January 9, 1998
Securities and Exchange Commission
Attn: Filing Desk, Stop 1-4
450 Fifth Street, N.W.
Washington, DC 20549
Re: Brandes International Fund
File No. 33-81396, 811-08614
CIK No. 926678
Dear Sir or Madam:
On behalf of the above Registrant and pursuant to Rule 30b-2
under the Investment Company Act of 1940, I enclose for filing via
EDGAR, a copy of the Annual Report to shareholders of the
BrandesInstitutional International Equity Fund series of the
Registrant for the twelve month period ended October 31, 1997.
If you have any questions, please contact me at (602) 952-1100.
Sincerely yours,
Robert H. Wadsworth
<PAGE>
Brandes Institutional International Equity Fund
Annual
Report
For the Period
January 2, 1997
through
October 31, 1997
<PAGE>
BRANDES INSTITUTIONAL INTERNATIONAL EQUITY FUND
Annual Report
For the period from inception (January 2, 1997) through October 31, 1997
December 16, 1997
Dear Shareholder:
Your fund's performance was strong for the fiscal year, even in the face of
widespread volatility in world markets. For the period from inception on January
2, 1997, through fiscal year end of October 31, 1997, your fund returned 16.56%.
This compares to a return of only 2.96% for the same period for the benchmark,
the Morgan Stanley Capital International EAFE (Europe, Australasia, Far East)
Index.
Returns in your Fund were driven by strong performance in its holdings in the
telecommunications industry, in insurance and banking stocks, and in food and
household products companies. Geographically, strong returns were experienced by
companies the Fund owns in Europe, particularly France, Switzerland, Italy,
Denmark and Spain.
As you are well aware, recent months saw world markets decline substantially.
The decline was led by Asian markets, spread to Latin America, and then to the
developed markets in the U.S. and Europe. The currency turmoil experienced in
Asia seems to have precipitated the declines, generating concerns over other
emerging market currencies, which then provoked worries over the earnings and
competitiveness of developed market businesses.
For years, we have been hearing about the "Asian miracle", defined as high
economic growth, low currency risk and generally high stock market valuations.
For years, we at Brandes have been fielding questions as to why we were not
generally investing in this region, with all the good news and opportunity. Our
response has been simple and consistent: "The stocks aren't cheap enough." Now
perceptions of Asia have changed, and it is being called the "Asian Disaster."
We believe both perceptions were wrong. In our opinion, Asian conditions were
neither as rosy as believed in the past, nor as dire as they are currently
viewed. Over the past 18 months, some top Asian companies have gone from trading
at 4
<PAGE>
BRANDES INSTITUTIONAL INTERNATIONAL EQUITY FUND
times book value to trading at less than book value, while their currencies have
declined. In our opinion, Asia is finally beginning to look attractive from a
value perspective. At October 31, 1997, your fund consisted of about 14% in
Asian stocks. Don't be surprised in the coming months if you see the fund
increase its commitment to Asia in light of the recent availability of bargain
opportunities.
Keep in mind that the Brandes Institutional International Equity Fund does not
have a 12-18 month investment horizon. We do not buy companies with the
expectation of a near-term increase in the quoted price of a company. We do not
buy companies because we think the market will rise in the short run. We would
call such a short-term focus "speculation." We are not speculators. We are
investors. In general, we buy companies which have an identifiable competitive
advantage in product or service, and which have strong balance sheets to
withstand difficult economic periods. We buy them at prices below our estimate
of the fair value of the business. We then take a 3- to 5-year investment view.
We believe it is critical to hold value investments long enough to allow them to
achieve their long-term potential.
Over time, market declines are not only a possibility, but a virtual certainty.
Volatility has always been, and always will be, the nature of financial markets.
But despite the unpleasantness of such disruption, it is necessary if investors
are to attain strong long-term investment results. If stock prices always moved
in small, even increments over the years, there would be no opportunity to
purchase businesses at under-valued prices. In the short term, volatile
financial markets can provide long-term investors a tremendous advantage.
We continue to assess markets to identify quality companies selling at bargain
prices to add to your fund. We believe recent market conditions will make some
opportunities even more attractive. And we believe our insistence on purchasing
under-valued stocks will dampen the volatility of the fund's performance over
time, while producing solid returns.
We thank you for your confidence in Brandes' long-term value investment approach
and look forward to continuing to serve you.
Sincerely,
/s/
Barry P. O'Neil
President
<PAGE>
BRANDES INSTITUTIONAL INTERNATIONAL EQUITY FUND
Comparison of the change in value of a
$10,000 investment in the
Brandes Institutional
International Equity Fund and
the Morgan Stanley Capital
International EAFE
(Europe, Australasia and Far East) Index.
Date Fund EAFE Index
2-Jan-97 10,000 10,000
31-Jan-97 10,224 9,747
30-Apr-97 10,624 9,995
31-Jul-97 12,272 11,414
31-Oct-97 11,656 10,296
Fund total return from inception on
January 2, 1997 to October 31, 1997: 16.56%
Past performance is not predictive of future performance.
<PAGE>
BRANDES INSTITUTIONAL INTERNATIONAL EQUITY FUND
<TABLE>
<CAPTION>
SCHEDULE OF INVESTMENTS as of October 31, 1997
Shares Value
- --------------------------------------------------------------------------------
COMMON AND PREFERRED STOCKS: 95.3%
- --------------------------------------------------------------------------------
<S> <C> <C>
Argentina: 2.2%
Yacimientos Petroliferos
S.A. D Shares, ADR...... 35,800 $ 1,145,600
---------
Austria: 0.8%
EVN Energie-Versorg.
Nie., ORD............... 3,505 406,795
-----
Brazil: 3.4%
Centrais Electricas,
ADR..................... 51,980 1,096,217
Telecommunicacoes
Brasileiras Preferred,
ADR..................... 6,190 628,285
-------
1,724,502
---------
Denmark: 7.5%
Den Danske Bank
Group, ORD.............. 15,710 1,772,460
Den Danske Bank
Group, ADR.............. 190 21,463
Tele Danmark AS-B,
ORD..................... 35,170 2,064,437
---------
3,858,360
---------
France: 17.4%
AGF Assurances Gen
de France, ORD.......... 29,410 1,546,284
Alcatel Alsthom, ORD 16,540 1,994,254
CIE Financiere
De Paribas, ORD......... 7,300 529,748
Group Danone, ADR........ 1,560 47,808
Groupe Danone, ORD....... 13,740 2,099,381
PSA Peugeot Citroen,
ORD..................... 10,650 1,204,755
Ste. Natl. Elf Aquitaine,
ORD..................... 7,475 924,582
Societe General, ORD..... 3,800 520,052
-------
8,866,864
---------
Germany: 4.2%
Daimler-Benz, ADR........ 580 39,694
Daimler-Benz AG,
ORD..................... 30,940 2,105,566
---------
2,145,260
---------
Israel: 0.0%
Scitex Corporation, Ltd.,
ORD..................... 600 7,275
-----
Italy: 11.7%
Banca Commerciale
It. SPA, ORD............ 302,510 825,126
Istituto Mobiliare
Italiano, ORD........... 174,300 1,558,014
Instit. Nazionale
Assic., ORD............. 592,900 953,858
Italgas-Sta It per il
Gas pA, ORD............. 123,900 440,725
Telecom Italia Spa,
ORD..................... 354,000 2,217,527
---------
5,995,250
---------
Japan: 10.2%
Daiwa Securities Co.,
Ltd., ORD............... 67,000 406,127
Fuji Photo Film
Co. Ltd., ORD........... 36,900 1,339,581
Hitachi, Ltd., ADR....... 260 20,800
Hitachi, Ltd., ORD....... 178,800 1,377,100
Nippon Oil Co., Ltd.,
ORD..................... 85,000 348,917
<PAGE>
BRANDES INSTITUTIONAL INTERNATIONAL EQUITY FUND
SCHEDULE OF INVESTMENTS as of October 31, 1997
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
Japan, continued
Tokio Marine & Fire
Insur., ADR............. 490 $ 25,051
Tokio Marine & Fire
Insur., ADR............. 119,900 1,197,993
Yamaichi Secs. Co.,
Ltd., ORD............... 263,000 499,279
-------
5,214,848
---------
Mexico: 2.2%
Telefonos de
Mexico, ADR............. 25,600 1,107,200
---------
Netherlands: 3.8%
ING Groep N.V.,
ORD..................... 20,310 850,248
KPN - Konin. PTT
Nederland, ORD.......... 29,150 1,111,017
---------
1,961,265
---------
Portugal: 1.7%
Electricidade de
Portugal, ORD........... 50,000 876,720
-------
Singapore: 3.2%
Development Bank
of Singapore, ORD....... 53,000 494,506
Jardine Matheson
Holdings, ORD........... 181,800 1,163,520
---------
1,658,026
---------
South Africa: 2.7%
De Beers Cons. Mines,
ADR..................... 830 19,920
De Beers-Cent. Linked
Unit, ORD............... 35,100 836,598
Iscor, Ltd., ORD......... 968,300 502,548
-------
1,359,066
---------
South Korea: 0.3%
Korea Electric Power
Corp., ADR.............. 19,750 161,703
---------
Spain: 4.9%
Argentaria, ORD.......... 13,090 725,825
Telefonica de Espana
S.A., ORD............... 43,170 1,176,123
Union Electrica Fenosa,
S.A..................... 61,000 581,867
-------
2,483,815
---------
Switzerland: 7.1%
Baloise Holdings - Reg,
ORD+.................... 592 1,066,361
Nestle S.A., ADR......... 790 55,811
Nestle S.A., ORD......... 1,790 2,524,424
---------
3,646,596
---------
Thailand: 0.5%
Thai Farmers Bank,
F Shares, ORD........... 99,000 270,557
-------
United Kingdom: 11.5%
B.A.T. Industries PLC,
ADR..................... 1,720 30,745
B.A.T. Industries PLC,
ORD..................... 119,700 1,046,932
BTR PLC, ORD............. 447,090 1,509,018
Grand Metropolitan
PLC, ORD................ 98,700 890,570
Guinness PLC, ORD........ 159,650 1,427,143
Imperial Chemical
Ind. PLC, ORD........... 63,900 943,094
-------
5,847,502
---------
Total Common Stocks
(cost $46,620,472)....... 48,737,204
----------
<PAGE>
BRANDES INSTITUTIONAL INTERNATIONAL EQUITY FUND
SCHEDULE OF INVESTMENTS as of October 31, 1997
- --------------------------------------------------------------------------------
Principal Value
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS: 4.5%
- --------------------------------------------------------------------------------
United States: 4.5%
Investors Bank & Trust Co.,
Repurchase Agreement, 5.25%,
dated 10/31/97, due 11/3/97,
collateralized by FHLMC CMT
FLTR, due 2/25/22 (proceeds
$2,288,558)...................... $ 2,287,557
-----------
+ Non-income producing security.
# Cost for federal income tax purposes is the same.
Net unrealized appreciation consists of:
Gross unrealized appreciation..... $ 4,236,524
Gross unrealized depreciation..... (2,119,792)
----------
Net unrealized appreciation...... $ 2,116,732
Total Investments in Securities
(cost $48,908,029#): 99.8%...... $51,024,761
Other Assets less
Liabilities: 0.2%................ 104,755
-------
Total Net Assets: 100.0% ........... $51,129,516
===========
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE>
BRANDES INSTITUTIONAL INTERNATIONAL EQUITY FUND
<TABLE>
<CAPTION>
SCHEDULE OF INVESTMENTS by Industry
- --------------------------------------------------------------------------------
<S> <C>
Automobiles............................. 6.8%
Banking................................. 13.7%
Beverages and Tobacco .................. 5.1%
Chemicals............................... 1.9%
Electrical & Electronics................ 7.0%
Energy Sources.......................... 5.0%
Financial Services...................... 1.9%
Food and Household Products............. 11.5%
Insurance............................... 11.6%
Metals-Steel............................ 1.1%
Misc. Materials and Commodities......... 1.8%
Multi - Industry........................ 5.5%
Recreation, Other Consumer Goods....... 2.8%
Telecommunications...................... 17.0%
Utilities - Electrical & Gas............ 7.3%
---
100.0%
=====
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE>
BRANDES INSTITUTIONAL INTERNATIONAL EQUITY FUND
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES as of October 31, 1997
- ------------------------------------------------------------------------------------------------------------------------------------
ASSETS
<S> <C>
Investments in securities, at value (identified cost $48,908,029)...................... $51,024,761
Foreign cash (cost $1,120,656)......................................................... 1,132,745
Receivables:
Fund shares sold.................................................................... 314,946
Dividends and interest ............................................................. 64,693
Tax reclaim......................................................................... 53,319
Prepaid expenses....................................................................... 7,938
Deferred organization costs............................................................ 12,800
------
Total assets ....................................................................... 52,611,202
----------
LIABILITIES
Payable for securities purchased....................................................... 1,407,453
Due to investment advisor.............................................................. 29,246
Fund shares redeemed................................................................... 11,453
Accrued expenses ...................................................................... 33,534
------
Total liabilities................................................................... 1,481,686
---------
Net assets .............................................................................. $51,129,516
===========
SOURCE OF NET ASSETS
Paid-in capital ....................................................................... $47,926,405
Undistributed net investment income.................................................... 372,846
Net realized gain on investments and foreign currency.................................. 701,444
Net unrealized appreciation on investments and foreign currency........................ 2,128,821
---------
Net assets ......................................................................... $51,129,516
===========
Net asset value, offering price and redemption price per share [3,510,009 shares
outstanding; unlimited number of shares authorized without par value] .............. $14.57
======
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE>
BRANDES INSTITUTIONAL INTERNATIONAL EQUITY FUND
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS - January 2, 1997* to October 31, 1997
- ------------------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME:
Income:
<S> <C>
Dividends (net of withholding tax of $76,372)....................................... $ 571,931
Interest............................................................................ 117,908
-------
Total income..................................................................... 689,839
-------
Expenses:
Accounting fees..................................................................... 43,384
Administration fee ................................................................. 33,261
Advisory fees ...................................................................... 260,518
Amortization of deferred organization costs ........................................ 1,770
Auditing fees....................................................................... 17,521
Blue sky fees....................................................................... 13,391
Custodian fees...................................................................... 45,676
Insurance expense................................................................... 1,367
Legal fees.......................................................................... 9,275
Miscellaneous fees.................................................................. 8,628
Shareholder reporting............................................................... 7,885
Transfer agent fees................................................................. 15,588
Trustees' fees...................................................................... 9,539
-----
Total expenses...................................................................... 467,803
Expense reimbursements ............................................................. (150,810)
--------
Net expenses........................................................................ 316,993
-------
Net investment income ........................................................ 372,846
-------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments and foreign currency............................... 701,444
Net unrealized appreciation on investments and foreign currency..................... 2,128,821
---------
Net realized and unrealized gain on investments and foreign currency............. 2,830,265
---------
Net increase in net assets resulting from operations ......................... $ 3,203,111
===========
<FN>
*Commencement of operations.
</FN>
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE>
BRANDES INSTITUTIONAL INTERNATIONAL EQUITY FUND
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS - January 2, 1997* to October 31, 1997
- ------------------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME:
Income:
<S> <C>
Dividends (net of withholding tax of $76,372)....................................... $ 571,931
Interest............................................................................ 117,908
-------
Total income..................................................................... 689,839
-------
Expenses:
Accounting fees..................................................................... 43,384
Administration fee ................................................................. 33,261
Advisory fees ...................................................................... 260,518
Amortization of deferred organization costs ........................................ 1,770
Auditing fees....................................................................... 17,521
Blue sky fees....................................................................... 13,391
Custodian fees...................................................................... 45,676
Insurance expense................................................................... 1,367
Legal fees.......................................................................... 9,275
Miscellaneous fees.................................................................. 8,628
Shareholder reporting............................................................... 7,885
Transfer agent fees................................................................. 15,588
Trustees' fees...................................................................... 9,539
-----
Total expenses...................................................................... 467,803
Expense reimbursements ............................................................. (150,810)
--------
Net expenses........................................................................ 316,993
-------
Net investment income ........................................................ 372,846
-------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments and foreign currency............................... 701,444
Net unrealized appreciation on investments and foreign currency..................... 2,128,821
---------
Net realized and unrealized gain on investments and foreign currency............. 2,830,265
---------
Net increase in net assets resulting from operations ......................... $ 3,203,111
===========
<FN>
*Commencement of operations.
</FN>
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE>
BRANDES INSTITUTIONAL INTERNATIONAL EQUITY FUND
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
- ------------------------------------------------------------------------------------------------------------------------------------
January 2, 1997*
through
October 31, 1997
- ------------------------------------------------------------------------------------------------------------------------------------
INCREASE IN NET ASSETS FROM:
OPERATIONS:
<S> <C>
Net investment income................................................................... $ 372,846
Net realized gain on investments and foreign currency................................... 701,444
Net unrealized appreciation on investments and foreign currency......................... 2,128,821
---------
Net increase in net assets resulting from operations ............................ 3,203,111
---------
CAPITAL SHARE TRANSACTIONS:
Net increase in net assets resulting from capital share transactions (a)................ 47,926,405
----------
Total increase in net assets .................................................... 51,129,516
NET ASSETS:
Beginning of period..................................................................... -0-
-
End of period (including undistributed net investment income of $372,846)............... $51,129,516
===========
<FN>
(a) A summary of capital shares transactions is as follows:
January 2, 1997*
through
October 31, 1997
- ------------------------------------------------------------------------------------------------------------------------------------
Shares Value
- ------------------------------------------------------------------------------------------------------------------------------------
Shares sold............................................................ 4,293,211 $58,991,562
Shares redeemed........................................................ 783,202 11,065,157
------- ----------
Net increase........................................................... 3,510,009 $47,926,405
========= ===========
*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
- ------------------------------------------------------------------------------------------------------------------------------------
January 2, 1997*
through
October 31, 1997
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Net asset value, beginning of period.................................................... $12.50
------
Income from investment operations:
Net investment income............................................................. .17
Net realized and unrealized gain on investments................................... 1.90
----
Total from investment operations ....................................................... 2.07
----
Net asset value, end of period.......................................................... $14.57
======
Total return............................................................................ 16.56%++
RATIOS / SUPPLEMENTAL DATA:
Net assets, end of period (thousands) .................................................. $51,130
Ratio of expenses to average net assets:
Before expense reimbursement...................................................... 1.76%+
After expense reimbursement....................................................... 1.19%+
Ratio of net investment income to average net assets:
Before expense reimbursement...................................................... 0.84%+
After expense reimbursement...................................................... 1.40%+
Portfolio turnover rate................................................................. 27.40%
Average commission rate paid per share.................................................. $.0261
<FN>
*Commencement of operations.
+ Annualized.
++ Not annualized.
</FN>
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE>
BRANDES INSTITUTIONAL INTERNATIONAL EQUITY FUND
NOTES TO FINANCIAL STATEMENTS - October 31, 1997
- --------------------------------------------------------------------------------
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 - October 31, 1997
- --------------------------------------------------------------------------------
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. The cost of
securities owned on realized transactions are relieved on the specific
identification basis. 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 $14,570
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 October 31, 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 October 31, 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 provided certain personnel needed by the Fund. As compensation for
its services, the Advisor was
<PAGE>
BRANDES INSTITUTIONAL INTERNATIONAL EQUITY FUND
NOTES TO FINANCIAL STATEMENTS - October 31, 1997
- --------------------------------------------------------------------------------
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 1.20% of average
daily net assets, the Advisor has waived fees and reimbursed expenses totalling
$150,810 during the period January 2, 1997 through October 31, 1997. Any such
reductions made by the Advisor in its fees or reimbursement of expenses are
subject to reimbursement by the Fund.
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 October 31, 1997, the cost of
purchases and the proceeds from sales of securities, excluding short-term
securities, were $54,559,147 and $8,469,767, respectively.
<PAGE>
REPORT OF INDEPENDENT AUDITORS
- --------------------------------------------------------------------------------
TO THE BOARD OF TRUSTEES OF
BRANDES INVESTMENT TRUST
AND THE SHAREHOLDERS OF
BRANDES INSTITUTIONAL
INTERNATIONAL EQUITY FUND
We have audited the accompanying statement of assets and liabilities of
Brandes Institutional International Equity Fund (the "Fund"), a series of
Brandes Investment Trust, including the schedule of investments, as of October
31, 1997, and the related statements of operations, changes in net assets, and
the financial highlights for the period from January 2, 1997 (commencement of
operations) through October 31, 1997. 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, 1997, by correspondence with the custodian and brokers. 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 Institutional International Equity Fund as of October 31, 1997, the
results of its operations, the changes in its net assets, and the financial
highlights for the period from January 2, 1997 (commencement of operations)
through October 31, 1997, in conformity with generally accepted accounting
principles.
ERNST & YOUNG LLP
Los Angeles, California
December 12, 1997
<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.
