BRANDES
[Logo]
Brandes
Institutional
International
Equity
Fund
, 1996
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INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, PRELIMINARY PROSPECTUS DATED NOVEMBER 14, 1996
BRANDES INSTITUTIONAL INTERNATIONAL EQUITY FUND
12750 High Bluff Drive
San Diego, CA 92130
(619) 755-0239
The BRANDES INSTITUTIONAL INTERNATIONAL EQUITY FUND (the "Fund") is a
mutual fund which seeks to achieve long-term capital appreciation by investing
principally in equity securities of foreign issuers. The Fund invests primarily
in equity securities of companies with market capitalizations greater than $1
billion. Brandes Investment Partners, L.P. (the "Advisor") serves as investment
advisor to the Fund.
The Fund is not insured or guaranteed by the U.S. Government or any other
person.
This Prospectus sets forth basic information about the Fund that
prospective investors should know before investing. It should be read and
retained for future reference. The Fund is a series of Brandes Investment Trust.
A Statement of Additional Information dated , 1996, as may be amended from time
to time, has been filed with the Securities and Exchange Commission and is
incorporated herein by reference. This Statement of Additional Information is
available without charge by calling the number listed above or upon written
request to the Fund at the address given above.
TABLE OF CONTENTS
Expense Table........................................................ 2
Investment Objective, Policies and Risks............................. 3
Other Securities and Investment Techniques and Risks................. 6
Investment Restrictions.............................................. 9
Organization and Management.......................................... 9
Purchases............................................................ 10
Shareholder Services................................................. 13
Redeeming Shares..................................................... 13
Dividends, Distributions and Tax Status.............................. 15
Performance Information.............................................. 16
Prior Performance of the Advisor..................................... 16
General Information.................................................. 17
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Prospectus dated , 1996
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The BRANDES INSTITUTIONAL INTERNATIONAL EQUITY FUND (the "Fund") is a
diversified series of Brandes Investment Trust ( the "Trust"), a registered
open-end management investment company or mutual fund. The investment objective
of the Fund is long-term capital appreciation. The minimum initial investment in
the Fund is $1 million; there is no minimum subsequent investment. If a
shareholder reduces its total investment in shares to less than $100,000, the
investment may be subject to redemption. See "Redeeming Shares - Redemption of
Small Accounts," page 14.
Like all equity investments, an investment in the Fund involves certain
risks. The value of the Fund's shares will fluctuate with market conditions, and
an investor's shares when redeemed may be worth more or less than their original
cost. International investing, especially in small capitalization companies,
also is subject to certain additional risks, which are described on page 4. The
Fund may invest in certain options and stock index futures transactions, which
may be regarded as transactions in derivative securities that involve special
risks. These transactions and the related risks are described under "Options"
and "Stock Index Futures" at pages 7 and 8 of the prospectus.
EXPENSE TABLE
Expenses are among several factors to consider when investing in the Fund.
The purpose of the following fee table is to provide an understanding of the
various costs and expenses which may be borne directly or indirectly by an
investment in the Fund. The expenses are estimated for the Fund's first year of
operations. Actual expenses in the future may be more or less than those shown.
Institutional
International
Shareholder Transaction Expenses Equity Fund
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Maximum sales charge on purchases (as % of offering price) None
Sales charge on reinvested dividends None
Maximum contingent deferred sales charge
(as % of redemption proceeds) None
Redemption fee None
Total Annual Fund Operating Expenses
(as a % of average net assets)
Management fees 1.00%
Other expenses (after reimbursement) 0.20%
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Total operating expenses (after reimbursement)(1) 1.20%
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(1)The Advisor has voluntarily agreed to reimburse the Fund through at least
October 31, 1997 to ensure that the Fund's total operating expenses will not
exceed the percentage set forth above. Shareholders will receive 30 days notice
prior to any change in this policy. In the absence of this reimbursement, "Other
expenses" of the Fund would be estimated to be .78%, and "Total operating
expenses" would be estimated to be 1.78%. To the extent that the Advisor
reimburses the Fund, the Fund will, repay the Advisor when operating expenses
(before reimbursement) are less than the expense limitation. Thus, overall
operating expenses in the future may not fall below the expense limitation until
the Advisor has been fully repaid for of its reimbursements to the Fund; see
"Operating Expenses; Expense Limitation," page 10.
The purpose of the preceding table is to assist the investor in
understanding the various costs and expenses that an investor in the Fund will
bear directly or indirectly. For more information regarding costs and expenses,
see "Organization and Management," page 9.
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<TABLE>
<CAPTION>
Example of Effect of Fund Expenses One Year Three Years
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<S> <C> <C>
An investor would directly or indirectly pay the following expenses
on a $1,000 investment in the Fund, assuming a 5% annual return: $12 $38
</TABLE>
The Example shown above should not be considered a representation of past
or future expenses, and actual expenses may be greater or less than those shown.
In addition, although federal regulations require use of an assumed 5% annual
return in preparing the Example, the Fund's actual return may be higher or
lower. See "Organization and Management," page 9.
INVESTMENT OBJECTIVE, POLICIES AND RISKS
The Fund has the investment objective of long-term capital appreciation,
and the Fund seeks to achieve its objective by investing principally in equity
securities of foreign issuers. No assurance can be given that the Fund will
achieve its investment objective. Brandes Investment Partners, L.P. serves as
investment advisor to the Fund.
International Investing
During the past decade, there has been significant growth in foreign
capital markets. Because of this growth, nearly two-thirds of the world's equity
value is located outside of the United States. Accordingly, the Advisor believes
that significant investment opportunities exist throughout the world.
The Fund normally invests at least 65% of its total assets in equity
securities of foreign issuers with market capitalizations greater than $1
billion. However, the Fund may invest up to 25% of its total assets in small
capitalization companies, i.e., those with market capitalizations of $1 billion
or less. Small capitalization companies have historically offered greater growth
potential than larger ones, but they are often overlooked by investors. However,
small capitalization companies often have limited product lines, markets or
financial resources and may be dependent on one person or a few key persons for
management. The securities of such companies may be subject to more volatile
market movements than securities or larger, more established companies, both
because the securities typically are traded in lower value and because the
issuers typically are more subject to changes in earnings and prospects.
Under normal circumstances, the Fund will invest at least 65% of its total
assets in equity securities of issuers located in at least three countries other
than the United States. Countries in which the Fund may invest include, but are
not limited to, the nations of Western Europe, North and South America,
Australia and Asia. Equity securities include common stocks, preferred stocks
and securities convertible into common stocks. It is anticipated that securities
generally will be purchased in the form of common stock, American Depositary
Receipts ("ADRs"), European Depositary Receipts ("EDRs") or Global Depositary
Receipts ("GDRs"). ADRs, EDRs and GDRs, which may be sponsored or unsponsored,
are receipts typically issued by a U.S. bank or trust company evidencing
ownership of the underlying foreign securities. The issuers of securities
underlying unsponsored ADRs, EDRs and GDRs are not obligated to disclose
material information in the United States and, accordingly, there may not be a
correlation between such information and the market value of the Depositary
Receipts.
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In seeking out foreign securities for purchase, the Advisor does not
attempt to match the security allocations of foreign stock market indices.
Therefore, the Fund's country weightings may differ significantly from country
weightings found in published foreign stock indices. For example, the Advisor
may choose not to invest the Fund's assets in a country whose stock market, at
any given time, may comprise a large portion of a published foreign stock market
index. At the same time, the Advisor may invest the Fund's assets in countries
whose representation in such an index may be small or non-existent. The Advisor
selects stocks for the Fund based on their individual merits and not necessarily
on their geographic locations.
The Advisor will apply the principles of value investing in the analysis
and selection of securities of foreign companies for the Fund's investment
portfolios.
Value Investing
The Advisor is committed to the use of the Graham and Dodd Value Investing
approach as introduced in the classic book Security Analysis. Utilizing this
philosophy, the Advisor views stocks as parts of businesses which are for sale.
It seeks to purchase a diversified group of these businesses at prices its
research indicates are well below their true long-term, or intrinsic, value. By
purchasing stocks whose current prices are believed to be considerably below
their intrinsic value, the Advisor believes it can buy not only a possible
margin of safety against price declines, but also an attractive opportunity for
profit over the business cycle.
In estimating a company's true long-term value, the Advisor uses sources of
information such as company reports, filings with the Securities and Exchange
Commission (the "SEC"), computer databases, industry publications, general and
business publications, brokerage firm research reports, and interviews with
company management. The Advisor's analysis is focused on fundamental
characteristics of a company, including, but not limited to, book value, cash
flow and capital structure, as well as management's record and broad industry
issues. Once the intrinsic value of a company is estimated, this value is
compared to the price of the stock. If the price is substantially lower than the
estimated intrinsic value, the stock may be purchased. The Advisor believes that
the margin between current price and estimated intrinsic value should provide a
margin of safety against price declines. In addition, over a business cycle of
three to five years, the Advisor believes the market should begin to recognize
the company's value and drive its price up toward its intrinsic value. As a
result, the investor could realize profits. Of course, there can be no assurance
that companies selected using the value investing approach will generate profits
or that the Advisor's assessment of intrinsic value will be correct.
Risks of International Investing
Investments in foreign securities involve special risks. These include
currency fluctuations, a risk which was not addressed by Graham and Dodd, whose
work focused on U.S. stocks. The Advisor has applied the value method of stock
selection to foreign securities. By looking outside the U.S. for investment
opportunities, the Advisor believes that the likelihood of finding undervalued
companies is increased. The Advisor does not believe that currency fluctuation,
over the long term, on a group of broadly diversified companies, representing a
number of currencies and countries, significantly affects portfolio performance.
In having this ability to search world-wide for undervalued companies, rather
than being limited to searching only among U.S. stocks, the Advisor believes
that over the long term the benefits of strict value investing apply just as
well with an added currency risk as they would without such risk.
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There are additional risks in international investing, including political
or economic instability in the country of issue and the possible imposition of
exchange controls or other laws or restrictions. In addition, securities prices
in foreign markets are generally subject to different economic, financial,
political and social factors than are the prices of securities in U.S. markets.
With respect to some foreign countries there may be the possibility of
expropriation or confiscatory taxation, limitations on liquidity of securities
or political or economic developments which could affect the foreign investments
of the Fund. Moreover, securities of foreign issuers generally will not be
registered with the SEC, and such issuers will generally not be subject to the
SEC's reporting requirements. Accordingly, there is likely to be less publicly
available information concerning certain of the foreign issuers of securities
held by the Fund than is available concerning U.S. companies. Foreign companies
are also generally not subject to uniform accounting, auditing and financial
reporting standards or to practices and requirements comparable to those
applicable to U.S. companies. There may also be less government supervision and
regulation of foreign broker-dealers, financial institutions and listed
companies than exists in the U.S. These factors could make foreign investments,
especially those in developing countries, more volatile. All of the above issues
should be considered before investing in the Fund.
Emerging Markets and Related Risks
The Fund may invest up to 25% of its assets in securities of companies
located in countries with emerging securities markets. Emerging markets are the
capital markets of any country that in the opinion of the Advisor is generally
considered a developing country by the international financial community.
Currently, these markets include, but are not limited to, the markets of
Argentina, Brazil, Chile, China, Colombia, Czech Republic, Greece, Hungary,
India, Indonesia, Israel, Korea, Malaysia, Mexico, Pakistan, Peru, the
Philippines, Poland, Portugal, Slovak Republic, Sri Lanka, Taiwan, Thailand,
Turkey, Venezuela and countries that comprise the former Soviet Union. As
opportunities to invest in other emerging markets countries develop, the Fund
expects to expand and diversify further the countries in which it invests.
Investing in emerging market securities involves risks which are in
addition to the usual risks inherent in foreign investments. Some emerging
markets countries may have fixed or managed currencies that are not
free-floating against the U.S. dollar. Further, certain currencies may not be
traded internationally. Certain of these currencies have experienced a steady
devaluation relative to the U.S. dollar. Any devaluations in the currencies in
which the Fund's portfolio securities are denominated may have a detrimental
impact on the Fund.
Some countries with emerging securities markets have experienced
substantial, and in some periods extremely high, rates of inflation for many
years. Inflation and rapid fluctuations in inflation rates have had and may
continue to have negative effects on the economies and securities markets of
certain countries. Moreover, the economies of some countries may differ
favorably or unfavorably from the U.S. economy in such respects as rate of
growth of gross domestic product, the rate of inflation, capital reinvestment,
resource self-sufficiency, number and depth of industries forming the economy's
base, governmental controls and investment restrictions that are subject to
political change and balance of payments position. Further, there may be greater
difficulties or restrictions with respect to investments made in emerging
markets countries.
Emerging securities markets typically have substantially less volume than
U.S. markets, securities in many of such markets are less liquid, and their
prices often are more volatile than securities of comparable
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U.S. companies. Such markets often have different clearance and settlement
procedures for securities transactions, and in some markets there have been
times when settlements have been unable to keep pace with the volume of
transactions, making it difficult to conduct transactions. Delays in settlement
could result in temporary periods when assets which the Fund desires to invest
in emerging markets may be uninvested. Settlement problems in emerging markets
countries also could cause the Fund to miss attractive investment opportunities.
Satisfactory custodial services may not be available in some emerging markets
countries, which may result in the Fund's incurring additional costs and delays
in the transportation and custody of such securities.
OTHER SECURITIES AND INVESTMENT TECHNIQUES AND RISKS
Short-Term Investments
At times the Fund may invest in short-term cash equivalent securities
either for temporary, defensive purposes, or as part of its overall investment
strategy. These securities consist of high quality debt obligations maturing in
one year or less from the date of purchase, such as U.S. Government securities,
certificates of deposit, bankers' acceptances and commercial paper. High quality
means the obligations have been rated at least A-1 by Standard & Poor's
Corporation ("S&P") or Prime-1 by Moody's Investor's Service, Inc. ("Moody's"),
have an outstanding issue of debt securities rated at least AA by S&P or Aa by
Moody's, or are of comparable quality in the opinion of the Advisor.
Repurchase Agreements
Short-term investments also include repurchase agreements with respect to
the high quality debt obligations listed above. A repurchase agreement is a
transaction in which the Fund purchases a security and, at the same time, the
seller (normally a commercial bank or broker-dealer) agrees to repurchase the
same security (and/or a security substituted for it under the repurchase
agreement) at an agreed-upon price and date in the future. The resale price is
in excess of the purchase price in that it reflects an agreed-upon market
interest rate effective for the period of time during which the Fund holds the
securities. The majority of these transactions run from day to day and not more
than seven days from the original purchase. The Fund's risk is limited to the
ability of the seller to pay the agreed-upon sum on the delivery date; in the
event of bankruptcy or the default by the seller, there may be possible delays
and expenses in liquidating the instrument purchased, decline in its value and
loss of interest. The securities will be marked to market every business day so
that their value is at least equal to the amount due from the seller, including
accrued interest. The Advisor will also consider the credit-worthiness of any
bank or broker-dealer involved in repurchase agreements under procedures adopted
by the Trust's Board of Trustees.
U.S. Government Securities
The Fund may invest in securities issued or guaranteed by the U.S.
Government, its agencies and instrumentalities. U.S. Government securities
include direct obligations issued by the United States Treasury, such as
Treasury bills, certificates of indebtedness, notes and bonds. U.S. Government
agencies and instrumentalities that issue or guarantee securities include, but
are not limited to, the Federal Home Loan Banks, the Federal National Mortgage
Association, and the Student Loan Marketing Association.
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Except for U.S. Treasury securities, obligations of U.S. Government agencies and
instrumentalities may or may not be supported by the full faith and credit of
the United States. Some, such as those of the Federal Home Loan Banks, are
backed by the right of the issuer to borrow from the Treasury, others by
discretionary authority of the U.S. Government to purchase the agencies'
obligations, while still others, such as the Student Loan Marketing Association,
are supported only by the credit of the instrumentality. In the case of
securities not backed by the full faith and credit of the United States, the
investor must look principally to the agency issuing or guaranteeing the
obligation for ultimate repayment and may not be able to assert a claim against
the United States itself in the event the agency or instrumentality does not
meet its commitment.
When-Issued Securities
The Fund may purchase securities on a when-issued or delayed-delivery
basis, generally in connection with an underwriting or other offering.
When-issued and delayed-delivery transactions occur when securities are bought
with payment for and delivery of the securities scheduled to take place at a
future time, beyond normal settlement dates, generally from 15 to 45 days after
the transaction. No interest accrues to the purchaser during the period before
delivery. There is a risk in these transactions that the value of the securities
at settlement may be more or less than the agreed upon price, or that the value
of the securities or settlement may be more or less than the agreed upon price,
or that the party with which the Fund enters into such a transaction may not
perform its commitment. The Fund will segregate liquid assets, such as cash,
U.S. Government securities and other liquid, high quality debt securities in an
amount sufficient to meet its payment obligations with respect to these
transactions.
Securities Lending
The Fund may lend its securities in an amount not exceeding 30% of its
assets to financial institutions such as banks and brokers if the loan is
collateralized in accordance with applicable regulations. Under the present
regulatory requirements which govern loans of portfolio securities, the loan
collateral must, on each business day, at least equal the value of the loaned
securities and must consist of cash, letters of credit of domestic banks or
domestic branches of foreign banks, or securities of the U.S. Government. Loans
of securities involve risks of delay in receiving additional collateral or in
recovering the securities loaned or even loss of rights in the collateral should
the borrower of the securities fail financially. However, such securities
lending will be made only when, in the opinion of the Advisor, the income to be
earned from the loans justifies the attendant risks. Loans are subject to
termination at the option of the Fund or the borrower.
Options
The Fund may write (sell) covered call options on individual securities and
on stock indices and engage in related closing transactions. A covered call
option on a security is an agreement by the Fund, in exchange for a premium, to
sell a particular portfolio security if the option is exercised at a specified
price before a set date. An option on a stock index gives the option holder the
right to receive, upon exercising the option, a cash settlement amount based on
the difference between the exercise price and the value of the underlying stock
index. Risks associated with writing covered options include the possible
inability to effect closing transactions at favorable prices and an appreciation
limit on the securities set aside for settlement. The Fund may also purchase
call options in closing transactions, to terminate option positions
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written by the Fund. There is no assurance of liquidity in the secondary market
for purposes of closing out covered call option positions.
The Fund may purchase put and call options with respect to securities which
are eligible for purchase by the Fund and with respect to various stock indices
for the purpose of hedging against the risk of unfavorable price movements
adversely affecting the value of the Fund's securities or securities the Fund
intends to buy. A put option on a security is an agreement by the writer of the
option, in exchange for a premium, to purchase the security from the Fund, if
the option is exercised, at a specified price before a set date. The Fund may
also sell put and call options in closing transactions.
Special risks are associated with the use of options. There can be no
guarantee of a correlation between price movements in the option and in the
underlying securities or index. A lack of correlation could result in a loss on
both the Fund's portfolio holdings and the option so that the Fund's return
might have been better had the option not been purchased or sold. There can be
no assurance that a liquid market will exist at a time when the Fund seeks to
close out an option position. The Fund may purchase a put or call option only if
the value of its premium, when aggregated with the premiums on all other options
held by the Fund, does not exceed 5% of the Fund's total assets.
Stock Index Futures
The Fund may buy and sell stock index futures contracts for bona fide
hedging purposes, e.g., in order to hedge against changes in prices of the
Fund's securities. No more than 25% of the Fund's assets will be hedged.
A stock index futures contract is an agreement pursuant to which one party
agrees to deliver to the other an amount of cash equal to a specific dollar
amount times the difference between the value of a specific stock index at the
close of the last trading day of the contract and the price at which the
agreement is made. No physical delivery of securities is made. If the Advisor
expected general stock market prices to rise, it might purchase a stock index
futures contract as a hedge against an increase in prices of particular equity
securities it wanted ultimately to buy. If in fact the stock index did rise, the
price of the equity securities intended to be purchased might also increase, but
that increase would be offset in part by the increase in the value of the Fund's
futures contract resulting from the increase in the index. On the other hand, if
the Advisor expected general stock market prices to decline, it might sell a
futures contract on the index. If that index did in fact decline, the value of
some or all of the equity securities held by the Fund might also be expected to
decline, but that decrease would be offset in part by the increase in the value
of the futures contract.
There is no assurance that it will be possible at any particular time to
close a futures position. In the event that the Fund could not close a futures
position and the value of the position declined, the Fund would be required to
continue to make daily cash payments to the other party to the contract to
offset the decline in value of the position. There can be no assurance that
hedging transactions will be successful, as there may be an imperfect
correlation between movements in the prices of the futures contracts and of the
securities being hedged, or price distortions due to market conditions in the
futures markets. Successful use of futures contracts is subject to the Advisor's
ability to predict correctly movements in the direction of interest rates,
market prices and other factors affecting the value of securities.
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Illiquid and Restricted Securities; Short Sales Against the Box
The Fund may invest up to 5% of its net assets in illiquid securities,
including (i) securities for which there is no readily available market; (ii)
securities which may be subject to legal restrictions on resale (so-called
"restricted securities") other than Rule 144A securities noted below; (iii)
repurchase agreements having more than seven days to maturity; and (iv) fixed
time deposits subject to withdrawal penalties (other than those with a term of
less than seven days). Illiquid securities do not include those which meet the
requirements of Securities Act Rule 144A and which the Trustees have determined
to be liquid based on the applicable trading markets. The Fund is permitted to
engage in short sales "against the box." Such short sales are a method of
locking in unrealized capital gains without current recognition of such gains.
INVESTMENT RESTRICTIONS
The Fund has adopted certain investment restrictions, which are described
fully in the Statement of Additional Information. Like the Fund's investment
objectives, certain of these restrictions are fundamental and may be changed
only by a majority vote of the Fund's outstanding shares.
ORGANIZATION AND MANAGEMENT
The Trust is organized as a Delaware business trust, and is registered as
an open-end diversified management investment company. The Trust's Board of
Trustees decides on matters of general policy and reviews the activities of the
Advisor, Distributor and Administrator. The Trust's officers conduct and
supervise its daily business operations.
The Advisor
The Advisor is a limited partnership organized in May 1995 as the successor
to its general partner, Brandes Investment Partners, Inc., which was founded in
1974. As of September 30, 1996, the Advisor managed over $7.5 billion in assets
for various clients, including corporations, public and corporate pension plans,
foundations and charitable endowments, and individuals. Charles H. Brandes, who
owns over 25% of the common stock of Brandes Investment Partners, Inc., serves
as a Trustee of the Trust. The Advisor's offices are located at 12750 High Bluff
Drive, San Diego, California 92130.
Management Fee. Subject to the direction and control of the Trustees, the
Advisor formulates and implements an investment program for the Fund, including
determining which securities should be bought and sold. The Advisor also
provides certain officers for the Trust. For its services, the Advisor receives
a fee, accrued daily and paid monthly at the annual rate of 1.00% of average net
assets.
Managers of the Fund. The Fund is team-managed by the Advisor's Investment
Committee, whose members are firm principals and/or portfolio managers. Current
members of the Investment Committee are Charles H. Brandes, CFA; Walter J.
Brown, CFA; Jeffrey A. Busby, CFA; Glenn R. Carlson, CFA; Douglas C. Edman;
Robert J. Gallagher; Ann W. Humphreville; Marnelle A. Marchese, CFA; Jeffrey R.
Meyer, CFA; William A. Pickering, CFA; Ann M. Priebe; and Brent V. Woods, J.D.
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Operating Expenses; Expense Limitation
The Fund is responsible for paying its operating expenses, including, but
not limited to, management and administrative fees, legal and auditing fees,
fees and expenses of its custodian, accounting services and shareholder
servicing agents, Trustees' fees, the cost of communicating with shareholders
and registration fees. However, the Advisor has voluntarily agreed through at
least October 31, 1997 to limit the Fund's operating expenses to 1.20% of
average net assets. Any such reductions made by the Advisor in its fees or
reimbursement of expenses are subject to reimbursement by the Fund, provided
that the Fund is able to effect such reimbursement while remaining within the
expense limitation. Shareholders will receive 30 days prior notice in the event
the Advisor determines not to maintain this voluntary limit in the future. The
Board of Trustees has determined that it is possible, but not probable, that the
Fund will be large enough in the future for the expense ratio to be sufficiently
reduced to permit reimbursement of the Advisor.
Portfolio Transactions and Brokerage
The Advisor considers a number of factors in determining which brokers or
dealers to use for the Fund's portfolio transactions. These factors include, but
are not limited to, the reasonableness of commissions, quality of services and
execution, and the availability of research which the Advisor may lawfully and
appropriately use in its investment management and advisory capacities. Provided
the Fund receives prompt execution at competitive prices, the Advisor may also
consider the sale of shares of the Fund as a factor in selecting broker-dealers
for the Fund's portfolio transactions. The Advisor does not expect the portfolio
turnover rate of the Fund to exceed, under normal conditions, 50% per year.
The Administrator
Investment Company Administration Corporation (the "Administrator"),
pursuant to an administration agreement with the Trust, supervises the overall
administration of the Fund including, among other responsibilities, the
preparation and filing of documents required for compliance by the Fund with
applicable laws and regulations, arranging for the maintenance of books and
records of the Fund, and supervision of other organizations that provide
services to the Fund. Certain officers of the Trust may be provided by the
Administrator. For its services, the Administrator receives a fee from the Trust
at the annual rate of 0.10% of average net assets, subject to a minimum of
$70,000 per year.
PURCHASES
General
Shares of the Fund are offered on a continuous basis only to certain
institutional investors, including qualified retirement and deferred
compensation plans and trusts used to fund those plans, including, but not
limited to, those defined in section 401(a), 403(b), or 457 of the Internal
Revenue Code (the "Code"), "rabbi trusts," foundations, endowments, corporations
and other taxable and tax-exempt investors that would otherwise generally
qualify as advisory clients of the Advisor. Shares may also be purchased by
officers and employees of the Advisor, the Administrator and the Distributor and
their immediate family members, as well as to certain other persons determined
from time to time by the Distributor, including
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investment advisors or financial planners or their clients, who may clear
transactions through a broker-dealer, bank or trust company which may maintain
an omnibus account with the Transfer Agent, (each of which may impose fees with
respect to such transactions or accounts).
Shares of the Fund are sold without a sales charge. The Fund's Distributor
is Worldwide Value Distributors, Inc., an affiliate of the Advisor. The minimum
initial investment in the Fund is $1 million; there is no minimum subsequent
investment. The minimum investment may be waived by the Distributor for
institutions making continuing investments in the Fund and from time to time for
other investors, including retirement plans with assets in excess of $10
million. Investors may be charged a fee if they effect transactions in fund
shares through a broker or agent.
Purchases through a Securities Dealer
Shares of the Fund may be purchased through a securities dealer which has
executed an agreement with the Distributor or the Fund (a "selected dealer") or
directly from the Fund's Transfer Agent, [Insert name of Transfer Agent], acting
as agent for a selected dealer. Shares are offered continuously at the public
offering price (determined as described below) which is next computed (1) after
the investor's selected dealer receives the order which is promptly transmitted
to the Fund, or (2) after receipt of an order by the Transfer Agent from the
shareholder directly in proper form (which generally means a completed
Application Form together with a negotiable check in U.S. dollars or a wire
transfer of funds). The Fund and the Distributor reserve the right to refuse any
order for the purchase of shares and to cancel an order for which payment is not
received from a selected dealer by the third business day following the order.
An order placed with a selected dealer may be subject to postage and handling
charges imposed by the dealer.
Purchases through the Transfer Agent
An investor who wishes to purchase shares of a Fund directly from the
Transfer Agent may do so by completing the Application form (available from the
Transfer Agent or a selected dealer) and mailing it to the Transfer Agent at the
address shown on the Application Form. Payment may be made by a check that
accompanies the Application Form, or it may be made by a wire transfer of funds,
as described below. Subsequent investments may be made by mailing a check,
together with the investment form from a recent account statement. Subsequent
investments may also be made by wire, as described below.
Payment by Wire
For payment by wire of an initial investment in the Fund, the investor
should first call the Transfer Agent at (800) between the hours of
9:00 a.m. and 4:00 p.m., Eastern time, on a day when the New York Stock Exchange
is open for trading in order to receive an account number. The Transfer Agent
will request the investor's name, address, tax identification number, amount
being wired and wiring bank. The investor should then instruct the wiring bank
to transfer funds by wire to: [Insert wiring instructions] , for credit to
Brandes Institutional International Equity Fund, for further credit to
[Investor's name and account number]. The investor should also ensure that the
wiring bank includes the name of the Fund and the account number with the wire.
If the funds are received by the Transfer Agent prior to the time that the
Fund's net asset value is calculated, the funds will be invested on that day:
otherwise, they will be invested on the next business day. Finally, the investor
should write the account number provided by the Transfer Agent on the
Application Form and mail the Form promptly to the Transfer Agent.
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Subsequent Purchases
To make a subsequent purchase by wire, the investor should call the
Transfer Agent at (800) before the wire is sent. Failure to do so may cause the
purchase to be delayed indefinitely. The investor should wire funds to the
Transfer Agent, care of [Insert name of Transfer Agent], in the manner described
above, including the name of the Fund and the investor's account number with the
wire.
Retirement Plans
Individual participants in qualified retirement plans should purchase
shares of the Fund through their plan sponsor or administrator, which is
responsible for transmitting orders. The procedures for investing in the Fund
depend on the provisions of the qualified retirement plan and any arrangements
that the plan sponsor may have made for special processing services, including
subaccounting.
Other
Shares are credited to an investor's account, and certificates are
generally not issued. The Trust and the Distributor each reserve the right to
reject any purchase order or suspend or modify the offering of the Fund's
shares.
Purchasing with Securities
In addition to cash purchases, shares of the Fund may be purchased by
tendering payment "in-kind" in the form of securities, provided that any such
securities are of the type which the Fund can or may legally purchase and
consistent with the Fund's investment objective and policies, are acquired for
investment and not for resale, are liquid, unrestricted and have a readily
determinable value by exchange or NASDAQ listing and that such a purchase has
been approved by the Advisor in its sole discretion.
Net Asset Value
To determine the net asset value per share of the Fund, the current value
of the Fund's total assets, less all liabilities, is divided by the total number
of shares outstanding, and the result is rounded to the nearer cent. The Fund
values its investments on the basis of their market value. Securities and other
assets for which market prices are not readily available are valued at fair
value as determined in good faith by the Board of Trustees. Debt securities with
remaining maturities of 60 days or less are normally valued at amortized cost,
unless the Board of Trustees determines that amortized cost does not represent
fair value. Cash and receivables will be valued at their face amounts. Interest
will be recorded as accrued, and dividends will be recorded on their ex-dividend
date.
The Fund will calculate its net asset value once daily at the close of
public trading on the New York Stock Exchange (normally 4:00 p.m. Eastern time)
on days that the Exchange is open for trading, except on days on which no orders
to purchase, sell or redeem shares have been received by the Fund. The New York
Stock Exchange is closed on the following holidays: New Year's Day, Presidents'
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day
and Christmas Day.
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SHAREHOLDER SERVICES
Automatic Reinvestment
Dividends and capital gain distributions are reinvested without any sales
charge in additional shares unless indicated otherwise on the Application Form.
A shareholder may elect to have dividends or capital gain distributions paid in
cash.
Shareholder Reports
Shareholders will receive an audited annual report and an unaudited
semiannual report, both of which present the financial statements of the Fund.
REDEEMING SHARES
How to Redeem Shares
Shares may be redeemed only by instructions from the registered owner of a
shareholder account. Individuals who are participants in a retirement or other
plan should direct redemption requests to the plan sponsor or administrator,
which may have special procedures for processing such requests and which is
responsible for forwarding requests to the Transfer Agent.
A shareholder may redeem shares of a Fund by contacting the shareholder's
selected dealer. The selected dealer may arrange for the repurchase of the
shares through the Fund's distributor at the net asset value next determined
after receipt by the selected dealer of instructions from the shareholder. The
dealer may charge the shareholder for this service. Shares held in street name
must be redeemed through the dealer holding the shares.
An investor may also redeem shares by mailing instructions to the Transfer
Agent, [Insert name and mailing instructions of Transfer Agent], or by
delivering instructions to the Transfer Agent at [Insert address of Transfer
Agent]. The instructions must specify the name of the Fund, the number of shares
or dollar amount to be redeemed and the shareholder's name and account number.
If a redemption is requested by a corporation, partnership, trust or fiduciary,
written evidence of authority acceptable to the Transfer Agent must be submitted
before such request will be accepted. If the proceeds of the redemption exceed
$50,000, are to be paid to a person other than the record owner, are to be sent
to an address other than the address on the Transfer Agent's records, or are to
be paid to a corporation, partnership, trust or fiduciary, the signature(s) on
the redemption request and on the certificates, if any, or stock powers must be
guaranteed by an "eligible guarantor," which includes a bank or savings and loan
association that is federally insured or a member firm of a national securities
exchange. The price the shareholder will receive for the Fund shares redeemed is
at the next determined net asset value for the shares after a completed
redemption request is received by the Transfer Agent.
Telephone Redemptions. A shareholder may establish telephone redemption
privileges by checking the appropriate box and supplying the necessary
information on the Application Form. Shares may then be redeemed by telephoning
the Transfer Agent at (800) , between the hours of 9:00 a.m. and 4:00 p.m.
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Eastern time on a day when the New York Stock Exchange is open for trading.
Redemption requests received by the Transfer Agent before 4:00 p.m. Eastern time
on a day when the New York Stock Exchange is open for trading will be processed
that day; otherwise processing will occur on the next business day.
Institutional investors may also make special arrangements with the Transfer
Agent for designating personnel of the investor who are authorized to place
telephone redemption requests.
Special Factors Regarding Telephone Redemptions. The Trust will use
procedures, such as assigned personal identification numbers, designed to
provide reasonable verification of the identity of a person making a telephone
redemption request. The Trust reserves the right to refuse a telephone
redemption request if it believes that the person making the request is neither
the record owner of the shares being redeemed nor otherwise authorized by the
shareholder to request the redemption. Shareholders will be promptly notified of
any refused request for a telephone redemption. If these normal identification
procedures are not followed, the Trust or its agents could be liable for any
loss, liability or cost which results from acting upon instructions of a person
believed to be a shareholder with respect to the telephone redemption privilege.
Redemption Payments
Payment for redemptions will be made within seven days after receipt by the
Transfer Agent of the written or telephone redemption request, any share
certificates, and, if required, a signature guarantee and any other necessary
documents, except as indicated below. Payment may be postponed or the right of
redemption suspended at times when the New York Stock Exchange is closed for
other than customary weekends and holidays, when trading on such exchange is
restricted, when an emergency exists as a result of which disposal by the Trust
of securities owned by the Fund is not reasonably practicable or it is not
reasonably practicable for the Trust fairly to determine the value of the Fund's
net assets, or during any other period when the SEC, by order, so permits.
Redemption proceeds are generally paid by check. However, at the
shareholder's request, redemption proceeds of $300 or more may be wired by the
Transfer Agent to the shareholder's bank account. Requests for redemption by
wire should include the name, location and ABA or bank routing number (if known)
of the designated bank and the shareholder's bank account number.
Redemption of Small Accounts
If the value of a shareholder's investment falls below $100,000 because of
shareholder redemption(s), the Fund may notify the shareholder, and if his
investment value remains below $100,000 for a continuous 60-day period, the
shares are subject to redemption by the Fund, and, if redeemed, the net asset
value of those shares will be promptly paid to the shareholder. The Fund,
however, will not redeem shares based solely upon changes in the market that
reduce the net asset value of the shares.
The foregoing minimum account size requirements do not apply to shares held
by employees of the Advisor or its affiliates. However, if the value of an
account held by an employee of the Advisor or its affiliates falls below $5,000
because of shareholder redemption(s), the Fund may notify the shareholder, and
if the account value remains below $5,000 for a continuous 60-day period, the
shares in that account are subject to redemption by the Fund, and, if redeemed,
the net asset value of those shares will be promptly paid to the shareholder.
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The Fund reserves the right to modify or terminate the involuntary
redemption features of the shares as stated above at any time upon 60-days'
notice to shareholders.
DIVIDENDS, DISTRIBUTIONS AND TAX STATUS
Dividends and Distributions
The Fund expects to pay income dividends annually. Distributions of net
capital gains, if any, will be made at least annually. The Board of Trustees may
determine to declare dividends and make distributions more frequently.
Dividends and capital gain distributions are automatically reinvested in
additional shares at the net asset value per share on the reinvestment date
unless the shareholder has previously requested in writing to the Transfer Agent
that payment be made in cash.
Any dividend or distribution paid by the Fund has the effect of reducing
the net asset value per share on the reinvestment date by the amount of the
dividend or distribution. Investors should note that a dividend or distribution
paid on shares purchased shortly before such dividend or distribution was
declared will be subject to income taxes as discussed below even though the
dividend or distribution represents, in substance, a partial return of capital
to the shareholder.
Tax Status
The Fund intends to qualify and elect to be treated as a regulated
investment company under Subchapter M of the Code. As long as the Fund continues
to qualify, and as long as the Fund distributes all of its income each year to
shareholders, the Fund will not be subject to any federal income or excise
taxes. The distributions made by the Fund will be taxable to shareholders
whether received in shares (through dividend reinvestment) or in cash.
Distributions derived from net investment income, including net short-term
capital gains, are taxable to shareholders as ordinary income. Distributions
designated as capital gains dividends are taxable as long-term capital gains
regardless of the length of time shares of the Fund have been held. Although
distributions are generally taxable when received, certain distributions made in
January are taxable as if received in the prior December. Shareholders will be
informed annually of the amount and nature of the Fund's distributions.
The Trust may be required to impose backup withholding at a rate of 31%
from income dividends and capital gain distributions and upon payment of
redemption proceeds if provisions of the Code relating to the furnishing and
certification of taxpayer identification numbers and reporting of dividends are
not complied with by a shareholder. Any shareholder account without a tax
identification number may be liquidated and distributed to the shareholder, net
of withholding, after the sixtieth day of investment. In addition, dividends and
capital gains distributions to foreign shareholders may be subject to U.S.
withholding at a rate of up to 30%.
Dividends and interest earned by the Fund may be subject to withholding and
other taxes imposed by foreign countries, at rates from 10% to 40%, which taxes
would reduce the Fund's investment income. However, under certain circumstances
shareholders may be able to claim credits against their U.S. taxes for
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for such foreign taxes. The Trust will also notify shareholders each year as to
the amounts available as credits.
Additional information about taxes is set forth in the Statement of
Additional Information. Shareholders should consult their own advisers
concerning federal, state and local taxation of distributions from the Fund.
PERFORMANCE INFORMATION
From time to time, the Trust may publish the total return of the Fund in
advertisements and communications to investors. Total return information will
include the Fund's average annual compounded rate of return over the four most
recent calendar quarters and over the period from the Fund's inception of
operations. The Trust may also advertise aggregate and average total return
information of the Fund over different periods of time. The Fund's total return
will be based upon the value of the shares acquired through a hypothetical
$1,000 investment at the beginning of the specified period and the net asset
value of those shares at the end of the period, assuming reinvestment of all
distributions. Total return figures will reflect all recurring charges against
Fund income. Investors should note that the investment results of the Fund will
fluctuate over time, and any presentation of a Fund's total return for any prior
period should not be considered as a representation of what an investor's total
return may be in any future period.
In addition to standardized return, performance advertisements and sales
literature may also include other total return performance data
("non-standardized return"). Non-standardized return may be quoted for the same
or different periods as those for which standardized return is quoted and may
consist of aggregate or average annual percentage rate of return, actual
year-by-year rates or any combination thereof. All data included in performance
advertisements will reflect past performance and will not necessarily be
indicative of future results. The Trust may also advertise relative rankings by
mutual fund ranking services such as Lipper Analytical Services or Morningstar,
Inc. The investment return and principal value of an investment in the Fund will
fluctuate and an investor's proceeds upon redeeming Fund shares may be more or
less than the original cost of the shares.
PRIOR PERFORMANCE OF THE ADVISOR
Set forth below are certain performance data provided by the Advisor
relating to the composite of international equity accounts of clients of the
Advisor. These accounts had the same investment objective as the Fund and were
managed by the same team that will manage the Fund's securities, using
substantially similar, though not in all cases identical, investment strategies,
policies and techniques as those contemplated for use by the Fund. See
"Investment, Objectives and Policies." The data are provided to illustrate the
past performance of the Advisor in managing similar accounts as measured against
the Morgan Stanley Capital International (MSCI) EAFE Index, a standard
international equity investment benchmark. The data below do not represent the
performance of the Fund. You should not consider this performance data as an
indication of future performance of the Fund or of the Advisor.
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The accounts that are included in the Advisor's composite are not subject
to the same types of expenses to which the Fund is subject nor to the
diversification requirements, specific tax restrictions and investment
limitations imposed on the Fund by the Investment Company Act of 1940 (the "1940
Act"). Consequently, the performance results for the Advisor's composite could
have been adversely affected if the accounts included in the composite had been
regulated as investment companies.
For Periods ended June 30, 1996
-------------------------------
Five Years Three Years One Year
---------- ----------- --------
Annualized Total Return*:
Advisor's Composite 16.41% 13.37% 13.30%
MSCI EAFE** 9.99% 10.45% 13.28%
*Investment performance for both the Advisor's composite and the MSCI EAFE
benchmark include the reinvestment of dividends and income, net of (after) any
applicable foreign withholding taxes, plus the time-weighted effect of
contributions and withdrawal of capital, with dividends accounted for on a cash
basis. Also, Advisor's performance shown above is calculated net of trading
costs and management fees, but before any custodian costs. The Advisor's results
represent the percentage change in the total market value expressed in U.S.
dollars of all its fully discretionary International Equity accounts, under
management for at least one month. Accounts which the Advisor manages pursuant
to a bundled wrap fee agreement are excluded. Unbundled wrap fee accounts are
included in the composite returns above. These accounts may have paid a single
fee for brokerage, search, monitoring, management and other services. For these
accounts, the whole fee was deducted to arrive at the net performance figure,
even though only a portion of such fee was for brokerage and management. A small
number of non-fee paying accounts was included, but had no material effect on
performance results. The Advisor's composite performance figures meet Level II
Verification Standards established by the Association for Investment Management
and Research. Past investment performance should not be taken as representative
of future performance.
**The MSCI EAFE Index is an unmanaged index consisting of securities listed on
exchanges in European, Australian and Far Eastern markets and includes dividends
and distributions, but does not reflect fees, brokerage commission or other
expenses of investing.
GENERAL INFORMATION
The Trust was organized as a Delaware business trust on July 6, 1994. The
Trustees have authority to issue an unlimited number of shares of beneficial
interest of separate series, par value $.01 per share. The Fund is one of three
separate series of the Trust. Although it has no present intention to do so, the
Trust has reserved the right to convert to a master-feeder structure in the
future by investing all of the Fund's assets in the securities of another
investment company, upon notice to and approval of shareholders.
The Trust does not hold annual shareholder meetings of the Fund. There
normally will be no meetings of shareholders to elect Trustees unless fewer than
a majority of the Trustees holding office have been elected by shareholders.
Shareholders of record holding at least two-thirds of the outstanding shares of
the Trust may remove a Trustee by votes cast in person or by proxy at a meeting
called for that purpose. The Trustees are required to call a meeting of
shareholders for the purpose of voting upon the question of removal of any
Trustee when so requested in writing by the shareholders of record owning at
least 10% of the Trust's outstanding shares. Each share of the Fund has equal
voting rights. Each share of the Fund is entitled to participate equally in
dividends and distributions and the proceeds of any liquidation from the Fund.
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Custodian and Transfer Agent. [Insert name of Custodian] is the custodian
of the Fund's assets and employs foreign sub-custodians, approved by the Board
of Trustees in accordance with applicable requirements under the 1940 Act, to
provide custody of the Fund's foreign assets. [Insert name of Transfer Agent] is
the Fund's transfer and dividend disbursing agent.
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