<PAGE>
Brandes Institutional International Equity Fund
================================================================================
Annual Report
For the Fiscal Year Ended October 31, 1999
December 17, 1999
Dear Shareholder:
The fund produced strong performance this year reaping the benefits of
well-placed investments made in 1998 and 1997. For fiscal year ended October 31,
1999, the fund returned 34.23%. This compared to a return of 23.03% for the
benchmark Morgan Stanley Capital International EAFE (Europe, Australasia, Far
East) Index.
Returns in the fund were driven by excellent performance in its holdings in the
telecommunications, electrical and energy equipment industries. Geographically,
on an impact basis, holdings in Europe and Asia turned in the strongest
performance, especially those securities in Japan, Germany and France. The
emerging markets portion of the fund also turned in strong returns for the
period.
The economic weather has changed overseas. As recently as last fall, some
pundits were claiming that Asia's financial crisis could keep economies in the
region in quicksand for years, if not decades to come. Yet barely 15 months
after the devaluation of the Thai baht signaled the beginning of instability, a
new bull market had begun.
Our point? Investors should not allow the recent bout of profit taking in Asian
markets to distract them from the fact that many businesses in the region remain
attractively priced and that long-term prospects are solid. The same can be said
about Latin America. While the rise in U.S. interest rates has indeed created
short-term concerns about Latin countries, in time those concerns should
dissipate.
We are pleased to report that our European holdings enjoyed strong relative
performance during the year, led by gains in our developed market positions.
Mergers and acquisitions activity continued to be strong in Europe, as companies
in the region strive to improve competitiveness in the wake of currency
devaluations in Asia. Despite the solid gains in our portfolios during the year,
our holdings remain inexpensive relative to U.S. benchmarks when measured
against earnings, book value, and cash flow.
The emerging markets portion of the portfolio also performed very well. These
holdings were up substantially during the first part of the year, then drifted
lower in the middle part of the year as investors considered the implications of
several country specific issues and then rebounded during the later part of the
fiscal year. These mid year issues included upcoming presidential
<PAGE>
Brandes Institutional International Equity Fund
elections, higher U.S. rates, controversy over the International Monetary Fund
payments to Russia, stop and go efforts at economic reform in Brazil, violence
in East Timor, and earthquakes in Turkey and Taiwan. In our view, some of these
short-term problems represented buying opportunities for long-term investors. In
fact, we used the widespread weakness in the middle of the year to buy
attractive businesses in both Latin America and Asia. After the sharp gains
during the first half of the year, the recent correction in emerging markets is
a reminder of why it is important to avoid knee-jerk reactions to short-term
events. The history of the emerging markets asset class is one of over-optimism
during the good times, and undue pessimism during the tough times. As value
investors, however, such overreactions are generally what provide us with the
opportunity to profit over the long-term through the accumulation of quality
businesses at undervalued prices.
Value Investing
The various global markets for fiscal year 1999 may have at times resembled a
roller coaster ride at the local amusement park. First Asia was down then it was
up, European markets suddenly became affected by huge price swings due to
unexpected earnings reports (similar to the U.S.) and the emerging markets were
up then down and then finished the year up again. We believe now is a good time
to think about what our value discipline means to the long-term investor.
We are proud to be among the first global money management firms to embrace and
employ the original concept of value investing, as described by Benjamin Graham
and David Dodd in their classic book, "Security Analysis." For over 25 years, we
have been loyal to the value discipline, as articulated by Graham & Dodd. And
while investment fads come and go, we have no intention of going blindly along
with the crowd.
That is because traditional value investing is based on a recurring facet of
human nature. Specifically, value managers look to exploit the tendency of other
investors to overreact to short-term negative events. Those overreactions create
opportunities for long-term investors, such as ourselves, to buy solid
businesses at inexpensive prices.
We recognize that it may take time for such purchases to evolve. Sentiment does
not swing from overly negative to excessively positive overnight. But we know
from history that the emotional pendulum can swing back.
Thank you for your confidence in Brandes and the opportunity to service your
investment needs.
Sincerely yours,
/s/ Jeff Busby
Jeff Busby
President
2
<PAGE>
Brandes Institutional International Equity Fund
Comparison of the change in value of a $1,000,000 investment in the
Brandes Institutional International Equity Fund and the Morgan Stanley
Capital International EAFE (Europe, Australasia and Far East) Index
[GRAPH]
NAME MSCI EAFE NI*USD Brandes
SOURCE MSCI Institutional International
DESC EAFE Equity Fund
- --------------------------------------------------------------------------------
value of $1,000,000 value of $1,000,000
- --------------------------------------------------------------------------------
02-Jan-97 1,000,000 1,000,000
30-Apr-97 999,508 1,062,390
31-Jul-97 1,141,429 1,227,313
31-Oct-97 1,029,617 1,165,658
30-Jan-98 1,075,025 1,239,346
30-Apr-98 1,188,564 1,411,524
31-Jul-98 1,203,832 1,402,611
30-Oct-98 1,128,926 1,317,408
29-Jan-99 1,229,938 1,420,794
30-Apr-99 1,301,420 1,666,099
30-Jul-99 1,320,645 1,731,215
29-Oct-99 1,388,955 1,768,213
Past performance is not indicative of future performance.
The MSCI EAFE Index is an unmanaged index that is a generally accepted benchmark
for major overseas markets. The MSCI EAFE Index consists of securities listed on
exchanges in European, Australasian and Far Eastern markets and includes
dividends and distributions, but does not reflect fees, brokerage commissions,
or other expenses of investing. The Index weightings represent the relative
capitalizations of the major overseas markets included in the index on a U.S.
dollar adjusted basis.
3
<PAGE>
Brandes Institutional International Equity Fund
<TABLE>
<CAPTION>
SCHEDULE OF INVESTMENTS at October 31, 1999
- ----------------------------------------------------------------------------------------------------
COMMON STOCKS: 97.9% Shares Value
- ----------------------------------------------------------------------------------------------------
Austria: 0.5%
<S> <C> <C>
EVN AG..........................................................................7,805 $1,120,252
-------------
Brazil: 7.0%
Banco Bradesco S.A. Sponsored ADR.............................................474,600 2,334,035
Centrais Eletricas Brasileiras S.A. Sponsored ADR.............................538,130 4,603,810
Centrais Geradoras do Sul do Brasil S.A. ADR*..................................20,613 64,414
Companhia Cervejaria Brahma Sponsored ADR.....................................293,040 3,663,000
Embratel Participacoes ADR.....................................................13,090 168,534
Petroleo Brasileiro S.A. ADR*.................................................299,990 4,794,830
Telecelular Sul Participacoes ADR...............................................1,309 22,907
Telecentro Oeste Celular ADR....................................................4,363 15,271
Telecentro Sul Participacoes ADR................................................2,618 156,425
Teleleste Celular Participacoes ADR...............................................261 7,928
Telemig Celular Participacoes ADR.................................................654 17,944
Telenordeste Celular Participacoes ADR............................................654 16,595
Telenorte Celular Participacoes ADR...............................................261 7,112
Telenorte Leste Participacoes ADR..............................................13,090 220,894
Telesp Celular Participacoes ADR................................................5,236 128,936
Telesp Participacoes S.A. ADR..................................................13,090 211,894
-------------
16,434,529
-------------
Denmark: 1.8%
Den Danske Bank Group..........................................................38,120 4,339,383
-------------
France: 9.0%
Alcatel Alsthom Group..........................................................51,800 8,088,472
Compagnie Generale des Establissements Michelin................................98,100 4,270,509
Total Fina S.A. ...............................................................64,239 8,679,829
-------------
21,038,810
-------------
Germany: 9.0%
Bayerische Motoren Werke AG...................................................128,900 4,154,267
BASF AG........................................................................83,000 3,748,446
</TABLE>
See accompanying Notes to Financial Statements.
4
<PAGE>
Brandes Institutional International Equity Fund
<TABLE>
<CAPTION>
SCHEDULE OF INVESTMENTS at October 31, 1999
- -----------------------------------------------------------------------------------------------------
COMMON STOCKS: 97.9% Shares Value
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
Germany-Continued
Deutsche Telekom AG...........................................................236,900 $10,923,080
Muenchener Rueckversicherun Namensaktie........................................10,100 2,301,392
------------
21,127,185
------------
Hong Kong/China: 3.1%
Citic Pacific Ltd. ...........................................................900,000 2,328,480
Swire Pacific Ltd. ...........................................................998,000 4,945,689
------------
7,274,169
------------
Italy: 4.7%
ENI S.p.A. ...................................................................787,000 4,601,117
Telecom Italia S.p.A. ........................................................758,900 6,551,432
------------
11,152,549
------------
Japan: 18.1%
Canon, Inc. ...................................................................52,000 1,473,160
Hitachi, Ltd. ................................................................691,800 7,487,351
Komatsu Ltd. .................................................................608,000 3,538,317
Kyocera Corporation...........................................................109,400 10,506,098
Matsushita Electric Works, Ltd. ..............................................204,000 4,300,198
Mitsubishi Heavy Industries, Ltd. ..........................................1,461,000 5,738,516
Nippon Mitsubishi Oil Co., Ltd. ..............................................445,000 1,965,832
The Tokio Marine & Fire Insurance Co. Ltd. ...................................577,400 7,568,906
------------
42,578,378
------------
Mexico: 3.6%
Telefonos de Mexico S.A. Class L Sponsored ADR.................................99,720 8,526,060
------------
Netherlands: 4.4%
ING Groep N.V. ...............................................................103,413 6,098,089
Koninklijke KPN N.V. ..........................................................80,602 4,135,108
------------
10,233,197
------------
New Zealand: 0.6%
Telecom New Zealand...........................................................370,000 1,487,400
------------
</TABLE>
See accompanying Notes to Financial Statements.
5
<PAGE>
Brandes Institutional International Equity Fund
<TABLE>
<CAPTION>
SCHEDULE OF INVESTMENTS at October 31, 1999
- ----------------------------------------------------------------------------------------------------
COMMON STOCKS: 97.9% Shares Value
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
Portugal: 1.4%
Portugal Telecom...............................................................72,129 $3,215,778
------------
Singapore: 4.7%
The Development Bank of Singapore Ltd. .......................................707,266 7,995,571
Jardine Matheson Holdings Limited.............................................728,507 3,132,580
------------
11,128,151
------------
South Africa: 3.1%
DeBeers/Centenary Linked Unit.................................................187,710 5,126,585
Iscor Limited...............................................................1,179,110 456,787
South African Breweries Plc...................................................186,000 1,649,541
------------
7,232,913
------------
Spain: 1.9%
Argentaria, Caja Postal Banco Hipotecario de Espana, S.A. ....................172,380 3,824,543
Union Electrica Fenosa, S.A.*..................................................39,400 576,280
------------
4,400,823
------------
Switzerland: 2.7%
Swisscom AG.....................................................................9,200 2,800,209
Allied Zurich Plc*............................................................298,720 3,605,819
------------
6,406,028
------------
United Kingdom: 20.5%
Allied Domecq Plc.............................................................125,000 702,088
BOC Group Plc.................................................................124,200 2,657,781
British American Tobacco Plc*.................................................381,920 2,527,738
Corus Group Plc.............................................................1,418,000 2,701,432
Diageo Plc*...................................................................550,683 5,562,008
HSBC Holdings Plc.............................................................737,400 8,850,865
Imperial Chemical Industries Plc*.............................................179,940 1,787,884
Invensys Plc................................................................1,217,359 5,977,841
</TABLE>
See accompanying Notes to Financial Statements.
6
<PAGE>
Brandes Institutional International Equity Fund
<TABLE>
<CAPTION>
SCHEDULE OF INVESTMENTS at October 31, 1999
- ----------------------------------------------------------------------------------------------------
COMMON STOCKS: 97.9% Shares Value
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
United Kingdom-Continued
Marks & Spencer Plc.........................................................1,128,000 $5,187,108
National Power Plc............................................................615,000 4,153,710
Reckitt and Colman Plc........................................................353,200 4,283,751
Royal & Sun Alliance Insurance Group Plc*.....................................334,090 2,271,511
Safeway Plc...................................................................479,000 1,502,527
------------
48,166,244
------------
Venezuela: 1.8%
Compania Anonima Nacional
Telefonos de Venezuela, ADR*..................................................167,690 4,328,498
------------
Total Common Stocks (Cost $200,087,475).................................................230,190,347
------------
<CAPTION>
- ----------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS: 3.6% Principal Amount Value
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
Investors Bank & Trust Co., Repurchase Agreement, 4.510%, dated
10/29/1999, due 11/01/1999, collateralized by $6,483,227 Small
Business Administration Pool #504479, 5.875%, due 3/25/2024 and by
$2,430,809 Small Business Administration Pool #504616, 6.875%, due
7/25/2024 (proceeds $8,473,694) (cost $8,470,511)..........................$8,470,511 8,470,511
------------
Total Investments in Securities (cost $208,557,986**) 101.5% 238,660,858
Liabilities less Other Assets: (1.5%) (3,537,892)
------------
Total Net Assets: 100.0% $235,122,966
============
</TABLE>
- -----------------------------------
* Non-income producing security.
** At October 31, 1999 the cost basis of securities for federal tax purposes
was the same as for financial reporting purposes.
<TABLE>
<CAPTION>
Net realized appreciation consists of:
<S> <C>
Gross unrealized appreciation $42,616,512
Gross unrealized depreciation (12,513,640)
------------
Net unrealized appreciation $30,102,872
============
</TABLE>
See accompanying Notes to Financial Statements.
7
<PAGE>
Brandes Institutional International Equity Fund
SCHEDULE OF INVESTMENTS by Industry at October 31, 1999
- --------------------------------------------------------------------------------
Automobile.............................................................. 5.9%
Banking................................................................. 13.1
Beverages & Tobacco..................................................... 6.1
Chemicals............................................................... 3.6
Electrical & Electronics................................................ 14.0
Food & Household Products............................................... 0.8
Insurance............................................................... 4.9
Machinery & Engineering................................................. 6.0
Metals-Steel............................................................ 0.3
Misc. Materials & Commodities........................................... 3.9
Multi-Industry.......................................................... 11.7
Telecommunications...................................................... 20.9
Utilities-Electrical & Gas.............................................. 6.7
-------
Total Investments....................................................... 97.9
Liabilities less Other Assets........................................... 2.1
-------
Net Assets.............................................................. 100.0%
=======
See accompanying Notes to Financial Statements.
8
<PAGE>
Brandes Institutional International Equity Fund
- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES at October 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
ASSETS
Investments in securities, at value (cost $208,557,986)............. $238,660,858
Receivables for:
Dividends and interest............................................ 522,502
Fund shares sold.................................................. 277,714
Tax claim......................................................... 69,352
Prepaid expenses.................................................... 12,334
Deferred organization costs......................................... 7,771
------------
Total assets...................................................... 239,550,531
------------
LIABILITIES
Payables for:
Unrealized loss on forward contracts.............................. 7,059
Securities purchased.............................................. 4,189,065
Fund shares redeemed.............................................. 26,914
Due to investment advisor........................................... 161,107
Other accrued expenses.............................................. 43,420
------------
Total liabilities................................................. 4,427,565
------------
Net Assets........................................................... $235,122,966
============
SOURCE OF NET ASSETS
Paid-in capital..................................................... $183,017,294
Undistributed net investment income................................. 2,463,521
Undistributed net gain on investments and foreign currency.......... 19,545,523
Net unrealized appreciation (depreciation) on:
Investments....................................................... 30,102,872
Foreign currency.................................................. (6,244)
------------
Net assets...................................................... $235,122,966
============
Net asset value, offering price and redemption price per share
($235,122,966 / 11,848,596 shares outstanding, unlimited number of
shares authorized without par value)................................. $19.84
============
</TABLE>
See accompanying Notes to Financial Statements.
9
<PAGE>
Brandes Institutional International Equity Fund
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
STATEMENT OF OPERATIONS - Year ended October 31, 1999
- ----------------------------------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME:
Income:
Dividends (net of withholding tax of $348,812)................................... $ 4,562,854
Interest......................................................................... 268,032
------------
Total income................................................................... 4,830,886
------------
Expenses:
Advisory fees.................................................................... 2,012,004
Custody fees..................................................................... 201,214
Administration fees.............................................................. 147,876
Accounting fees.................................................................. 63,523
Registration fees................................................................ 53,011
Auditing fee..................................................................... 37,545
Legal fees....................................................................... 34,801
Transfer agent fees.............................................................. 26,498
Printing......................................................................... 18,766
Trustees' fees................................................................... 14,384
Amortization of deferred organization costs...................................... 2,896
Insurance........................................................................ 2,491
Miscellaneous.................................................................... 11,296
------------
Total expense.................................................................. 2,626,305
Less: Expense reimbursements................................................... (199,584)
------------
Net expenses before interest................................................... 2,426,721
Interest expense............................................................... 3,171
------------
Net expenses................................................................... 2,429,892
------------
Net investment income........................................................ 2,400,994
------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments and foreign currency............................ 19,599,093
Net change in unrealized appreciation on investments and foreign currency........ 35,116,475
------------
Net realized and unrealized gain on investments and foreign currency........... 54,715,568
------------
Net increase in net assets resulting from operations......................... $ 57,116,562
============
</TABLE>
See accompanying Notes to Financial Statements.
10
<PAGE>
Brandes Institutional International Equity Fund
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
- ------------------------------------------------------------------------------------------------------------------------------------
For the Year For the Year
ended ended
October 31, 1999 October 31, 1998
----------------- ----------------
INCREASE IN NET ASSETS FROM:
OPERATIONS:
<S> <C> <C>
Net investment income .............................................................. $ 2,400,994 $ 2,325,435
Net realized gain on investments and foreign currency .............................. 19,599,093 12,473,013
Net change in unrealized appreciation (depreciation) on investments
and foreign currency .............................................................. 35,116,475 (7,148,668)
----------------- ----------------
Net increase in net assets resulting from operations .............................. 57,116,562 7,649,780
----------------- ----------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income ......................................................... (2,286,065) (349,689)
From realized gains ................................................................ (12,503,131) (724,896)
----------------- ----------------
Total distributions to shareholders ............................................... (14,789,196) (1,074,585)
----------------- ----------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold .......................................................... 108,174,956 160,815,973
Net asset value of shares issued on reinvestment of distributions .................. 13,228,096 917,917
Cost of shares redeemed ............................................................ (88,622,622) (59,423,431)
----------------- ----------------
Net increase in net assets resulting from capital share transactions .............. 32,780,430 102,310,459
----------------- ----------------
Net increase in net assets ........................................................ 75,107,796 108,885,654
----------------- ----------------
NET ASSETS:
Beginning of period ................................................................ 160,015,170 51,129,516
----------------- ----------------
End of period (including undistributed net investment income of
$2,463,521 and $2,348,592, respectively) ...................................... $ 235,122,966 $ 160,015,170
================= ================
CHANGES IN SHARES:
Shares sold ........................................................................ 6,037,117 10,048,815
Shares issued on reinvestment from distributions ................................... 867,985 61,154
Shares redeemed .................................................................... (4,923,728) (3,752,756)
----------------- ----------------
Net increase ....................................................................... 1,981,374 6,357,213
================= ================
</TABLE>
See accompanying Notes to Financial Statements.
11
<PAGE>
Brandes Institutional International Equity Fund
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
for a capital share outstanding throughout the period
- ------------------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME: Year Year January 2, 1997*
ended ended through
October 31, 1999 October 31, 1998 October 31, 1997
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period ................................ $ 16.22 $ 14.57 $ 12.50
---------- ----------- ----------
Income from investment operations:
Net investment income .............................................. 0.20 0.21 0.17
Net realized and unrealized gain
on investments and foreign currency ............................... 4.91 1.66 1.90
---------- ----------- ----------
Total from investment operations .................................... 5.11 1.87 2.07
---------- ----------- ----------
Less distributions:
From net investment income ........................................ (0.23) (0.07) 0.00
From net realized gains ........................................... (1.26) (0.15) 0.00
---------- ----------- ----------
Total distributions ................................................. (1.49) (0.22) 0.00
---------- ----------- ----------
Net asset value, end of period ...................................... $ 19.84 $ 16.22 $ 14.57
========== =========== ==========
Total return ........................................................ 34.23% 13.01% 16.56%***
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (thousands) ............................... $ 235,123 $ 160,015 $ 51,130
Ratio of expenses to average net assets:
Before expense reimbursement ...................................... 1.30% 1.37% 1.76%**
After expense reimbursement ....................................... 1.20% 1.20% 1.19%**
Ratio of net investment income to average net assets:
Before expense reimbursement ...................................... 1.09% 1.75% 0.84%**
After expense reimbursement ....................................... 1.19% 1.92% 1.40%**
Portfolio turnover rate ............................................. 32.31% 50.08% 27.40%
</TABLE>
* Commencement of operations.
** Annualized.
*** Not annualized.
See accompanying Notes to Financial Statements.
12
<PAGE>
Brandes Institutional International Equity Fund
NOTES TO FINANCIAL STATEMENTS at October 31, 1999
- --------------------------------------------------------------------------------
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. The Fund seeks to achieve long-term capital appreciation.
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 have been no sales are valued at the mean between the bid and
asked price. Securities for which quotations are not readily available are
valued at their respective fair values as determined in good faith by 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 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, and the Fund will make payment for such securities only upon physical
delivery or upon evidence of book entry transfer to the account of
13
<PAGE>
Brandes Institutional International Equity Fund
NOTES TO FINANCIAL STATEMENTS at October 31, 1999 (continued)
- --------------------------------------------------------------------------------
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. 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, 1999, 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 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 those estimates.
NOTE 3 - INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Brandes Investment Partners, L.P. (The "Advisor") provides the Fund with
investment management services under an Investment Advisory Agreement. The
Advisor furnishes all investment advice, office space and certain administrative
services, and provides certain personnel needed by the Fund. As compensation for
its services, the Advisor is 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 totaling $199,584 during the year ended October 31, 1999. Any such
reductions
14
<PAGE>
Brandes Institutional International Equity Fund
NOTES TO FINANCIAL STATEMENTS at October 31, 1999 (continued)
- --------------------------------------------------------------------------------
made by the Advisor in its fees or reimbursement of expenses are subject to
reimbursement by the Fund. At October 31, 1999, the cumulative fee waiver from
the Advisor to the Fund was $551,262.
Effective October 31, 1998, Brandes Investment Partners, L.P. agreed to
amend the expense reimbursement agreement to limit the period within which
Brandes Investment Partners, L.P. may recoup the above amount from the Fund, to
no later than October 31, 2003. In addition, the possible recoupment period of
any expense reimbursements in each year subsequent to 1998 will be limited to
five years from the year of the reimbursement. Such recoupments are subject to
the Fund's ability to effect such reimbursement and remain in compliance with
applicable expense limitations.
Investment Company Administration LLC (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 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% in
excess of $200 million of the Fund's average daily net assets, subject to a
minimum of $40,000 per annum. For the year ended October 31, 1999 the Fund paid
$147,876 in such fees.
First Fund 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 Administrator.
Certain officers of the Fund are also officers and/or Trustees of the
Adviser, Administrator and Distributor.
NOTE 4 - PURCHASES AND SALES OF SECURITIES
For the year ended October 31, 1999, the cost of purchases and the proceeds
from sales of securities, excluding short-term securities, were $76,846,300 and
$63,302,502, respectively.
15
<PAGE>
Brandes Institutional International Equity Fund
NOTES TO FINANCIAL STATEMENTS at October 31, 1999 (continued)
- --------------------------------------------------------------------------------
NOTE 5 - FORWARD FOREIGN CURRENCY CONTRACTS
At October 31, 1999 the Fund had entered into forward foreign currency
contracts which obligated the Fund to exchange currencies at specified future
dates. Forward foreign currency contracts are valued at the forward rate, and
are marked to market at the end of each period. At the maturity of a forward
contract, the Fund may either make delivery of the foreign currency from
currency held, if any, or from the proceeds of the portfolio securities sold, or
it may terminate its obligation to deliver the foreign currency at any time by
purchasing an offsetting contract. The Fund could be exposed to the risk that
the counterparties to the contracts are unable to meet the terms of their
contracts. Open forward foreign currency exchange contracts at October 31, 1999
were as follows:
Foreign Currency
Currency Delivery Currency to Value in Unrealized
Deliverable Date be Received U.S.$ Gain / (Loss)
- ----------- -------- ----------- --------- ------------
Swiss Franc 11/01/99 1,076,047 $ 707,414 $(1,906)
Euro Dollar 11/01/99 1,443,264 1,523,045 (3,762)
British Pound 11/01/99 778,948 1,280,668 (1,391)
---------- -------
$3,511,127 $(7,059)
========== =======
NOTE 6 - YEAR 2000 ISSUE (UNAUDITED)
Like other mutual funds, financial and business organizations and
individuals around the world, the Fund could be adversely affected if the
computer systems used by the advisor, administrator and other service providers
do not properly process and calculate date-related information and data from and
after January 1, 2000. This is commonly known as the "Year 2000 issue." The
advisor and administrator are taking steps that they believe are reasonably
designed to address the Year 2000 issue with respect to computer systems that it
uses and to obtain reasonable assurances that comparable steps are being taken
by the Fund's other major service providers. At this time, however, there can be
no assurance that these steps will be sufficient to avoid any adverse impact to
the Fund.
16
<PAGE>
Brandes Institutional International Equity Fund
REPORT OF INDEPENDENT AUDITORS
- --------------------------------------------------------------------------------
To the Shareholders of Brandes Institutional
International Equity Fund and the
Board of Trustees of Brandes Investment Trust
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of Brandes Institutional International Equity Fund
(the "Fund"), (one of the portfolios constituting Brandes Investment Trust), as
of October 31, 1999, the related statement of operations for the year then
ended, the statement of changes in net assets for each of the two years in the
period then ended, and the financial highlights for each of the two years in the
period then ended and for the period from January 2, 1997 (commencement of
operations) to 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 audits.
We conducted our audits 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, 1999, 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 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
Brandes Institutional International Equity Fund as of October 31, 1999, 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 two years in the period then ended and for the period from
January 2, 1997 (commencement of operations) to October 31, 1997, in conformity
with generally accepted accounting principles.
ERNST & YOUNG LLP
Los Angeles, California
December 7, 1999
17
<PAGE>
[LOGO OF BRANDES]
ADVISOR
Brandes Investment Partners, L.P.
12750 High Bluff Drive
San Diego, California 92130
800.331.2979
DISTRIBUTOR
First Fund Distributors, Inc.
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
725 South Figueroa Street
Los Angeles, California 90017
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.
[LOGO OF BRANDES]
ANNUAL REPORT
For the period ended October 31, 1999
[ARTWORK]
WORLDWIDE VALUE SPECIALISTS
