Brandes International Fund
Annual
Report
For the
Period Ended
October 31, 1995
<PAGE>
Annual Report
For the period March 6, 1995 (commencement of operations) to October 31,
1995.
December 1, 1995
Dear Shareholder:
Your fund's fiscal period, ended October 31, has drawn to a close. In spite of a
short eight months of operations, and some recent fluctuation in overseas
markets, this first period has provided a beginning for a strong investment
program.
While most foreign markets have been out paced by the U.S. market thus far in
1995, this is a relatively rare event. Over the past twenty calendar years, the
U.S. market has never been the top performer in the world. Despite the strong
showing this year in the domestic markets, the reasons for investing abroad
continue to be compelling for the long-term investor.
1. Foreign-based companies now command over two-thirds of the total market
value for all publicly- traded businesses.
2. Many overseas economies, industries and companies are growing faster
than those in the U.S.
3. Many of these companies are much better values than similar domestic
companies.
4. Foreign investment provides additional diversification to an investor's
portfolio.
The world has had the biggest economic revolution in history. As communism
collapsed in many countries and socialism continues to be discredited, large
parts of the world's population are moving toward capitalism and market
economies. Private ownership, free enterprise and free trade are on the march in
many parts of Asia, Latin America and the former Soviet bloc. Of course, there
are still elements of the old regimes around to cause worry and volatility.
Modernization and growth will be uneven. We, however, look forward to the
opportunities that these trends present and to the resulting market volatility
that will enable us to purchase bargains in the foreign markets.
<PAGE>
Over the last three months, your fund has performed somewhat better than
the unmanaged benchmark index, the Morgan Stanley Capital International EAFE
(Europe, Australasia and Far East) Index. Nevertheless, we maintain that
short-term performance is not particularly relevant to a long-term value
investor. We do not think of ourselves as traders of stocks, but as owners of
businesses. We like to seize opportunities to purchase these businesses where
negative sentiment has brought their prices to bargain levels, and then to hold
them until the market realizes their intrinsic value. This typically takes
several years.
We have begun a strong investment program with an eye to the future. We welcome
your participation and look forward to working with you.
Sincerely yours,
Barry P. O'Neil
President
(GRAPHICAL MATERIAL OMITTED
<PAGE>
<TABLE>
<CAPTION>
PORTFOLIO OF INVESTMENTS as of October 31, 1995
Shares Value
- --------------------------------------------------------------------------------
COMMON STOCKS: 63.5%
- --------------------------------------------------------------------------------
Argentina: 2.0%
Yacimientos Petroliferos
<S> <C> <C>
S.A., ADS............... 12,500 $ 214,064
------ ---------
Austria: 0.2%
VA Technologie
AG, ORD................. 170 19,704
--- ------
Brazil: 1.6%
Telecommunicacoes
Brasileiras, ADR........ 4,500 180,000
----- -------
Canada: 0.2%
Molson Co. Ltd.,
Class A, ORD............ 1,100 17,704
----- ------
Denmark: 2.6%
Den Danske Bank
Group, ADR.............. 4,300 283,800
----- -------
France: 8.7%
Alcatel Alsthom, ADR..... 27,200 459,000
Compagnie UAP, ORD....... 10,400 270,545
Elf Aquitaine, ADR....... 6,750 227,813
----- -------
957,358
-------
Germany: 8.4%
Daimler-Benz, ADR........ 9,200 443,900
Siemens AG, ADR.......... 4,600 481,850
-------
925,750
-------
Israel: 0.4%
Scitex Corporation, Ltd.. 2,300 39,963
------
Italy: 7.9%
Istituto Mobiliare
Italiano, ADR........... 15,000 $ 241,875
Italgas-Sta It per il
Gas pA, ORD............. 79,500 211,401
Stet Societa Finanzioria
Telefonica, ADR......... 14,650 410,200
-------
863,476
-------
Japan: 6.1%
Fuji Photo Film
Co. Ltd., ADR........... 4,530 223,101
Hitachi, Ltd., ADR....... 4,280 447,795
-------
670,896
-------
Mexico: 2.9%
Telefonos de
Mexico, ADS............. 11,600 319,000
-------
Netherlands: 3.3%
KPN - Konin. PTT
Nederland, ORD.......... 10,150 357,032
-------
Spain: 5.1%
Repsol S.A., ADR......... 7,400 219,225
Telefonica de Espana
S.A., ADS............... 8,950 336,744
-------
555,969
-------
Sweden: 0.2%
Munksjo AB-Free,
ORD..................... 3,100 22,408
------
Switzerland: 6.0%
Nestle S.A., ADR......... 8,450 440,456
Schindler-Holding AG
Partn Ctf ORD........... 230 215,530
-------
655,986
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PORTFOLIO OF INVESTMENTS as of October 31, 1995
Shares Value
United Kingdom: 7.9%
Grand Metropolitan
<S> <C> <C>
PLC, ADR................ 12,000 $ 330,000
Hanson PLC, ADR.......... 27,800 430,900
Seeboard PLC, ADR........ 1,200 98,272
------
859,172
-------
Total Common Stocks
(cost $7,099,855)........ 6,942,282
---------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Principal
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS: 34.7%
- --------------------------------------------------------------------------------
United States: 34.7%
Prudential-Bache Repurchase
Agreement, due 11/1/95
collateralized by mortgage-
<S> <C> <C>
backed securities.......... $3,798,388 3,798,388
---------
Total Investments in Securities
(cost $10,898,243+): 98.2%........ $10,740,670
-----------
Other Assets less
Liabilities: 1.8%................. 196,931
-------
Total Net Assets: 100.0% ........... $10,937,601
===========
<FN>
+ Cost for federal income tax purposes is the same.
</FN>
Net unrealized depreciation consists of:
Gross unrealized appreication..... $ 178,018
Gross unrealized deprecaition..... (335,591)
--------
Net unrealized depreciation.. $ (157,573)
==========
</TABLE>
<TABLE>
PORTFOLIO OF INVESTMENTS by Industry
<S> <C>
Automobiles............................. 6.4%
Banking................................. 7.6%
Beverages and Tobacco .................. 0.3%
Data Processing & Reproductions......... 0.6%
Electrical & Electronics................ 20.0%
Energy Sources.......................... 9.5%
Food & Household Products............... 11.0%
Forest Products & Papers................ 0.3%
Insurance............................... 3.9%
Machinery & Engineering................. 3.4%
Multi - Industry........................ 6.2%
Recreation, Other Consumer Goods....... 3.2%
Telecommunications...................... 23.1%
Utilities - Electrical & Gas............ 4.5%
---
100.0%
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES as of October 31, 1995
- --------------------------------------------------------------------------------
ASSETS
<S> <C>
Investments in securities, at value (identified cost $10,898,243) ..................... $10,740,670
Receivables:
Fund shares purchased............................................................... 143,191
Dividends and interest ............................................................. 3,914
Due from Advisor.................................................................... 1,167
Prepaid expenses....................................................................... 20,792
Deferred organization costs............................................................ 91,093
------
Total assets .................................................................... 11,000,827
----------
LIABILITIES
Accrued expenses ...................................................................... 58,199
Accrued administration fees............................................................ 5,027
-----
Total liabilities................................................................ 63,226
------
Net assets ............................................................................... $10,937,601
===========
SOURCE OF NET ASSETS
Paid-in capital ....................................................................... $11,048,826
Undistributed net investment income.................................................... 46,449
Net unrealized depreciation on investments and foreign currency........................ (157,573)
Net realized loss on investments and foreign currency.................................. (101)
----
Net assets ......................................................................... $10,937,601
===========
Net assets:
Class A Shares ........................................................................ $ 5,188,105
Class C Shares ........................................................................ 5,749,496
---------
$10,937,601
===========
Class A Shares
Net asset value and redemption price per share, based on 391,153 shares outstanding
(unlimited number of shares authorized without par value) .......................... $13.26
======
Computation of Offering Price per share
(net asset value $13.26/.9525)...................................................... $13.92
======
Class C Shares
Net asset value and redemption price per share, based on 434,875 shares outstanding
(unlimited number of shares authorized without par value) .......................... $13.22
======
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS - March 6, 1995* to October 31, 1995
- ------------------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME:
Income:
<S> <C>
Interest............................................................................ $ 72,433
Dividends (net of withholding tax of $5,931)........................................ 49,633
------
Total income..................................................................... 122,066
-------
Expenses:
Advisory fees....................................................................... 34,019
Administrative fee ................................................................. 39,452
Custodian and accounting fees....................................................... 47,001
Transfer agent fees................................................................. 49,090
Auditing fees....................................................................... 22,000
Legal fees.......................................................................... 12,643
Blue sky fees....................................................................... 21,701
Amortization of deferred organization costs......................................... 13,728
Reports to shareholders............................................................. 4,246
Trustees fees....................................................................... 8,205
Miscellaneous....................................................................... 6,138
Expense reimbursements ............................................................. (207,194)
--------
51,029
Distribution and Shareholder Service fees
Class A Shares...................................................................... 5,078
Class C Shares...................................................................... 19,510
------
Net expenses........................................................................ 75,617
------
Net investment income ........................................................ 46,449
------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net unrealized depreciation on investments and foreign currency..................... (157,573)
Net realized loss on investments and foreign currency............................... (101)
----
Net realized and unrealized loss on investments and foreign currency............. (157,674)
--------
Net decrease in net assets resulting from operations ................... $ (111,225)
============
<FN>
*Commencement of operations.
</FN>
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS - March 6, 1995* to October 31, 1995
- ------------------------------------------------------------------------------------------------------------------------------------
INCREASE IN NET ASSETS FROM:
OPERATIONS:
<S> <C>
Net investment income..................................................................... $ 46,449
Net unrealized depreciation on investments and foreign currency........................... (157,573)
Net realized loss on investments and foreign currency..................................... (101)
----
Net decrease in net assets resulting from operations ............................... (111,225)
--------
CAPITAL SHARE TRANSACTIONS:(a)
Increase in net assets derived from net change in outstanding Class A Shares.............. 5,238,627
Increase in net assets derived from net change in outstanding Class C Shares.............. 5,810,199
---------
Increase in net assets resulting from capital share transactions.................... 11,048,826
----------
Total increase in net assets ....................................................... 10,937,601
NET ASSETS:
Beginning of period....................................................................... -0-
-
End of period (including undistributed net investment income of $46,449).................. $10,937,601
===========
<FN>
(a) A summary of capital shares transactions is as follows:
</FN>
</TABLE>
<TABLE>
<CAPTION>
Class A:
Shares Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Shares sold............................................. 392,800 $5,260,956
Shares redeemed......................................... 1,647 22,329
----- ------
Net increase............................................ 391,153 $5,238,627
======= ==========
Class C:
Shares Value
- ------------------------------------------------------------------------------------------------------------------------------------
Shares sold............................................. 438,014 $5,852,336
Shares redeemed......................................... 3,139 42,137
----- ------
Net increase............................................ 434,875 $5,810,199
======= ==========
<FN>
*Commencement of operations.
</FN>
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period) For the period March 6, 1995* to
October 31, 1995
- ------------------------------------------------------------------------------------------------------------------------------------
Class A Class C
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period................................... $12.50 $12.50
------ ------
Income (loss) from investment operations:
Net investment income............................................ .15** .10**
Net unrealized depreciation on investments....................... (.45)** (.39)**
Net realized gain on investments................................. 1.06*** 1.01***
---- ----
Total from investment operations ................................. .76 .72
--- ---
Net Asset Value, End of Period......................................... $13.26 $13.22
====== ======
Total return (sales load is not reflected in total return)............. 9.39%+ 8.89%+
RATIOS / SUPPLEMENTAL DATA:
Net assets, end of period .......................................... $5,188,105 $5,749,496
Ratio of expenses to average net assets:
Before expense reimbursement..................................... 7.93%+ 8.58%+
After expense reimbursement...................................... 1.85%+ 2.50%+
Ratio of net investment income (loss) to average net assets:
Before expense reimbursement..................................... (4.41)%+ (4.95)%+
After expense reimbursement..................................... 1.67%+ 1.13%+
Portfolio turnover rate................................................ 0% 0%
<FN>
*Commencement of operations.
**Calculated based on average shares outstanding.
***The amount shown in this caption for a share outstanding throughout the perod
does not correspond with the change in realized
gains and losses in the portfolio secruities for the period because of the
timing of sales and repurchases of portfolio shares in relation to fluctuating
market values for the portfolio.
+Annualized.
</FN>
</TABLE>
See accompanying notes to financial statements.
<PAGE>
NOTES TO FINANCIAL STATEMENTS - October 31, 1995
- --------------------------------------------------------------------------------
NOTE 1 - ORGANIZATION
The Brandes International Fund (the "Fund") is a Delaware business trust
organized on July 6, 1994 and registered under the Investment Company Act of
1940 (the "1940 Act") as a diversified, open-end management investment company.
The Fund began operations on March 6, 1995.
Shares of beneficial interest of the Fund are currently divided into two
Classes, designated Class A Shares and Class C Shares. Each Class represents
interests in the same assets of the Fund.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund. These policies are in conformity with generally accepted
accounting principles.
A. Security Valuation. Investments in securities traded on a primary
exchange are valued at the last reported sale price at the close of regular
trading on the last business day of the period; securities traded on an exchange
for which there has been no sale are valued at the last reported bid price.
Short-term investments are stated at cost, which when combined with accrued
interest, approximates market value.
U.S. Government securities with less than 60 days remaining to
maturity when acquired by the Fund are valued on an amortized cost basis. U.S.
Government securities with more than 60 days remaining to maturity are valued at
the current market value (using the mean between the bid and asked price) until
the 60th day prior to maturity, and are then valued at amortized cost based upon
the value on such date unless the Board determines during such 60 day period
that this amortized cost basis does not represent fair value.
Foreign securities are recorded in the financial statements after
translation to U.S. dollars, based on the applicable exchange rate at the end of
the period. The Fund does not isolate that portion of the results of operations
arising as a result of changes in the currency exchange rate from the
fluctuations arising as a result of changes in the market prices of investments
during the period.
Interest income is translated at the exchange rates which existed at
the dates the income was accrued. Exchange gains and losses related to interest
income are included in interest income on the accompanying Statement of
Operations.
B. Repurchase Agreements. The Fund may enter into repurchase agreements
with government securities dealers recognized by the Federal Reserve Board, with
member banks of the Federal Reserve System or with such other borkers or dealers
that meet the credit guidelines established by the Board of Trustees. The Fund
will always receive and maintian, as collateral, securities whose market value,
including accrued interest, will be at least equal to 100% of the dollar amount
invested by the Fund in each
<PAGE>
NOTES TO FINANCIAL STATEMENTS - October 31, 1995 agreement, and the Fund
will make payment for such securities only upon physical delivery or upon
evidence of book entry transfer to the account of the custodian. To the extent
that any repurchase transaction exceeds one business day, the value of the
collateral is marked-to-market on a daily basis to ensure the adequacy of the
collateral.
If the seller defaults and the value of the collateral declines, or if
bankruptcy proceedings are commenced with respect to the seller of the security,
realization of the collateral by the Fund may be delayed or limited.
C. Forward Foreign Currency Exchange Contracts. The Fund may utilize
forward foreign currency exchange contracts ("forward contracts") under which it
is obligated to exchange currencies at specific future dates.
D. Security Transactions, Dividends and Distributions. As is common in the
industry, security transactions are accounted for on the trade date. Dividend
income and distributions to shareholders are recorded on the ex-dividend date.
E. Federal Income Taxes. The Fund intends to comply with the requirements
of the Internal Revenue Code applicable to regulated investment companies and to
distribute all of its taxable income to its shareholders. Therefore, no federal
income tax provision is required.
F. Deferred Organization Costs. The Fund has incurred expenses of $104,821
in connection with its organization. These costs have been deferred and are
being amortized on a straight line basis over a period of sixty months from the
date the Fund commenced investment operations. In the event that any of the
initial shares of the Fund are redeemed by the holder during the period of
amortization of the Fund's organization costs, the redemption proceeds will be
reduced by any such unamortized organization costs in the same proportion as the
number of initial shares being redeemed bears to the number of those shares
outstanding at the time of redemption.
NOTE 3 - INVESTMENT MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES
For the period March 6, 1995 (commencement of operations) through October
31, 1995, Brandes Investment Partners, Inc. (the "Advisor") provided the Fund
with investment management services under an Investment Advisory Agreement. The
Advisor furnished all investment advice, office space and certain administrative
services, and provides certain personnel needed by the Fund. As compensation for
its services, the Advisor was entitled to a monthly fee at the annual rate of
1.00% based upon the average daily net assets of the Fund. The Fund is
responsible for its own operating expenses. In order to maintain the Fund's
operating expenses at 1.85% and 2.50% of average daily net assets of Class A
Shares and Class C Shares, respectively, the Advisor has waived fees and
reimbursed expenses totalling $207,194 during the period March 6, 1995
(commencement of operations) through October 31, 1995. The Fund will
<PAGE>
NOTES TO FINANCIAL STATEMENTS - October 31, 1995
reimburse the Advisor when operating expenses (before expense
reimbursement) are less than the expense limitations in future periods.
Investment Company Administration Corporation (the "Administrator") acts
as the Fund's Administrator under an Administration Agreement. The Administrator
prepares various federal and state regulatory filings, prepares reports and
materials to be supplied to the Directors; monitors the activities of the Fund's
custodian, transfer agent and accountants; coordinates the preparation and
payment of Fund expenses and reviews the Fund's expense accruals. For its
services, the Administrator receives an annual fee at the rate of 0.10 of 1% of
the first $100 million, 0.05 of 1% of the next $100 million and 0.03 of 1% of
assets in excess of $200 million of the Fund's average daily net assets, subject
to a minimum of $60,000.
Worldwide Value Distributors, Inc. (the "Distributor") acts as the Fund's
principal underwriter in a continuous public offering of the Fund's shares. The
Distributor is an affiliate of the Advisor.
Certain officers of the Fund are also officers and/or Directors of the
Advisor, Administrator and Distributor.
As of October 31, 1995, shares of the Fund owned by the Fund's Advisor and
its affiliates totalled 87,148 shares, out of 826,028 shares outstanding.
NOTE 4 - PURCHASES AND SALES OF SECURITIES
For the period March 6, 1995 (commencement of operations) through October
31, 1995, the cost of purchases and the proceeds from sales of securities,
excluding short-term securities, were $10,898,243 and $2,841, respectively.
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
- --------------------------------------------------------------------------------
TO THE SHAREHOLDERS OF
THE BRANDES INTERNATIONAL FUND
We have audited the accompanying statement of assets and liabilities of
Brandes International Fund, including the portfolio of investments as of October
31, 1995, the related statement of operations, the statement of changes in net
assets, and the financial highlights for the period from March 6, 1995
(commencement of operations) to October 31, 1995. These financial statements and
financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. 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. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1995, by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides 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
Brandes International Fund as of October 31, 1995, the results of its
operations, the net changes in its assets, and the financial highlights for the
period from March 6, 1995 (commencement of operations) to October 31, 1995, in
conformity with generally accepted accounting principles.
ERNST & YOUNG
Los Angeles, California
December 14, 1995
<PAGE>
Advisor
Brandes Investment Partners, Inc.
12750 High Bluff Drive
San Diego, California 92130
1-800-331-2979
Distributor
Worldwide Value Distributors, Inc.
4455 East Camelback Road
Suite 261E
Phoenix, Arizona 85018
Transfer Agent
Rodney Square Management Corp.
110 North Market Street
Wilmington, Delaware 19890
Auditors
Ernst & Young LLP
515 South Flower Street
Los Angeles, California 90071
Legal Counsel
Paul, Hastings, Janofsky & Walker
555 South Flower Street
Los Angeles, California 90071
This report is intended for shareholders of Brandes International Fund
and may not be used as sales literature unless preceded or accompanied
by a current prospectus.
