Brandes Institutional International Equity Fund
Semi-Annual Report
For the Period
January 2, 1997
through
April 30, 1997
<PAGE>
BRANDES INSTITUTIONAL INTERNATIONAL EQUITY FUND
Semi-Annual Report
For the period from inception (January 2, 1997) through April 30, 1997
June 16, 1997
Dear Shareholder:
Your fund's performance was strong during the first months of calendar 1997.
From inception at January 2, 1997 through April 30, 1997, it returned 6.24%
compared to slightly negative performance of -.049% for the benchmark, the
Morgan Stanley Capital International EAFE (Europe, Australasia, Far East ) Index
. From January 2 through May 31, 1997, your fund returned 11.60% compared to
6.45% for the EAFE Index.
We have constructed your fund portfolio applying the same value investing
discipline Brandes has used for over twenty years. Specifically, we continue to
search the world for companies whose stocks are selling at a significant
discount to our estimate of their long-term value. By purchasing only these
bargain stocks, we believe that two advantages may be created: a "margin of
safety" which should help protect against price declines, and enhanced upside
potential over a 3- to 5-year time horizon.
Brandes' strictly bottom-up stock selection process emphasizes the analysis of
an individual company's fundamental strengths and growth potential. You will see
in the following pages where your stocks are located geographically, and in
which industries they operate. Keep in mind that within the fund's
diversification standards, it is still the individual stocks which lead us to
countries and industries, not the other way around. By focusing on the
fundamentals of individual companies, we attempt to avoid rushing into given
markets or industries because they are newly popular.
<PAGE>
At this reporting period, your fund is heavily weighted in European stocks,
particularly those of issuers located in France, the United Kingdom, Germany and
Italy. This reflects no economic, political or other bias in favor of that area
of the world. It simply shows that more bargains have been available in these
countries. We believe there are some slow, revolutionary changes taking place in
Europe that ultimately could be very positive for investors. The outlook for
Europe is affected by expectations that the European Union will create a single,
standard currency, the European Currency Unit, (ECU), commonly known as the
"Euro". While there is much controversy over this issue, there can be little
doubt that it would be much easier, and likely cheaper, to conduct business with
one currency rather than several. Exchanging currency, and associated expenses,
significantly increase the costs of basic goods and services as well as
effecting transactions across borders. The ECU would do away with much of these
added costs. This could improve the profitability of many of the businesses in
the fund's portfolio. In the meantime, uncertainty surrounding the changes has
made good-quality businesses available for purchase at very reasonable prices.
Changes in Asia have made certain companies more attractive candidates for our
value portfolio, as well. For the past decade, Asia has been the darling of the
investment world, with its rapid growth and generally stable currencies. As is
often the case in popular regions, stocks became far overvalued. Recently,
however, as stock prices have fallen to more reasonable levels, we have been
able to increase our still-moderate exposure in Japan. In other areas of Asia,
although overall growth continues to be strong, 6% or more per year in some
countries, economies have slowed and there has been concern about some
currencies. We are watching this area closely as market declines bring quality
companies within our buying range.
With respect to industries, your fund is currently most heavily invested in the
telecommunications, food and household products, electrical and electronics, and
banking sectors.
Lastly, although recent strong performance in your fund has been exciting, it is
important to remember that we do not focus on shorter-term price movements. Our
goal remains to provide superior performance over the long-term investment
horizon. Thank you for your participation. We look forward to continuing to work
with you.
Sincerely yours,
/s/
Barry P. O'Neil
President
<PAGE>
BRANDES INSTITUTIONAL INTERNATIONAL EQUITY FUND
<TABLE>
<CAPTION>
PORTFOLIO OF INVESTMENTS as of April 30, 1997 (Unaudited)
Shares Value
- --------------------------------------------------------------------------------
COMMON STOCKS: 90.0%
- --------------------------------------------------------------------------------
Argentina: 1.9%
Yacimientos Petroliferos
<S> <C> <C>
S.A., ADR............... 19,100 $ 527,638
---------
Australia: 1.5%
Pacific Dunlop, Ltd.,
ORD..................... 162,400 438,523
-------
Austria: 2.1%
EVN Energie-Versorg.
Nie., ORD............... 2,505 309,746
VA Technologie
AG, ORD................. 1,845 286,586
-------
596,332
-------
Brazil: 2.9%
Centrais Electricas,
ADR..................... 11,320 254,916
Telecommunicacoes
Brasileiras, ADR........ 4,890 561,128
-------
816,044
-------
Canada: 0.9%
Molson Co. Ltd.,
Class A, ORD............ 14,500 242,575
-------
Denmark: 5.5%
Den Danske Bank
Group, ORD.............. 8,310 718,542
Tele Danmark AS-B,
ORD..................... 17,300 831,919
-------
1,550,461
---------
France: 16.0%
AGF Assurances Gen
de France, ORD.......... 15,320 498,375
Alcatel Alsthom, ORD 13,840 1,538,699
Groupe Danone, ORD 7,900 1,150,321
France (continued)
PSA Peugeot Citroen,
ORD..................... 6,250 $ 622,056
Ste. Natl.Elf Aquitaine,
ORD..................... 7,475 724,771
- -------
4,534,222
---------
Germany: 7.7%
Berliner Kraft und
Licht, ORD.............. 4,900 124,502
Daimler-Benz AG,
ORD..................... 17,340 1,281,700
Siemens AG, ORD.......... 14,400 780,411
-------
2,186,613
---------
Israel: 0.0%
Scitex Corporation, Ltd.. 600 4,125
----
Italy: 7.7%
Istituto Mobiliare
Italiano, ORD........... 83,800 713,473
Italgas-Sta It per il
Gas pA, ORD............. 73,900 252,576
Stet Societa Finanziaria
Telefonica, ORD......... 256,800 1,213,483
---------
2,179,532
---------
Japan: 8.0%
Fuji Photo Film
Co. Ltd., ORD........... 25,900 988,393
Hitachi, Ltd., ORD....... 94,800 857,817
Tokio Marine & Fire
Insur., ORD............. 42,900 418,567
-------
2,264,777
---------
Mexico: 2.8%
Telefonos de
Mexico, ADR............. 19,000 783,750
-------
<PAGE>
BRANDES INSTITUTIONAL INTERNATIONAL EQUITY FUND
PORTFOLIO OF INVESTMENTS as of April 30, 1997 (Unaudited)
Shares Value
- --------------------------------------------------------------------------------
Netherlands: 2.2%
Int'l Nederlanden
Groep, ORD.............. 340 $ 13,351
KPN - Konin. PTT
Nederland, ORD.......... 17,450 619,791
-------
633,142
-------
Singapore: 2.2%
Jardine Matheson
Holdings, ORD........... 114,200 628,100
-------
South Africa: 2.3%
De Beers-Cent. Linked
Unit, ORD............... 6,000 215,827
Iscor, Ltd., ORD......... 627,800 434,689
-------
650,516
-------
South Korea: 0.8%
Korea Electric Power
Corp., ADR.............. 4,850 82,450
Pohang Iron and Steel
Co., Inc., ADR.......... 6,450 155,606
-------
238,056
-------
Spain: 6.4%
Argentaria, ORD.......... 9,490 423,800
Banco Bilbao Vizcaya
(REGD), ORD............. 6,855 462,008
Telefonica de Espana
S.A., ORD............... 35,870 920,087
-------
1,805,895
---------
Switzerland: 7.8%
ABB AG-Bearer, ORD....... 250 302,543
Baloise Holdings - Reg,
ORD..................... 251 529,227
Nestle S.A.,
Registered, ORD......... 1,000 1,213,559
Schindler Holdings AG,
Partn Ctf, ORD.......... 137 165,793
-------
2,211,122
---------
United Kingdom: 11.3%
B.A.T. Industries PLC,
ORD..................... 83,000 $ 699,184
BG PLC, ORD.............. 102,400 297,508
BTR PLC, ORD............. 140,050 572,833
Grand Metropolitan
PLC, ORD................ 78,300 654,510
Guinness PLC, ORD........ 69,400 574,479
Imperial Chemical
Ind. PLC, ORD........... 34,000 386,852
-------
3,185,366
---------
Total Common Stocks
(cost $24,955,644)....... 25,476,789
----------
- --------------------------------------------------------------------------------
WARRANTS: 0.0%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Germany: 0.0%
Daimler-Benz AG,
expires 5/13/97......... 17,340 1,502
-----
- ------------------------------------------------------------------------------------------------------------------------------------
Principal
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS: 9.7%
- --------------------------------------------------------------------------------
United States: 9.7%
Investors Bank & Trust Co.,
Repurchase Agreement, 4.9%,
dated 4/30/97, due 5/1/97,
collateralized by Federal
National Mortgage
Association (FNMA)
(proceeds $2,740,055)... $2,739,680 2,739,680
Total Investments in Securities
(cost $27,696,826): 99.7%........ 28,217,971
Assets less Other
Liabilities: 0.3%................. 72,713
------
Total Net Assets: 100.0% ........... $28,290,684
</TABLE>
<PAGE>
BRANDES INSTITUTIONAL INTERNATIONAL EQUITY FUND
<TABLE>
<CAPTION>
PORTFOLIO OF INVESTMENTS by Industry (Unaudited)
- --------------------------------------------------------------------------------
<S> <C>
Automobiles............................. 7.5%
Banking................................. 9.1%
Beverages and Tobacco .................. 6.0%
Chemicals............................... 1.5%
Electrical & Electronics................ 13.7%
Energy Sources.......................... 4.9%
Food and Household Products............. 11.8%
Gold Mines.............................. 0.8%
Insurance............................... 5.7%
Machinery & Engineering................. 1.8%
Metals-Steel............................ 2.3%
Multi - Industry........................ 6.4%
Recreation, Other Consumer Goods....... 3.9%
Telecommunications...................... 19.4%
Utilities - Electrical & Gas............ 5.2%
---
100.0%
=====
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE>
BRANDES INSTITUTIONAL INTERNATIONAL EQUITY FUND
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES at April 30, 1997 (Unaudited)
- ------------------------------------------------------------------------------------------------------------------------------------
ASSETS
<S> <C>
Investments in securities, at value (identified cost $27,696,826) (Note 2-A) .......... $28,217,971
Foreign cash........................................................................... 1,270,154
Receivable for dividends and interest ................................................. 96,457
Receivable for securities sold......................................................... 674,637
Prepaid expenses....................................................................... 14,072
Deferred organization costs............................................................ 13,878
------
Total assets ....................................................................... 30,287,169
----------
LIABILITIES
Payable for securities purchased....................................................... 1,952,473
Due to investment advisor.............................................................. 22,599
Accrued expenses ...................................................................... 21,413
------
Total liabilities................................................................... 1,996,485
---------
Net assets .............................................................................. $28,290,684
===========
SOURCE OF NET ASSETS
Paid-in capital ....................................................................... $27,542,877
Undistributed net investment income.................................................... 106,774
Net realized gain on investments and foreign currency.................................. 119,888
Net unrealized appreciation on investments and foreign currency........................ 521,145
-------
Net assets ......................................................................... $28,290,684
===========
Net asset value, offering price and redemption price per share [2,130,994 shares
outstanding; unlimited number of shares authorized without par value] .............. $13.28
======
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE>
BRANDES INSTITUTIONAL INTERNATIONAL EQUITY FUND
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS - January 2, 1997 to April 30, 1997 (Unaudited)
- ------------------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME:
Income:
<S> <C>
Dividends (net of withholding tax of $19,511)....................................... $ 122,155
Interest............................................................................ 44,019
------
Total income..................................................................... 166,174
-------
Expenses:
Advisory fees (Note 3).............................................................. 48,629
Transfer agent fees................................................................. 6,950
Accounting fees..................................................................... 15,405
Administration fee (Note 3)......................................................... 12,932
Custodian fees...................................................................... 17,305
Blue sky fees....................................................................... 5,335
Auditing fees....................................................................... 6,088
Legal fees.......................................................................... 3,233
Amortization of deferred organization costs (Note 2-F).............................. 691
Trustees' fees...................................................................... 2,292
Miscellaneous fees.................................................................. 2,852
Expense reimbursements (Note 3)..................................................... (62,312)
-------
Net expenses........................................................................ 59,400
------
Net investment income ........................................................ 106,774
-------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments and foreign currency............................... 119,888
Net unrealized appreciation on investments and foreign currency..................... 521,145
-------
Net realized and unrealized gain on investments and foreign currency............. 641,033
-------
Net increase in net assets resulting from operations ......................... $ 747,807
=========
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE>
BRANDES INSTITUTIONAL INTERNATIONAL EQUITY FUND
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS (Unaudited)
- ------------------------------------------------------------------------------------------------------------------------------------
INCREASE IN NET ASSETS FROM:
OPERATIONS:
<S> <C>
Net investment income................................................................... $ 106,774
Net realized gain on investments and foreign currency................................... 119,888
Net unrealized appreciation on investments and foreign currency......................... 521,145
-------
Net increase in net assets resulting from operations ............................ 747,807
-------
CAPITAL SHARE TRANSACTIONS:
Net increase in net assets resulting from capital share transactions (a)................ 27,542,877
----------
Total increase in net assets .................................................... 28,290,684
NET ASSETS:
Beginning of period..................................................................... -0-
-
End of period (including undistributed net investment income of $106,774)............... $28,290,684
===========
<FN>
(a) A summary of capital shares transactions is as follows:
January 2, 1997*
through
April 30, 1997
- ------------------------------------------------------------------------------------------------------------------------------------
Shares Value
- ------------------------------------------------------------------------------------------------------------------------------------
Shares sold............................................................ 2,482,003 $32,122,710
Shares redeemed........................................................ (351,009) (4,579,833)
-------- ----------
Net increase........................................................... 2,130,994 $27,542,877
========= ===========
*Commencement of operations.
</FN>
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE>
BRANDES INSTITUTIONAL INTERNATIONAL EQUITY FUND
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
For a share outstanding throughout the period (Unaudited)
- ------------------------------------------------------------------------------------------------------------------------------------
January 2, 1997*
through
April 30, 1997
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Net asset value, beginning of period.................................................... $12.50
Income from investment operations:
Net investment income............................................................. .10
Net realized and unrealized gain on investments................................... .68
---
Total from investment operations ....................................................... .78
---
Net asset value, end of period.......................................................... $13.28
Total return+........................................................................... 20.40%
RATIOS / SUPPLEMENTAL DATA:
Net assets, end of period (thousands) .................................................. $28,291
Ratio of expenses to average net assets:+
Before expense reimbursement...................................................... 2.46%
After expense reimbursement....................................................... 1.20%
Ratio of net investment income to average net assets:+
Before expense reimbursement...................................................... 0.90%
After expense reimbursement...................................................... 2.16%
Portfolio turnover rate................................................................. 29.73%
Average commission rate paid per share.................................................. $0.0319
<FN>
*Commencement of operations.
+Annualized.
</FN>
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE>
BRANDES INSTITUTIONAL INTERNATIONAL EQUITY FUND
NOTES TO FINANCIAL STATEMENTS - April 30, 1997 (Unaudited)
- --------------------------------------------------------------------------------
NOTE 1 - ORGANIZATION
The Brandes Institutional International Equity Fund (the "Fund") is a
series of shares of beneficial interest of Brandes Investment Trust (the
"Trust"). The Trust is registered under the Investment Company Act of 1940 (the
"1940 Act") as a diversified, open-end management investment company. The Fund
began operations on January 2, 1997. The Fund invests its assets primarily in
equity securities of foreign issuers with market capitalizations greater than $1
billion.
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 (GAAP).
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.
Securities for which quotations are not readily available are valued at their
respective fair values as determined in good faith by the Advisor pursuant to
guidelines of the Board of Trustees. 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 Statements 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 brokers or dealers
that meet the credit guidelines established by the Board of Trustees. The Fund
will always receive and maintain, as collateral, securities whose market value,
including accrued interest, will be at least equal to 100% of the dollar amount
invested by the Fund in each agreement,
<PAGE>
BRANDES INSTITUTIONAL INTERNATIONAL EQUITY FUND
NOTES TO FINANCIAL STATEMENTS -
April 30, 1997 (Unaudited)
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 the term of any repurchase transaction exceeds one
business day, the value of the collateral is marked-to-market on a daily basis
to ensure the adequacy of the collateral.
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 $14,569
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.
G. Concentration of Risk. As of April 30, 1997 the Fund held a significant
portion of its assets in foreign securities. Certain price and foreign exchange
fluctuations as well as economic and political situations in the foreign
jurisdictions could have an impact on the Fund's net assets. It is the Trust's
policy to continuously monitor these off-balance sheet risks.
H. Use of Estimates. The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amount of assets and
liabilities at the date of the financial statements. Actual results could differ
from these estimates.
NOTE 3 - INVESTMENT MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES
For the period January 2, 1997 through April 30, 1997, Brandes Investment
Partners, L.P. (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.
<PAGE>
BRANDES INSTITUTIONAL INTERNATIONAL EQUITY FUND
NOTES TO FINANCIAL STATEMENTS - April 30, 1997 (Unaudited)
The Fund is responsible for its own operating expenses. In order to
maintain the Fund's operating expenses at 1.20% of average daily net assets, the
Advisor has waived fees and reimbursed expenses totalling $62,312 during the
period January 2, 1997 through April 30, 1997.
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 Trustees; monitors the activities of the Fund's
custodian, transfer agent and accountants; coordinates the preparation and
payment of the Fund's 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% in
excess of $200 million of the Fund's average daily net assets, subject to a
minimum of $40,000 per annum.
Worldwide Value Distributors, L.L.C. (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 Trust are also officers and/or Trustees of the
Advisor, Administrator and Distributor.
NOTE 4 - PURCHASES AND SALES OF SECURITIES
For the period January 2, 1997 through April 30, 1997, the cost of
purchases and the proceeds from sales of securities, excluding short-term
securities, were $28,604,954 and $3,771,912, respectively.
<PAGE>
Advisor
Brandes Investment Partners, L.P.
12750 High Bluff Drive
San Diego, California 92130
1-800-331-2979
Distributor
Worldwide Value Distributors, L.L.C.
4455 East Camelback Road
Suite 261E
Phoenix, Arizona 85018
Transfer Agent
Investors Bank & Trust Co.
200 Clarendon Street, 16th Floor
Boston, Massachusetts 02116
Auditors
Ernst & Young LLP
515 South Flower Street
Los Angeles, California 90071
Legal Counsel
Paul, Hastings, Janofsky & Walker LLP
555 South Flower Street
Los Angeles, California 90071
This report is intended for shareholders of the Brandes Institutional
International Equity Fund and may not be used as sales literature unless
preceded or accompanied by a current prospectus.
