261,622 
Net realized gains (losses) from investment and foreign currency transactions   (72,967,286)   (16,602,170)   (86,932)   (498,031)
Change in unrealized appreciation (depreciation) on investments and foreign currency   (77,078,613)   68,041,728    (20,186)   (148,092)
Change in net assets resulting from operations   (137,370,109)   62,151,339    10,724    (384,501)
Dividends paid to shareholders:                    
From net investment income (loss)   (17,209,426)   (4,421,004)        
Total dividends paid to shareholders   (17,209,426)   (4,421,004)        
Capital Transactions (Class I Shares):                    
Proceeds from sale of shares   400,422,422    246,814,100    14,655,713    28,062,171 
Value of shares issued to shareholders in reinvestment of dividends   17,091,301    4,385,347         
Value of shares redeemed   (152,979,026)   (42,478,739)   (4,019)   (24,337)
Change in net assets from capital transactions   264,534,697    208,720,708    14,651,694    28,037,834 
Change in net assets   109,955,162    266,451,043    14,662,418    27,653,333 
Net Assets:                    
Beginning of period   882,189,550    615,738,507         
End of period  $992,144,712   $882,189,550   $14,662,418   $27,653,333 
Accumulated net investment income (loss)  $2,518,628   $8,318,911   $127,272   $303,372 
                     
Share Transactions (Class I Shares):                    
Sold   42,406,850    26,521,914    1,444,610    2,729,745 
Reinvested   1,827,947    493,845         
Redeemed   (17,565,488)   (4,617,700)   (374)   (2,390)
Change   26,669,309    22,398,059    1,444,236    2,727,355 
                     

 

(a)Formerly the AIT Global Emerging Markets Opportunity Fund. See organizational note within the Notes to the Financial Statements.

(b)For the period January 2, 2015, commencement of operations, to September 30, 2015.

 

See notes to financial statements.

 

31
 

 

ADVISERS INVESTMENT TRUST
VONTOBEL FUNDS
FINANCIAL HIGHLIGHTS
For the periods indicated
             
             
   Class
I Shares
 
Vontobel Global Emerging Markets Equity Institutional Fund(a)  Year Ended
September 30, 2015
   Year Ended
September 30, 2014
   Period Ended
September 30, 2013(b)
 
Net asset value, beginning of period  $9.79   $9.10   $10.00 
Income (loss) from operations:               
Net investment income   0.12(c)   0.12    0.04 
Net realized and unrealized gains (losses) from investments   (1.23)   0.63    (0.94)
Total from investment operations   (1.11)   0.75    (0.90)
Less distributions paid:               
From net investment income   (0.18)   (0.06)    
Total distributions paid   (0.18)   (0.06)    
Change in net asset value   (1.29)   0.69    (0.90)
Net asset value, end of period  $8.50   $9.79   $9.10 
Total return(d)   (11.49%)   8.32%   (9.00%)
Ratios/Supplemental data:               
Net assets, end of period (000’s)  $992,145   $882,190   $615,739 
Ratio of net expenses to average net assets(e)   0.98%   1.00%   1.08%
Ratio of net investment income to average net assets(e)   1.24%   1.42%   1.36%
Portfolio turnover rate(d)   26.76%   43.44%   5.01%
                

 

(a)Formerly the AIT Global Emerging Markets Opportunity Fund. See organizational note within the Notes to the Financial Statements.

(b)For the period May 22, 2013, commencement of operations, to September 30, 2013.

(c)Net investment income (loss) for the period ended was calculated using the average shares outstanding method.

(d)Not annualized for periods less than one year.

(e)Annualized for periods less than one year.

 

See notes to financial statements.

 

32
 

 

ADVISERS INVESTMENT TRUST
VONTOBEL FUNDS
FINANCIAL HIGHLIGHTS
For the periods indicated

     
     
   Class
I Shares
 
Vontobel Global Equity Institutional Fund  Period Ended
September 30, 2015(a)
 
Net asset value, beginning of period  $10.00 
Income (loss) from operations:     
Net investment income(b)   0.10 
Net realized and unrealized gains (losses) from investments   0.05 
Total from investment operations   0.15 
Less distributions paid:     
From net investment income    
Total distributions paid    
Change in net asset value   0.15 
Net asset value, end of period  $10.15 
Total return(c)   1.50%
Ratios/Supplemental data:     
Net assets, end of period (000’s)  $14,662 
Ratio of net expenses to average net assets(d)   0.90%
Ratio of net investment income to average net assets(d)   1.28%
Ratio of gross expenses to average net assets(d)   2.27%
Portfolio turnover rate(c)   39.00%
      

 

(a)For the period January 2, 2015, commencement of operations, to September 30, 2015.

(b)Net investment income (loss) for the period ended was calculated using the average shares outstanding method.

(c)Not annualized for periods less than one year.

(d)Annualized for periods less than one year.

 

See notes to financial statements.

 

33
 

 

ADVISERS INVESTMENT TRUST
VONTOBEL FUNDS
FINANCIAL HIGHLIGHTS
For the periods indicated
       
       
   Class
I Shares
 
Vontobel International Equity Institutional Fund  Period Ended
September 30, 2015(a)
 
Net asset value, beginning of period  $10.00 
Income (loss) from operations:     
Net investment income(b)   0.15 
Net realized and unrealized gains (losses) from investments   (0.01)
Total from investment operations   0.14 
Less distributions paid:     
From net investment income    
Total distributions paid    
Change in net asset value   0.14 
Net asset value, end of period  $10.14 
Total return(c)   1.40%
Ratios/Supplemental data:     
Net assets, end of period (000’s)  $27,653 
Ratio of net expenses to average net assets(d)   0.95%
Ratio of net investment income to average net assets(d)   1.87%
Ratio of gross expenses to average net assets(d)   1.80%
Portfolio turnover rate(c)   30.76%
      

 

(a)For the period January 2, 2015, commencement of operations, to September 30, 2015.

(b)Net investment income (loss) for the period ended was calculated using the average shares outstanding method.

(c)Not annualized for periods less than one year.

(d)Annualized for periods less than one year.

 

See notes to financial statements.

 

34
 

 

ADVISERS INVESTMENT TRUST
VONTOBEL FUNDS
NOTES TO FINANCIAL STATEMENTS
September 30, 2015

 

The Advisers Investment Trust (the “Trust”) is an open-end registered investment company established under the laws of Ohio by an Agreement and Declaration of Trust registered March 1, 2011 (the “Trust Agreement”). As an investment company, as defined in Financial Accounting Standards Board (“FASB”) Accounting Standards Update 2013-08, the Trust follows accounting and reporting guidance under FASB Accounting Standards Codification Topic 946, “Financial Services – Investment Companies”. The Trust commenced operations on December 20, 2011. The Trust Agreement permits the Board of Trustees (the “Trustees” or “Board”) to authorize and issue an unlimited number of shares of beneficial interest, at no par value, in separate series of the Trust. The Vontobel Global Emerging Markets Equity Institutional Fund (formerly known as the AIT Global Emerging Markets Opportunity Fund), Vontobel Global Equity Institutional Fund, and Vontobel International Equity Institutional Fund, (referred to individually as a “Fund” and collectively as the “Funds” or the “Vontobel Funds”) are each a series of the Trust and commenced operations on May 22, 2013, January 2, 2015, and January 2, 2015, respectively. The Funds are authorized to issue multiple classes of shares, however, only the Class I shares are currently being offered and have commenced operations. These financial statements and notes only relate to the Vontobel Funds.

 

The Funds are each diversified funds and have an investment objective of providing capital appreciation.

 

Under the Funds’ organizational documents, its officers and Trustees are indemnified against certain liabilities arising out of the performance of their duties to the Funds. In addition, in the normal course of business, the Funds enter into contracts with their vendors and others that provide for general indemnifications. The Funds’ maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Funds.

 

A. Significant accounting policies are as follows:

 

INVESTMENT VALUATION

 

Investments are recorded at fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The valuation techniques employed by the Funds, as described below, maximize the use of observable inputs and minimize the use of unobservable inputs in determining fair value. These inputs are summarized in the following three broad levels:

 

● Level 1 —quoted prices in active markets for identical assets

 

● Level 2 —other significant observable inputs (including quoted prices of similar securities, interest rates, prepayment speeds, credit risk, etc.)

 

● Level 3 —significant unobservable inputs (including each Fund’s own assumptions in determining the fair value of investments)

 

The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. For example, certain short-term debt securities may be valued using amortized cost. Generally, amortized cost approximates the current value of a security, but since this valuation is not obtained from a quoted price in an active market, such securities would be reflected as Level 2 in the fair value hierarchy.

 

Security prices are generally provided by an independent third party pricing service approved by the Trustees as of the close of the New York Stock Exchange, normally at 4:00 pm EST, each business day on which the share price of

 

35
 

 

 

ADVISERS INVESTMENT TRUST
VONTOBEL FUNDS
NOTES TO FINANCIAL STATEMENTS
September 30, 2015

 

the Funds are calculated. Equity securities listed or traded on a primary exchange are valued at the closing price, if available, or the last sales price on the primary exchange. If no sale occurred on the valuation date, the securities will be valued at the latest quotations as of the close of the primary exchange. Investments in other open-end registered investment companies are valued at their respective net asset value as reported by such companies. In these types of situations, valuations are typically categorized as a Level 1 in the fair value hierarchy.

 

Debt and other fixed income securities, if any, are generally valued at an evaluated price provided by an independent pricing source approved by the Trustees. To value debt securities, pricing services may use various pricing techniques which take into account appropriate factors such as market activity, yield, quality, coupon rate, maturity, type of issue, trading characteristics, call features, credit ratings and other data, as well as broker quotes. Short-term debt securities of sufficient credit quality that mature within sixty days may be valued at amortized cost, which approximates fair value. In each of these situations, valuations are typically categorized as Level 2 in the fair value hierarchy.

 

When the price of a security is not readily available or deemed unreliable (e.g., an approved pricing service does not provide a price, a furnished price is in error, certain stale prices, or an event occurs that materially affects the furnished price), the Funds’ Fair Value Committee may in good faith establish a fair value for that security in accordance with procedures established by and under the general supervision of the Trustees. In addition, fair value pricing may be used if events materially affecting the value of foreign securities occur between the time when the exchange on which they are traded closes and the time when the Funds’ net asset value is calculated. The Funds identify possible fluctuations in international securities by monitoring the increase or decrease in the value of a designated benchmark index. In the event of an increase or decrease greater than predetermined levels, the Funds may use a systematic valuation model provided by an independent third party pricing service to fair value their international equity securities.

 

In the fair value situations as noted above, while the Trust’s valuation policy is intended to result in a calculation of each Fund’s net asset value that fairly reflects security values as of the time of pricing, the Trust cannot ensure that fair values determined pursuant to these guidelines would accurately reflect the price that a Fund could obtain for a security if it were to dispose of that security as of the time of pricing (for instance, in a forced or distressed sale). The prices used by the Funds may differ from the value that would be realized if the securities were sold, and these differences could be material to the financial statements. Depending on the source and relative significance of the valuation inputs in these instances, the instruments may be classified as Level 2 or Level 3 in the fair value hierarchy.

 

36
 

 

ADVISERS INVESTMENT TRUST
VONTOBEL FUNDS
NOTES TO FINANCIAL STATEMENTS
September 30, 2015

 

The following is a summary of the valuation inputs used as of September 30, 2015 in valuing each Fund’s investments based upon the three fair value levels defined above: 

 

                         
 Portfolio    Level 1 - Quoted
Prices
     Level 2 - Other
Significant
Observable Inputs
   Level 3 -
Significant
Unobservable
Inputs
   Total 
 Global Emerging Markets Equity                        
 Institutional Fund                        
Common Stocks                        
Consumer Discretionary    $14,290,216     $43,103,214   $   $57,393,430 
Consumer Staples     97,585,660      257,164,492        354,750,152 
Energy     4,863,316              4,863,316 
Financials     58,550,315      158,104,173        216,654,488 
Health Care     938,582      46,085,653        47,024,235 
Industrials           1,198,038        1,198,038 
Information Technology     77,660,806      64,887,723        142,548,529 
Materials     15,033,433      6,929,204        21,962,637 
Telecommunications Services           47,559,021        47,559,021 
Utilities           33,800,839        33,800,839 
Short-Term Investments     25,556,805              25,556,805 
Total Investments    $294,479,133     $658,832,357   $   $953,311,490 
 Global Equity Institutional Fund                        
Common Stocks                        
Consumer Discretionary    $583,643     $144,294   $   $727,937 
Consumer Staples     2,570,679      2,315,261        4,885,940 
Energy     231,172              231,172 
Financials     2,490,836      549,743        3,040,579 
Health Care     1,658,165      799,106        2,457,271 
Information Technology     2,493,409              2,493,409 
Materials     252,845              252,845 
Short-Term Investments     644,746              644,746 
Total Investments    $10,925,495     $3,808,404   $   $14,733,899 

  

37
 

  

ADVISERS INVESTMENT TRUST
VONTOBEL FUNDS
NOTES TO FINANCIAL STATEMENTS
September 30, 2015

 

                        
 Portfolio     Level 1 - Quoted
Prices
     Level 2 - Other
Significant
Observable Inputs
    Level 3 -
Significant
Unobservable
Inputs
    Total 
 International Equity Institutional Fund                       
Common Stocks                       
Consumer Discretionary    $505,876    $1,655,862   $   $2,161,738 
Consumer Staples     1,541,817     7,722,845        9,264,662 
Energy     519,709             519,709 
Financials     992,102     2,633,618        3,625,720 
Health Care          4,400,798        4,400,798 
Industrials          459,453        459,453 
Information Technology     1,112,471     390,119        1,502,590 
Materials          306,437        306,437 
Utilities          248,805        248,805 
Short-Term Investments     1,041,314             1,041,314 
Total Investments    $5,713,289    $17,817,937   $   $23,531,226 

  

As of September 30, 2015, there were no Level 3 securities held by the Funds. The Funds disclose all transfers between levels based on valuations at the end of each reporting period. At September 30, 2015, the Funds had transfers as follows:

 

           
Transfers from Level 1 to Level 2
Portfolio     Value   Reason
Global Emerging Markets Equity          
Institutional Fund          
Common Stocks          
Consumer Discretionary   $ 42,526,877   Foreign equity adjustment was applied in current period
Consumer Staples     202,855,232   Foreign equity adjustment was applied in current period
Financials     128,883,573   Foreign equity adjustment was applied in current period
Health Care     40,711,742   Foreign equity adjustment was applied in current period
Information Technology     51,532,119   Foreign equity adjustment was applied in current period
Materials     6,929,204   Foreign equity adjustment was applied in current period
Telecommunication Services     43,825,868   Foreign equity adjustment was applied in current period
Utilities     33,399,162   Foreign equity adjustment was applied in current period

 

38
 

  

ADVISERS INVESTMENT TRUST
VONTOBEL FUNDS
NOTES TO FINANCIAL STATEMENTS
September 30, 2015

  

EQUITY-LINKED SECURITIES

 

The Funds may invest in equity-linked securities, also known as participation notes. The Funds may use these instruments as an alternate means to gain exposure to what is generally an emerging securities market, such as countries in which it does not have local trading accounts. These instruments represent interests in securities listed on certain foreign exchanges, and thus present similar risks to investing directly in such equity securities. These instruments are generally issued by the associates of foreign-based foreign brokerages and domestic institutional brokerages. Accordingly, the equity-linked securities also expose investors to counterparty risk, which is the risk that the entity issuing the note may not be able to honor its financial commitments.

 

CURRENCY TRANSACTIONS

 

The functional and reporting currency for the Funds is the U.S. dollar. The market values of foreign securities, currency holdings and other assets and liabilities are translated into U.S. dollars based on the current exchange rates each business day. Purchases and sales of securities and income and expense items denominated in foreign currencies are translated into U.S. dollars at the exchange rate in effect on the transaction date. The Funds do not separately report the effects of changes in foreign exchange rates from changes in market prices on securities held. Such changes are included in net realized and net changes in unrealized gain or loss from investment transactions on the Statements of Operations. The Funds may invest in foreign currency-denominated securities and may engage in foreign currency transactions either on a spot (cash) basis at the rate prevailing in the currency exchange market at the time or through a forward foreign currency contract (see financial derivative instruments). Realized foreign exchange gains or losses arising from sales of spot foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions and the difference between the recorded amounts of dividends, interest, and foreign withholding taxes and the U.S. dollar equivalent of the amounts actually received or paid are included in net realized gain or loss on foreign currency transactions on the Statement of Operations. Net unrealized foreign exchange gains and losses arising from changes in foreign exchange rates on foreign denominated assets and liabilities other than investments in securities held at the end of the reporting period are included in net change in unrealized appreciation or depreciation on foreign currency transactions on the Statements of Operations.

 

The Funds may engage in spot currency transactions for the purpose of foreign security settlement and operational processes. Changes in foreign currency exchange rates will affect the value of the Funds’ securities and the price of the Funds’ shares. Generally, when the value of the U.S. dollar rises in value relative to a foreign currency, an investment in that country loses value because that currency is worth fewer U.S. dollars. Devaluation of a currency by a country’s government or banking authority also may have a significant impact on the value of any investments denominated in that currency. Currency markets generally are not as regulated as securities markets.

 

INVESTMENT TRANSACTIONS AND INCOME

 

Investment transactions are accounted for no later than one business day after trade date. For financial reporting purposes, investments are reported as of the trade date. The Funds determine the gain or loss realized from investment transactions by using an identified cost basis method. Interest income is recognized on an accrual basis and includes, where applicable, the amortization of premium or accretion of discount. Dividend income is recognized on the ex-dividend date. Dividends from foreign securities are recorded on the ex-dividend date, or as soon as the information is available.

 

39
 

  

ADVISERS INVESTMENT TRUST
VONTOBEL FUNDS
NOTES TO FINANCIAL STATEMENTS
September 30, 2015

 

EXPENSE ALLOCATIONS

 

Expenses directly attributable to a fund in the Trust are charged to that fund, while expenses that are attributable to more than one fund in the Trust are allocated among the applicable funds on a pro-rata basis to each adviser’s series of funds, based on relative net assets or another reasonable basis.

 

DIVIDENDS AND DISTRIBUTIONS

 

The Funds intend to distribute substantially all of their net investment income as dividends to shareholders on an annual basis. The Funds intend to distribute their net realized long-term capital gains and their net realized short-term capital gains at least once a year.

 

Distributions from net investment income and from net realized capital gain are determined in accordance with Federal income tax regulations, which may differ from accounting principles generally accepted in the United States of America (“GAAP”). These “book/tax” differences are either considered temporary or permanent in nature. To the extent these differences are permanent in nature (e.g. treatment of certain dividend distributions, gains/losses, return of capital, etc.), such amounts are reclassified within the composition of net assets based on their federal tax-basis treatment; temporary differences do not require reclassification. Distributions to shareholders that exceed net investment income and net realized capital gains for tax purposes are reported as distributions of capital.

 

FEDERAL INCOME TAX INFORMATION

 

No provision is made for Federal income taxes as each Fund intends to qualify each year as a “regulated investment company” under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”), and distribute substantially all of its net investment income and net realized capital gain in accordance with the Code.

 

As of September 30, 2015, the Funds did not have uncertain tax positions that would require financial statement recognition or disclosure based on an evaluation of all open tax years for all major tax jurisdictions. The Vontobel Global Emerging Markets Equity Institutional Fund’s federal tax returns filed for the tax years ended September 30, 2013 and 2014, and the Funds’ tax returns to be filed for the tax year ended 2015, remain subject to examination by the Internal Revenue Service. Interest or penalties incurred, if any, on future unknown, uncertain tax positions taken by the Funds will be recorded as interest expense on the Statement of Operations.

 

Management is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will change materially in the next 12 months.

 

CAPITAL GAIN TAXES

 

Investments in certain foreign securities may subject the Funds to capital gain taxes on the disposal of those securities. Any capital gains assessed will reduce the proceeds received on the sale and be reflected in net realized gain/loss on the transaction. The Funds estimate and accrue foreign capital gain taxes on certain investments held which impact the amount of unrealized appreciation/depreciation on such investments. The Vontobel Global Emerging Markets Equity Institutional Fund paid $788,020 in capital gain taxes during the year and, as of September 30, 2015, accrued $21,365 in estimated capital gain taxes based on the Fund’s current investments.

 

40
 

  

ADVISERS INVESTMENT TRUST
VONTOBEL FUNDS
NOTES TO FINANCIAL STATEMENTS
September 30, 2015

 

USE OF ESTIMATES

 

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.

 

OTHER RISKS

 

Securities markets outside the United States (“U.S.”), while growing in volume, have for the most part substantially less volume than U.S. markets, and many securities traded on these foreign markets are less liquid and their prices are more volatile than securities of comparable U.S. companies. In addition, settlement of trades in some non-U.S. markets is much slower and more subject to failure than in U.S. markets. Other risks associated with investing in foreign securities include, among other things, imposition of exchange control regulation by the U.S. or foreign governments, U.S. and foreign withholding taxes, limitations on the removal of funds or other assets, policies of governments with respect to possible nationalization of their industries, and economic or political instability in foreign nations. There may be less publicly available information about certain foreign companies than would be the case for comparable companies in the U.S., and certain foreign companies may not be subject to accounting, auditing and financial reporting standards and requirements comparable to or as uniform as those of U.S. companies.

 

The Funds may invest in emerging market securities. Investing in emerging market securities involves risks which are in addition to the usual risks inherent in foreign investments. These countries generally are located in the Asia and Pacific regions, the Middle East, Eastern Europe, Central America, South America and Africa. Some countries with emerging securities markets have experienced substantial, and in some periods extremely high, rates of inflation for many years. Inflation and rapid fluctuations in inflation rates have had and may continue to have negative effects on the economies and securities markets of certain countries. Moreover, the economies of some countries may differ favorably or unfavorably from the U.S. economy in such respects as rate of growth of gross domestic product, rate of inflation, capital reinvestment, resource self-sufficiency, number and depth of industries forming the economy’s base, condition and stability of financial institutions, governmental controls and investment restrictions that are subject to political change and balance of payments position. Further, a Fund may face greater difficulties or restrictions with respect to investments made in emerging markets countries than in the U.S. Satisfactory custodial services may not be available in some emerging markets countries, which may result in a Fund incurring additional costs and delays in the trading and custody of such securities.

 

B.    Fees and Transactions with Affiliates and Other Parties

 

The Funds have entered into an Investment Advisory Agreement (the “Agreement”) with Vontobel Asset Management, Inc. (the “Adviser”) to provide investment advisory services to the Funds. Under the terms of the Agreement, the Funds pay the Adviser an annual fee based on each Fund’s daily net assets as set forth in the following table. In addition, the Adviser has contractually agreed to waive fees and reimburse expenses to the extent that Total Annual Operating Expenses (exclusive of brokerage and other transaction expenses relating to the purchase or sale of portfolio investments, interest, taxes, short sale dividends and financing costs associated with the use of the cash proceeds on securities sold short, litigation and indemnification expenses, expenses with underlying investment companies and extraordinary expenses) exceed the rates in the table below.

 

41
 

  

ADVISERS INVESTMENT TRUST
VONTOBEL FUNDS
NOTES TO FINANCIAL STATEMENTS
September 30, 2015

 

                     
Fund   Class   Advisory Fee   Expense Limitation  
Global Emerging Markets Equity Institutional Fund     Class I     0.80 %   N/A  
Global Equity Institutional Fund     Class I     0.70 %   0.90 %
International Equity Institutional Fund     Class I     0.75 %   0.95 %

  

The expense limitation for Global Equity Institutional Fund and International Equity Institutional Fund are effective until January 28, 2016. If it becomes unnecessary for the Adviser to waive fees or make reimbursements, the Adviser may recapture any of its prior waivers or reimbursements for a period not to exceed three fiscal years from the year on which the waiver or reimbursement was made to the extent that such a recapture does not cause the Total Annual Fund Operating Expenses (excluding taxes, extraordinary expenses, expenses associated with investments in underlying investment companies, brokerage commissions, interest, dividends, litigation and indemnification expenses) to exceed the current expense limitation at the time of repayment or the applicable expense limitation that was in effect at the time of the waiver or reimbursement. The agreement to waive fees and reimburse expenses may be terminated by the Board at any time and will terminate automatically upon termination of the Investment Management Agreement.

 

For the year ended September 30, 2015, the Adviser waived and reimbursed expenses of $125,708 and $118,672 for the Vontobel Global Equity Institutional Fund and Vontobel International Equity Institutional Fund, respectively. These amounts are subject to repayment to the Adviser until September 30, 2018.

 

BHIL Distributors, Inc. (“Distributor”) provides distribution services to the Funds pursuant to a distribution agreement with the Trust. Under its agreement with the Trust, the Distributor acts as an agent of the Trust in connection with the offering of the shares of the Funds on a continuous basis. Effective May 1, 2015 the Adviser, at its own expense, pays the Distributor $50,000 annually and reimburses for certain out-of-pocket expenses incurred on behalf of the Funds. Prior to May 1, 2015 the Adviser, at its own expense, paid the Distributor $25,000 annually and certain variable fees and reimbursement for certain out-of-pocket expenses incurred on behalf of the Funds.

 

The Northern Trust Company (“Northern Trust”) serves as the financial administrator, transfer agent, custodian and fund accounting agent for the Funds pursuant to written agreements between the Funds and Northern Trust. The Funds have agreed to pay Northern Trust a tiered basis-point fee based on the Funds’ daily net assets, and certain per account and transaction charges. Each Fund is subject to a minimum annual fee of $125,000 relating to these services, and reimbursement for certain expenses incurred on behalf of the Fund. Total fees paid to Northern Trust pursuant to these agreements are reflected as “Accounting and Administration” fees on the Statement of Operations.

 

Beacon Hill Fund Services, Inc. (“Beacon Hill”) provides Compliance Services, Financial Control Services and Business Management and Governance Services for the Funds pursuant to a written agreement between the Funds and Beacon Hill, including providing the President, Treasurer, Chief Compliance Officer and Secretary to the Funds and performing certain regulatory administrative services. The Funds have agreed to pay Beacon Hill a tiered basis-point fee based on the Funds’ daily net assets, subject to an overall Vontobel complex minimum annual fee of $200,000 for these services, and reimburse for certain expenses incurred on behalf of the Funds. Total fees paid to Beacon Hill pursuant to these agreements are reflected as “Regulatory and Compliance” fees on the Statement of Operations.

 

42
 

  

ADVISERS INVESTMENT TRUST
VONTOBEL FUNDS
NOTES TO FINANCIAL STATEMENTS
September 30, 2015

 

Certain officers and Trustees of the Trust are affiliated with Beacon Hill, Northern Trust or the Distributor and receive no compensation from the Funds for serving in their respective roles. Prior to April 1, 2015, the Trust paid each Independent Trustee compensation for their services based on an annual retainer of $22,000 and reimbursement for certain expenses. As of April 1, 2015, the Trust pays each Independent Trustee compensation for their services based on an annual retainer of $30,000 and reimbursement for certain expenses. If there are more than six meetings in a year, additional meeting fees may apply. For the year ended September 30, 2015, the aggregate Trustee compensation paid by the Trust was $79,500. The amount of total Trustee compensation and reimbursement of out-of-pocket expenses allocated from the Trust to the Funds are reflected as “Trustees” expenses on the Statement of Operations.

 

C.   Investment Transactions

 

For the year ended September 30, 2015, the aggregate costs of purchases and proceeds from sales of securities (excluding short-term investments) for the Funds were as follows: 

 

    
   Cost of Purchases   Proceeds from Sales
Global Emerging Markets Equity Institutional Fund  $504,920,869   $260,305,482
Global Equity Institutional Fund   19,053,518    4,858,554
           
International Equity Institutional Fund   29,025,545    5,861,181

 

D.   Federal Income Tax

 

As of September 30, 2015, the cost, gross unrealized appreciation and gross unrealized depreciation on securities, for federal income tax purposes, were as follows: 

                    
   Tax Cost    Tax Unrealized
Appreciation
    Tax Unrealized
(Depreciation)
     Net Unrealized
Appreciation
(Depreciation)
 
Global Emerging Markets Equity Institutional Fund  $1,023,426,998   $49,484,032   $(119,599,540)  $(70,115,508)
Global Equity Institutional Fund   14,755,794    493,024    (514,919)   (21,895)
International Equity Institutional Fund   23,688,959    801,094    (958,827)   (157,733)

  

43
 

 

 
ADVISERS INVESTMENT TRUST
VONTOBEL FUNDS
NOTES TO FINANCIAL STATEMENTS
September 30, 2015

 

The tax character of distributions paid to shareholders during the latest tax year ended September 30, 2015 and 2014 for the Funds were as follows: 

                     
Global Emerging Markets
Equity Institutional Fund
 Ordinary Income Net Long
Term Gains
 Total Taxable
Distributions
 Tax Return
of Capital
 Total Distributions
Paid
2015   $17,209,426   $   $17,209,426   $   $17,209,426 
2014    4,421,004        4,421,004        4,421,004 
                           
Global Equity Institutional Fund   Ordinary Income   Net Long
Term Gains
   Total Taxable
Distributions
   Tax Return
of Capital
   Total Distributions
Paid
 
2015   $   $   $   $   $ 
                           
International Equity
Institutional Fund
   Ordinary Income   Net Long
Term Gains
   Total Taxable
Distributions
   Tax Return
of Capital
   Total Distributions
Paid
 
2015   $   $   $   $   $ 

 

The difference between the tax cost of portfolio investments and the financial statement cost is primarily due to wash sale loss deferrals and investments in certain foreign companies.

 

For the period subsequent to October 31, 2014, through the fiscal year ended September 30, 2015, the following Funds incurred net capital losses and/or Section 988 net currency losses which each Fund intends to treat as having been incurred in the following fiscal year:

 

Fund  Amount 
Global Emerging Markets Equity Institutional Fund  $68,431,883 
Global Equity Institutional Fund    
International Equity Institutional Fund    

 

As of the latest tax year ended September 30, 2015, the components of accumulated earnings on a tax basis were as follows:

 

   Undistributed
Ordinary
Income
   Undistributed
Long Term
Capital Gains
 Accumulated
Earnings
   Distributions
Payable
   Accumulated
Capital and
Other Losses
   Unrealized
Depreciation
   Total
Accumulated
Earnings
 
Global Emerging Markets Equity Institutional Fund  $11,687,231   $   $11,687,231   $   $(85,721,332)  $(70,070,629)  $(144,104,730)
Global Equity Institutional Fund   127,272        127,272        (86,662)   (21,898)   18,712 
International Equity Institutional Fund   304,721        304,721        (525,893)   (154,441)   (375,613)

 

44
 

  

ADVISERS INVESTMENT TRUST
VONTOBEL FUNDS
NOTES TO FINANCIAL STATEMENTS
September 30, 2015

 

At September 30, 2015, capital losses incurred by the Funds are carried forward indefinitely under the provisions of the Regulated Investment Company Modernization Act of 2010 are as follows: 

           
Fund  Short-Term
Capital Loss
Carry-Forward
   Long-Term
Capital Loss
Carry-Forward
 
Global Emerging Markets Equity Institutional Fund  $14,748,364   $2,541,084 
Global Equity Institutional Fund   86,662     
International Equity Institutional Fund   525,893     

45
 

 

 
ADVISERS INVESTMENT TRUST
VONTOBEL FUNDS
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
September 30, 2015

 

To the Board of Trustees and Shareholders of The Vontobel Funds of the Advisers Investment Trust

 

We have audited the accompanying statements of assets and liabilities, including the schedules of investments, of the Advisers Investment Trust (comprising the Vontobel Global Emerging Markets Equity Institutional Fund (formerly, the AIT Global Emerging Markets Opportunity Fund), Vontobel Global Equity Institutional Fund (commenced operations on January 2, 2015) and Vontobel International Equity Institutional Fund (commenced operations on January 2, 2015), (the “Funds”), as of September 30, 2015, and the related statements of operations for the year or period then ended, the statements of changes in net assets for each of the two years or periods indicated therein and the financial highlights for each of the three years or periods indicated therein. These financial statements and financial highlights are the responsibility of the Funds’ management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.

 

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Funds’ internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Funds’ internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of September 30, 2015 by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. We believe that our audits provide a reasonable basis for our opinion.

 

In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of each of the respective funds listed above constituting the Advisers Investment Trust at September 30, 2015, the results of their operations for the year or period then ended, the changes in their net assets for each of the two years or period indicated therein and the financial highlights for each of three years or periods indicated therein, in conformity with U.S. generally accepted accounting principles.

 

-s- Ernst & Young LLP 

 

Cincinnati, Ohio
November 23, 2015

 

46
 

 

 
ADVISERS INVESTMENT TRUST
VONTOBEL FUNDS
ADDITIONAL INFORMATION
September 30, 2015 (Unaudited)
 

 

A.Other Federal Tax Information

 

Under the Jobs and Growth Tax Relief Reconciliation Act of 2003 (the “Act”), the following percentages of ordinary dividends paid during the fiscal year ended September 30, 2015 are designated as “qualified dividend Income”, as defined in the Act, subject to reduced tax rates in 2015: 

     
   QDI Percentage 
Global Emerging Markets Equity Institutional Fund   100.00%
Global Equity Institutional Fund   0.00 
International Equity Institutional Fund   0.00 

 

The Fund intends to make an election that will allow shareholders to treat their proportionate share of foreign taxes paid by the Funds as having been paid by them. The amounts per share which represent income from sources within, and taxes paid to, foreign countries are as follows:

 

   Foreign Tax Credit   Foreign Source Income 
Global Emerging Markets Equity Institutional Fund  $0.005234   $0.115416 
Global Equity Institutional Fund        
International Equity Institutional Fund   0.007447    0.096353 

 

47
 

 
ADVISERS INVESTMENT TRUST
VONTOBEL FUNDS
ADDITIONAL INFORMATION
September 30, 2015 (Unaudited)

 

B.Summary of Fund Holdings

 
Vontobel Global Emerging Markets Equity Institutional Fund

  

Market Exposure 

     
Equity Securities  % of Net
Assets
 
Agriculture   13.1%
Banks   10.8 
Beverages   11.8 
Chemicals   0.5 
Commercial Services   2.1 
Computers   4.2 
Cosmetics/Personal Care   3.0 
Diversified Financial Services   6.3 
Electric   3.4 
Engineering & Construction   0.1 
Food   0.8 
Healthcare-Services   0.4 
Holding Companies-Divers   1.6 
Household Products/Wares   2.6 
Insurance   1.7 
Internet   3.9 
Lodging   1.4 
Media   3.4 
Mining   2.2 
Pharmaceuticals   4.3 
Real Estate Investment Trust   1.5 
Retail   4.9 
Semiconductors   2.1 
Software   2.6 
Telecommunications   4.8 
Total   93.5%

5 Largest Equity Positions

     
Issuer  % of Net
Assets
 
British American Tobacco PLC   5.7%
Housing Development Finance Corp. Ltd.   5.5 
HDFC Bank Ltd. - ADR   4.5 
ITC Ltd.   4.4 
SABMiller PLC   4.0 
Total   24.1%

 

 

48
 

 

 
ADVISERS INVESTMENT TRUST
VONTOBEL FUNDS
ADDITIONAL INFORMATION
September 30, 2015 (Unaudited)

 

Vontobel Global Equity Institutional Fund

 

Market Exposure

     
Equity Securities  % of Net
Assets
 
Agriculture   18.4%
Banks   8.8 
Beverages   3.1 
Biotechnology   3.8 
Building Materials   1.7 
Commercial Services   6.7 
Computers   3.7 
Cosmetics/Personal Care   2.4 
Diversified Finan Serv   8.9 
Food   5.0 
Healthcare-Products   2.7 
Healthcare-Services   1.3 
Household Products/Wares   3.2 
Insurance   4.5 
Internet   5.5 
Media   1.0 
Pharmaceuticals   9.0 
Pipelines   1.6 
Real Estate Investment Trust   1.8 
Retail   3.0 
Total   96.1%

 

5 Largest Equity Positions 

     
Issuer  % of Net
Assets
 
British American Tobacco PLC   5.0%
MasterCard, Inc. - Class A   5.0 
Philip Morris International, Inc.   4.8 
Atria Group, Inc.   4.3 
Wells Fargo & Co.   3.7 
Total   22.8%

 

49
 

 

 
ADVISERS INVESTMENT TRUST
VONTOBEL FUNDS
ADDITIONAL INFORMATION
September 30, 2015 (Unaudited)

  

Vontobel International Equity Institutional Fund

 

Market Exposure 

     
Equity Securities  % of Net
Assets
 
Advertising   0.4%
Agriculture   13.4 
Apparel   1.0 
Banks   7.1 
Beverages   4.0 
Biotechnology   1.8 
Chemicals   1.1 
Commercial Services   3.1 
Computers   0.6 
Cosmetics/Personal Care   5.2 
Diversified Finan Serv   4.2 
Engineering&Construction   0.9 
Entertainment   1.0 
Food   5.7 
Healthcare-Products   2.1 
Healthcare-Services   2.6 
Home Builders   1.6 
Household Products/Wares   3.6 
Internet   3.5 
Media   1.2 
Pharmaceuticals   9.4 
Pipelines   1.9 
Real Estate   0.9 
Real Estate Investment Trust   0.9 
Retail   2.7 
Software   1.4 
Total   81.3%

 

5 Largest Equity Positions 

     
Issuer  % of Net
Assets
 
British American Tobacco PLC   5.7%
Roche Holding A.G. (Genusschein)   4.6 
Unilever N.V. - CVA   4.5 
Housing Development Finance Corp. Ltd., Issued by Macquarie Bank Ltd.   4.1 
Reckitt Benckiser Group PLC   4.0 
Total   22.9%

 

50
 

  

 
ADVISERS INVESTMENT TRUST
VONTOBEL FUNDS
ADDITIONAL INFORMATION
September 30, 2015 (Unaudited)

 

C.Expense Examples

 

As a Fund shareholder, you may incur two types of costs: (1) transaction costs; and (2) ongoing costs, including management 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 the ongoing costs of investing in other mutual funds. Please note that the expenses shown in the tables are meant to highlight your ongoing costs only and do not reflect any transactional costs. Therefore, the examples are useful in comparing ongoing costs only and will not help you determine the relative total cost of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.

 

The examples below are based on an investment of $1,000 invested at April 1, 2015 and held for the entire period through September 30, 2015.

 

The Actual Expense Example below provides information about actual account values and actual expenses. You may use this information, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the table under the heading entitled “Expenses Paid” to estimate the expenses you paid on your account during this period.

 

The Hypothetical Expense Example below provides information about hypothetical account values and hypothetical expenses based on the Funds’ actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Funds’ actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Funds and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.

                     
Vontobel Global Emerging Markets Equity Institutional Fund            
   Expense
Ratio
   Beginning Account Value
4/1/2015
   Ending Account Value
9/30/15
   *Expenses Paid
4/1/15-9/30/15
 
Actual   0.98%  $1,000.00   $893.80   $4.65 
Hypothetical   0.98%  $1,000.00   $1,020.16   $4.96 
                     
Vontobel Global Equity Institutional Fund     
   Expense
Ratio
   Beginning Account Value
4/1/2015
   Ending Account Value
9/30/15
   *Expenses Paid
4/1/15-9/30/15
 
Actual   0.90%  $1,000.00   $976.90   $4.46 
Hypothetical   0.90%  $1,000.00   $1,020.56   $4.56 
                     
Vontobel International Equity Institutional Fund       
   Expense
Ratio
   Beginning Account Value
4/1/2015
   Ending Account Value
9/30/15
   *Expenses Paid
4/1/15-9/30/15
 
Actual   0.95%  $1,000.00   $966.60   $4.68 
Hypothetical   0.95%  $1,000.00   $1,020.31   $4.81 

 

51