File No. 33-81396
811-8614
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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 3 [X]
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
ACT OF 1940 [ ]
Amendment No. 4 [X]
BRANDES INVESTMENT TRUST
(Formerly Brandes International Fund)
(Exact name of registrant as specified in charter)
12750 High Bluff Drive, Suite 420
San Diego, CA 92130
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number (including area code): (619) 755-0239
Charles H. Brandes
Brandes Investment Partners, Inc.
12750 High Bluff Drive, Suite 420
San Diego, CA 92130
(Name and address of agent for service of process)
Approximate Date of Proposed Public Offering: As soon as practicable after the
effective date of the registration statement.
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It is proposed that this filing will become effective (check appropriate box)
[ ] immediately upon filing pursuant to paragraph (b)
[X] on April 1, 1996 pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(i)
[ ] on (date) pursuant to paragraph (a)(i)
[ ] 75 days after filing pursuant to paragraph (a)(ii)
[ ] on April 1, 1996 pursuant to paragraph (a)(ii) of Rule 485
If appropriate, check the following box
[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
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<PAGE>
<TABLE>
BRANDES INVESTMENT TRUST
FORM N-1A
CROSS REFERENCE SHEET
<CAPTION>
Form N-1A
Item No.
Part Location in Prospectus
A Item of Class A and Class C Shares
<S> <C> <C>
1. Cover Page Cover page
2. Synopsis "Expense Table"
3. Condensed Financial Information "Financial Highlights"
4. General Description of Registrant "General Information"; "Organization
and Management"; "Investment
Objective, Policies and Risks";
"Other Securities and Investment
Techniques and Risks"; "Investment
Restrictions"
5. Management of the Fund "Organization and Management";
"General Information"
5A. Management's Discussion of Fund Contained in the Annual Report to
Performance Shareholders
6. Capital Stock and Other Securities "General Information"; "Dividends,
Distributions and Tax Status"
7. Purchase of Securities Being "Purchases"; Shareholder Services";
Offered "Distribution Plan"
8. Redemption or Repurchase "Redeeming Shares"
9. Pending Legal Proceedings Not applicable
Part Location in Prospectus
A Item of Institutional Shares
1. Cover Page Cover page
2. Synopsis "Expense Table"
3. Condensed Financial Information "Financial Highlights"
4. General Description of Registrant "General Information"; "Organization
and Management"; "Investment
Objective, Policies and Risks";
"Other Securities and Investment
Techniques and Risks"; "Investment
Restrictions"
5. Management of the Fund "Organization and Management";
"General Information"
5A. Management's Discussion of Fund Contained in the Annual Report to
Performance Shareholders
6. Capital Stock and Other Securities "General Information"; "Dividends,
Distributions and Tax Status"
7. Purchase of Securities Being "Purchases"; Shareholder Services";
Offered
8. Redemption or Repurchase "Redeeming Shares"
9. Pending Legal Proceedings Not applicable
Part Location in
B Item Statement of Additional Information
10. Cover Page Cover Page
11. Table of Contents "Table of Contents"
12. General Information and History Not applicable
13. Investment Objective and Policies "Investment Objectives and
Policies"; "Investment Restrictions"
14. Management of the Fund "Management"
15. Control Persons and Principal
Holders of Securities Not applicable
16. Investment Advisory and Other "Management"; "Distribution
Services Arrangements"; "General Information"
17. Brokerage Allocation "Portfolio Transactions and
Brokerage"
18. Capital Stock and Other Securities "General Information"
19. Purchase, Redemption and Pricing "Net Asset Value"; "Redemptions"
of Securities Being Offered
20. Tax Status "Taxation"
21. Underwriters Not applicable
22. Calculation of Performance Data "Performance Information"
23. Financial Statements "Financial Statements"
</TABLE>
Part C
The information required to be included in Part C is set forth
under the appropriate item, so numbered, in Part C to the Registration
Statement.
<PAGE>
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 FEBRUARY 8, 1996
BRANDES INTERNATIONAL FUND
BRANDES SMALL CAP INTERNATIONAL FUND
12750 High Bluff Drive
San Diego, CA 92130
(619) 755-0239
BRANDES INVESTMENT TRUST (the "Trust") is a mutual fund consisting of
two separate series: the Brandes International Fund and the Brandes Small Cap
International Fund. Each Fund seeks to achieve long-term capital appreciation by
investing principally in equity securities of foreign issuers. The International
Fund invests primarily in equity securities of established companies with market
capitalizations greater than $1 billion. The Small Cap Fund invests primarily in
equity securities of small- to medium- sized companies with market
capitalizations less than $1 billion. Brandes Investment Partners, Inc. serves
as investment advisor to the Trust.
This Prospectus describes two separate classes of shares of each of the Funds:
Class A Shares, offered at their net asset value plus a sales charge of 4.75%,
or less, depending on the amount invested; and Class C Shares, offered at their
net asset value without a sales charge, but subject to a 1.00% contingent
deferred sales charge upon certain early redemptions. Both classes of shares
also pay distribution and service fees. See "Purchases" and "Redeeming Shares"
at pages and , respectively.
Neither of the Funds is insured or guaranteed by the U.S.
Government or any other person. This Prospectus sets forth basic information
about the Trust that prospective investors should know before investing. It
should be read and retained for future reference. A Statement of Additional
Information dated April 1, 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
upon written request to the Trust at the address given above.
TABLE OF CONTENTS
Expense
Table...........................................................................
Financial Highlights............................................................
Investment Objective, Policies and Risks........................................
Other Securities and Investment Techniques and Risks............................
Investment Restrictions.........................................................
Organization and Management.....................................................
Purchases.......................................................................
Shareholder Services............................................................
Redeeming Shares................................................................
Distribution Plan...............................................................
Shareholder Service Plan........................................................
Dividends, Distributions and Tax Status.........................................
Performance Information.........................................................
General Information.............................................................
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 April 1, 1996
<PAGE>
The BRANDES INVESTMENT TRUST (the "Trust") is a diversified registered
open-end management investment company or mutual fund. The Trust consists of two
separate Funds, each with its own assets, liabilities and shares: the Brandes
International Fund (the "International Fund") and the Brandes Small Cap
International Fund (the "Small Cap Fund") (collectively, the "Funds"). The
investment objective of each of the Funds is long-term capital appreciation. The
Funds each offer three separate classes of shares, two of which are described in
this Prospectus. Class A Shares of each Fund are offered to investors at their
net asset value plus a sales charge of 4.75% or less, depending upon the amount
invested. Class C Shares of each Fund are offered to investors at their net
asset value without an initial sales charge, but are subject to a 1.00%
contingent deferred sales charge upon certain early redemptions. Both classes of
shares also pay distribution and service fees. See "Purchases" and "Redeeming
Shares" at pages and , respectively. The minimum initial investment in a Fund is
$2,500 ($1,000 and $100, respectively, for retirement plans and automatic
purchase arrangements). The minimum subsequent investment is $100.
Like all equity investments, an investment in either Fund involves
certain risks. The value of the Funds' 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 5.
EXPENSE TABLE
Expenses are among several factors to consider when investing in a
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 a Fund. These are based on the expenses of the International Fund
for its fiscal year ended October 31, 1995, but they are estimated for the first
year of operations of the Small Cap Fund. Actual expenses in the future may be
more or less than those shown.
International Small Cap
Fund Fund
Class Class Class Class
A C A C
-----------------------------------
Shareholder Transaction Expenses
Maximum sales charge on purchases
(as % of offering price) 4.75% None 4.75% None
Sales charge on reinvested dividends None None None None
Maximum contingent deferred sales charge
(as % of redemption proceeds) None(1) 1.00% None(1) 1.00%
Redemption fee(2) None None None None
Total Annual Fund Operating Expenses
(as a percentage of average net assets)
Management fees 1.00% 1.00% 1.00% 1.00%
12b-1 expenses 0.25% 0.75% 0.25% 0.75%
Shareholder service fees 0.10% 0.25% 0.10% 0.25%
Other expenses (after reimbursement)(3) 0.50% 0.50% 0.50% 0.50%
---- ---- ---- ----
Total operating expenses (3) 1.85% 2.50% 1.85% 2.50%
==== ==== ==== ====
(1) Although purchases of $1 million or more are not subject to an initial sales
charge, a contingent deferred sales charge of 1.00% applies on certain
redemptions made within 12 months of purchase. See "Purchases- Contingent
Deferred Sales Charge on Redemptions of Class A Shares."
(2) A $7 charge is deducted on redemptions paid by wire transfer. See "Redeeming
Shares-Redemption Payments."
(3) The Advisor has voluntarily agreed to reduce its fees through at least
October 31, 1996 to ensure that the Fund's total operating expenses will not
exceed the percentages set forth above. In the absence of this reduction in
fees, "Other expenses" of each Class of Shares of the International Fund during
the fiscal year ended October 31, 1995 would have been 6.58% and "Total
operating expenses" of the Class A Shares and Class C Shares of the
International Fund would have been 7.93% and 8.58%, respectively. In the absence
of this reduction in fees, it is estimated that "Other expenses" of each Class
of Shares of the Small Cap Fund for the fiscal year ending October 31, 1996
would be 6.12% (annualized), and "Total operating expenses" of the Class A
Shares and Class C Shares would be 7.47% and 8.12% (annualized), respectively.
To the extent that the Advisor reduces its fees, the Funds will, within the
following three years, reimburse 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 reimbursed for any fees foregone; see "Operating
Expenses," page .
The purpose of the preceding table is to assist the investor in
understanding the various costs and expenses that an investor in the Funds will
bear directly or indirectly. For more information regarding costs and expenses,
see "Organization and Management," page . Long-term shareholders may pay more
than the economic equivalent of the maximum front-end sales charges permitted by
the rules of the National Association of Securities Dealers. See "Distribution
Plan," page .
Example of Effect of Fund Expenses
An investor would directly or indirectly pay the following expenses on a
$1,000 investment in either Fund, assuming a 5% annual return:
One Year Three Years
Class A Shares $65 $103
Class C Shares
Assuming complete redemption at
the end of the period, with contingent
deferred sales charge (first year only) $35 $78
Assuming no redemption $25 $78
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, federal regulations require the Example to assume a 5%
annual return, but the Fund's actual return may be higher or lower. See
"Organization and Management."
FINANCIAL HIGHLIGHTS
(For a share outstanding of the International Fund throughout the
period)
The following information regarding the International Fund has been
audited by Ernst & Young LLP, independent accountants, whose unqualified report
covering the fiscal period ended October 31, 1995 is included in the Statement
of Additional Information. This information should be read in conjunction with
the financial statements and accompanying notes thereto which also appear in the
Statement of Additional Information. Further information about the International
Fund's performance is included in the annual report to shareholders for the
fiscal period ended October 31, 1995, which may be obtained without charge by
writing or calling the address or telephone number on the cover page. Financial
highlights for the Small Cap Fund are not available, because that Fund has not
yet commenced operations.
For the period March 6, 1995* through October 31, 1995:
Class A Class C
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Net asset value, beginning of period.................. $12.50 $12.50
------ ------
Income (loss) from investment operations:
Net investment income......................... .15** .10**
Net unrealized depreciation on investments.... (.45)** (.39)**
Net realized gain on investments.............. 1.06*** 1.01***
---- ----
Total from investment operations...................... .76 .72
---- ----
Net Asset Value, End of Period........................ $13.26 $13.22
====== ======
Total return.......................................... 9.39%+ 8.89%+
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period............................. $5,188,105 $5,749,496
Ratio of expenses to average net assets:
Before expense reimbursement.................. 7.93%+ 8.58%+
After expense reimbursement................... 1.85%+ 2.50%+
Ratio of net investment income (loss) to average net assets:
Before expense reimbursement.................. (4.41)%+ (4.95)%+
After expense reimbursement................... 1.67%+ 1.13%+
Portfolio turnover rate............................... 0% 0%
*Commencement of operations.
**Calculated based on average shares outstanding
***The amount shown in this caption for a share outstanding throughout the
period may not correspond with the change in realized gains and losses in the
portfolio securities for the period because of the timing of sales and
repurchases of portfolio shares in relation to fluctuating market values for the
portfolio.
+Annualized.
INVESTMENT OBJECTIVE, POLICIES AND RISKS
The International Fund and the Small Cap Fund each have the investment
objective of long-term capital appreciation, and each Fund seeks to achieve its
objective by investing principally in equity securities of foreign issuers. No
assurance can be given that either Fund will achieve its investment objective.
Brandes Investment Partners, Inc. (The "Advisor") serves as investment advisor
to the Funds.
International Investing
During the past decade, there has been unprecedented 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.
o The International Fund invests primarily in equity
securities of established foreign issuers, with
market capitalizations greater than $1 billion.
However, the International Fund may invest up to
25% of its total assets in small capitalization
companies, i.e., those with capitalization of less
than $1 billion. (Small capitalization companies
are subject to greater risks than companies with
larger capitalizations, as discussed below.)
o The Small Cap Fund invests primarily in equity
securities of small- to medium- sized companies,
with market capitalizations less than $1 billion at
the time of purchase. If the market capitalization
of a company whose securities are held by the Small
Cap Fund increases to an amount greater than $1
billion, the Fund may, but is not required to, sell
its holdings in those securities. 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 of larger, more established companies,
both because the securities typically are traded in
lower volume and because the issuers typically are
more subject to changes in earnings and prospects.
Because the Fund applies a U.S. size standard on a
global basis, it may invest in issuers which might,
in some countries, rank among the largest companies
in terms of capitalization.
Under normal circumstances, each 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 Funds 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.
In seeking out foreign securities for purchase, the Advisor does not
attempt to match the security allocations of foreign stock market indices.
Therefore, a 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 a 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 a Fund's assets in countries
whose representation in such an index may be small or non-existent. The Advisor
selects stocks for each 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 Funds'
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 analyzing 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. Its focus is 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 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 company 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.
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 Funds. 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
either Fund.
Emerging Markets and Related Risks
Each 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
Funds expect to expand and diversify further the countries in which they invest.
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 Funds' portfolio securities are denominated may have a detrimental
impact on the Funds.
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, and securities in many of such markets are less liquid, and
their prices often are more volatile than securities of comparable 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 Funds desire to invest in emerging
markets may be uninvested. Settlement problems in emerging markets countries
also could cause the Funds to miss attractive investment opportunities.
Satisfactory custodial services may not be available in some emerging markets
countries, which may result in the Funds' 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 either 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 a 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. A 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 Board of Trustees.
U.S. Government Securities
Each 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. 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
Each 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. A 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
Each 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.
Options
Each 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 a 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. Each Fund may
also purchase call options in closing transactions, to terminate option
positions written by the Fund. There is no assurance of liquidity in the
secondary market for purposes of closing out covered call option positions.
Each 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 a
Fund, if the option is exercised, at a specified price before a set date. A 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. A 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
Each 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 a 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 a 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.
Illiquid and Restricted Securities; Short Sales Against the Box
Each Fund may invest up to 5% of its total 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. Each Fund is
also 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
Each Fund has adopted certain investment restrictions, which are
described fully in the Statement of Additional Information. Like the Funds'
investment objectives, certain of these restrictions are fundamental and may be
changed only by a majority vote of a 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 was founded in 1974 and currently manages over $5 billion
in assets for various clients including corporations, public and corporate
pension plans, foundations and charitable endowments, and individuals. Ten
employees own either common stock or options to purchase common stock of the
Advisor. Charles H. Brandes, who owns over 25% of the common stock, serves as
one of the Managing Directors of the Advisor and 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
Funds, including determining which securities should be bought and sold. The
Advisor also provides certain officers for the Funds. For its services, the
Advisor receives a fee, accrued daily and paid monthly at the annual rate of
1.00% of average net assets. This fee is higher than that charged by most other
investment companies.
Managers of the Funds. The Funds are 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; Jeffrey A. Busby, CFA; Glenn R. Carlson, CFA; Robert J. Gallagher; Ann W.
Humphreville; Marnelle A. Marchese, CFA; Jeffrey R. Meyer, CFA; William A.
Pickering, CFA; Ronald J. Saba and Brent V. Woods.
Operating Expenses
The Funds are responsible for paying their 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, 12b-1 and shareholder servicing fees, trustees'
fees, the cost of communicating with shareholders and registration fees. In
order to comply with a regulation of a state in which the Funds' shares are
sold, the Advisor is required to reduce its fees or reimburse each Fund for its
annual operating expenses which exceed the limit set by the regulation. However,
the Advisor has voluntarily agreed through at least October 31, 1996 to limit
each Funds' operating expenses to more stringent percentages: 1.85% in the case
of Class A Shares and 2.50% in the case of Class C Shares. Any such reductions
made by the Advisor in its fees or reimbursement of expenses with respect to a
Fund are subject to reimbursement by that Fund within the following three years,
provided that the Fund is able to effect such reimbursement while remaining
within the expense limitation. The Advisor will notify shareholders in the event
it 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 Funds
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 Funds' 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 Funds receive prompt execution at competitive prices, the Advisor
may also consider the sale of shares of the Funds as a factor in selecting
broker-dealers for the Funds' portfolio transactions. The Advisor does not
expect its portfolio turnover rate to exceed, under normal conditions, 50%.
The Administrator
Investment Company Administration Corporation (the "Administrator"),
pursuant to administration agreements with the Trust, supervises the overall
administration of the Funds including, among other responsibilities, the
preparation and filing of documents required for compliance by the Funds with
applicable laws and regulations, arranging for the maintenance of books and
records of the Funds, and supervision of other organizations that provide
services to the Funds. Certain officers of the Trust may be provided by the
Administrator.
PURCHASES
General
Class A Shares of the Funds are sold to investors subject to an
initial sales charge. Class C Shares of the Funds are sold without an initial
sales charge but are subject to higher ongoing expenses than Class A Shares and
a contingent deferred sales charge payable upon certain redemptions. The Funds'
Distributor is Worldwide Value Distributors, Inc., an affiliate of the Advisor.
In deciding whether to purchase Class A Shares or Class C Shares, an
investor should consider which class best suits the investor's individual
circumstances; i.e., whether it is more advantageous to incur an initial sales
charge and lower annual fees, or to have the entire purchase price invested in
shares of a Fund with the investment thereafter being subject to a contingent
deferred sales charge for a period of one year from the date of purchase, as
well as higher annual fees. For example, an investor who is making a large
investment may prefer to purchase Class A Shares, because the investment may
qualify for a reduced sales charge, and reduced sales charges are not applicable
in the case of purchases of Class C Shares. Moreover, all Class A Shares are
subject to lower distribution and shareholder service fees and, accordingly, may
pay correspondingly higher dividends on a per share basis than Class C Shares.
Even if an investment will not qualify for reduced initial sales charges, a
purchaser may prefer Class A Shares if the Shares will be held for an extended
period of time, because, depending on the number of years the investment is
held, the accumulated continuing distribution and shareholder service charges on
Class C Shares would eventually exceed the initial sales charge plus the lower
continuing distribution and shareholder service charges on Class A Shares during
the life of the investment. However, because initial sales charges are deducted
from Class A Shares at the time of purchase, an investor would not have all of
the purchase payment for Class A Shares invested initially.
Purchases through a Securities Dealer
Shares of the Funds may be purchased through a securities dealer which
has executed an agreement with the Distributor (a "selected dealer") or directly
from the Funds' Transfer Agent, Rodney Square Management Corporation, 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 Transfer Agent, 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 Trust and the Distributor reserve the right to refuse
any order for the purchase of shares and to cancel any 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 (included with this
prospectus, or 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. Payments made be check
will be invested at the net asset value determined on the day the check is
received by the Transfer Agent. 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 a Fund, the investor
should first call the Transfer Agent at (800) 543-7518 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: RSMC, c/o Wilmington Trust Company, Wilmington,
Delaware, ABA # 0311-0009-2, DDA #2670-3514, for credit to either Brandes
International Fund or Brandes Small Cap International 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.
To make a subsequent purchase by wire, the investor should wire funds
to the Transfer Agent, care of Wilmington Trust Company, in the manner described
above, including the name of the Fund and the investor's account number with the
wire. However, it is not necessary to call the Transfer Agent to obtain an
account number prior to wiring funds for a subsequent purchase.
Share Certificates
Shares are credited to an investor's account, and certificates are not
issued unless specifically requested. This eliminates the costly problem of lost
or destroyed certificates.
Investment Minimums
The minimum initial investment in either Fund is $2,500. For
retirement plan investments and custodial accounts under the Uniform
Gifts/Transfers to Minors Act the minimum is $1,000. The minimum is reduced to
$100 for purchases through the Automatic Investment plan or to $100 for
purchases by retirement plans through payroll deductions. The minimum for
additional investments is $100.
Purchasing with Securities
In addition to cash purchases, shares may be purchased by tendering
payment in kind in the form of securities, provided that any such securities are
consistent with a Fund's investment objective and policies, are acquired for
investment and not for resale, and 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.
Net Asset Value
To determine the net asset value per share of a 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. Net
asset value is calculated separately for each class of shares. The Funds value
their 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.
Each 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.
Class A Shares
Sales Charges. The public offering price per Class A Share is equal to
the net asset value per share, plus a sales charge, which is reduced on
purchases involving amounts of $50,000 or more, as set forth in the table below.
The reduced sales charges apply to quantity purchases made at one time by (I) an
individual, (ii) members of a family (i.e., an individual, spouse and children
under age 21), or (iii) a trustee or fiduciary of a single trust estate or a
single fiduciary account.
Sales Charge as % of Dealer Commission
Amount of purchase at Offering Net amount as % of
offering price price invested Offering Price
Less than $50,000 4.75% 4.99% 4.25%
$50,000 up to $99,999 4.50% 4.71% 4.00%
$100,000 up to $249,999 3.50% 3.62% 3.00%
$250,000 up to $499,999 2.50% 2.56% 2.00%
$500,000 up to $999,999 2.00% 2.04% 1.50%
$1,000,000 or more None None (See below)
Although no initial sales charge applies on purchases of $1 million or
more of the Class A Shares, a contingent deferred sales charge of 1.00% will be
imposed on certain redemptions within one year of the purchase of $1 million or
more. The Distributor may pay commissions to dealers who initiate and are
responsible for purchases of $1 million or more and for purchases made at net
asset value by certain retirement plans of organizations with collective
retirement plan assets of $5 million or more.
Net Asset Value Purchases. The Trust may sell Class A Shares of the
Funds at net asset value to (1) current or retired trustees, directors, officers
and employees of the Trust, the Distributor and the Advisor, certain family
members of these persons, and trusts or plans primarily for such persons; (2)
current or retired registered representatives or full-time employees and their
spouses and minor children of dealers having selling group agreements with the
Distributor and plans for such persons; (3) investment advisory clients of the
Advisor, including family members, employees or beneficial owners of such
clients; (4) companies or other entities exchanging securities with either Fund
through a merger, acquisition or exchange offer; (5) trustees or other
fiduciaries purchasing shares for certain retirement plans (or the trusts which
fund them) of organizations with retirement plan assets of $5 million or more,
including, but not limited to, those defined in sections 401(k), 401(a), 403(b)
or 457 of the Internal Revenue Code (the "Code"), and "rabbi trusts;" (6)
participants in certain pension, profit-sharing or employee benefit plans that
are sponsored by the Distributor and its affiliates; and (7) investment advisers
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 transaction fees with respect to
such transactions). In addition, Class A Shares may be sold at net asset value
to shareholders and former shareholders of another mutual fund which has a sales
charge, so long as shares of a Fund are purchased with the proceeds of a
redemption, made within 60 days of the purchase, of shares of such other mutual
fund; however, this benefit is not available if the shares redeemed were subject
to a contingent deferred sales charge or redemption fee. In order to obtain this
benefit, the redemption check, endorsed to a Fund, or a copy of the confirmation
showing the redemption must be forwarded to the Transfer Agent. Shares are
offered at net asset value to these persons and organizations due to anticipated
economies in sales effort and expense. No sales charges are imposed on shares of
a Fund purchased upon the reinvestment of dividends and distributions.
Right of Accumulation. The sales charge for an investment may be
reduced by taking into account a shareholder's existing holdings in Class A
Shares of both Funds. See the Application Form for further details.
Letter of Intent. An investor may reduce sales charges on all
investments by meeting the terms of a letter of intent, a non-binding commitment
to invest a certain amount within a 13-month period. Existing holdings in Class
A Shares of both Funds also may be combined with the investment commitment set
forth in the letter of intent to reduce the sales charge further. Up to 5% of
the letter amount will be held in escrow to cover additional sales charges which
may be due if the total investments made over the letter period are not
sufficient to qualify for a sales charge reduction. See the Application Form for
further details.
Contingent Deferred Sales Charge on Redemptions of Class A Shares. A
contingent deferred sales charge of 1.00% applies to certain redemptions of
shares of Class A Shares of either Fund within the first year on investments of
$1 million or more. The charge is 1.00% of the lesser of the value of the shares
redeemed (exclusive of reinvested dividends and capital gain distributions) or
the total cost of such shares. The charge is waived for redemptions in
connection with mergers, acquisitions and exchange offers involving Class A
Shares of the Funds; for distributions from qualified retirement plans and other
employee benefit plans; for distributions from custodial accounts under Section
403(b)(7) of the Code or from IRA's due to death, disability or attainment of
age 59 1/2; for tax-free returns of excess contributions to IRA's; for any
partial or complete redemption following the death or disability of a
shareholder, provided the redemption is made within one year of death or initial
determination of disability; and for redemptions through certain automatic
withdrawals.
Class C Shares
Contingent Deferred Sales Charge. The public offering price of Class C
Shares is the net asset value, and no initial sales charge is imposed. A
contingent deferred sales charge of 1.00%, however, is imposed upon most
redemptions of Class C Shares made within one year from the date of their
purchase.
Class C Shares that are redeemed within one year will not be subject
to a contingent deferred sales charge to the extent that the value of such
shares represents (1) capital appreciation of Fund assets or (2) reinvestment of
dividends or capital gain distributions. Otherwise, redemptions of Class C
Shares will be subject to the 1.00% contingent deferred sales charge.
In determining the applicability of any contingent deferred sales
charge, it will be assumed that a redemption is made from shares held by the
shareholder for the longest period of time. For federal income tax purposes, the
amount of the contingent deferred sales charge will reduce the gain or increase
the loss, as the case may be, on the amount realized on redemption. The amount
of any contingent deferred sales charge will be deducted from the redemption
proceeds and paid to the Distributor.
Waivers of Contingent Deferred Sales Charges. The contingent deferred
sales charge is waived for redemptions of Class C Shares by (1) current or
retired trustees, directors, officers and employees of the Trust, the
Distributor, the Advisor, certain family members of these persons, and trusts or
plans primarily for such persons; (2) redemptions made in connection with the
Funds' Automatic Withdrawal Plan; (3) for distributions from qualified
retirement plans and other employee benefit plans; (4) for distributions from
custodial accounts under Section 403(b)(7) of the Code or from IRA's due to
death, disability or attainment of age 59 1/2; (5)for tax-free returns of excess
contributions to IRA's; and (6) for any partial or complete redemption following
the death or disability of a shareholder, provided the redemption is made within
one year of death or initial determination of disability.
SHAREHOLDER SERVICES
Automatic Investment Plan
An investor may make regular monthly or quarterly investments in
either Fund through automatic withdrawals of specified amounts from a bank
account once an automatic investment plan is established. See the Check-A-Matic
Application for further details about this service or call the Transfer Agent at
(800) 543-7518.
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.
Automatic Withdrawals
A shareholder may make automatic withdrawals from a Fund of $100 or
more on a monthly or quarterly basis if the shareholder's account has a value of
$10,000 or more. Withdrawal proceeds will normally be received prior to the end
of the month or quarter. See the Application Form for further information.
Retirement Plans and Individual Retirement Accounts (IRAs)
Shares of the Funds are available for purchase by any retirement plan,
including 401(k) plans, profit sharing plans, 403(b) plans and IRAs. More
information is available from investment dealers or the Transfer Agent at (800)
543-7518.
Shareholder Reports
Shareholders will receive an audited annual report and an unaudited
semiannual report, both of which present the financial statements of the Funds.
Exchange Privilege
A shareholder may exchange shares of either Fund for shares of the
same Class of the other Fund, based on the respective net asset values as of the
date of the Exchange. Shares of both Classes of each Fund may also be exchanged
for shares of the Money Market Portfolio of The Rodney Square Fund, a money
market mutual fund advised by Rodney Square Management Corporation and not
affiliated with the Funds. Prior to making such an exchange, a shareholder
should obtain and read a prospectus for The Rodney Square Fund, by calling (800)
543-7518. A contingent deferred sales charge will be imposed, if applicable, on
shares of the Fund being redeemed in connection with an exchange into The Rodney
Square Fund. Exchanges are limited to four per shareholder account per year; the
exchange privilege is available only in states where all funds are qualified for
sale. The exchange privilege may be modified or terminated on 60 days written
notice to shareholders. For tax purposes, an exchange is considered a redemption
and a new purchase.
REDEEMING SHARES
How to Redeem Shares
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 Trust'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, Rodney Square Management Corporation, P.O. Box 8987, Wilmington,
DE 19899, or by delivering instructions to the Transfer Agent at 1105 N. Market
Street, Wilmington, Delaware 19890. 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. Except as
noted above with respect to contingent deferred sales charges that may apply,
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) 543-7518, 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. Redemptions by telephone must be at least $5,000. 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.
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 a Fund is not reasonably practicable or it is not
reasonably practicable for the Trust fairly to determine the value of a Fund's
net assets, or during any other period when the SEC, by order, so permits.
Payment for redemption of recently purchased shares will be delayed until the
Transfer Agent has been advised that the purchase check has been honored, up to
15 calendar days from the time of receipt of the purchase check by the Transfer
Agent. This delay may be avoided by purchasing shares by wire or by certified or
official bank checks.
Redemption proceeds are generally paid by check. However, at the
shareholder's request, redemption proceeds 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. A $7 fee for wire transmission
of redemption proceeds will be charged by the Transfer Agent, which will be
deducted from the proceeds.
Reinstatement Privilege-Class A Shares
A shareholder may reinvest proceeds from a redemption of Class A
Shares without a sales charge, provided that a written request and check are
sent to the Transfer Agent within 90 days after the date of the redemption.
Reinvestment will be at the next calculated net asset value after receipt. The
tax status of a gain realized on a redemption will not be affected by exercise
of the reinstatement privilege, but a loss may be nullified if reinvestment is
made within 30 days.
Redemption of Small Accounts
In order to reduce expenses, the Funds may redeem shares in any
account, other than retirement plan or Uniform Gift or Transfer to Minors Act
accounts, if at any time, due to redemptions, the total value of a shareholder's
account falls below $500. Shareholders will be given 30 days prior written
notice in which to purchase sufficient additional shares to avoid such a
redemption.
DISTRIBUTION PLAN
The Trust has adopted a Distribution Plan pursuant to Rule 12b-1 under
the Investment Company Act of 1940 ("The 1940 Act") with respect to each Fund.
Under the Plan, each Fund pays the Distributor monthly distribution fees at the
annual rate of 0.25% of the average daily net assets of the Class A Shares of
the Fund and 0.75% of the average daily net assets of the Class C Shares of the
Fund.
The Distributor uses the distribution fees under the Plan to offset
the commissions and other payments made to broker-dealers for selling the Funds'
shares, and to offset the Trust's marketing costs, such as preparation of sales
literature, advertising and printing and distributing prospectuses and other
shareholder materials to prospective investors. The Distributor also receives a
portion of the initial sales charge paid upon the purchase of Class A Shares and
the contingent deferred sales charge paid upon certain redemptions of Class C
Shares, and may use these proceeds for any of the distribution expenses
described above.
During the period they are in effect, the Plan and related
distribution contracts pertaining to each Class of shares ("Distribution
Contracts") obligate the Funds to pay distribution fees as compensation for
distribution activities, not as reimbursement for specific expenses incurred.
Thus, even if distribution expenses exceed distribution fees, the Funds will not
be obligated to pay more than those fees, and if distribution expenses are less
than those fees, the Advisor will retain its full fees and realize a profit. The
Funds will pay the distribution fees under the Plan until either the applicable
Plan or Distribution Contract is terminated or not renewed. In that event, the
distribution expenses in excess of distribution fees received or accrued through
the termination date will be the Advisor's sole responsibility and not
obligations of the Funds. In their annual consideration of the continuation of
the Plan, the Trustees will consider and review the Plan and corresponding
expenses for each Class separately.
SHAREHOLDER SERVICE PLAN
The Trust has adopted a Shareholder Service Plan with respect to each
Fund, under which the Fund reimburses the Distributor for shareholder servicing
expenses. Under this Plan, the Funds pay the Distributor a fee at the annual
rate of 0.10% of the average daily net assets of the Class A Shares and 0.25% of
the average daily net assets of the Class C Shares as reimbursement for certain
expenses actually incurred in connection with shareholder services provided by
the Distributor and for payments to investment dealers, retirement plan
administrators and others for the provision of such services. These services
include establishing and maintaining accounts and records relating to clients
who invest in the Funds, responding to shareholder inquiries, assisting
shareholders in changing account options, transmitting communications to
shareholders and providing such other information and assistance to shareholders
as they may reasonably request.
DIVIDENDS, DISTRIBUTIONS AND TAX STATUS
Dividends and Distributions
Both Funds expect to pay income dividends for each class of shares
annually. Distributions of net capital gains with respect to each Class of
shares, 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 a 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
Each Fund intends to qualify and elect to be treated as a regulated
investment company under Subchapter M of the Code. As long as a Fund continues
to qualify, and as long as a 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 Funds 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. A portion of
these distributions may qualify for the intercorporate dividends-received
deduction. Distributions designated as capital gains dividends are taxable as
long-term capital gains regardless of the length of time shares of a 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 Funds may be subject to
withholding and other taxes imposed by foreign countries, at rates from 10% to
40%, which taxes would reduce the Funds' investment income. However, under
certain circumstances shareholders may be able to claim credits against their
U.S. taxes 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 Funds.
PERFORMANCE INFORMATION
From time to time, the Trust may publish the total return of the Funds
in advertisements and communications to investors. As discussed above under
"Purchases," because of the differences in sales charges and expenses, total
return of Class A Shares will be different from that of Class C Shares. Total
return information will include a 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 Funds over different periods of time. A
Fund's total return will be based upon the value of the shares acquired through
a hypothetical $1,000 investment (at the maximum public offering price) at the
beginning of the specified period and the net asset value of such shares at the
end of the period, assuming reinvestment of all distributions and after giving
effect to the maximum applicable sales charge. Total return figures will reflect
all recurring charges against Fund income for each respective class. Investors
should note that the investment results of each 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 a Fund will
fluctuate and an investor's proceeds upon redeeming Fund shares may be more or
less than the original cost of the shares.
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. 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 assets of the
Funds in the securities of another investment company.
Shares of beneficial interest of each Fund are currently divided into
three Classes, designated Class A Shares, Class C Shares and Institutional
Shares. Each Class represents interests in the same assets of the respective
Fund. The Classes differ as follows: (1) each Class has exclusive voting rights
on matters pertaining to its plan of distribution; (2) Class A Shares are
subject to an initial sales charge; (3) all Class C Shares are subject to a
contingent deferred sales charge, whereas only some Class A Shares are subject
to such a charge; (4) Institutional Shares are not subject to an initial sales
charge, a contingent deferred sales charge, or fees pursuant to a Distribution
Plan or Shareholder Service Plan; and (5) each Class may bear differing amounts
of certain Class-specific expenses, such as distribution fees. The Board of
Trustees does not anticipate that there will be any conflicts among the
interests of the holders of the different Classes of shares of the Fund. On an
ongoing basis, the Board will consider whether any such conflict exists and, if
so, take appropriate action.
The Trust does not hold annual shareholder meetings of the Funds.
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 Funds has
equal voting rights except as noted above. Each share of each Fund is entitled
to participate equally in dividends and distributions and the proceeds of any
liquidation from the respective Fund except that, due to the differing expenses
borne by the three Classes, such dividends and proceeds are likely to be lower
for the Class C Shares than for the Class A Shares or Institutional Shares. The
shares of each Fund will be voted together except when a separate vote by Fund
or Class is required by the 1940 Act.
Custodian and Transfer Agent. Investors Bank and Trust Company is
custodian of the Funds' 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 Funds' foreign assets. Rodney Square Management
Corporation is the Funds' transfer and dividend disbursing agent.
<PAGE>
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 FEBRUARY 9, 1996
BRANDES INTERNATIONAL FUND
BRANDES SMALL CAP INTERNATIONAL FUND
12750 High Bluff Drive, Suite 420
San Diego, CA 92130
(619) 755-0239
BRANDES INVESTMENT TRUST (the "Trust") is a mutual fund consisting of
two separate series: the Brandes International Fund and the Brandes Small Cap
International Fund. Each Fund seeks to achieve long-term capital appreciation by
investing principally in equity securities of foreign issuers. The International
Fund invests primarily in equity securities of established companies with market
capitalization greater than $1 billion. The Small Cap Fund invests primarily in
equity securities of small- to medium- sized companies with market
capitalizations less than $1 billion. Brandes Investment Partners, Inc. serves
as investment advisor to the Trust.
This Prospectus describes the Institutional Shares, a separate class of shares
of the Funds, offered at their net asset value. See "Purchases" and "Redeeming
Shares" at pages and , respectively.
Neither of the Funds is insured or guaranteed by the U.S. Government or any
other person.
This Prospectus sets forth basic information about the Funds that prospective
investors should know before investing. It should be read and retained for
future reference. A Statement of Additional Information dated April 1, 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 upon written request to the
Fund at the address given above.
TABLE OF CONTENTS
Expense Table...................................................................
Financial Highlights............................................................
Investment Objective, Policies and Risks........................................
Other Securities and Investment Techniques and Risks............................
Investment Restrictions.........................................................
Organization and Management.....................................................
Purchases.......................................................................
Shareholder Services............................................................
Redeeming Shares................................................................
Distribution Plan...............................................................
Shareholder Service Plan........................................................
Dividends, Distributions and Tax Status.........................................
Performance Information.........................................................
General Information.............................................................
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 April 1, 1996
<PAGE>
The BRANDES INVESTMENT TRUST (the "Trust") is a diversified registered
open-end management investment company or mutual fund. The Trust consists of two
separate Funds, each with its own assets, liabilities and shares: the Brandes
International Fund (the "International Fund") and the Brandes Small Cap
International Fund (the "Small Cap Fund") (collectively, the "Funds"). The
investment objective of each of the Funds is long-term capital appreciation. The
Funds each offer three separate classes of shares, one of which is described in
this Prospectus. Institutional Shares are offered to investors at their net
asset value. See "Purchases" and "Redeeming Shares" at pages and , respectively.
The minimum initial investment in a Fund is $1 million; there is no minimum
subsequent investment.
Like all equity investments, an investment in either Fund involves
certain risks. The value of the Funds' 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 5.
EXPENSE TABLE
Expenses are among several factors to consider when investing in a
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 a Fund. These are based on the expenses of the International Fund
for its fiscal year ended October 31, 1995, but they are estimated for the first
year of operations of the Small Cap Fund. Actual expenses in the future may be
more or less than those shown.
International Small Cap
Fund Fund
-----------------------------------
Shareholder Transaction Expenses
Maximum sales charge on purchases
(as % of offering price) None None
Sales charge on reinvested dividends None None
Maximum contingent deferred sales charge
(as % of redemption proceeds) None None
Redemption fee None None
Total Annual Fund Operating Expenses
(as a percentage of average net assets)
Management fees 1.00% 1.00%
Other expenses (after reimbursement 0.20% 0.20%
---- ----
Total operating expenses(1) 1.20% 1.20%
==== ====
(1) The Advisor has voluntarily agreed to reduce its fees through at least
October 31, 1996 to ensure that the Fund's total operating expenses will not
exceed the percentages set forth above. In the absence of this reduction in
fees, "Other expenses" of the International Fund during the fiscal year ended
October 31, 1995 would have been 6.58%, and "Total operating expenses" of the
International Fund would have been 7.58%. In the absence of this reduction in
fees, it is estimated that "Other expenses" of the Small Cap Fund would be 6.12%
during the fiscal year ending October 31, 1996, and "Total operating expenses"
would be 7.12%. To the extent that the Advisor reduces its fees, the Funds will,
within the following three years, reimburse 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 reimbursed for any fees foregone; see "Operating
Expenses," page .
The purpose of the preceding table is to assist the investor in
understanding the various costs and expenses that an investor in the Funds will
bear directly or indirectly. For more information regarding costs and expenses,
see "Organization and Management," page .
Example of Effect of Fund Expenses
An investor would directly or
indirectly pay the following expenses
on a $1,000 investment in the Fund, One Year Three Years
assuming a 5% annual return: $12 $38
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, federal regulations require the Example to assume a 5%
annual return, but the Fund's actual return may be higher or lower. See
"Organization and Management."
FINANCIAL HIGHLIGHTS
(For a share outstanding of the International Fund throughout the period)
The following information regarding the International Fund has been
audited by Ernst & Young LLP, independent accountants, whose unqualified report
covering the fiscal period ended October 31, 1995 is included in the Statement
of Additional Information. This information should be read in conjunction with
the financial statements and accompanying notes thereto which also appear in the
Statement of Additional Information. Further information about the International
Fund's performance may be included in the annual report to shareholders, which
may be obtained without charge by writing or calling the address or telephone
number on the cover page. Financial highlights for the Small Cap Fund are not
available, because that Fund has not yet commenced operations.
For the period March 6, 1995* through October 31, 1995:
Class A Class C
- - --------------------------------------------------------------------------------
Net asset value, beginning of period.................. $12.50 $12.50
------ ------
Income (loss) from investment operations:
Net investment income........................... .15** .10**
Net unrealized depreciation on investments...... (.45)** (.39)**
Net realized gain on investments................ 1.06*** 1.01***
---- ----
Total from investment operations...................... .76 .72
---- ----
Net Asset Value, End of Period........................ $13.26 $13.22
====== ======
Total return.......................................... 9.39%+ 8.89%+
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period............................. $5,188,105 $5,749,496
Ratio of expenses to average net assets:
Before expense reimbursement.................... 7.93%+ 8.58%+
After expense reimbursement..................... 1.85%+ 2.50%+
Ratio of net investment income (loss) to average net assets:
Before expense reimbursement.................... (4.41)%+ (4.95)%+
After expense reimbursement..................... 1.67%+ 1.13%+
Portfolio turnover rate............................... 0% 0%
*Commencement of operations.
**Calculated based on average shares outstanding
***The amount shown in this caption for a share outstanding throughout the
period may not correspond with the change in realized gains and losses in the
portfolio securities for the period because of the timing of sales and
repurchases of portfolio shares in relation to fluctuating market values for the
portfolio. +Annualized.
INVESTMENT OBJECTIVE, POLICIES AND RISKS
The International Fund and the Small Cap Fund each have the
investment objective of long-term capital appreciation, and each Fund seeks to
achieve its objective by investing principally in equity securities of foreign
issuers. No assurance can be given that either Fund will achieve its investment
objective. Brandes Investment Partners, Inc. (The "Advisor") serves as
investment advisor to the Funds.
International Investing
During the past decade, there has been unprecedented 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.
o The International Fund invests primarily in equity
securities of established foreign issuers, with
market capitalizations greater than $1 billion.
However, the International Fund may invest up to
25% of its total assets in small capitalization
companies, i.e., those with capitalizations of less
than $1 billion. (Small capitalization companies
are subject to greater risks than companies with
larger capitalizations, as discussed below.)
o The Small Cap Fund invests primarily in equity
securities of small- to medium- sized companies,
with market capitalizations less than $1 billion at
the time of purchase. If the market capitalization
of a company whose securities are held by the Small
Cap Fund increases to an amount greater than $1
billion, the Fund may, but is not required to, sell
its holdings in those securities. 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 of larger, more established companies,
both because the securities typically are traded in
lower volume and because the issuers typically are
more subject to changes in earnings and prospects.
Because the Fund applies a U.S. size standard on a
global basis, it may invest in issuers which might,
in some countries, rank among the largest companies
in terms of capitalization.
Under normal circumstances, each 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 Funds 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.
In seeking out foreign securities for purchase, the Advisor does not
attempt to match the security allocations of foreign stock market indices.
Therefore, a 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 a 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 a Fund's assets in countries
whose representation in such an index may be small or non-existent. The Advisor
selects stocks for each 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 Funds'
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 analyzing 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. Its focus is 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 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 company 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.
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 Funds. 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
either Fund.
Emerging Markets and Related Risks
Each 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
Funds expect to expand and diversify further the countries in which they invest.
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 Funds' portfolio securities are denominated may have a detrimental
impact on the Funds.
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, and securities in many of such markets are less liquid, and
their prices often are more volatile than securities of comparable 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 Funds desire to invest in emerging
markets may be uninvested. Settlement problems in emerging markets countries
also could cause the Funds to miss attractive investment opportunities.
Satisfactory custodial services may not be available in some emerging markets
countries, which may result in the Funds' 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 either 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 a 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. A 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 Board of Trustees.
U.S. Government Securities
Each 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. 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
Each 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. A 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
Each 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.
Options
Each 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 a 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. Each Fund may
also purchase call options in closing transactions, to terminate option
positions written by the Fund. There is no assurance of liquidity in the
secondary market for purposes of closing out covered call option positions.
Each 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 a
Fund, if the option is exercised, at a specified price before a set date. A 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. A 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
Each 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 a 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 a 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.
Illiquid and Restricted Securities; Short Sales Against the Box
Each Fund may invest up to 5% of its total 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. Each 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
Each Fund has adopted certain investment restrictions, which are
described fully in the Statement of Additional Information. Like the Funds'
investment objectives, certain of these restrictions are fundamental and may be
changed only by a majority vote of a 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 was founded in 1974 and currently manages over $5 billion
in assets for various clients including corporations, public and corporate
pension plans, foundations and charitable endowments, and individuals. Ten
employees own either common stock or options to purchase common stock of the
Advisor. Charles H. Brandes, who owns over 25% of the common stock, serves as
one of the Managing Directors of the Advisor and 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 Funds,
including determining which securities should be bought and sold. The Advisor
also provides certain officers for the Funds. For its services, the Advisor
receives a fee, accrued daily and paid monthly at the annual rate of 1.00% of
average net assets. This fee is higher than that charged by most other
investment companies.
Managers of the Funds. The Funds are 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; Jeffrey A. Busby, CFA; Glenn R. Carlson, CFA; Robert J. Gallagher; Ann W.
Humphreville; Marnelle A. Marchese, CFA; Jeffrey R. Meyer, CFA; William A.
Pickering, CFA; Ronald J. Saba and Brent V. Woods.
Operating Expenses
The Funds are responsible for paying their 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, 12b-1 and shareholder servicing fees, trustees'
fees, the cost of communicating with shareholders and registration fees. In
order to comply with a regulation of a state in which the Funds' shares are
sold, the Advisor is required to reduce its fees or reimburse each Fund for its
annual operating expenses which exceed the limit set by the regulation. However,
the Advisor has voluntarily agreed through at least October 31, 1996 to limit
the Funds' operating expenses to 1.20% of average net assets in the case of the
Institutional Class. Any such reductions made by the Advisor in its fees or
reimbursement of expenses are subject to reimbursement by each Fund within the
following three years, provided that the Fund is able to effect such
reimbursement while remaining within the expense limitation. The Advisor will
notify shareholders in the event it 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 Funds 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 Funds' 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 Funds receive prompt execution at competitive prices,
the Advisor may also consider the sale of shares of the Funds as a factor in
selecting broker-dealers for the Funds' portfolio transactions. The Advisor does
not expect its portfolio turnover rate to exceed, under normal conditions, 50%.
The Administrator
Investment Company Administration Corporation (the "Administrator"),
pursuant to administration agreements with the Trust, supervises the overall
administration of the Funds including, among other responsibilities, the
preparation and filing of documents required for compliance by the Funds with
applicable laws and regulations, arranging for the maintenance of books and
records of the Funds, and supervision of other organizations that provide
services to the Funds. Certain officers of the Trust may be provided by the
Administrator.
PURCHASES
General
Institutional Class Shares of the Funds are offered only to certain
institutional investors, including qualified retirement plans, 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.
Shares of the Funds are sold without a sales charge. The Funds'
Distributor is Worldwide Value Distributors, Inc., an affiliate of the Advisor.
The minimum initial investment in either 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 a Fund and from time to time
for other investors, including retirement plans with assets in excess of $10
million.
Purchases
Purchases of shares of the Fund may be made only by wiring federal
funds to the Transfer Agent. Before making an initial investment in a Fund, the
investor should first call the Transfer Agent at (800) 543-7518 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: RSMC, c/o Wilmington Trust Company,
Wilmington, Delaware, ABA # 0311-0009-2, DDA #2670-3514, for credit to either
Brandes International Fund or Brandes Small Cap International 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.
In addition to wiring federal funds, the investor must also forward a
completed Application Form to the Transfer Agent. The investor should write the
account number provided by the Transfer Agent on the Application Form. Certain
institutional investors may open separate accounts with a Fund for individual
employees or plan participants, in which case the institution is responsible for
providing an Application Form to the individual. Plan sponsors and
administrators are also responsible for forwarding to the Transfer Agent the
Application Forms and other relevant information for plan participants.
To make a subsequent purchase by wire, the investor should wire funds
to the Transfer Agent, care of Wilmington Trust Company, in the manner described
above, including the name of the Fund and the investor's account number with the
wire. However, it is not necessary to call the Transfer Agent to obtain an
account number prior to wiring funds for a subsequent purchase
Individual participants in qualified retirement plans should purchase
shares of a Fund through their plan sponsor or administrator, which is
responsible for transmitting orders. The procedures for investing in a 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. Information about such services available from the Trust is
available from the Distributor, by calling (800) - .
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 Funds'
shares.
Purchasing with Securities
In addition to cash purchases, shares may be purchased by tendering
payment in kind in the form of securities, provided that any such securities are
consistent with a Fund's investment objective and policies, are acquired for
investment and not for resale, and 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.
Net Asset Value
To determine the net asset value per share of a 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. Net
asset value is calculated separately for each class of shares. The Funds value
their 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.
Each 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.
SHAREHOLDER SERVICES
Automatic Investment Plan
An investor may make regular monthly or quarterly investments in
either Fund through automatic withdrawals of specified amounts from a bank
account once an automatic investment plan is established. See the Check-A-Matic
Application for further details about this service or call the Transfer Agent at
(800) 543-7518.
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.
Automatic Withdrawals
A shareholder may make automatic withdrawals from a Fund of $100 or
more on a monthly or quarterly basis if the shareholder's account has a value of
$10,000 or more. Withdrawal proceeds will normally be received prior to the end
of the month or quarter. See the Application Form for further information.
Retirement Plans and Individual Retirement Accounts (IRAs)
Shares of the Funds are available for purchase by any retirement
plan, savings plan or defined contribution plan, including 401(k) plans, profit
sharing plans, 403(b) plans and IRAs, as well as by endowments, foundations,
hospitals and other non-profit organizations. More information is available from
investment dealers or the Transfer Agent at (800) 543-7518.
Shareholder Reports
Shareholders will receive an audited annual report and an unaudited
semiannual report, both of which present the financial statements of the Funds.
Exchange Privilege
A shareholder may exchange shares of either Fund for shares of the
Institutional Class of the other Fund, based on the respective net asset values
as of the date of the Exchange. Shares of either Fund may also be exchanged for
shares of the Money Market Portfolio of The Rodney Square Fund, a money market
mutual fund advised by Rodney Square Management Corporation and not affiliated
with the Funds. Prior to making such an exchange, a shareholder should obtain
and read a prospectus for The Rodney Square Fund, by calling (800) 543-7518.
Exchanges are limited to four per shareholder account per year; the exchange
privilege is available only in states where all funds are qualified for sale.
The exchange privilege may be modified or terminated on 60 days written notice
to shareholders. For tax purposes, an exchange is considered a redemption and a
new purchase.
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 Funds' Transfer Agent.
An investor may redeem shares by mailing instructions to the Transfer
Agent, Rodney Square Management Corporation, P.O. Box 8987, Wilmington, DE
19899, or by delivering instructions to the Transfer Agent at 1105 N. Market
Street, Wilmington, Delaware 19890. 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) 543-7518, 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. 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 a Fund is not reasonably practicable or it is not
reasonably practicable for the Trust fairly to determine the value of a 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 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
In order to reduce expenses, the Funds may redeem shares in any
account, other than a qualified retirement plan, if at any time, due to
redemptions, the total value of a shareholder's account falls below $500.
Shareholders will be given 30 days prior written notice in which to purchase
sufficient additional shares to avoid such a redemption.
DIVIDENDS, DISTRIBUTIONS AND TAX STATUS
Dividends and Distributions
Both Funds expect to pay income dividends for each class of shares
annually. Distributions of net capital gains with respect to each Class of
shares, 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 a 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
Each Fund intends to qualify and elect to be treated as a regulated
investment company under Subchapter M of the Code. As long as a Fund continues
to qualify, and as long as a 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 Funds 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. A portion of
these distributions may qualify for the intercorporate dividends-received
deduction. Distributions designated as capital gains dividends are taxable as
long-term capital gains regardless of the length of time shares of a 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 Funds may be subject to
withholding and other taxes imposed by foreign countries, at rates from 10% to
40%, which taxes would reduce the Funds' investment income. However, under
certain circumstances shareholders may be able to claim credits against their
U.S. taxes 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 Funds.
PERFORMANCE INFORMATION
From time to time, the Trust may publish the total return of the
Funds in advertisements and communications to investors. Total return
information will include a 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 Funds over different periods of time. A Fund's
total return will be based upon the value of the shares acquired through a
hypothetical $1,000 investment (at the maximum public offering price) at the
beginning of the specified period and the net asset value of such shares at the
end of the period, assuming reinvestment of all distributions and after giving
effect to the maximum applicable sales charge. Total return figures will reflect
all recurring charges against Fund income for each respective class. Investors
should note that the investment results of each 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 a Fund will
fluctuate and an investor's proceeds upon redeeming Fund shares may be more or
less than the original cost of the shares.
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. 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 Funds' assets in
the securities of another investment company.
Shares of beneficial interest of each Fund are currently divided into
three Classes, designated Class A Shares, Class C Shares and Institutional
Shares. Each Class represents interests in the same assets of the respective
Fund. The Classes differ as follows: (1) each Class has exclusive voting rights
on matters pertaining to its plan of distribution; (2) Class A Shares are
subject to an initial sales charge; (3) all Class C Shares are subject to a
contingent deferred sales charge, whereas only some Class A Shares are subject
to such a charge; (4) Institutional Shares are not subject to an initial sales
charge, a contingent deferred sales charge, or fees pursuant to a Distribution
Plan or Shareholder Service Plan; and (5) each Class may bear differing amounts
of certain Class-specific expenses, such as distribution fees. The Board of
Trustees does not anticipate that there will be any conflicts among the
interests of the holders of the different Classes of shares of the Fund. On an
ongoing basis, the Board will consider whether any such conflict exists and, if
so, take appropriate action.
The Trust does not hold annual shareholder meetings of the Funds.
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 Funds has
equal voting rights except as noted above. Each share of each Fund is entitled
to participate equally in dividends and distributions and the proceeds of any
liquidation from the respective Fund except that, due to the differing expenses
borne by the three Classes, such dividends and proceeds are likely to be lower
for the Class C Shares than for the Class A Shares and Institutional Shares. The
shares of each Fund will be voted together except when a separate vote by Fund
or Class is required by the 1940 Act.
Custodian and Transfer Agent. Investors Bank and Trust Company is
custodian of the Funds' 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 Funds' foreign assets. Rodney Square Management
Corporation is the Funds' transfer and dividend disbursing agent.
<PAGE>
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. There securities may not be sold nor may any
offers to buy be accepted prior to the time the registration statement become
effective. This Statement of Additional Information does not constitute a
prospectus.
BRANDES INVESTMENT TRUST
Subject to Completion, Statement of Additional Information
Dated February 8, 1996
This Statement of Additional Information is not a prospectus, and it
should be read in conjunction with the prospectuses of Brandes International
Trust (the "Trust") dated April 1, 1996. Brandes Investment Partners Inc. (the
"Advisor") is the Advisor to the Trust. Copies of the prospectuses may be
obtained from the Trust at 12750 High Bluff Drive, Suite 420, San Diego, CA
92130 or by calling 1-800-237-7119.
TABLE OF CONTENTS
Cross-reference
to page in
Page Prospectus
---- ---------------
Investment Objective and Policies.................. B-2 4
Investment Restrictions............................ B-2 9
Other Securities and Investment Techniques......... B-4 6
Repurchase Agreements................... B-4 7
When-Issued Securities.................. B-4 7
Rule 144A Securities.................... B-5 9
Put and Call Options.................... B-5 8
Futures Contracts....................... B-7 8
Management......................................... B-7 9
Advisory Agreement...................... B-8 10
Administration Agreement................ B-9 11
Distribution Arrangements.......................... B-10 11
Portfolio Transactions and Brokerage............... B-11 11
Net Asset Value.................................... B-12 13
Redemptions........................................ B-12 16
Taxation........................................... B-12 19
Dividends and Distributions........................ B-14 19
Performance Information............................ B-14 20
General Information................................ B-14 21
Appendix........................................... B-15
Financial Statements............................... B-15 3
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
Brandes International Fund (the "International Fund") and Brandes
International Small Cap Fund (the "Small Cap Fund") (collectivelly, the "Funds")
are mutual funds whose investment objective is long-term capital appreciation.
Each Fund seeks to achieve its objective by investing principally in equity
securities of foreign issuers.
Foreign Securities
The U.S. Government has, from time to time, imposed restrictions,
through taxation or otherwise, on foreign investments by U.S. entities such as
the Funds. If such restrictions should be reinstituted, the Board of Trustees of
the Trust would consider alternative arrangements, including reevaluation of the
Funds' investment objective and policies. However, a Fund would adopt any
revised investment objective and fundamental policies only after approval by the
holders of a "majority of the outstanding voting securities" of the Fund, which
is defined in the Investment Company Act of 1940 (the "1940 Act") to mean the
lesser of (i) 67% of the shares represented at a meeting at which more than 50%
of the outstanding shares are represented or (ii) more than 50% of the
outstanding shares.
Investments in foreign securities involve certain inherent risks.
Individual foreign economies may differ from the U.S. economy in such aspects as
growth of gross national product, rate of inflation, capital reinvestment,
resource self-sufficiency, diversification and balance of payments position. The
internal politics of certain foreign countries may not be as stable as those of
the United States. Governments in certain foreign countries also continue to
participate to a significant degree in their respective economies. Action by
these governments could include restrictions on foreign investment,
nationalization, expropriation of propery or imposition of taxes, and could have
a significant effect on market prices of securities and payment of interest. The
economies of many foreign countries are heavily dependent on international trade
and are accordingly affected by the trade policies and economic conditions of
their trading partners. Enactment by these trading partners of protectionist
trade legislation could have a significant adverse effect on the securities
markets of such countries.
Because most of the securities in which the Funds will invest are
denominated in foreign currencies, a change in the value of any such currency
against the U.S. dollar will result in a corresponding change in the U.S. dollar
value of the Funds' assets which are denominated in that currency. Such changes
will also affect the Fund's income. The values of the Funds' assets may also be
affected significantly by currency restrictions and exchange control regulations
imposed from time to time.
Foreign securities markets may be more volatile than those in the
United States. While growing in volume, they usually have substantially less
volume than U.S. markets, and the Fund's portfolio securities may be less liquid
and more volatile than U.S. securities. Settlement practices for transactions
may differ from those in the United States and may include delays beyond periods
customary in the United States. Such differences and potential delays may expose
the Funds to increased risk of loss in the event of a failed trade or the
insolvency of a foreign broker-dealer.
INVESTMENT RESTRICTIONS
The Trust has adopted the following fundamental investment policies
and restrictions with respect to each Fund in addition to the policies and
restrictions discussed in the prospectus. The policies and restrictions listed
below cannot be changed with respect to a Fund without approval by the holders
of a majority of the outstanding voting securities of the Fund. As a matter of
fundamental policy, each Fund is diversified; i.e., at least 75% of the value of
its total assets is represented by cash and cash items (including receivables),
Government securities, securities of other investment companies, and other
securities for the purposes of this calculation limited in respect of any one
issuer to an amount not greater in value than 5% of the value of the total
assets of the Fund and to not more than 10% of the outstanding voting securities
of such issuer.
In addition, neither Fund may:
1. Issue senior securities, borrow money or pledge its assets, except
that a Fund may borrow on an unsecured basis from banks for temporary or
emergency purposes or for the clearance of transactions in amounts not exceeding
10% of its total assets (not including the amount borrowed), provided that it
will not make investments while borrowings in excess of 5% of the value of its
total assets are outstanding;
2. Make short sales of securities or maintain a short position, except
for short sales against the box;
3. Purchase securities on margin, except such short-term credits as
may be necessary for the clearance of transactions;
4. Write put or call options, except that a Fund may (i) write
covered call options on individual securities and on stock indices; (ii)
purchase put and call options on securities which are eligible for purchase by
the Fund and on stock indices; and (iii) engage in closing transactions with
respect to its options writing and purchases, in all cases subject to applicable
federal and state laws and regulations;
5. Act as underwriter (except to the extent a Fund may be deemed to be
an underwriter in connection with the sale of securities in its investment
portfolio);
6. Invest 25% or more of its total assets, calculated at the time of
purchase and taken at market value, in any one industry (other than U.S.
Government securities), except that each Fund reserves the right to invest all
of its assets in shares of another investment company;
7. Purchase or sell real estate or interests in real estate or real
estate limited partnerships (although each Fund may purchase and sell securities
which are secured by real estate, securities of companies which invest or deal
in real estate and securities issued by real estate investment trusts);
8. Purchase or sell commodities or commodity futures contracts,
except that a Fund may purchase and sell stock index futures contracts for
hedging purposes to the extent permitted under applicable federal and state laws
and regulations and except that each Fund may engage in foreign exchange forward
contracts, although it has no current intention to do so;
9. Make loans (except for purchases of debt securities consistent with
the investment policies of the Fund and except for repurchase agreements);
10. Make investments for the purpose of exercising control or
management;
11. Invest in oil and gas limited partnerships or oil, gas or mineral
leases;
Each Fund observes the following restrictions as a matter of
operating, but not fundamental, policy, which can be changed by the Board of
Trustees without shareholder approval, pursuant to positions taken by federal
and state regulatory authorities:
Each Fund may not:
1. Purchase any security if as a result the Fund would then hold more
than 10% of any class of voting securities of an issuer (taking all common stock
issues as a single class, all preferred stock issues as a single class, and all
debt issues as a single class), except that each Fund reserves the right to
invest all of its assets in a class of voting securities of another investment
company;
2. Invest in securities of any issuer if any officer or Trustee of
the Trust or any officer or Director of the Advisor owns more than 1/2 of 1% of
the outstanding securities of such issuer, and such officers, Trustees and
Directors who own more than 1/2 of 1% own in the aggregate more than 5% of the
outstanding securities of such issuer;
3. Invest more than 10% of its assets in real estate investment
trusts;
4. Invest more than 5% of the value of its net assets in warrants
(included in that amount, but not to exceed 2% of the value of the Fund's net
assets, may be warrants which are not listed on the New York or American Stock
Exchange), although neither Fund has any present intention to invest in
warrants;
5. Invest in any security if, as a result, the Fund would have more
than 5% of its total assets invested in securities of companies which together
with any predecessor have been in continuous operation for fewer than three
years ("unseasoned securities");
6. Invest more than 10% of its assets in the securities of other
investment companies or purchase more than 3% of any other investment company's
voting securities or make any other investment in other investment companies
except as permitted by federal and state law, except that each Fund reserves the
right to invest all of its assets in another investment company;
7. Invest more than 5% of its total assets in restricted securities,
other than restricted securities eligible for resale pursuant to Rule 144A under
the Securities Act of 1933 that have been determined to be liquid;
8. Invest more than 5% in the aggregate of illiquid and unseasoned
securities;
9. Invest more than 15% of its total assets in unseasoned securities
and illiquid securities, including Rule 144A securities.
OTHER SECURITIES AND INVESTMENT TECHNIQUES
Repurchase Agreements
Repurchase agreements are transactions in which a Fund purchases a
security from a bank or recognized securities dealer and simultaneously commits
to resell that security to the bank or dealer at an agreed-upon date and price
reflecting a market rate of interest unrelated to the coupon rate or maturity of
the purchased security. The purchaser maintains custody of the underlying
securities prior to their repurchase; thus the obligation of the bank or dealer
to pay the repurchase price on the date agreed to is, in effect, secured by such
underlying securities. If the value of such securities is less than the
repurchase price, the other party to the agreement will provide additional
collateral so that at all times the collateral is at least equal to the
repurchase price.
Although repurchase agreements carry certain risks not associated
with direct investments in securities, each Fund intends to enter into
repurchase agreements only with banks and dealers believed by the Advisor to
present minimum credit risks in accordance with guidelines established by the
Board of Trustees. The Advisor will review and monitor the creditworthiness of
such institutions under the Board's general supervision. To the extent that the
proceeds from any sale of collateral upon a default in the obligation to
repurchase were less than the repurchase price, the purchaser would suffer a
loss. If the other party to the repurchase agreement petitions for bankruptcy or
otherwise becomes subject to bankruptcy or other liquidation proceedings, there
might be restrictions on the purchaser's ability to sell the collateral and the
purchaser could suffer a loss. However, with respect to financial institutions
whose bankruptcy or liquidation proceedings are subject to the U.S. Bankruptcy
Code, each Fund intends to comply with provisions under such Code that would
allow it immediately to resell the collateral.
When-Issued Securities
Either Fund may from time to time purchase securities on a
"when-issued" basis. The price of such securities, which may be expressed in
yield terms, is fixed at the time the commitment to purchase is made, but
delivery and payment for the when-issued securities take place at a later date.
Normally, the settlement date occurs within one month of the purchase; during
the period between purchase and settlement, no payment is made by the Fund to
the issuer and no interest accrues to the Fund. To the extent that assets of the
Fund are held in cash pending the settlement of a purchase of securities, the
Fund would earn no income. While when-issued securities may be sold prior to the
settlement date, the Fund intends to purchase such securities with the purpose
of actually acquiring them unless a sale appears desirable for investment
reasons. At the time the Fund makes the commitment to purchase a security on a
when-issued basis, it will record the transaction and reflect the value of the
security in determining its net asset value. The market value of the when-issued
securities may be more or less than the purchase price. The Advisor does not
believe that a Fund's net asset value or income will be adversely affected by
the purchase of securities on a when-issued basis. A Fund will establish a
segregated account with the Custodian in which it will maintain cash or liquid
assets such as U.S. Government securities or other high-grade debt obligations
equal in value to commitments for when-issued securities. Such segregated
securities either will mature or, if necessary, be sold on or before the
settlement date.
Rule 144A Securities
As noted in the prospectus, each Fund may invest no more than 5% of
its net assets in securities that at the time of purchase have legal or
contractual restrictions on resale, are otherwise illiquid or do not have
readily available market quotations. Historically, illiquid securities have
included securities subject to contractual or legal restrictions on resale
because they have not been registered under the Securities Act of 1933
("restricted securities"), securities which are otherwise not readily marketable
such as over-the-counter, or dealer traded, options, and repurchase agreements
having a maturity of more than seven days. Mutual funds do not typically hold a
significant amount of restricted or other illiquid securities because of the
potential for delays on resale and uncertainty in valuation. Limitations on
resale may have an adverse effect on the marketability of portfolio securities,
and a Fund might not be able to dispose of such securities promptly or at
reasonable prices and might thereby experience difficulty satisfying
redemptions. A Fund might also have to register such restricted securities in
order to dispose of them, resulting in additional expense and delay.
In recent years, however, a large institutional market has developed
for certain securities that are not registered under the Securities Act of 1933,
including repurchase agreements, commercial paper, foreign securities, municipal
securities and corporate bonds and notes. Institutional investors depend on an
efficient institutional market in which the unregistered security can be readily
resold or on an issuer's ability to honor a demand for repayment. The fact that
there are contractual or legal restrictions on resale to the general public or
to certain institutions may not be indicative of the liquidity of such
investments. If such securities are subject to purchase by institutional buyers
in accord with Rule 144A promulgated by the Securities and Exchange Commission,
the Trustees may determine that such securities, up to a limit of 5% of a Fund's
total net assets, are not illiquid notwithstanding their legal or contractual
restrictions on resale.
Put and Call Options
Purchasing Options. By purchasing a put option, a Fund obtains the
right (but not the obligation) to sell the option's underlying instrument at a
fixed "strike" price. In return for this right, the Fund pays the current market
price for the option (known as the option premium). Options have various types
of underlying instruments, including specific securities, indices of securities
prices, and futures contracts. A Fund may terminate its position in a put option
it has purchased by allowing it to expire or by exercising the option. If the
option is allowed to expire, the Fund will lose the entire premium it paid. If
the Fund exercises the option, it completes the sale of the underlying
instrument at the strike price. A Fund also may terminate a put option position
by closing it out in the secondary market at its current price (i.e., by selling
an option of the same series as the option purchased), if a liquid secondary
market exists.
The buyer of a typical put option can expect to realize a gain if
security prices fall substantially. However, if the underlying instrument's
price does not fall enough to offset the cost of purchasing the option, a put
buyer can expect to suffer a loss (limited to the amount of the premium paid,
plus related transaction costs).
The features of call options are essentially the same as those of put
options, except that the purchaser of a call option obtains the right to
purchase, rather than sell, the underlying instrument at the option's strike
price. A call buyer typically attempts to participate in potential price
increases of the underlying instrument with risk limited to the cost of the
option if security prices fall. At the same time, the buyer can expect to suffer
a loss if the underlying prices do not rise sufficiently to offset the cost of
the option.
Writing Options. When a Fund writes a call option, it takes the
opposite side of the transaction from the option's purchaser. In return for
receipt of the premium, the Fund assumes the obligation to sell or deliver the
option's underlying instrument, in return for the strike price, upon exercise of
the option. A Fund may seek to terminate its position in a call option it writes
before exercise by closing out the option in the secondary market at its current
price (i.e., by buying an option of the same series as the option written). If
the secondary market is not liquid for a call option the Fund has written,
however, the Fund must continue to be prepared to deliver the underlying
instrument in return for the strike price while the option is outstanding,
regardless of price changes, and must continue to segregate assets to cover its
position. A Fund will establish a segregated account with the Custodian in which
it will maintain the security underlying the option written, or securities
convertible into that security, or cash or liquid assets such as U.S. Government
securities or other high-grade debt obligations equal in value to commitments
for options written.
Writing a call generally is a profitable strategy if the price of the
underlying security remains the same or falls. Through receipt of the option
premium, a call writer mitigates the effects of a price decline. At the same
time, because a call writer must be prepared to deliver the underlying
instrument in return for the strike price, even if its current value is greater,
a call writer gives up some ability to participate in the underlying price
increases.
Combined Positions. Each Fund may purchase and write options in
combination with each other to adjust the risk and return characteristics of the
overall position. For example, a Fund may purchase a put option and write a call
option on the same underlying instrument, in order to construct a combined
position whose risk and return characteristics are similar to selling a futures
contract. Another possible combined position would involve writing a call option
at one strike price and buying a call option at a lower price, in order to
reduce the risk of the written call option in the event of a substantial price
increase. Because combined options positions involve multiple trades, they
result in higher transaction costs and may be more difficult to open and close
out.
Correlation of Price Changes. Because there are a limited number of
types of exchange-traded options contracts, it is likely that the standardized
contracts available will not match the Funds' current or anticipated investments
exactly. A Fund may invest in options contracts based on securities with
different issuers, maturities, or other characteristics from the securities in
which it typically invests.
Options prices also can diverge from the prices of their underlying
instruments, even if the underlying instruments match the Funds' investments
well. Options prices are affected by such factors as current and anticipated
short-term interest rates, changes in volatility of the underlying instrument,
and the time remaining until expiration of the contract, which may not affect
the security prices the same way. Imperfect correlation also may result from:
differing levels of demand in the options markets and the securities markets,
structural differences in how options are traded, or imposition of daily price
fluctuation limits or trading halts. A Fund may purchase or sell options with a
greater or lesser value than the securities it wishes to hedge or intends to
purchase in order to attempt to compensate for differences in volatility between
the contract and the securities, although this may not be successful in all
cases. If price changes in a Fund's options positions are poorly correlated with
its other investments, the positions may fail to produce anticipated gains or
result in losses that are not offset by gains in other investments.
Liquidity of Options. There is no assurance a liquid secondary market
will exist for any particular options contract at any particular time. Options
may have relatively low trading volume and liquidity if their strike prices are
not close to the underlying instrument's current price. In addition, exchanges
may establish daily price fluctuation limits for options contracts, and may halt
trading if a contract's price moves upward or downward more than the limit in a
given day. On volatile trading days when the price fluctuation limit is reached
or a trading halt is imposed, it may be impossible for a Fund to enter into new
positions or close out existing positions. If the secondary market for a
contract is not liquid because of price fluctuation limits or otherwise, it
could prevent prompt liquidation of unfavorable positions, and potentially could
require the Fund to continue to hold a position until delivery or expiration
regardless of changes in its value. As a result, a Fund's access to other assets
held to cover its options positions also could be impaired.
OTC Options. Unlike exchange-traded options, which are standardized
with respect to the underlying instrument, expiration date, contract size, and
strike price, the terms of over-the-counter options, i.e., options not traded on
exchanges ("OTC options"), generally are established through negotiation with
the other party to the option contract. While this type of arrangement allows a
Fund greater flexibility to tailor an option to its needs, OTC options generally
involve greater credit risk than exchange-traded options, which are guaranteed
by the clearing organization of the exchanges where they are traded. OTC options
are considered to be illiquid, since these options generally can be closed out
only by negotiation with the other party to the option.
Stock Index Options. The distinctive characteristics of options on
stock indices create certain risks that are not present with stock options
generally. Because the value of an index option depends on movements in the
level of the index rather than the price of a particular stock, whether a Fund
will realize a gain or loss on an options transaction depends on movements in
the level of stock prices generally rather than movements in the price of a
particular stock. Accordingly, successful use of options on a stock index will
be subject to the Advisor's ability to predict correctly movements in the
direction of the stock market generally. Index prices may be distorted if
trading in certain stocks included in the index is interrupted. Trading of index
options also may be interrupted in certain circumstances, such as if trading
were halted in a substantial number of stocks included in the index. If this
were to occur, the Fund would not be able to close out positions it holds. It is
the policy of the Funds to engage in options transactions only with respect to
an index which the Advisor believes includes a sufficient number of stocks to
minimize the likelihood of a trading halt in the index.
Futures Contracts
Each Fund may buy and sell stock index futures contracts. Such a
futures contract is an agreement between two parties to buy and sell an index
for a set price on a future date. Futures contracts are traded on designated
"contract markets" which, through their clearing corporations, guarantee
performance of the contracts. A stock index futures contract does not require
the physical delivery of securities, but merely provides for profits and losses
resulting from changes in the market value of the contract to be credited or
debited at the close of each trading day to the respective accounts of the
parties to the contract. On the contract's expiration date, a final cash
settlement occurs. Changes in the market value of a particular stock index
futures contract reflects changes in the specified index of equity securities on
which the future is based.
There are several risks in connection with the use of futures
contracts. In the event of an imperfect correlation between the index and the
portfolio position which is intended to be protected, the desired protection may
not be obtained and a Fund may be exposed to risk of loss. Further,
unanticipated changes in stock price movements may result in a poorer overall
performance for the Fund than if it had not entered into any futures on stock
indexes.
In addition, the market prices of futures contracts may be affected
by certain factors. First, all participants in the futures market are subject to
margin deposit and maintenance requirements. Rather than meeting additional
margin deposit requirements, investors may close futures contracts through
offsetting transactions which could distort the normal relationship between the
securities and futures markets. Second, from the point of view of speculators,
the deposit requirements in the futures market are less onerous than margin
requirements in the securities market. Therefore, increased participation by
speculators in the futures market may also cause temporary price distortions.
Finally, positions in futures contracts may be closed out only on an
exchange or board of trade which provides a secondary market for such futures.
There is no assurance that a liquid secondary market on an exchange or board of
trade will exist for any particular contract or at any particular time.
A Fund will engage in futures transactions only as a hedge against the
risk of unexpected changes in the values of securities held or intended to be
held by the Fund. As a general rule, neither Fund will purchase or sell futures
if, immediately thereafter, more than 25% of its net assets would be hedged. In
addition, neither Fund will purchase or sell futures or related options if,
immediately thereafter, the sum of the amount of margin deposits on the Fund's
existing futures positions and premiums paid for such options would exceed 5% of
the market value of the Fund's net assets.
MANAGEMENT
The overall management of the business and affairs of the Trust is
vested with its Board of Trustees. The Board approves all significant agreements
between the Trust and persons or companies furnishing services to it, including
the agreements with the Advisor, Administrator, Custodian and Transfer Agent.
The day-to-day operations of the Trust are delegated to its officers, subject to
the Funds' investment objectives and policies and to general supervision by the
Board of Trustees.
The Trustees and officers of the Trust, their business addresses and
principal occupations during the past five years are:
Barry P. O'Neil,* (age 48) Managing Director, Brandes Investment
President and Trustee Partners, Inc. since 1991; formerly Vice
12750 High Bluff Drive President, Investment Brokerage of Dean
San Diego, CA 92130 Witter & Co. Director, RCM Equity Funds, Inc.
DeWitt F. Bowman, C.F.A, Pension investment consultant; formerly Chief
(age 65) Trustee Investment Officer of the California Public
79 Eucalyptus Knoll Employees Retirement System.
Mill Valley, CA 94941
Charles H. Brandes,* Managing Director, Brandes Investment
(age 52) Trustee Partners, Inc.
12750 High Bluff Drive
San Diego, CA 92130
Gordon Clifford Broadhead, Marine biologist and consultant in fisheries.
(age 71) Trustee
P.O. Box 1427
Rancho Santa Fe, CA 92067
Joseph E. Coberly, Jr., Managing Partner, Red Tail Golf Association
(age 78) Trustee (real estate developer).
P.O. Box 944
Rancho Santa Fe, CA 92067
W. Daniel Larsen, General contractor. Director of Merkley,
(age 68) Trustee Mitchell Mortuary.
1405 Savoy Circle
San Diego, CA 92107
Betsy M. Blodgett, Vice President, Brandes Investment Partners,
(age 37) Vice President Inc. since 1994. Formerly Principal, Cameron
121 Corte Ramon Capital Management (investment adviser) from
Greenbrae, CA 94904 1992 to 1994 and consultant in 1994; Vice
President, Van Kasper & Co. (broker-dealer)
from 1991 to 1992; Vice President, Prudential
Capital Corporation (investments) prior
thereto.
Glenn R. Carlson, Managing Director, Brandes Investment
(age 34) Secretary Partners, Inc.
12750 High Bluff Drive
San Diego, CA 92130
Gregory S. Houck, Vice President, Brandes Investment Partners,
(age 34) Treasurer Inc. since 1994. Formerly Senior Consultant,
12750 High Bluff Drive Ernst & Young.
San Diego, CA 92130
- - --------------------------------------
*Denotes "interested person" as defined in the 1940 Act.
The Trust pays a fee of $800 per meeting to Trustees who are not
"interested persons" of the Trust. Trustees also receive a fee of $800 for any
committee meetings held on dates other than scheduled Board meeting dates. Such
Trustees are reimbursed for any expenses incurred in attending meetings.During
the fiscal year ended October 31, 1995, Messrs. Bowman, Broadhead, Coberly and
Larsen each received fees from the Trust in the amount of $1,600; no other
compensation or other benefits were paid.
Mr. O'Neil is the the President, and Ms. Blodgett is Vice President
and Secretary, of Worldwide Value Distributors, Inc., the Distributor of the
Funds' shares.
Advisory Agreement
Subject to the supervision of the Board of Trustees, investment
management and services are provided to each Fund by the Advisor, pursuant to an
Investment Advisory Agreement (the "Advisory Agreement"). Under the Advisory
Agreement, the Advisor provides a continuous investment program for each Fund
and makes decisions and place orders to buy, sell or hold particular securities.
In addition to the fees payable to the Advisor and the Administrator, each Fund
is responsible for its operating expenses, including: (i) interest and taxes;
(ii) brokerage commissions; (iii) insurance premiums; (iv) compensation and
expenses of Trustees other than those affiliated with the Advisor or the
Administrator; (v) legal and audit expenses; (vi) fees and expenses of the
custodian, shareholder service and transfer agents; (vii) fees and expenses for
registration or qualification of the Fund and its shares under federal and state
securities laws; (viii) expenses of preparing, printing and mailing reports and
notices and proxy material to shareholders; (ix) other expenses incidental to
holding any shareholder meetings; (x) dues or assessments of or contributions to
the Investment Company Institute or any successor; (xi) such non-recurring
expenses as may arise, including litigation affecting the Trust or the Fund and
the legal obligations with respect to which the Trust or the Fund may have to
indemnify the Trust's officers and Trustees; and (xii) amortization of
organization costs.
Under the Advisory Agreement, the Advisor and its officers,
directors, agents, employees, controlling persons, shareholders and other
affiliates will not be liable to a Fund for any error of judgment by the Advisor
or any loss sustained by the Funds, except in the case of a breach of fiduciary
duty with respect to the receipt of compensation for services (in which case any
award of damages will be limited as provided in the 1940 Act) or of willful
misfeasance, bad faith, gross negligence or reckless disregard of duty. In
addition, the Fund will indemnify the Advisor and such other persons from any
such liability to the extent permitted by applicable law.
The Advisory Agreement with respect to each Fund will remain in effect
for two years from its execution. Thereafter, if not terminated, it will
continue automatically for successive annual periods, provided that such
continuance is specifically approved at least annually (i) by a majority vote of
the Trustees who are not parties to the Agreement or "interested persons" of the
Fund as defined in the 1940 Act, cast in person at a meeting called for the
purpose of voting on such approval, and (ii) by the Board of Trustees or by vote
of a majority of the outstanding voting securities.
The Advisory Agreement with respect to each Fund is terminable by
vote of the Board of Trustees or by the holders of a majority of the outstanding
voting securities of the Fund at any time without penalty, on 60 days written
notice to the Advisor. The Advisory Agreement also may be terminated by the
Advisor on 60 days written notice to the Fund. The Advisory Agreement terminates
automatically upon its assignment (as defined in the 1940 Act).
As required by state regulation, the Advisor will reimburse a Fund if
and to the extent that the aggregate operating expenses of the Fund exceed
applicable limits in any fiscal year. Currently, the most restrictive such limit
applicable to the Funds are 2.5% of the first $30 million of the Fund's average
daily net assets, 2.0% of the next $70 million of its average daily net assets
and 1.5% of its average daily net assets in excess of $100 million. Certain
expenses, such as brokerage commissions, taxes, interest, distribution fees,
certain expenses attributable to investing outside the U.S. and extraordinary
items, are excluded from this limitation. During the fiscal year ended October
31, 1995, the Advisor voluntarily agreed to limit the total operating expenses
of the Class A Shares of the International Fund to 1.85% of average net assets,
and the total operating expenses of the Class C Shares to 2.50% of average net
assets. As a result of those limitations, the Advisor waived its entire advisory
fee of $34,019 and reimbursed the International Fund for expenses in excess of
such limitations in an additional amount of $173,175. The Advisor has agreed to
continue such limitations through October 31, 1996.
Neither Fund invests in a security for the purpose of exercising
control or management. When a Fund receives a proxy in connection with matters
to be voted on by holders of securities in which it invests, that proxy will be
voted by the Advisor in accordance with the Advisor's judgment as to the best
interests of the Fund, considering the effect of any such vote on the value of
the Fund's investment. The Advisor does not solicit or consider the views of
individual shareholders of Funds in voting proxies. Because voting proxies of
foreign securities may entail additional costs to the Funds, the Advisor
considers the costs and benefits to a Fund in deciding whether or not to vote a
particular proxy.
Administration Agreement
Investment Company Administration Corporation serves as Administrator
for the Funds, subject to the overall supervision of the Trustees. The
Administrator is responsible for providing such services as the Trustees may
reasonably request, including but not limited to (i) maintaining the Funds'
books and records (other than financial or accounting books and records
maintained by any custodian, transfer agent or accounting services agent); (ii)
overseeing the Funds' insurance relationships; (iii) preparing for the Funds (or
assisting counsel and/or auditors in the preparation of) all required tax
returns, proxy statements and reports to the Funds' shareholders and Trustees
and reports to and other filings with the Securities and Exchange Commission and
any other governmental agency; (iv) preparing such applications and reports as
may be necessary to register or maintain the Funds' registration and/or the
registration of the shares of the Funds under the blue sky laws of the various
states; (v) responding to all inquiries or other communications of shareholders;
(vi) overseeing all relationships between the Funds and any custodian(s),
transfer agent(s) and accounting services agent(s); and (vii) authorizing and
directing any of the Administrator's directors, officers and employees who may
be elected as Trustees or officers of the Trust to serve in the capacities in
which they are elected. The Trust's Agreement with the Administrator contains
limitations on liability and indemnification provisions similar to those of the
Advisory Agreement described above. For its services, the Administrator receives
a fee at the annual rate of 0.10% of each Fund's average net assets, subject to
a $60,000 annual minimum. During the fiscal year ended October 31, 1995, the
Administrator received a fee in the amount of $39,452 from the International
Fund.
DISTRIBUTION ARRANGEMENTS
As described in the prospectus, under the Distribution Plans adopted
by the Trustees with respect to the Class A and Class C Shares, each Fund pays
the Distributor monthly distribution fees at the annual rate of 0.25% of the
average daily net assets of the Class A shares and 0.75% of the average daily
net assets of the Class C shares. During the fiscal year ended October 31, 1995,
the Fund paid to the Distributor distribution fees with respect to the Class A
Shares of the International Fund aggregating $3,627, and with respect to the
Class C Shares, fees aggregating $14,633. All of the fees paid with respect to
the Class C Shares of the International Fund were paid by the Distributor to
dealers who sold Class C Shares. Of the fees paid with respect to Class A
Shares, $2,179 were paid to dealers who sold Class A Shares and the balance was
paid for printing sales material. During such fiscal year, the Distributor also
received gross sales charges in connection with the sale of Class A Shares of
the International Fund in the amount of $99,067, of which $83,458 was reallowed
to selling dealers. The Distribution Plans do not apply to Institutional Shares.
Among other things, each Fund's Plan provides that (1) the
Distributor will submit to the Trustees at least quarterly, and the Trustees
will review, reports regarding all amounts expended under the Plan and the
purposes for which such expenditures were made; (2) the Plan will continue in
effect only so long as it is approved at least annually, and any material
amendment thereto is approved, by the Trustees, including those Trustees who are
not "interested persons" of the Trust and who have no direct or indirect
financial interest in the Plan or any agreement related thereto, acting in
person at a meeting called for that purpose; (3) the Plan may be terminated at
any time by such Trustees or by a vote of a majority of the outstanding shares
of the Fund; (4) payments by the Fund under the Plan shall not be materially
increased without the affirmative vote of the holders of a majority of the
outstanding shares of the relevant Class of that Fund; and (5) while the Plan
remains in effect, the selection and nomination of the Trustees who are not
"interested persons" of the Trust shall be committed to the discretion of such
Trustees.
In reporting amounts expended under the Plans to the Trustees, the
Distributor will allocate expenses attributable to the sale of both Classes of
Fund shares to each Class based on the ratio of sales of shares of such Class to
the sales of both Classes of shares.
The Trust has also adopted a Shareholder Service Plan with respect to
the Class A and Class C Shares of each Fund, pursuant to which the Fund pays the
Distributor for expenses incurred in connection with non-distribution
shareholder services provided by the Distributor to securities broker-dealers
and other securities professionals ("Service Organizations") and/or beneficial
owners of the shares of the Fund, including, but not limited to, shareholder
servicing provided by the Distributor at facilities dedicated to the Fund,
provided that such shareholder servicing is not duplicative of the servicing
otherwise provided on behalf of the Fund.
Under the Plans, each Fund also reimburses the Distributor for fees
paid by the Distributor to Service Organizations (which may include the
Distributor itself) for the providing of support services to beneficial owners
of shares of the Fund ("Clients"). Such services may include, but are not
limited to, (a) establishing and maintaining accounts and records relating to
Clients who invest in the Fund; (b) aggregating and processing orders involving
the shares of the Fund; (c) processing dividend and other distribution payments
from the Fund on behalf of Clients; (d) providing information to Clients as to
their ownership of shares of the Fund or about other aspects of the operations
of the Fund; (e) preparing tax reports or forms on behalf of Clients; (f)
forwarding communications from the Fund to Clients; (g) assisting Clients in
changing the Fund's records as to their addresses, dividend options, account
registrations or other data; and (h) providing such other similar services as
the Distributor may reasonably request to the extent the Service Organization is
permitted to do so under applicable statutes, rules or regulations.
Each Fund reimburses the Distributor, for its services under the
Shareholder Service Plans, at an annual rate of 0.10% of the average daily net
assets of the Class A Shares and 0.25% of the average daily net assets of the
Class C Shares of the Fund. Payments to the Distributor may be discontinued, or
the rate amended, at any time by the Board of Trustees of the Trust, in its sole
discretion. Each Plan provides that (1) the Distributor will report in writing
at least quarterly to the Trustees, and the Trustees will review, the amounts
expended under this Plan and the purposes for which such expenditures were made;
(2) the Plan will continue in effect only so long as it has been approved at
least annually, by the Trustees, including a majority of the Trustees who are
not "interested persons" (as defined in the 1940 Act) of the Trust and who have
no direct or indirect financial interest in the operation of the Plan, acting in
person at a meeting called for that purpose; and (3) the Plan may be terminated
at any time by a vote of a majority of such Trustees or by the vote of the
holders of a majority of the outstanding voting securities of the Fund. The
amounts paid by the International Fund to the Distributor under the Shareholder
Service Plan for the fiscal year ended October 31, 1995 aggregated $1,450 and
$4,878 for the Class A Shares and the Class C Shares, respectively. The
Shareholder Service Plans do not apply to the Institutional Shares.
PORTFOLIO TRANSACTIONS AND BROKERAGE
In all purchases and sales of securities for the Funds, the primary
consideration is to obtain the most favorable price and execution available.
Pursuant to the Advisory Agreement, the Advisor determines which securities are
to be purchased and sold by a Fund and which broker-dealers are eligible to
execute portfolio transactions, subject to the instructions of and review by the
Trust's Board of Trustees.
Purchases of portfolio securities may be made directly from issuers
or from underwriters. Where possible, purchase and sale transactions are
effected through dealers (including banks) which specialize in the types of
securities which a Fund will be holding, unless better executions are available
elsewhere. Dealers and underwriters usually act as principals for their own
accounts. Purchases from underwriters include a commission paid by the issuer to
the underwriter and purchases from dealers include the spread between the bid
and the asked price.
In placing portfolio transactions, the Advisor uses its best efforts
to choose a broker-dealer capable of providing the services necessary to obtain
the most favorable price and execution available. The full range and quality of
services available are considered in making these determinations, such as the
size of the order, the difficulty of execution, the operational facilities of
the firm involved, the firm's risk in positioning a block of securities, and
other factors.
In those instances where it is reasonably determined that more than
one broker-dealer can offer the services needed to obtain the most favorable
price and execution available and the transaction involves a brokerage
commission, consideration may be given to those broker-dealers which furnish or
supply research and statistical information to the Advisor that it may lawfully
and appropriately use in its investment advisory capacity for the Funds and for
other accounts, as well as provide other services in addition to execution
services. The Advisor considers such information, which is in addition to, and
not in lieu of, the services required to be performed by it under the Agreement,
to be useful in varying degrees, but of indeterminable value. The Board of
Trustees reviews brokerage allocations where services other than best
price/execution capabilities are a factor to ensure that the other services
provided meet the tests outlined above and produce a benefit to the Funds.
Brokerage commissions paid by the International Fund during the fiscal year
ended October 31, 1995 aggregated $9,822, all of which was paid to brokers which
provided research to the Advisor.
The placement of portfolio transactions with broker-dealers who sell
shares of the Funds is subject to rules adopted by the National Association of
Securities Dealers, Inc. ("NASD"). Provided the Trust's officers are satisfied
that the Funds are receiving the most favorable price and execution available,
the Advisor may also consider the sale of the Funds' shares as a factor in the
selection of broker-dealers to execute its portfolio transactions.
Investment decisions for the Funds are made independently from those
of other client accounts of the Advisor. Nevertheless, it is possible that at
times the same securities will be acceptable for a Fund and for one or more of
such client accounts. To the extent any of these client accounts and a Fund seek
to acquire the same security at the same time, the Fund may not be able to
acquire as large a portion of such security as it desires, or it may have to pay
a higher price or obtain a lower yield for such security. Similarly, the Fund
may not be able to obtain as high a price for, or as large an execution of, an
order to sell any particular security at the same time. If one or more of such
client accounts simultaneously purchases or sells the same security that a Fund
is purchasing or selling, each day's transactions in such security will be
allocated between the Fund and all such client accounts in a manner deemed
equitable by the Advisor, taking into account the respective sizes of the
accounts, the amount being purchased or sold and other factors deemed relevant
by the Advisor. It is recognized that in some cases this system could have a
detrimental effect on the price or value of the security insofar as a Fund is
concerned. In other cases, however, it is believed that the ability of a Fund to
participate in volume transactions may produce better executions for the Fund.
The Funds do not effect securities transactions through
broker-dealers in accordance with any formula, nor do they effect securities
transactions through such broker-dealers solely for selling shares of either
Fund. However, as stated above, broker-dealers who execute transactions for the
Funds may from time to time effect purchases of shares of the Funds for their
customers.
NET ASSET VALUE
The net asset value of each Fund's shares will fluctuate and is
determined as of the close of trading on the New York Stock Exchange (normally
4:00 p.m. Eastern time) each business day. The Exchange annually announces the
days on which it will not be open for trading. The most recent
announcement indicates that it will not be open on the following days: New
Year's Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor
Day, Thanksgiving Day and Christmas Day. However, the Exchange may close on days
not included in that announcement.
Options and futures contracts which are traded on exchanges are
valued at their last sale or settlement price as of the close of such exchanges
or, if no sales are reported, at the mean between the last reported bid and
asked prices. However, if an exchange closes later than the New York Stock
Exchange, the options or futures traded on it are valued based on the sales
price, or the mean between bid and asked prices, as the case may be, as of the
close of the New York Stock Exchange.
Trading in securities in foreign securities markets is normally
completed well before the close of the New York Stock Exchange. In addition,
foreign securities trading may not take place on all days on which the New York
Stock Exchange is open for trading, and may occur in certain foreign markets on
days on which a Fund's net asset value is not calculated. Events affecting the
values of portfolio securities that occur between the time their prices are
determined and the close of the New York Stock Exchange will not be reflected in
the calculation of net asset value unless the Board of Trustees deems that the
particular event would materially affect net asset value, in which case an
adjustment will be made. Assets or liabilities expressed in foreign currencies
are translated, in determining net asset value, into U.S. dollars based on the
spot exchange rates at 1:00 p.m., Eastern time, or at such other rates as the
Advisor may determine to be appropriate.
The Funds may use a pricing service approved by the Board of
Trustees. Prices provided by such a service represent evaluations of the mean
between current bid and asked prices, may be determined without exclusive
reliance on quoted prices, and may reflect appropriate factors such as
institution-size trading in similar groups of securities, yield, quality, coupon
rate, maturity, type of issue, individual trading characteristics, indications
of values from dealers and other market data. Such services also may use
electronic data processing techniques and/or a matrix system to determine
valuations.
Securities and other assets for which market quotations are not
readily available, or for which the Board of Trustees or its designate
determines the foregoing methods do not accurately reflect current market value,
are valued at fair value as determined in good faith by or under the direction
of the Board of Trustees. Such valuations and procedures, as well as any pricing
services, are reviewed periodically by the Board of Trustees.
REDEMPTIONS
Each Fund intends to pay cash (U.S. dollars) for all shares redeemed,
but, under abnormal conditions which make payment in cash unwise, the Fund may
make payment partly in readily marketable securities with a current market value
equal to the redemption price. Although neither Fund anticipates that it will
make any part of a redemption payment in securities, if such payment were made,
an investor may incur brokerage costs in converting such securities to cash.
Each Fund has elected to be governed by the provisions of Rule 18f-1 under the
1940 Act, which commits the Fund to paying redemptions in cash, limited in
amount with respect to each shareholder during any 90-day period to the lesser
of $250,000 or 1% of the Fund's total net assets at the beginning of such 90-day
period.
TAXATION
The International Fund qualified for treatment as a regulated
investment company ("RIC") under Subchapter M of the Internal Revenue Code (the
"Code") during its last fiscal year, and each Fund intends to do so in the
future. In each taxable year that a Fund qualifies, the Fund (but not its
shareholders) will be relieved of federal income tax on that part of its
investment company taxable income (consisting generally of interest and dividend
income, net short-term capital gain and net realized gains from currency
transactions) and net capital gain that is distributed to shareholders.
In order to qualify for treatment as a RIC, a Fund must distribute
annually to shareholders at least 90% of its investment company taxable income
and must meet several additional requirements. Among these requirements are the
following: (1) at least 90% of the Fund's gross income each taxable year must be
derived from dividends, interest, payments with respect to securities loans and
gains from the sale or other disposition of securities or foreign currencies, or
other income derived with respect to its business of investing in securities or
currencies; (2) less than 30% of the Fund's gross income each taxable year may
be derived from the sale or other disposition of securities held for less than
three months; (3) at the close of each quarter of the Fund's taxable year, at
least 50% of the value of its total assets must be represented by cash and cash
items, U.S. Government securities, securities of other RICs and other
securities, limited in respect of any one issuer to an amount that does not
exceed 5% of the value of the Fund and that does not represent more than 10% of
the outstanding voting securities of such issuer; and (4) at the close of each
quarter of the Fund's taxable year, not more than 25% of the value of its assets
may be invested in securities (other than U.S. Government securities or the
securities of other RICs) of any one issuer.
Each Fund will be subject to a nondeductible 4% excise tax to the
extent it fails to distribute by the end of any calendar year substantially all
of its ordinary income for that year and capital gain net income for the
one-year period ending on October 31 of that year, plus certain other amounts.
Dividends and interest received by the Funds may give rise to
withholding and other taxes imposed by foreign countries. Tax conventions
between certain countries and the U.S. may reduce or eliminate such taxes.
Shareholders may be able to claim U.S. foreign tax credits with respect to such
taxes, subject to provisions and limitations contained in the Code. For example,
certain retirement accounts cannot claim foreign tax credits on investments in
foreign securities held by a Fund. If more than 50% in value of a Fund's total
assets at the close of its taxable year consists of securities of foreign
corporations, the Fund will be eligible, and intends, to file an election with
the Internal Revenue Service pursuant to which shareholders of the Fund will be
required to include their proportionate share of such withholding taxes in the
U.S. income tax returns as gross income, treat such proportionate share as taxes
paid by them, and deduct such proportionate share in computing their taxable
incomes or, alternatively, use them as foreign tax credits against their U.S.
income taxes. No deductions for foreign taxes, however, may be claimed by
noncorporate shareholders who do not itemize deductions. A shareholder that is a
nonresident alien individual or foreign corporation may be subject to U.S.
withholding tax on the income resulting from the Fund's election described in
this paragraph but may not be able to claim a credit or deduction against such
U.S. tax for the foreign taxes treated as having been paid by such shareholder.
Each Fund will report annually to its shareholders the amount per share of such
withholding taxes.
Many of the options, futures and forwards contracts used by the Funds
are "section 1256 contracts." Any gains or losses on section 1256 contracts are
generally treated as 60% long-term and 40% short-term capital gains or losses
("60/40") although gains and losses from hedging transactions, certain mixed
straddles and certain foreign currency transactions from such contracts may be
treated as ordinary in character. Also section 1256 contracts held by a Fund at
the end of its fiscal year (and, for purposes of the 4% excise tax, on certain
other dates as prescribed under the Code) are "marked to market" with the result
that unrealized gains or losses are treated as though they were realized, and
the resulting gain or loss is treated as ordinary or 60/40 gain or loss,
depending on the circumstances.
Generally, the transactions in options, futures and forward contracts
undertaken by a Fund may result in "straddles" for federal income tax purposes.
The straddle rules may affect the character of gains or losses realized by the
Fund. In addition, losses realized on positions that are part of a straddle may
be deferred under the rules, rather than being taken into account in the fiscal
year in which the losses were realized. Because only a few regulations
implementing the straddle rules have been promulgated, the tax consequences of
transactions in options, futures and forward contracts are not entirely clear.
These transactions may increase the amount of short-term capital gain realized
by the Fund and taxed as ordinary income when distributed to shareholders. The
Funds may make certain elections available under the Code which are applicable
to straddles. If a Fund makes such elections, recognition of gains or losses
from certain straddle positions may be accelerated.
The tests which a Fund must meet to qualify as a RIC, described
above, may limit the extent to which the Fund will be able to engage in
transactions in options, futures contracts or forward contracts.
Under the Code, fluctuations in exchange rates which occur between
the dates various transactions are entered into or accrued and subsequently
settled may cause gains or losses, referred to as "section 988" gains or losses.
Section 988 gains or losses may increase or decrease the amount of income
taxable as ordinary income distributed to shareholders.
DIVIDENDS AND DISTRIBUTIONS
Dividends from each Fund's investment company taxable income (whether
paid in cash or invested in additional shares) will be taxable to shareholders
as ordinary income to the extent of the Fund's earnings and profits.
Distributions of a Fund's net capital gain (whether paid in cash or invested in
additional shares) will be taxable to shareholders as long-term capital gain,
regardless of how long they have held their Fund shares. Dividends declared by a
Fund in October, November or December of any year and payable to shareholders of
record on a date in one of such months will be deemed to have been paid by the
Fund and received by the shareholders on the record date if the dividends are
paid by the Fund during the following January. Accordingly, such dividends will
be taxed to shareholders for the year in which the record date falls.
Each Fund is required to withhold 31% of all dividends, capital gain
distributions and repurchase proceeds payable to any individuals and certain
other noncorporate shareholders who do not provide the Fund with a correct
taxpayer identification number. Each Fund also is required to withhold 31% of
all dividends and capital gain distributions paid to such shareholders who
otherwise are subject to backup withholding.
PERFORMANCE INFORMATION
Total Return
Average annual total return quotations used in a Fund's advertising
and promotional materials are calculated according to the following formula:
n
P(1 + T) = ERV
where P equals a hypothetical initial payment of $1000; T equals average annual
total return; n equals the number of years; and ERV equals the ending redeemable
value at the end of the period of a hypothetical $1000 payment made at the
beginning of the period.
The time periods used in advertising will be updated to the last day
of the most recent quarter prior to submission of the advertising for
publication. Average annual total return, or "T" in the above formula, is
computed by finding the average annual compounded rates of return over the
period that would equate the initial amount invested to the ending redeemable
value. Average annual total return assumes the reinvestment of all dividends and
distributions. Any performance information used in advertising and sales
literature will include information based on this formula for the most recent
one, five and ten year periods, or for the life of the Fund, whichever is
available.
Other Information
Performance data of a Fund quoted in advertising and other
promotional materials represents past performance and is not intended to predict
or indicate future results. The return and principal value of an investment in a
Fund will fluctuate, and an investor's redemption proceeds may be more or less
than the original investment amount. In advertising and promotional materials a
Fund may compare its performance with data published by Lipper Analytical
Services, Inc. ("Lipper"), Morningstar, Inc. ("Morningstar") or CDA Investment
Technologies, Inc.("CDA"). A Fund also may refer in such materials to mutual
fund performance rankings and other data, such as comparative asset, expense and
fee levels, published by Lipper, CDA or Morningstar. Advertising and promotional
materials also may refer to discussions of the Fund and comparative mutual fund
data and ratings reported in independent periodicals including, but not limited
to, The Wall Street Journal, Money Magazine, Forbes, Business Week, Financial
World and Barron's
GENERAL INFORMATION
Each Fund might determine to allocate certain of its expenses (in
addition to distribution fees) to the specific classes of the Fund's shares to
which those expenses are attributable. For example, Class C shares may bear
higher transfer agency fees per shareholder account than those borne by Class A
shares. The higher fee is imposed due to the higher costs incurred by the
Transfer Agent in tracking shares subject to a contingent deferred sales charge.
The specific extent to which such fees may differ between the Classes as a
percentage of net assets is not certain because fees will be affected by the
number of accounts and relative amounts of net assets in each Class.
The Trust's custodian, Investors Bank and Trust Company, is
responsible for holding the Funds' assets and also acts as the Funds' accounting
services agent. Rodney Square Management Corporation acts as the Funds' transfer
agent. The Trust's independent accountants, Ernst & Young, LLP, examine the
Funds' financial statements annually and prepare the Funds' tax returns.
The Trust's Declaration of Trust provides that obligations of the
Trust are not binding on the Trustees, officers, employees and agents
individually and that the Trustees, officers, employees and agents will not be
liable to the Trust or its investors for any action or failure to act, but
nothing in the Declaration of Trust protects a Trustee, officer, employee or
agent against any liability to the Trust, the Funds or their investors to which
the Trustee, officer, employee or agent would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence or reckless disregard of his or
her duties.
As of December 31, 1995, the following persons owned more than 5% of
the Fund's outstanding Class A Shares:
Charles H. Brandes, 12650 High Bluff Drive, San Diego, CA 92130 (7.13%)
Memphis Jewish Federation, 6560 Poplar Avenue, Memphis, TN 38138 (7.70%)
First American Trust Company, Trustee for Rutan & Tucker Profit
Sharing Plan, 421 N. Main Street, Santa Ana, CA 92701 (5.02%)
No person owned more than 5% of the outstanding Class C Shares at
December 31, 1995. The Class A Shares owned by the Trustees and officers as a
group amounted to 7.35%; the amount of Class C Shares owned by such Trustees and
officers as a group amounted to less than 1%.
The Trust's Registration Statement on Form N-1A may be examined at
the office of the Securities and Exchange Commission in Washington, DC.
Statements contained in the prospectus and this Statement of Additional
Information as to the contents of any contract or other document are not
necessarily complete and, in each instance, reference is made to the copy of
such contract or document filed as an exhibit to the Registration Statement,
each such statement being qualified in all respects by such reference.
APPENDIX
Description of Ratings
Moody's Investors Service, Inc.: Corporate Bond Ratings
Aaa--Bonds which are rated Aaa are judged to be of the best quality
and carry the smallest degree of investment risk. Interest payments are
protected by a large, or by an exceptionally stable, margin, and principal is
secure. While the various protective elements are likely to change, such changes
as can be visualized are most unlikely to impair the fundamentally strong
position of such issues.
Aa---Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in Aaa securities.
Moody's applies numerical modifiers "1", "2" and "3" to both the Aaa
and Aa rating classifications. The modifier "1" indicates that the security
ranks in the higher end of its generic rating category; the modifier "2"
indicates a mid-range ranking; and the modifier "3" indicates that the issue
ranks in the lower end of its generic rating category.
A--Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper medium grade obligations. Factors
giving security to principal and interest are considered adequate but elements
may be present which suggest a susceptibility to impairment sometime in the
future.
Baa--Bonds which are rated Baa are considered as medium grade
obligations, i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great period of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
Standard & Poor's Corporation: Corporate Bond Ratings
AAA--This is the highest rating assigned by Standard & Poor's to a
debt obligation and indicates an extremely strong capacity to pay principal and
interest.
AA--Bonds rated AA also qualify as high-quality debt obligations.
Capacity to pay principal and interest is very strong, and in the majority of
instances they differ from AAA issues only in small degree.
A--Bonds rated A have a strong capacity to pay principal and
interest, although they are somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions.
BBB--Bonds rated BBB are regarded as having an adequate capacity to
pay principal and interest. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay principal and interest for bonds in
this category than for bonds in the A category.
Commercial Paper Ratings
Moody's commercial paper ratings are assessments of the issuer's
ability to repay punctually promissory obligations. Moody's employs the
following three designations, all judged to be investment grade, to indicate the
relative repayment capacity of rated issuers: Prime 1--highest quality; Prime
2--higher quality; Prime 3--high quality.
A Standard & Poor's commercial paper rating is a current assessment
of the likelihood of timely payment. Ratings are graded into four categories,
ranging from "A" for the highest quality obligations to "D" for the lowest.
Issues assigned the highest rating, A, are regarded as having the
greatest capacity for timely payment. Issues in this category are delineated
with the numbers "1", "2" and "3" to indicate the relative degree of safety. The
designation A-1 indicates that the degree of safety regarding timely payment is
either overwhelming or very strong. A "+" designation is applied to those issues
rated "A- 1" which possess extremely strong safety characteristics. Capacity for
timely payment on issues with the designation "A-2" is strong. However, the
relative degree of safety is not as high as for issues designated A-1. Issues
carrying the designation "A-3" have a satisfactory capacity for timely payment.
They are, however, somewhat more vulnerable to the adverse effect of changes in
circumstances than obligations carrying the higher designations.
<TABLE>
<CAPTION>
PORTFOLIO OF INVESTMENTS as of October 31, 1995
Shares Value
- - --------------------------------------------------------------------------------
COMMON STOCKS: 63.5%
- - --------------------------------------------------------------------------------
Argentina: 2.0%
Yacimientos Petroliferos
<S> <C> <C>
S.A., ADS............... 12,500 $ 214,064
------ ---------
Austria: 0.2%
VA Technologie
AG, ORD................. 170 19,704
--- ------
Brazil: 1.6%
Telecommunicacoes
Brasileiras, ADR........ 4,500 180,000
----- -------
Canada: 0.2%
Molson Co. Ltd.,
Class A, ORD............ 1,100 17,704
----- ------
Denmark: 2.6%
Den Danske Bank
Group, ADR.............. 4,300 283,800
----- -------
France: 8.7%
Alcatel Alsthom, ADR..... 27,200 459,000
Compagnie UAP, ORD....... 10,400 270,545
Elf Aquitaine, ADR....... 6,750 227,813
----- -------
957,358
-------
Germany: 8.4%
Daimler-Benz, ADR........ 9,200 443,900
Siemens AG, ADR.......... 4,600 481,850
-------
925,750
-------
Israel: 0.4%
Scitex Corporation, Ltd.. 2,300 39,963
------
Italy: 7.9%
Istituto Mobiliare
Italiano, ADR........... 15,000 $ 241,875
Italgas-Sta It per il
Gas pA, ORD............. 79,500 211,401
Stet Societa Finanzioria
Telefonica, ADR......... 14,650 410,200
-------
863,476
-------
Japan: 6.1%
Fuji Photo Film
Co. Ltd., ADR........... 4,530 223,101
Hitachi, Ltd., ADR....... 4,280 447,795
-------
670,896
-------
Mexico: 2.9%
Telefonos de
Mexico, ADS............. 11,600 319,000
-------
Netherlands: 3.3%
KPN - Konin. PTT
Nederland, ORD.......... 10,150 357,032
-------
Spain: 5.1%
Repsol S.A., ADR......... 7,400 219,225
Telefonica de Espana
S.A., ADS............... 8,950 336,744
-------
555,969
-------
Sweden: 0.2%
Munksjo AB-Free,
ORD..................... 3,100 22,408
------
Switzerland: 6.0%
Nestle S.A., ADR......... 8,450 440,456
Schindler-Holding AG
Partn Ctf ORD........... 230 215,530
-------
655,986
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PORTFOLIO OF INVESTMENTS as of October 31, 1995
Shares Value
United Kingdom: 7.9%
Grand Metropolitan
<S> <C> <C>
PLC, ADR................ 12,000 $ 330,000
Hanson PLC, ADR.......... 27,800 430,900
Seeboard PLC, ADR........ 1,200 98,272
------
859,172
-------
Total Common Stocks
(cost $7,099,855)........ 6,942,282
---------
</TABLE>
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------
Principal
- - --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS: 34.7%
- - --------------------------------------------------------------------------------
United States: 34.7%
Prudential-Bache Repurchase
Agreement, due 11/1/95
collateralized by mortgage-
<S> <C> <C>
backed securities.......... $3,798,388 3,798,388
---------
Total Investments in Securities
(cost $10,898,243+): 98.2%........ $10,740,670
-----------
Other Assets less
Liabilities: 1.8%................. 196,931
-------
Total Net Assets: 100.0% ........... $10,937,601
===========
<FN>
+ Cost for federal income tax purposes is the same.
</FN>
Net unrealized depreciation consists of:
Gross unrealized appreication..... $ 178,018
Gross unrealized deprecaition..... (335,591)
--------
Net unrealized depreciation.. $ (157,573)
==========
</TABLE>
<TABLE>
PORTFOLIO OF INVESTMENTS by Industry
<S> <C>
Automobiles............................. 6.4%
Banking................................. 7.6%
Beverages and Tobacco .................. 0.3%
Data Processing & Reproductions......... 0.6%
Electrical & Electronics................ 20.0%
Energy Sources.......................... 9.5%
Food & Household Products............... 11.0%
Forest Products & Papers................ 0.3%
Insurance............................... 3.9%
Machinery & Engineering................. 3.4%
Multi - Industry........................ 6.2%
Recreation, Other Consumer Goods....... 3.2%
Telecommunications...................... 23.1%
Utilities - Electrical & Gas............ 4.5%
---
100.0%
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES as of October 31, 1995
- - --------------------------------------------------------------------------------
ASSETS
<S> <C>
Investments in securities, at value (identified cost $10,898,243) ..................... $10,740,670
Receivables:
Fund shares purchased............................................................... 143,191
Dividends and interest ............................................................. 3,914
Due from Advisor.................................................................... 1,167
Prepaid expenses....................................................................... 20,792
Deferred organization costs............................................................ 91,093
------
Total assets .................................................................... 11,000,827
----------
LIABILITIES
Accrued expenses ...................................................................... 58,199
Accrued administration fees............................................................ 5,027
-----
Total liabilities................................................................ 63,226
------
Net assets ............................................................................... $10,937,601
===========
SOURCE OF NET ASSETS
Paid-in capital ....................................................................... $11,048,826
Undistributed net investment income.................................................... 46,449
Net unrealized depreciation on investments and foreign currency........................ (157,573)
Net realized loss on investments and foreign currency.................................. (101)
----
Net assets ......................................................................... $10,937,601
===========
Net assets:
Class A Shares ........................................................................ $ 5,188,105
Class C Shares ........................................................................ 5,749,496
---------
$10,937,601
===========
Class A Shares
Net asset value and redemption price per share, based on 391,153 shares outstanding
(unlimited number of shares authorized without par value) .......................... $13.26
======
Computation of Offering Price per share
(net asset value $13.26/.9525)...................................................... $13.92
======
Class C Shares
Net asset value and redemption price per share, based on 434,875 shares outstanding
(unlimited number of shares authorized without par value) .......................... $13.22
======
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS - March 6, 1995* to October 31, 1995
- - ------------------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME:
Income:
<S> <C>
Interest............................................................................ $ 72,433
Dividends (net of withholding tax of $5,931)........................................ 49,633
------
Total income..................................................................... 122,066
-------
Expenses:
Advisory fees....................................................................... 34,019
Administrative fee ................................................................. 39,452
Custodian and accounting fees....................................................... 47,001
Transfer agent fees................................................................. 49,090
Auditing fees....................................................................... 22,000
Legal fees.......................................................................... 12,643
Blue sky fees....................................................................... 21,701
Amortization of deferred organization costs......................................... 13,728
Reports to shareholders............................................................. 4,246
Trustees fees....................................................................... 8,205
Miscellaneous....................................................................... 6,138
Expense reimbursements ............................................................. (207,194)
--------
51,029
Distribution and Shareholder Service fees
Class A Shares...................................................................... 5,078
Class C Shares...................................................................... 19,510
------
Net expenses........................................................................ 75,617
------
Net investment income ........................................................ 46,449
------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net unrealized depreciation on investments and foreign currency..................... (157,573)
Net realized loss on investments and foreign currency............................... (101)
----
Net realized and unrealized loss on investments and foreign currency............. (157,674)
--------
Net decrease in net assets resulting from operations ................... $ (111,225)
============
<FN>
*Commencement of operations.
</FN>
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS - March 6, 1995* to October 31, 1995
- - ------------------------------------------------------------------------------------------------------------------------------------
INCREASE IN NET ASSETS FROM:
OPERATIONS:
<S> <C>
Net investment income..................................................................... $ 46,449
Net unrealized depreciation on investments and foreign currency........................... (157,573)
Net realized loss on investments and foreign currency..................................... (101)
----
Net decrease in net assets resulting from operations ............................... (111,225)
--------
CAPITAL SHARE TRANSACTIONS:(a)
Increase in net assets derived from net change in outstanding Class A Shares.............. 5,238,627
Increase in net assets derived from net change in outstanding Class C Shares.............. 5,810,199
---------
Increase in net assets resulting from capital share transactions.................... 11,048,826
----------
Total increase in net assets ....................................................... 10,937,601
NET ASSETS:
Beginning of period....................................................................... -0-
-
End of period (including undistributed net investment income of $46,449).................. $10,937,601
===========
<FN>
(a) A summary of capital shares transactions is as follows:
</FN>
</TABLE>
<TABLE>
<CAPTION>
Class A:
Shares Value
- - ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Shares sold............................................. 392,800 $5,260,956
Shares redeemed......................................... 1,647 22,329
----- ------
Net increase............................................ 391,153 $5,238,627
======= ==========
Class C:
Shares Value
- - ------------------------------------------------------------------------------------------------------------------------------------
Shares sold............................................. 438,014 $5,852,336
Shares redeemed......................................... 3,139 42,137
----- ------
Net increase............................................ 434,875 $5,810,199
======= ==========
<FN>
*Commencement of operations.
</FN>
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period) For the period March 6, 1995* to
October 31, 1995
- - ------------------------------------------------------------------------------------------------------------------------------------
Class A Class C
- - ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period................................... $12.50 $12.50
------ ------
Income (loss) from investment operations:
Net investment income............................................ .15** .10**
Net unrealized depreciation on investments....................... (.45)** (.39)**
Net realized gain on investments................................. 1.06*** 1.01***
---- ----
Total from investment operations ................................. .76 .72
--- ---
Net Asset Value, End of Period......................................... $13.26 $13.22
====== ======
Total return (sales load is not reflected in total return)............. 9.39%+ 8.89%+
RATIOS / SUPPLEMENTAL DATA:
Net assets, end of period .......................................... $5,188,105 $5,749,496
Ratio of expenses to average net assets:
Before expense reimbursement..................................... 7.93%+ 8.58%+
After expense reimbursement...................................... 1.85%+ 2.50%+
Ratio of net investment income (loss) to average net assets:
Before expense reimbursement..................................... (4.41)%+ (4.95)%+
After expense reimbursement..................................... 1.67%+ 1.13%+
Portfolio turnover rate................................................ 0% 0%
<FN>
*Commencement of operations.
**Calculated based on average shares outstanding.
***The amount shown in this caption for a share outstanding throughout the perod
does not correspond with the change in realized
gains and losses in the portfolio secruities for the period because of the
timing of sales and repurchases of portfolio shares in relation to fluctuating
market values for the portfolio.
+Annualized.
</FN>
</TABLE>
See accompanying notes to financial statements.
<PAGE>
NOTES TO FINANCIAL STATEMENTS - October 31, 1995
- - --------------------------------------------------------------------------------
NOTE 1 - ORGANIZATION
The Brandes International Fund (the "Fund") is a Delaware business trust
organized on July 6, 1994 and registered under the Investment Company Act of
1940 (the "1940 Act") as a diversified, open-end management investment company.
The Fund began operations on March 6, 1995.
Shares of beneficial interest of the Fund are currently divided into two
Classes, designated Class A Shares and Class C Shares. Each Class represents
interests in the same assets of the Fund.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund. These policies are in conformity with generally accepted
accounting principles.
A. Security Valuation. Investments in securities traded on a primary
exchange are valued at the last reported sale price at the close of regular
trading on the last business day of the period; securities traded on an exchange
for which there has been no sale are valued at the last reported bid price.
Short-term investments are stated at cost, which when combined with accrued
interest, approximates market value.
U.S. Government securities with less than 60 days remaining to
maturity when acquired by the Fund are valued on an amortized cost basis. U.S.
Government securities with more than 60 days remaining to maturity are valued at
the current market value (using the mean between the bid and asked price) until
the 60th day prior to maturity, and are then valued at amortized cost based upon
the value on such date unless the Board determines during such 60 day period
that this amortized cost basis does not represent fair value.
Foreign securities are recorded in the financial statements after
translation to U.S. dollars, based on the applicable exchange rate at the end of
the period. The Fund does not isolate that portion of the results of operations
arising as a result of changes in the currency exchange rate from the
fluctuations arising as a result of changes in the market prices of investments
during the period.
Interest income is translated at the exchange rates which existed at
the dates the income was accrued. Exchange gains and losses related to interest
income are included in interest income on the accompanying Statement of
Operations.
B. Repurchase Agreements. The Fund may enter into repurchase agreements
with government securities dealers recognized by the Federal Reserve Board, with
member banks of the Federal Reserve System or with such other borkers or dealers
that meet the credit guidelines established by the Board of Trustees. The Fund
will always receive and maintian, as collateral, securities whose market value,
including accrued interest, will be at least equal to 100% of the dollar amount
invested by the Fund in each
<PAGE>
NOTES TO FINANCIAL STATEMENTS - October 31, 1995 agreement, and the Fund
will make payment for such securities only upon physical delivery or upon
evidence of book entry transfer to the account of the custodian. To the extent
that any repurchase transaction exceeds one business day, the value of the
collateral is marked-to-market on a daily basis to ensure the adequacy of the
collateral.
If the seller defaults and the value of the collateral declines, or if
bankruptcy proceedings are commenced with respect to the seller of the security,
realization of the collateral by the Fund may be delayed or limited.
C. Forward Foreign Currency Exchange Contracts. The Fund may utilize
forward foreign currency exchange contracts ("forward contracts") under which it
is obligated to exchange currencies at specific future dates.
D. Security Transactions, Dividends and Distributions. As is common in the
industry, security transactions are accounted for on the trade date. Dividend
income and distributions to shareholders are recorded on the ex-dividend date.
E. Federal Income Taxes. The Fund intends to comply with the requirements
of the Internal Revenue Code applicable to regulated investment companies and to
distribute all of its taxable income to its shareholders. Therefore, no federal
income tax provision is required.
F. Deferred Organization Costs. The Fund has incurred expenses of $104,821
in connection with its organization. These costs have been deferred and are
being amortized on a straight line basis over a period of sixty months from the
date the Fund commenced investment operations. In the event that any of the
initial shares of the Fund are redeemed by the holder during the period of
amortization of the Fund's organization costs, the redemption proceeds will be
reduced by any such unamortized organization costs in the same proportion as the
number of initial shares being redeemed bears to the number of those shares
outstanding at the time of redemption.
NOTE 3 - INVESTMENT MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES
For the period March 6, 1995 (commencement of operations) through October
31, 1995, Brandes Investment Partners, Inc. (the "Advisor") provided the Fund
with investment management services under an Investment Advisory Agreement. The
Advisor furnished all investment advice, office space and certain administrative
services, and provides certain personnel needed by the Fund. As compensation for
its services, the Advisor was entitled to a monthly fee at the annual rate of
1.00% based upon the average daily net assets of the Fund. The Fund is
responsible for its own operating expenses. In order to maintain the Fund's
operating expenses at 1.85% and 2.50% of average daily net assets of Class A
Shares and Class C Shares, respectively, the Advisor has waived fees and
reimbursed expenses totalling $207,194 during the period March 6, 1995
(commencement of operations) through October 31, 1995. The Fund will
<PAGE>
NOTES TO FINANCIAL STATEMENTS - October 31, 1995
reimburse the Advisor when operating expenses (before expense
reimbursement) are less than the expense limitations in future periods.
Investment Company Administration Corporation (the "Administrator") acts
as the Fund's Administrator under an Administration Agreement. The Administrator
prepares various federal and state regulatory filings, prepares reports and
materials to be supplied to the Directors; monitors the activities of the Fund's
custodian, transfer agent and accountants; coordinates the preparation and
payment of Fund expenses and reviews the Fund's expense accruals. For its
services, the Administrator receives an annual fee at the rate of 0.10 of 1% of
the first $100 million, 0.05 of 1% of the next $100 million and 0.03 of 1% of
assets in excess of $200 million of the Fund's average daily net assets, subject
to a minimum of $60,000.
Worldwide Value Distributors, Inc. (the "Distributor") acts as the Fund's
principal underwriter in a continuous public offering of the Fund's shares. The
Distributor is an affiliate of the Advisor.
Certain officers of the Fund are also officers and/or Directors of the
Advisor, Administrator and Distributor.
As of October 31, 1995, shares of the Fund owned by the Fund's Advisor and
its affiliates totalled 87,148 shares, out of 826,028 shares outstanding.
NOTE 4 - PURCHASES AND SALES OF SECURITIES
For the period March 6, 1995 (commencement of operations) through October
31, 1995, the cost of purchases and the proceeds from sales of securities,
excluding short-term securities, were $10,898,243 and $2,841, respectively.
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
- - --------------------------------------------------------------------------------
TO THE SHAREHOLDERS OF
THE BRANDES INTERNATIONAL FUND
We have audited the accompanying statement of assets and liabilities of
Brandes International Fund, including the portfolio of investments as of October
31, 1995, the related statement of operations, the statement of changes in net
assets, and the financial highlights for the period from March 6, 1995
(commencement of operations) to October 31, 1995. These financial statements and
financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1995, by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Brandes International Fund as of October 31, 1995, the results of its
operations, the net changes in its assets, and the financial highlights for the
period from March 6, 1995 (commencement of operations) to October 31, 1995, in
conformity with generally accepted accounting principles.
ERNST & YOUNG
Los Angeles, California
December 14, 1995
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits.
(a) Financial Statements:
The following financial statements are included in Part B
of the Registration Statement--
Portfolio of Investments as of October 31, 1995
Statement of Assets and Liabilities as of October 31, 1995
Statement of Operations - March 6, 1995 to October 31, 1995
Statement of Changes in Net Assets - March 6, 1995 to
October 31, 1995
Financial Highlights
Notes to Financial Statements
Report of Independent Certified Public Accountants
(b) Exhibits:
The following exhibits are included with this Post-
Effective Amendment, except as noted:
(1) (i) Agreement and Declaration of Trust (3)
(ii) Amendment to Agreement and Declaration of
Trust (3)
(iii) Amendment to Agreement and Declaration of
Trust
(2) By-Laws (3)
(3) Not applicable
(4) Specimen stock certificate
(5) (i) Investment Advisory Agreement (3)
(ii) Investment Advisory Agreement relating to
the Brandes Small Cap International Fund(3)
(6) (i) Distribution Agreement with First Fund
Distributors, Inc. (1)
(ii) Distribution Agreement with Worldwide
Value Distributors, Inc. (3)
(7) Not applicable
(8) Custodian Agreement
(9) (i) Administration Agreement (3)
(ii) Transfer Agency Agreement
(iii) Shareholder Service Plan (3)
(iv) Shareholder Service Plan relating to the
Brandes Small Cap International Fund (3)
(v) Multiple Class Plan (3)
(10) Opinion and consent of counsel
(11) Consent of independent accountants
(12) Not applicable
(13) Investment letter (3)
(14) Individual Retirement Account forms(2)
(15) (I) Distribution Plan Pursuant to Rule 12b-1 (3)
(ii) Distribution Plan relating to the Brandes
Small Cap International Fund (3)
(16) Not applicable
(17) Not applicable
(1) Previously filed with the Registration Statement on Form N-1A
(File No. 33-81396), filed on July 11, 1994, and incorporated herein by
reference.
(2) Previously filed with Post-Effective Amendment No. 1 to the
Registration Statement on Form N-1A (File No. 33-81396), filed on August 31,
1995, and incorporated herein by reference.
(3) Previously filed with Post-Effective Amendment No. 1 to the
Registration Statement on Form N-1A (File No. 33-81396), filed of August 31,
1995, and incorporated herein by reference.
Item 25. Persons Controlled by or under Common Control with Registrant.
The Registrant does not control, nor is it under common control, with
any other person.
Item 26. Number of Holders of Securities.
As of December 31, 1995, there were 467 holders of Class A and 410
holders of Class C shares of the Registrant.
Item 27. Indemnification.
Article VI of Registrant's By-Laws states as follows:
Section 1. AGENTS, PROCEEDINGS AND EXPENSES. For the purpose of this
Article, "agent" means any person who is or was a Trustee, officer, employee or
other agent of this Trust or is or was serving at the request of this Trust as a
Trustee, director, officer, employee or agent of another foreign or domestic
corporation, partnership, joint venture, trust or other enterprise or was a
Trustee, director, officer, employee or agent of a foreign or domestic
corporation which was a predecessor of another enterprise at the request of such
predecessor entity; "proceeding" means any threatened, pending or completed
action or proceeding, whether civil, criminal, administrative or investigative;
and "expenses" includes without limitation attorney's fees and any expenses of
establishing a right to indemnification under this Article.
Section 2. ACTIONS OTHER THAN BY TRUST. This Trust shall indemnify
any person who was or is a party or is threatened to be made a party to any
proceeding (other than an action by or in the right of this Trust) by reason of
the fact that such person is or was an agent of this Trust, against expenses,
judgments, fines, settlements and other amounts actually and reasonably incurred
in connection with such proceeding, if it is determined that person acted in
good faith and reasonably believed:
(a) in the case of conduct in his official capacity as a Trustee
of the Trust, that his conduct was in the Trust's best
interests, and
(b) in all other cases, that his conduct was at least not opposed
to the Trust's best interests, and
(c) in the case of a criminal proceeding, that he had no
reasonable cause to believe the conduct of that person was
unlawful.
The termination of any proceeding by judgment, order, settlement,
conviction or upon a plea of nolo contendere or its equivalent shall not of
itself create a presumption that the person did not act in good faith and in a
manner which the person reasonably believed to be in the best interests of this
Trust or that the person had reasonable cause to believe that the person's
conduct was unlawful.
Section 3. ACTIONS BY THE TRUST. This Trust shall indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action by or in the right of this Trust to
procure a judgment in its favor by reason of the fact that that person is or was
an agent of this Trust, against expenses actually and reasonably incurred by
that person in connection with the defense or settlement of that action if that
person acted in good faith, in a manner that person believed to be in the best
interests of this Trust and with such care, including reasonable inquiry, as an
ordinarily prudent person in a like position would use under similar
circumstances.
Section 4. EXCLUSION OF INDEMNIFICATION. Notwithstanding any
provision to the contrary contained herein, there shall be no right to
indemnification for any liability arising by reason of willful misfeasance, bad
faith, gross negligence, or the reckless disregard of the duties involved in the
conduct of the agent's office with this Trust.
No indemnification shall be made under Sections 2 or 3 of this
Article:
(a) In respect of any claim, issue, or matter as to which that
person shall have been adjudged to be liable on the basis that
personal benefit was improperly received by him, whether or
not the benefit resulted from an action taken in the person's
official capacity; or
(b) In respect of any claim, issue or matter as to which that
person shall have been adjudged to be liable in the
performance of that person's duty to this Trust, unless and
only to the extent that the court in which that action was
brought shall determine upon application that in view of all
the circumstances of the case, that person was not liable by
reason of the disabling conduct set forth in the preceding
paragraph and is fairly and reasonably entitled to indemnity
for the expenses which the court shall determine; or
(c) of amounts paid in settling or otherwise disposing of a
threatened or pending action, with or without court approval,
or of expenses incurred in defending a threatened or pending
action which is settled or otherwise disposed of without court
approval, unless the required approval set forth in Section 6
of this Article is obtained.
Section 5. SUCCESSFUL DEFENSE BY AGENT. To the extent that an agent
of this Trust has been successful on the merits in defense of any proceeding
referred to in Sections 2 or 3 of this Article or in defense of any claim, issue
or matter therein, before the court or other body before whom the proceeding was
brought, the agent shall be indemnified against expenses actually and reasonably
incurred by the agent in connection therewith, provided that the Board of
Trustees, including a majority who are disinterested, non-party Trustees, also
determines that based upon a review of the facts, the agent was not liable by
reason of the disabling conduct referred to in Section 4 of this Article.
Section 6. REQUIRED APPROVAL. Except as provided in Section 5 of this
Article, any indemnification under this Article shall be made by this Trust only
if authorized in the specific case on a determination that indemnification of
the agent is proper in the circumstances because the agent has met the
applicable standard of conduct set forth in Sections 2 or 3 of this Article and
is not prohibited from indemnification because of the disabling conduct set
forth in Section 4 of this Article, by:
(a) A majority vote of a quorum consisting of Trustees who are not
parties to the proceeding and are not interested persons of
the Trust (as defined in the Investment Company Act of 1940);
or
(b) A written opinion by an independent legal counsel.
Section 7. ADVANCE OF EXPENSES. Expenses incurred in defending any
proceeding may be advanced by this Trust before the final disposition of the
proceeding upon a written undertaking by or on behalf of the agent, to repay the
amount of the advance if it is ultimately determined that he or she is not
entitled to indemnification, together with at least one of the following as a
condition to the advance: (i) security for the undertaking; or (ii) the
existence of insurance protecting the Trust against losses arising by reason of
any lawful advances; or (iii) a determination by a majority of a quorum of
Trustees who are not parties to the proceeding and are not interested persons of
the Trust, or by an independent legal counsel in a written opinion, based on a
review of readily available facts that there is reason to believe that the agent
ultimately will be found entitled to indemnification. Determinations and
authorizations of payments under this Section must be made in the manner
specified in Section 6 of this Article for determining that the indemnification
is permissible.
Section 8. OTHER CONTRACTUAL RIGHTS. Nothing contained in this
Article shall affect any right to indemnification to which persons other than
Trustees and officers of this Trust or any subsidiary hereof may be entitled by
contract or otherwise.
Section 9. LIMITATIONS. No indemnification or advance shall be made
under this Article, except as provided in Sections 5 or 6 in any circumstances
where it appears:
(a) that it would be inconsistent with a provision of the
Agreement and Declaration of Trust of the Trust, a resolution
of the shareholders, or an agreement in effect at the time of
accrual of the alleged cause of action asserted in the
proceeding in which the expenses were incurred or other
amounts were paid which prohibits or otherwise limits
indemnification; or
(b) that it would be inconsistent with any condition expressly
imposed by a court in approving a settlement.
Section 10. INSURANCE. Upon and in the event of a determination by
the Board of Trustees of this Trust to purchase such insurance, this Trust shall
purchase and maintain insurance on behalf of any agent of this Trust against any
liability asserted against or incurred by the agent in such capacity or arising
out of the agent's status as such, but only to the extent that this Trust would
have the power to indemnify the agent against that liability under the
provisions of this Article and the Agreement and Declaration of Trust of the
Trust.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to trustees, officers and controlling
persons of Registrant pursuant to the foregoing provisions, or otherwise,
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in that
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by Registrant
of expenses incurred or paid by a trustee, officer or controlling person of
Registrant in the successful defense of any action, suit or proceeding) is
asserted by such trustee, officer or controlling person in connection with the
securities being registered, Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
Item 28. Business and Other Connections of Investment Adviser.
Brandes Investment Partners, Inc. is the investment advisor of the
Registrant. For information as to the business, profession, vocation or
employment of a substantial nature of Brandes Investment Partners, Inc. and its
officers, reference is made to Part B of this Registration Statement and to the
Form ADV filed under the Investment Advisers Act of 1940 by Brandes Investment
Partners, Inc. (File No. 801-24896).
Item 29. Principal Underwriters.
(a) First Fund Distributors, Inc. also acts as principal underwriter
for the following investment companies:
Guinness Flight Investment Funds, Inc.
Jurika and Voyles Mutual Funds
Hotchkis and Wiley Mutual Funds
PIC Investment Trust
Professionally Managed Portfolios
Rainier Investment Management Mutual Funds
RNC Liquid Assets Fund, Inc.
Worldwide Value Distributors, Inc. does not act as principal
underwriter for any other investment company.
(b) The following information is furnished with respect to the
officers and directors of First Fund Distributors, Inc.:
Position and Offices Position and
Name and Principal with Principal Offices with
Business Address Underwriter Registrant
- - ------------------ -------------------- ------------------
Robert H. Wadsworth President, Assistant
4455 E. Camelback Rd, Treasurer and Secretary
Suite 261E Director
Phoenix, AZ 85018
Steven J. Paggioli Vice President, Assistant
479 West 22nd Street Secretary and Secretary
New York, New York 10011 Director
Eric M. Banhazl Vice President Assistant
2025 E. Financial Way and Director Treasurer
Glendora, CA 91741
The following information is furnished with respect to the officers
and directors of Worldwide Value Distributors, Inc.:
Position and Offices Position and
Name and Principal with Principal Offices with
Business Address Underwriter Registrant
- - ------------------- --------------------- -----------------
Barry P. O'Neil President President
12750 High Bluff Drive and
San Diego, CA 92130 Director
Betsy M. Blodgett Vice President Vice President
121 Corte Ramon and Secretary
Greenbrae, CA 94904
Richard D. Burritt Treasurer Assistant
4455 E. Camelback Road Treasurer
Phoenix, AZ 85018
(c) Not applicable.
Item 30. Location of Accounts and Records.
The accounts, books and other documents required to be maintained by
Registrant pursuant to Section 31(a) of the Investment Company Act of 1940 and
the rules promulgated thereunder are in the possession of Registrant and
Registrant's Administrator and custodian, as follows: the documents required to
be maintained by paragraphs (5), (6), (7), (10) and (11) of Rule 31a-1(b) will
be maintained by the Registrant at 12750 High Bluff Drive, San Diego, CA 92130;
the documents required to be maintained by paragraph (4) of Rule 31a-1(b) will
be maintained by the Administrator at 4455 E. Camelback Road, Suite 261E,
Phoenix, AZ 85018, and all other records will be maintained by the Custodian at
89 South Street, Boston, MA 02111.
Item 31. Management Services.
Not applicable.
Item 32. Undertakings.
The Registrant undertakes, if requested to do so by the holders of at
least 10% of the Trust's outstanding shares, to call a meeting of shareholders
for the purposes of voting upon the question of removal of a director and will
assist in communications with other shareholders.
The Registrant undertakes, in the event the information required by
Item 5A is contained in an annual report to shareholders, to furnish a copy of
such latest report to shareholders to each person to whom a prospectus is
delivered, upon request and without charge.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all the
requirements for effectiveness of this Registration Statement pursuant to Rule
485(b) under the Securities Act of 1933 and has duly caused this Amendment to
the Registration Statement on Form N-1A of Brandes Investment Trust to be signed
on its behalf by the undersigned, thereunto duly authorized in the City of San
Diego and State of California on the 5th day of February, 1996
BRANDES INVESTMENT TRUST
By: /s/ Barry P. O'Neil
-------------------
Barry P. O'Neil
This Amendment to the Registration Statement on Form N-1A of Brandes
Investment Trust has been signed below by the following persons in the
capacities indicated on February 5, 1996.
/s/ Barry P. O'Neil President and
- - ------------------------------- Trustee
Barry P. O'Neil
/s/ Charles H. Brandes Trustee
- - -------------------------------
Charles H. Brandes
/s/ Dewill F. Bowman* Trustee
- - -------------------------------
DeWitt F. Bowman
/s/ Gordon Clifford Broadhead* Trustee
- - -------------------------------
Gordon Clifford Broadhead
- - ------------------------------- Trustee
Joseph E. Coberly, Jr.
/s/ W. Daniel Larsen* Trustee
- - -------------------------------
W. Daniel Larsen
/s/ Gregory S. Houck Treasurer and Principal
- - ------------------------------- Financial and Accounting
Gregory S. Houck Officer
* Robert H. Wadsworth
--------------------------
By: Robert H. Wadsworth
Attorney-in-fact
<PAGE>
EXHIBIT INDEX
(1) (i) Agreement and Declaration of Trust(3)
(ii) Amendment to Agreement and Declaration of
Trust(3)
(iii) Amendment to Agreement and Declaration of
Trust
(2) By-Laws(3)
(3) Not applicable
(4) Specimen stock certificate
(5) (i) Investment Advisory Agreement(3)
(ii) Investment Advisory Agreement relating to
the Brandes Small Cap International Fund(3)
(6) (i) Distribution Agreement with First Fund
Distributors, Inc.(1)
(ii) Distribution Agreement with Worldwide
Value Distributors, Inc.(3)
(7) Not applicable
(8) Custodian Agreement
(9) (i) Administration Agreement(3)
(ii) Transfer Agency Agreement
(iii) Shareholder Service Plan(3)
(iv) Shareholder Service Plan relating to the
Brandes Small Cap International Fund(3)
(v) Multiple Class Plan(3)
(10) Opinion and consent of counsel
(11) Consent of independent accountants
(12) Not applicable
(13) Investment letter(3)
(14) Individual Retirement Account forms(3)
(15) (I) Distribution Plan Pursuant to Rule 12b-1(3)
(ii) Distribution Plan relating to the Brandes
Small Cap International Fund(3)
(16) Not applicable
(17) Not applicable
(1) Previously filed with the Registration Statement on Form N-1A
(File No. 33-81396), filed on July 11, 1994, and incorporated herein by
reference.
(2) Previously filed with Post-Effective Amendment No. 1 to the
Registration Statement on Form N-1A (File No. 33-81396), filed on August 31,
1995, and incorporated herein by reference.
(3) Previously filed with Post-Effective Amendment No. 2 to the
Registration Statement on Form N-1A (File No. 33-81396), filed on January 9,
1996, and incorporated herein by reference.
Exhibit (1)(iii)
AMENDMENT
to
AGREEMENT AND DECLARATION OF TRUST
of
BRANDES INTERNATIONAL TRUST
Pursuant to ARTICLE VIII, Section 4 of the Declaration of Trust,
ARTICLE I, Section 1 of the Declaration of Trust is hereby amended to read as
follows:
Section 1. Name. This Trust shall be known as BRANDES
INVESTMENT TRUST and the Trustees shall conduct the business of the
Trust under that name or any other name as they may from time to time
determine.
IN WITNESS WHEREOF, the undersigned Trustees have executed this
Amendment to the Agreement and Declaration of Trust this day of January, 1996.
/s/ DeWitt F. Bowman /s/ Charles H. Brandes
- - ----------------------------- ---------------------------
DeWitt F. Bowman Charles H. Brandes
/s/ Gordon Clifford Broadhead /s/ Joseph E. Coberly, Jr.
- - ----------------------------- ---------------------------
Gordon Clifford Broadhead Joseph E. Coberly, Jr.
/s/ W. Daniel Larsen /s/ Barry P. O'Neil
- - ----------------------------- ---------------------------
W. Daniel Larsen Barry P. O'Neil
NUMBER SHARES
___________________ ____________________
This Certifies that _____________________________________________________ is the
registered holder of ____________________________________________________ Shares
transferable only on the books of the Corporation by the holder hereof in person
or by Attorney upon surrender of this Certificate properly endorsed.
In Witness Whereof, the said Corporation has caused this Certificate to be
signed by its duly authorized officers and its Corporate Seal to be hereunto
affixed
this ___________________ day of __________________ A.D. 19 __
/s/ Barry P. O'Neil /s/ Glenn R. Carlson
- - ------------------- ----------------------
Barry P. O'Neil Glenn R. Carlson
President Secretary
1
FORM OF
CUSTODIAN AGREEMENT
BETWEEN
BRANDES INTERNATIONAL FUND
And
INVESTORS BANK & TRUST COMPANY
<PAGE>
2
TABLE OF CONTENTS
Page
----
1. Bank Appointed Custodian ............................................. 1
2. Definitions........................................................... 1
2.1 Authorized Person................................... 1
2.2 Security............................................ 1
2.3 Portfolio Security.................................. 1
2.4 Officers' Certificate............................... 2
2.5 Book-Entry System................................... 2
2.6 Depository.......................................... 2
2.7 Proper Instructions................................. 2
3. Separate Accounts..................................................... 2
4. Certification as to Authorized Persons................................ 3
5. Custody of Cash....................................................... 3
5.1 Purchase of Securities................................. 3
5.2 Redemptions............................................ 3
5.3 Distributions and Expenses of Fund..................... 3
5.4 Payment in Respect of Securities....................... 4
5.5 Repayment of Loans..................................... 4
5.6 Repayment of Cash...................................... 4
5.7 Foreign Exchange Transactions.......................... 4
5.8 Other Authorized Payments.............................. 4
5.9 Termination............................................ 4
6. Securities............................................................ 4
6.1 Segregation and Registration........................... 4
6.2 Voting and Proxies..................................... 5
6.3 Book-Entry System...................................... 5
6.4 Use of a Depository.................................... 6
6.5 Use of Book-Entry System for Commercial Paper.......... 7
6.6 Use of Immobilization Programs......................... 8
6.7 Eurodollar CDs......................................... 8
6.8 Options and Futures Transactions....................... 8
(a) Puts and Calls Traded on Securities Exchanges,
NASDAQ or Over-the-Counter...................... 8
<PAGE>
3
Page
----
(b) Puts, Calls, and Futures Traded
on Commodities Exchanges........................ 9
6.9 Segregated Account..................................... 9
6.10 Interest Bearing Call or Time Deposits................. 11
6.11 Transfer of Securities................................. 11
7. Redemptions........................................................... 12
8. Merger, Dissolution, etc. of Fund..................................... 13
9. Actions of Bank Without Prior Authorization........................... 13
10. Collection; Defaults................................................. 14
11. Maintenance of Records; Accounting Services........................... 14
12. Fund Evaluation....................................................... 14
13. Concerning the Bank................................................... 15
13.1 Performance of Duties;
Standard of Care ................................ 15
13.2 Agents and Subcustodians............................ 16
13.3 Duties of the Bank with Respect to Property
Held Outside of the United States................ 16
13.4 Insurance........................................... 19
13.5 Fees and Expenses of Bank.......................... 19
13.6 Advances by Bank................................... 20
14. Termination........................................................... 20
15. Confidentiality....................................................... 21
16. Notices............................................................... 21
17. Amendments............................................................ 21
18. Parties............................................................... 22
19. Governing Law......................................................... 22
20. Counterparts.......................................................... 22
<PAGE>
4
FORM OF
CUSTODIAN AGREEMENT
AGREEMENT made as of this 7th day of February, 1994, between BRANDES
INTERNATIONAL FUND, a Delaware business trust (the "Fund") and INVESTORS BANK &
TRUST COMPANY (the "Bank").
The Fund, an open-end management investment company, consisting of one
portfolio, Brandes International Fund, desires to place and maintain all of its
portfolio securities and cash in the custody of the Bank. The Bank has at least
the minimum qualifications required by Section 17(f)(1) of the Investment
Company Act of 1940 (the "1940 Act") to act as custodian of the portfolio
securities and cash of the Fund, and has indicated its willingness to so act,
subject to the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements contained herein, the parties hereto agree as follows:
1. Bank Appointed Custodian. The Fund hereby appoints the Bank as custodian
of its portfolio securities and cash delivered to the Bank as hereinafter
described and the Bank agrees to act as such upon the terms and conditions
hereinafter set forth.
2. Definitions. Whenever used herein, the terms listed below will have the
following meaning:
2.1 Authorized Person. Authorized Person will mean any of the persons
duly authorized to give Proper Instructions or otherwise act on behalf of the
Fund by appropriate resolution of its Board of Trustees (the "Board"), and set
forth in a certificate as required by Section 4 hereof.
2.2 Security. The term security as used herein will have the same
meaning as when such term is used in the Securities Act of 1933, as amended,
including, without limitation, any note, stock, treasury stock, bond, debenture,
evidence of indebtedness, certificate of interest or participation in any profit
sharing agreement, collateral-trust certificate, preorganization certificate or
subscription, transferable share, investment contract, voting-trust certificate,
certificate of deposit for a security, fractional undivided interest in oil,
gas, or other mineral rights, any put, call, straddle, option, or privilege on
any security, certificate of deposit, or group or index of securities (including
any interest therein or based on the value thereof), or any put, call, straddle,
option, or privilege entered into on a national securities exchange relating to
a foreign currency, or, in general, any interest or instrument commonly known as
a "security", or any certificate of interest or participation in, temporary or
interim certificate for, receipt for, guarantee of, or warrant or right to
subscribe to, or option contract to purchase or sell any of the foregoing, and
futures, forward contracts and options thereon.
<PAGE>
5
2.3 Portfolio Security. Portfolio Security will mean any security owned
by the Fund.
2.4 Officers' Certificate. Officers' Certificate will mean, unless
otherwise indicated, any request, direction, instruction, or certification in
writing signed by any two Authorized Persons of the Fund.
2.5 Book-Entry System. Book-Entry System shall mean the Federal
Reserve-Treasury Department Book Entry System for United States government,
instrumentality and agency securities operated by the Federal Reserve Bank, its
successor or successors and its nominee or nominees.
2.6 depository. Depository shall mean The Depository Trust Company
("DTC"), a clearing agency registered with the Securities and Exchange
Commission under Section 17A of the Securities Exchange Act of 1934 ("Exchange
Act"), its successor or successors and its nominee or nominees. The term
"Depository" shall further mean and include any United States or foreign person
authorized to act as a depository under the 1940 Act, its successor or
successors and its nominee or nominees, specifically identified in a certified
copy of a resolution of the Board.
2.7 Proper Instructions. Proper Instructions shall mean (i)
instructions regarding the purchase or sale of Portfolio Securities, and
payments and deliveries in connection therewith, given by an Authorized Person
as shall have been designated in an Officers' Certificate, such instructions to
be given in such form and manner as the Bank and the Fund shall agree upon from
time to time, and (ii) instructions (which may be continuing instructions)
regarding other matters signed or initialed by such one or more persons from
time to time designated in an Officers' Certificate as having been authorized by
the Board. Oral instructions will be considered Proper Instructions if the Bank
reasonably believes them to have been given by a person authorized to give such
instructions with respect to the transaction involved. The Fund shall cause all
oral instructions to be promptly confirmed in writing. The Bank shall act upon
and comply with any subsequent Proper Instruction which modifies a prior
instruction and the sole obligation of the Bank with respect to any follow-up or
confirmatory instruction shall be to make reasonable efforts to detect any
discrepancy between the original instruction and such confirmation and to report
such discrepancy to the Fund. The Fund shall be responsible, at the Fund's
expense, for taking any action, including any reprocessing, necessary to correct
any such discrepancy or error, and to the extent such action requires the Bank
to act the Fund shall give the Bank specific Proper Instructions as to the
action required. Upon receipt of an Officers' Certificate as to the
authorization by the Board accompanied by a detailed description of procedures
approved by the Fund, Proper Instructions may include communication effected
directly between electro-mechanical or electronic devices provided that the
Board and the Bank are satisfied that such procedures afford adequate safeguards
for the Fund's assets.
3. Separate Accounts. If the Fund has more than one series or portfolio,
the Bank will segregate the assets of each series or portfolio to which this
Agreement relates into a separate account for each such series or portfolio
containing the assets of such series or portfolio (and all investment earnings
thereon).
<PAGE>
6
4. Certification as to Authorized Persons. The Secretary or Assistant
Secretary of the Fund will at all times maintain on file with the Bank his or
her certification to the Bank, in such form as may be acceptable to the Bank, of
(i) the names and signatures of the Authorized Persons and (ii) the names of the
Board, it being understood that upon the occurrence of any change in the
information set forth in the most recent certification on file (including
without limitation any person named in the most recent certification who is no
longer an Authorized Person as designated therein), the Secretary or Assistant
Secretary of the Fund, will sign a new or amended certification setting forth
the change and the new, additional or omitted names or signatures. The Bank will
be entitled to rely and act upon any Officers' Certificate given to it by the
Fund which has been signed by Authorized Persons named in the most recent
certification.
5. Custody of Cash. As custodian for the Fund, the Bank will open and
maintain a separate account or accounts in the name of the Fund or in the name
of the Bank, as Custodian of the Fund, and will deposit to the account of the
Fund all of the cash of the Fund, except for cash held by a subcustodian
appointed pursuant to Section 13.2 hereof, including borrowed funds, delivered
to the Bank, subject only to draft or order by the Bank acting pursuant to the
terms of this Agreement. Upon receipt by the Bank of Proper Instructions (which
may be continuing instructions) or in the case of payments for redemptions and
repurchases of outstanding shares of common stock of the Fund, notification from
the Fund's transfer agent as provided in Section 7, requesting such payment,
designating the payee or the account or accounts to which the Bank will release
funds for deposit, and stating that it is for a purpose permitted under the
terms of this Section 5, specifying the applicable subsection, the Bank will
make payments of cash held for the accounts of the Fund, insofar as funds are
available for that purpose, only as permitted in subsections 5.1-5.9 below.
5.1 Purchase of Securities. Upon the purchase of securities for the
Fund, against contemporaneous receipt of such securities by the Bank registered
in the name of the Fund or in the name of, or properly endorsed and in form for
transfer to, the Bank, or a nominee of the Bank, or receipt for the account of
the Bank pursuant to the provisions of Section 6 below, each such payment to be
made at the purchase price shown on a broker's confirmation (or transaction
report in the case of Book Entry Paper) of purchase of the securities received
by the Bank before such payment is made, as confirmed in the Proper Instructions
received by the Bank before such payment is made.
5.2 Redemptions. In such amount as may be necessary for the repurchase
or redemption of common shares of the Fund offered for repurchase or redemption
in accordance with Section 7 of this Agreement.
5.3 Distributions and Expenses of Fund. For the payment on the account
of the Fund of dividends or other distributions to shareholders as may from time
to time be declared by the Board, interest, taxes, management or supervisory
fees, distribution fees, fees of the Bank for its services hereunder and
reimbursement of the expenses and liabilities of the Bank as provided
<PAGE>
7
hereunder, fees of any transfer agent, fees for legal, accounting, and auditing
services, or other operating expenses of the Fund.
5.4 Payment in Respect of Securities. For payments in connection with
the conversion, exchange or surrender of Portfolio Securities or securities
subscribed to by the Fund held by or to be delivered to the Bank.
5.5 Repayment of Loans. To repay loans of money made to the Fund, but,
in the case of final payment, only upon redelivery to the Bank of any Portfolio
Securities pledged or hypothecated therefor and upon surrender of documents
evidencing the loan;
5.6 Repayment of Cash. To repay the cash delivered to the Fund for the
purpose of collateralizing the obligation to return to the Fund certificates
borrowed from the Fund representing Portfolio Securities, but only upon
redelivery to the Bank of such borrowed certificates.
5.7 Foreign Exchange Transactions. For payments in connection with
foreign exchange contracts or options to purchase and sell foreign currencies
for spot and future delivery which may be entered into by the Bank on behalf of
the Fund upon the receipt of Proper Instructions, such Proper Instructions to
specify the currency broker or banking institution (which may be the Bank, or
any other subcustodian or agent hereunder, acting as principal) with which the
contract or option is made, and the Bank shall have no duty with respect to the
selection of such currency brokers or banking institutions with which the Fund
deals or for their failure to comply with the terms of any contract or option.
5.8 Other Authorized Payments. For other authorized transactions of the
Fund, or other obligations of the Fund incurred for proper Fund purposes;
provided that before making any such payment the Bank will also receive a
certified copy of a resolution of the Board signed by an Authorized Person
(other than the Person certifying such resolution) and certified by its
Secretary or Assistant Secretary, naming the person or persons to whom such
payment is to be made, and either describing the transaction for which payment
is to be made and declaring it to be an authorized transaction of the Fund, or
specifying the amount of the obligation for which payment is to be made, setting
forth the purpose for which such obligation was incurred and declaring such
purpose to be a proper corporate purpose.
5.9 Termination: upon the termination of this Agreement as hereinafter
set forth pursuant to Section 8 and Section 14 of this Agreement.
6. Securities.
6.1 Segregation and Registration. Except as otherwise provided herein,
and except for securities to be delivered to any subcustodian appointed pursuant
to Section 13.2 hereof, the Bank as custodian, will receive and hold pursuant to
the provisions hereof, in a separate account or accounts and physically
segregated at all times from those of other persons, any and all Portfolio
Securities which may now or hereafter be delivered to it by or for the account
of the
<PAGE>
8
Fund. All such Portfolio Securities will be held or disposed of by the Bank for,
and subject at all times to, the instructions of the Fund pursuant to the terms
of this Agreement. Subject to the specific provisions herein relating to
Portfolio Securities that are not physically held by the Bank, the Bank will
register all Portfolio Securities (unless otherwise directed by Proper
Instructions or an Officers' Certificate), in the name of a registered nominee
of the Bank as defined in the Internal Revenue Code and any Regulations of the
Treasury Department issued thereunder, and will execute and deliver all such
certificates in connection therewith as may be required by such laws or
regulations or under the laws of any state. The Bank will use its best efforts
to the end that the specific Portfolio Securities held by it hereunder will be
at all times identifiable.
The Fund will from time to time furnish to the Bank appropriate
instruments to enable it to hold or deliver in proper form for transfer, or to
register in the name of its registered nominee, any Portfolio Securities which
may from time to time be registered in the name of the Fund.
6.2 Voting and Proxies. Neither the Bank nor any nominee of the Bank
will vote any of the Portfolio Securities held hereunder, except in accordance
with Proper Instructions or an Officers' Certificate. The Bank will execute and
deliver, or cause to be executed and delivered, to the Fund all notices, proxies
and proxy soliciting materials with respect to such Securities, such proxies to
be executed by the registered holder of such Securities (if registered otherwise
than in the name of the Fund), but without indicating the manner in which such
proxies are to be voted.
6.3 Book-Entry System. Provided (i) the Bank has received a certified
copy of a resolution of the Board specifically approving deposits of Fund assets
in the Book-Entry System, and (ii) for any subsequent changes to such
arrangements following such approval, the Board has reviewed and approved the
arrangement and has not delivered an Officer's Certificate to the Bank
indicating that the Board has withdrawn its approval:
(a) The Bank may keep Portfolio Securities in the Book-Entry
System provided that such Portfolio Securities are represented in an account
("Account") of the Bank (or its agent) in such System which shall not include
any assets of the Bank (or such agent) other than assets held as a fiduciary,
custodian, or otherwise for customers;
(b) The records of the Bank (and any such agent) with respect to
the Fund's participation in the Book-Entry System through the Bank (or any such
agent) will identify by book entry Portfolio Securities which are included with
other securities deposited in the Account and shall at all times during the
regular business hours of the Bank (or such agent) be open for inspection by
duly authorized officers, employees or agents of the Fund. Where securities are
transferred to the Fund's account, the Bank shall also, by book entry or
otherwise, identify as belonging to the Fund a quantity of securities in
fungible bulk of securities (i) registered in the name of the Bank or its
nominee, or (ii) shown on the Bank's account on the books of the Federal Reserve
Bank;
(c) The Bank (or its agent) shall pay for securities purchased for
the account of the Fund or shall pay cash collateral against the return of
Portfolio Securities loaned by the Fund
<PAGE>
9
upon (i) receipt of advice from the Book-Entry System that such Securities have
been transferred to the Account, and (ii) the making of an entry on the records
of the Bank (or its agent) to reflect such payment and transfer for the account
of the Fund. The Bank (or its agent) shall transfer securities sold or loaned
for the account of the Fund upon
(i) receipt of advice from the Book-Entry System that payment
for securities sold or payment of the initial cash collateral against the
delivery of securities loaned by the Fund has been transferred to the Account;
and
(ii) the making of an entry on the records of the Bank (or its
agent) to reflect such transfer and payment for the account of the Fund. Copies
of all advices from the Book-Entry System of transfers of securities for the
account of the Fund shall identify the Fund, be maintained for the Fund by the
Bank and shall be provided to the Fund at its request. The Bank shall send the
Fund a confirmation, as defined by Rule 17f-4 of the 1940 Act, of any transfers
to or from the account of the Fund;
(d) The Bank will promptly provide the Fund with any report
obtained by the Bank or its agent on the Book-Entry System's accounting system,
internal accounting control and procedures for safeguarding securities deposited
in the Book-Entry System;
(e) The Bank shall be liable to the Fund for any loss or damage to
the Fund resulting from use of the Book-Entry System by reason of any gross
negligence, willful misfeasance or bad faith of the Bank or any of its agents or
of any of its or their employees or from any reckless disregard by the Bank or
any such agent of its duty to use its best efforts to enforce such rights as it
may have against the Book-Entry System; at the election of the Fund, it shall be
entitled to be subrogated for the Bank in any claim against the Book-Entry
System or any other person which the Bank or its agent may have as a consequence
of any such loss or damage if and to the extent that the Fund has not been made
whole for any loss or damage;
6.4 Use of a Depository. Provided (i) the Bank has received a certified
copy of a resolution of the Board specifically approving deposits in DTC or
other such Depository and (ii) for any subsequent changes to such arrangements
following such approval, the Board has reviewed and approved the arrangement and
has not delivered an Officer's Certificate to the Bank indicating that the Board
has withdrawn its approval:
(a) The Bank may use a Depository to hold, receive, exchange,
release, lend, deliver and otherwise deal with Portfolio Securities including
stock dividends, rights and other items of like nature, and to receive and remit
to the Bank on behalf of the Fund all income and other payments thereon and to
take all steps necessary and proper in connection with the collection thereof;
(b) Registration of Portfolio Securities may be made in the name
of any nominee or nominees used by such Depository;
<PAGE>
10
(c) Payment for securities purchased and sold may be made through
the clearing medium employed by such Depository for transactions of participants
acting through it. Upon any purchase of Portfolio Securities, payment will be
made only upon delivery of the securities to or for the account of the Fund and
the Fund shall pay cash collateral against the return of Portfolio Securities
loaned by the Fund only upon delivery of the Securities to or for the account of
the Fund; and upon any sale of Portfolio Securities, delivery of the Securities
will be made only against payment thereof or, in the event Portfolio Securities
are loaned, delivery of Securities will be made only against receipt of the
initial cash collateral to or for the account of the Fund; and
(d) The Bank shall be liable to the Fund for any loss or damage to
the Fund resulting from use of a Depository by reason of any gross negligence,
willful misfeasance or bad faith of the Bank or its employees or from any
reckless disregard by the Bank of its duty to use its best efforts to enforce
such rights as it may have against a Depository. In this connection, the Bank
shall use its best efforts to ensure that:
(i) The Depository obtains replacement of any certificated
Portfolio Security deposited with it in the event such Security is lost,
destroyed, wrongfully taken or otherwise not available to be returned to the
Bank upon its request;
(ii) Any proxy materials received by a Depository with respect
to Portfolio Securities deposited with such Depository are forwarded immediately
to the Bank for prompt transmittal to the Fund;
(iii) Such Depository immediately forwards to the Bank
confirmation of any purchase or sale of Portfolio Securities and of the
appropriate book entry made by such Depository to the Fund's account;
(iv) Such Depository prepares and delivers to the Bank such
records with respect to the performance of the Bank's obligations and duties
hereunder as may be necessary for the Fund to comply with the recordkeeping
requirements of Section 31(a) of the 1940 Act and Rule 31(a) thereunder; and
(v) Such Depository delivers to the Bank and the Fund all
internal accounting control reports, whether or not audited by an independent
public accountant, as well as such other reports as the Fund may reasonably
request in order to verify the Portfolio Securities held by such Depository.
6.5 Use of Book-Entry System for Commercial Paper. Provided (i) the
Bank has received a certified copy of a resolution of the Board specifically
approving participation in a system maintained by the Bank for the holding of
commercial paper in book-entry form ("Book-Entry Paper") and (ii) for each year
following such approval the Board has received and approved the arrangements,
upon receipt of Proper Instructions and upon receipt of confirmation from an
Issuer (as defined below) that the Fund has purchased such Issuer's Book-entry
Paper, the Bank
<PAGE>
11
shall issue and hold in book-entry form, on behalf of the Fund, commercial paper
issued by issuers with whom the Bank has entered into a book-entry agreement
(the "Issuers"). In maintaining its Book-entry Paper System, the Bank agrees
that:
(a) the Bank will maintain all Book-Entry Paper held by the Fund
in an account of the Bank that includes only assets held by it for customers;
(b) the records of the Bank with respect to the Fund's purchase of
Book-entry Paper through the Bank will identify, by book-entry, Commercial Paper
belonging to the Fund which is included in the Book-entry Paper System and shall
at all times during the regular business hours of the Bank be open for
inspection by duly authorized officers, employees or agents of the Fund;
(c) The Bank shall pay for Book-Entry Paper purchased for the
account of the Fund upon contemporaneous (i) receipt of advice from the Issuer
that such sale of Book-Entry Paper has been effected, and (ii) the making of an
entry on the records of the Bank to reflect such payment and transfer for the
account of the Fund;
(d) The Bank shall cancel such Book-Entry Paper obligation upon
the maturity thereof upon contemporaneous (i) receipt of advice that payment for
such Book-Entry Paper has been transferred to the Fund, and (ii) the making of
an entry on the records of the Bank to reflect such payment for the account of
the Fund;
(e) the Bank shall transmit to the Fund a transaction journal
confirming each transaction in Book-Entry Paper for the account of the Fund on
the next business day following the transaction; and
(f) the Bank will send to the Fund such reports on its system of
internal accounting control with respect to the Book-Entry Paper System as the
Fund may reasonably request from time to time.
6.6 Use of Immobilization Programs. Provided (i) the Bank has
received a certified copy of a resolution of the Board specifically approving
the maintenance of Portfolio Securities in an immobilization program operated by
a bank which meets the requirements of Section 26(a)(1) of the 1940 Act, and
(ii) for each year following such approval the Board has reviewed and approved
the arrangement and has not delivered an Officer's Certificate to the Bank
indicating that the Board has withdrawn its approval, the Bank shall enter into
such immobilization program with such bank acting as a subcustodian hereunder.
6.7 Eurodollar CDs. Any Portfolio Securities which are Eurodollar
CDs may be physically held by the European branch of the U.S. banking
institution that is the issuer of such Eurodollar CD (a "European Branch"),
provided that such Securities are identified on the books of the Bank as
belonging to the Fund and that the books of the Bank identify the European
Branch holding such Securities. Notwithstanding any other provision of this
Agreement to the contrary, except as stated in the first sentence of this
subsection 6.7, the Bank shall be under no
<PAGE>
12
other duty with respect to such Eurodollar CDs belonging to the Fund, and shall
have no liability to the Fund or its shareholders with respect to the actions,
inactions, whether negligent or otherwise of such European Branch in connection
with such Eurodollar CDs, except for any loss or damage to the Fund resulting
from the Bank's own gross negligence, willful misfeasance or bad faith in the
performance of its duties hereunder.
6.8 Options and Futures Transactions.
(a) Puts and Calls Traded on Securities Exchanges, NASDAQ or
Over-the-Counter.
1. The Bank shall take action as to put options ("puts") and
call options ("calls") purchased or sold (written) by the Fund regarding escrow
or other arrangements (i) in accordance with the provisions of any agreement
entered into upon receipt of Proper Instructions between the Bank, any
broker-dealer registered under the Exchange Act and a member of the National
Association of Securities Dealers, Inc. (the "NASD"), and, if necessary, the
Fund relating to the compliance with the rules of the Options Clearing
Corporation and of any registered national securities exchange, or of any
similar organization or organizations.
2. Unless another agreement requires it to do so, the Bank
shall be under no duty or obligation to see that the Fund has deposited or is
maintaining adequate margin, if required, with any broker in connection with any
option, nor shall the Bank be under duty or obligation to present such option to
the broker for exercise unless it receives Proper Instructions from the Fund.
The Bank shall have no responsibility for the legality of any put or call
purchased or sold on behalf of the Fund, the propriety of any such purchase or
sale, or the adequacy of any collateral delivered to a broker in connection with
an option or deposited to or withdrawn from a Segregated Account (as defined in
subsection 6.9 below). The Bank specifically, but not by way of limitation,
shall not be under any duty or obligation to: (i) periodically check or notify
the Fund that the amount of such collateral held by a broker or held in a
Segregated Account is sufficient to protect such broker of the Fund against any
loss; (ii) effect the return of any collateral delivered to a broker; or (iii)
advise the Fund that any option it holds, has or is about to expire. Such duties
or obligations shall be the sole responsibility of the Fund.
(b) Puts, Calls and Futures Traded on Commodities Exchanges
1. The Bank shall take action as to puts, calls and futures
contracts ("Futures") purchased or sold by the Fund in accordance with the
provisions of any agreement among the Fund, the Bank and a Futures Commission
Merchant registered under the Commodity Exchange Act, relating to compliance
with the rules of the Commodity Futures Trading Commission and/or any Contract
Market, or any similar organization or organizations, regarding account deposits
in connection with transactions by the Fund.
2. The responsibilities and liabilities of the Bank as to
Futures, puts and calls traded on commodities exchanges, any Futures Commission
Merchant account and the Segregated Account shall be limited as set forth in
subparagraph (a)(2) of this Section 6.8 as if
<PAGE>
13
such subparagraph referred to Futures Commission Merchants rather than brokers,
and Futures and puts and calls thereon instead of options.
6.9 Segregated Account. The Bank shall upon receipt of Proper
Instructions establish and maintain a Segregated Account or Accounts for and on
behalf of the Fund, into which Account or Accounts may be transferred upon
receipt of Proper Instructions cash and/or Portfolio Securities:
(a) in accordance with the provisions of any agreement among the
Fund, the Bank and a broker-dealer registered under the Exchange Act and a
member of the NASD or any Futures Commission Merchant registered under the
Commodity Exchange Act, relating to compliance with the rules of the Options
Clearing Corporation and of any registered national securities exchange or the
Commodity Futures Trading Commission or any registered Contract Market, or of
any similar organizations regarding escrow or other arrangements in connection
with transactions by the Fund;
(b) for the purpose of segregating cash or securities in
connection with options purchased or written by the Fund or commodity futures
purchased or written by the Fund;
(c) for the deposit of liquid assets, such as cash, U.S.
Government securities or other high grade debt obligations, having a market
value (marked to market on a daily basis) at all times equal to not less than
the aggregate purchase price due on the settlement dates of all the Fund's then
outstanding forward commitment or "when-issued" agreements relating to the
purchase of Portfolio Securities and all the Fund's then outstanding commitments
under reverse repurchase agreements entered into with broker-dealer firms;
(d) for the deposit of any Portfolio Securities which the Fund has
agreed to sell on a forward commitment basis, all in accordance with Investment
Company Act Release No. 10666;
(e) for the purposes of compliance by the Fund with the
procedures required by Investment Company Act Release No. 10666, or any
subsequent release or releases of the Securities and Exchange Commission
relating to the maintenance of Segregated Accounts by registered investment
companies;
(f) for other proper corporate purposes, but only, in the case of
this clause (f), upon receipt of, in addition to Proper Instructions, a
certified copy of a resolution of the Board, or of the Executive Committee
signed by an officer of the Fund and certified by the Secretary or an Assistant
Secretary, setting forth the purpose or purposes of such Segregated Account and
declaring such purposes to be proper corporate purposes.
(g) Assets may be withdrawn from the Segregated Account pursuant
to Proper Instructions only
(i) in accordance with the provisions of any agreements
referenced in (a) or (b) above;
<PAGE>
14
(ii) for sale or delivery to meet the Fund's obligations
under outstanding firm commitment or when-issued agreements for
the purchase of Portfolio Securities and under reverse repurchase
agreements;
(iii) for exchange for other liquid assets of equal or
greater value deposited in the Segregated Account;
(iv) to the extent that the Fund's outstanding forward
commitment or when-issued agreements for the purchase of portfolio
securities or reverse repurchase agreements are sold to other
parties or the Fund's obligations thereunder are met from assets
of the Fund other than those in the Segregated Account; or
(v) for delivery upon settlement of a forward commitment
agreement for the sale of Portfolio Securities.
6.10 Interest Bearing Call or Time Deposits. The Bank shall, upon
receipt of Proper Instructions relating to the purchase by the Fund of
interest-bearing fixed-term and call deposits, transfer cash, by wire or
otherwise, in such amounts and to such bank or banks as shall be indicated in
such Proper Instructions. The Bank shall include in its records with respect to
the assets of the Fund appropriate notation as to the amount of each such
deposit, the banking institution with which such deposit is made (the "Deposit
Bank"), and shall retain such forms of advice or receipt evidencing the deposit,
if any, as may be forwarded to the Bank by the Deposit Bank. Such deposits shall
be deemed Portfolio Securities of the Fund and the responsibility of the Bank
therefore shall be the same as and no greater than the Bank's responsibility in
respect of other Portfolio Securities of the Fund.
6.11 Transfer of Securities. The Bank will transfer, exchange, deliver
or release Portfolio Securities held by it hereunder, insofar as such Securities
are available for such purpose, provided that before making any transfer,
exchange, delivery or release under this Section the Bank will receive Proper
Instructions requesting such transfer, exchange or delivery stating that it is
for a purpose permitted under the terms of this Section 6.11, specifying the
applicable subsection, or describing the purpose of the transaction with
sufficient particularity to permit the Bank to ascertain the applicable
subsection, only
(a) upon sales of Portfolio Securities for the account of the
Fund, against contemporaneous receipt by the Bank of payment therefor in full,
each such payment to be in the amount of the sale price shown in a broker's
confirmation of sale of the Portfolio Securities received by the Bank before
such payment is made, as confirmed in the Proper Instructions received by the
Bank before such payment is made;
(b) in exchange for or upon conversion into other securities alone
or other securities and cash pursuant to any plan of merger, consolidation,
reorganization, share split-up, change in par value, recapitalization or
readjustment or otherwise, upon exercise of subscription, purchase or sale or
other similar rights represented by such Portfolio Securities, or for the
purpose of
<PAGE>
15
tendering shares in the event of a tender offer therefor, provided however that
in the event of an offer of exchange, tender offer, or other exercise of rights
requiring the physical tender or delivery of Portfolio Securities, the Bank
shall have no liability for failure to so tender in a timely manner unless such
Proper Instructions are received by the Bank at least two business days prior to
the date required for tender, and unless the Bank (or its agent or subcustodian
hereunder) has actual possession of such Security at least two business days
prior to the date of tender;
(c) upon conversion of Portfolio Securities pursuant to their
terms into other securities;
(d) for the purpose of redeeming in kind shares of the Fund upon
authorization from the Fund;
(e) in the case of option contracts owned by the Fund, for
presentation to the endorsing broker;
(f) when such Portfolio Securities are called, redeemed or retired
or otherwise become payable;
(g) for the purpose of effectuating the pledge of Portfolio
Securities held by the Bank in order to collateralize loans made to the Fund by
any bank, including the Bank; provided, however, that such Portfolio Securities
will be released only upon payment to the Bank for the account of the Fund of
the moneys borrowed, except that in cases where additional collateral is
required to secure a borrowing already made, and such fact is made to appear in
the Proper Instructions, further Portfolio Securities may be released for that
purpose without any such payment. In the event that any such pledged Portfolio
Securities are held by the Bank, they will be so held for the account of the
lender, and after notice to the Fund from the lender in accordance with the
normal procedures of the lender, that an event of deficiency or default on the
loan has occurred, the Bank may deliver such pledged Portfolio Securities to or
for the account of the lender;
(h) for the purpose of releasing certificates representing
Portfolio Securities, against contemporaneous receipt by the Bank of the fair
market value of such security, as set forth in the Proper Instructions received
by the Bank before such payment is made;
(i) for the purpose of delivering securities lent by the Fund to a
bank or broker dealer, but only against receipt in accordance with street
delivery custom except as otherwise provided herein, of adequate collateral as
agreed upon from time to time by the Fund and the Bank, and upon receipt of
payment in connection with any repurchase agreement relating to such securities
entered into by the Fund;
(j) for other authorized transactions of the Fund or for other
proper corporate purposes; provided that before making such transfer, the Bank
will also receive a certified copy of resolutions of the Board, signed by an
authorized officer of the Fund (other than the officer
<PAGE>
16
certifying such resolution) and certified by its Secretary or Assistant
Secretary, specifying the Portfolio Securities to be delivered, setting forth
the transaction in or purpose for which such delivery is to be made, declaring
such transaction to be an authorized transaction of the Fund or such purpose to
be a proper corporate purpose, and naming the person or persons to whom delivery
of such securities shall be made; and
(k) upon termination of this Agreement as hereinafter set forth
pursuant to Section 8 and Section 14 of this Agreement.
As to any deliveries made by the Bank pursuant to subsections (a), (b),
(c), (e), (f), (g), (h) and (i) securities or cash receivable in exchange
therefor shall be delivered to the Bank.
7. Redemptions. In the case of payment of assets of the Fund held by
the Bank in connection with redemptions and repurchases by the Fund of
outstanding common shares, the Bank will rely on notification by the Fund's
transfer agent of receipt of a request for redemption and certificates, if
issued, in proper form for redemption before such payment is made. Payment shall
be made in accordance with the Articles and By-laws of the Fund, from assets
available for said purpose.
8. Merger, Dissolution, etc. of Fund. In the case of the following
transactions, not in the ordinary course of business, namely, the merger of the
Fund into or the consolidation of the Fund with another investment company, the
sale by the Fund of all, or substantially all, of its assets to another
investment company, or the liquidation or dissolution of the Fund and
distribution of its assets, the Bank will deliver the Portfolio Securities held
by it under this Agreement and disburse cash only upon the order of the Fund set
forth in an Officers' Certificate, accompanied by a certified copy of a
resolution of the Board authorizing any of the foregoing transactions. Upon
completion of such delivery and disbursement and the payment of the fees,
disbursements and expenses of the Bank, this Agreement will terminate.
9. Actions of Bank Without Prior Authorization. Notwithstanding
anything herein to the contrary, unless and until the Bank receives an Officers'
Certificate to the contrary, it will without prior authorization or instruction
of the Fund or the transfer agent:
9.1 Endorse for collection and collect on behalf of and in the
name of the Fund all checks, drafts, or other negotiable or transferable
instruments or other orders for the payment of money received by it for the
account of the Fund and hold for the account of the Fund all income, dividends,
interest and other payments or distribution of cash with respect to the
Portfolio Securities held thereunder;
9.2 Present for payment all coupons and other income items held by
it for the account of the Fund which call for payment upon presentation and hold
the cash received by it upon such payment for the account of the Fund;
<PAGE>
17
9.3 Receive and hold for the account of the Fund all securities
received as a distribution on Portfolio Securities as a result of a stock
dividend, share split-up, reorganization, recapitalization, merger,
consolidation, readjustment, distribution of rights and similar securities
issued with respect to any Portfolio Securities held by it hereunder.
9.4 Execute as agent on behalf of the Fund all necessary ownership
and other certificates and affidavits required by the Internal Revenue Code or
the regulations of the Treasury Department issued thereunder, or by the laws of
any state, now or hereafter in effect, inserting the Fund's name on such
certificates as the owner of the securities covered thereby, to the extent it
may lawfully do so and as may be required to obtain payment in respect thereof.
The Bank will execute and deliver such certificates in connection with Portfolio
Securities delivered to it or by it under this Agreement as may be required
under the provisions of the Internal Revenue Code and any Regulations of the
Treasury Department issued thereunder, or under the laws of any State;
9.5 Present for payment all Portfolio Securities which are called,
redeemed, retired or otherwise become payable, and hold cash received by it upon
payment for the account of the Fund; and
9.6 Exchange interim receipts or temporary securities for
definitive securities.
10. Collections and Defaults. The Bank will use all reasonable efforts to
collect any funds which may to its knowledge become collectible arising from
Portfolio Securities, including dividends, interest and other income, and to
transmit to the Fund notice actually received by it of any call for redemption,
offer of exchange, right of subscription, reorganization or other proceedings
affecting such Securities. If Portfolio Securities upon which such income is
payable are in default or payment is refused after due demand or presentation,
the Bank will notify the Fund in writing of any default or refusal to pay within
two business days from the day on which it receives knowledge of such default or
refusal. In addition, the Bank will send the Fund a written report once each
month showing any income on any Portfolio Security held by it which is more than
ten days overdue on the date of such report and which has not previously been
reported.
11. Maintenance of Records and Accounting Services. The Bank will maintain
records with respect to transactions for which the Bank is responsible pursuant
to the terms and conditions of this Agreement, and in compliance with the
applicable rules and regulations of the 1940 Act and will furnish the Fund daily
with a statement of condition of the Fund. The Bank will furnish to the Fund at
the end of every month, and at the close of each quarter of the Fund's fiscal
year, a list of the Portfolio Securities and the aggregate amount of cash held
by it for the Fund. The books and records of the Bank pertaining to its actions
under this Agreement and reports by the Bank or its independent accountants
concerning its accounting system, procedures for safeguarding securities and
internal accounting controls will be open to inspection and audit at reasonable
times by officers of or auditors employed by the Fund and will be preserved by
the Bank in the manner and in accordance with the applicable rules and
regulations under the 1940 Act.
<PAGE>
18
The Bank shall keep the books of account and render statements or copies
from time to time as reasonably requested by the Treasurer or any executive
officer of the Fund.
The Bank shall assist generally in the preparation of reports to
shareholders and others, audits of accounts, and other ministerial matters of
like nature.
12. Fund Evaluation. The Bank shall compute and, unless otherwise directed
by the Board, determine as of the close of business on the New York Stock
Exchange on each day on which said Exchange is open for unrestricted trading and
as of such other hours, if any, as may be authorized by the Board the net asset
value and the public offering price of a share of capital stock of the Fund,
such determination to be made in accordance with the provisions of the Articles
and By-laws of the Fund and Prospectus and Statement of Additional Information
relating to the Fund, as they may from time to time be amended, and any
applicable resolutions of the Board at the time in force and applicable; and
promptly to notify the Fund, the proper exchange and the NASD or such other
persons as the Fund may request of the results of such computation and
determination. In computing the net asset value hereunder, the Bank may rely in
good faith upon information furnished to it by any Authorized Person in respect
of (i) the manner of accrual of the liabilities of the Fund and in respect of
liabilities of the Fund not appearing on its books of account kept by the Bank,
(ii) reserves, if any, authorized by the Board or that no such reserves have
been authorized, (iii) the source of the quotations to be used in computing the
net asset value, (iv) the value to be assigned to any security for which no
price quotations are available, and (v) the method of computation of the public
offering price on the basis of the net asset value of the shares, and the Bank
shall not be responsible for any loss occasioned by such reliance or for any
good faith reliance on any quotations received from a source pursuant to (iii)
above.
13. Concerning the Bank.
13.1 Performance of Duties and Standard of Care.
In performing its duties hereunder and any other duties listed on any
Schedule hereto, if any, the Bank will be entitled to receive and act upon the
advice of independent counsel of its own selection, which may be counsel for the
Fund, and will be without liability for any action taken or thing done or
omitted to be done in accordance with this Agreement in good faith in conformity
with such advice. In the performance of its duties hereunder, the Bank will be
protected and not be liable, and will be indemnified and held harmless for any
action taken or omitted to be taken by it in good faith reliance upon the terms
of this Agreement, any Officers' Certificate, Proper Instructions, resolution of
the Board, telegram, notice, request, certificate or other instrument reasonably
believed by the Bank to be genuine and for any other loss to the Fund except in
the case of its gross negligence, willful misfeasance or bad faith in the
performance of its duties or reckless disregard of its obligations and duties
hereunder.
The Bank will be under no duty or obligation to inquire into and will not
be liable for:
(a) the validity of the issue of any Portfolio Securities
purchased by or for the Fund, the legality of the purchases thereof or the
propriety of the price incurred therefor;
<PAGE>
19
(b) the legality of any sale of any Portfolio Securities by or for
the Fund or the propriety of the amount for which the same are sold;
(c) the legality of an issue or sale of any common shares of the
Fund or the sufficiency of the amount to be received therefor;
(d) the legality of the repurchase of any common shares of the
Fund or the propriety of the amount to be paid therefor;
(e) the legality of the declaration of any dividend by the Fund or
the legality of the distribution of any Portfolio Securities as payment in kind
of such dividend; and
(f) any property or moneys of the Fund unless and until received
by it, and any such property or moneys delivered or paid by it pursuant to the
terms hereof.
Moreover, the Bank will not be under any duty or obligation to ascertain
whether any Portfolio Securities at any time delivered to or held by it for the
account of the Fund are such as may properly be held by the Fund under the
provisions of its Articles, By-laws, any federal or state statutes or any rule
or regulation of any governmental agency.
Notwithstanding anything in this Agreement to the contrary, in no event
shall the Bank be liable hereunder or to any third party:
(a) for any losses or damages of any kind resulting from acts of
God, earthquakes, fires, floods, storms or other disturbances of nature,
epidemics, strikes, riots, nationalization, expropriation, currency
restrictions, acts of war, civil war or terrorism, insurrection, nuclear fusion,
fission or radiation, the interruption, loss or malfunction of utilities,
transportation, or computers (hardware or software) and computer facilities, the
unavailability of energy sources and other similar happenings or events except
as results from the Bank's own gross negligence; or
(b) for special, punitive or consequential damages arising from
the provision of services hereunder, even if the Bank has been advised of the
possibility of such damages.
13.2 Agents and Subcustodians with Respect to Property of the Fund Held
in the United States. The Bank may employ agents in the performance of its
duties hereunder and shall be responsible for the acts and omissions of such
agents as if performed by the Bank hereunder.
Upon receipt of Proper Instructions, the Bank may employ certain
subcustodians, selected by the Funds, provided that any such subcustodian meets
at least the minimum qualifications required by Section 17(f)(1) of the 1940 Act
to act as a custodian of the Fund's assets with respect to property of the Fund
held in the United States. The Bank shall have no liability to the Fund or any
other person by reason of any act or omission of any such subcustodian and the
Fund shall indemnify the Bank and hold it harmless from and against any and all
actions, suits and claims,
<PAGE>
20
arising directly or indirectly out of the performance of any such subcustodian.
Upon request of the Bank, the Fund shall assume the entire defense of any
action, suit, or claim subject to the foregoing indemnity. The Fund shall pay
all fees and expenses of any such subcustodian.
13.3 Duties of the Bank with Respect to Property of the Fund Held
Outside of the United States.
(a) Appointment of Foreign Sub-Custodians. The Fund hereby
authorizes and instructs the Bank to employ as sub-custodians for the Fund's
Portfolio Securities and other assets maintained outside the United States the
foreign banking institutions and foreign securities depositories designated on
the Schedule attached hereto (each, a "Selected Foreign Sub-Custodian"). Upon
receipt of Proper Instructions, together with a certified resolution of the
Fund's Board of Trustees, the Bank and the Fund may agree to designate
additional foreign banking institutions and foreign securities depositories to
act as Selected Foreign Sub-Custodians hereunder. Upon receipt of Proper
Instructions, the Fund may instruct the Bank to cease the employment of any one
or more such Selected Foreign Sub-Custodians for maintaining custody of the
Fund's assets, and the Bank shall so cease to employ such sub-custodian as soon
as alternate custodial arrangements have been implemented.
(b) Foreign Securities Depositories. Except as may otherwise be
agreed upon in writing by the Bank and the Fund, assets of the Fund shall be
maintained in foreign securities depositories only through arrangements
implemented by the foreign banking institutions serving as Selected Foreign
Sub-Custodians pursuant to the terms hereof. Where possible, such arrangements
shall include entry into agreements containing the provisions set forth in
subparagraph (d) hereof. Notwithstanding the foregoing, except as may otherwise
be agreed upon in writing by the Bank and the Fund, the Fund authorizes the
deposit in Euro-clear, the securities clearance and depository facilities
operated by Morgan Guaranty Trust Company of New York in Brussels, Belgium, of
Foreign Portfolio Securities eligible for deposit therein and to utilize such
securities depository in connection with settlements of purchases and sales of
securities and deliveries and returns of securities, until notified to the
contrary pursuant to subparagraph (a) hereunder.
(c) Segregation of Securities. The Bank shall identify on its
books as belonging to the Fund the Foreign Portfolio Securities held by each
Selected Foreign Sub-Custodian. Each agreement pursuant to which the Bank
employs a foreign banking institution shall require that such institution
establish a custody account for the Bank and hold in that account, Foreign
Portfolio Securities and other assets of the Fund, and, in the event that such
institution deposits Foreign Portfolio Securities in a foreign securities
depository, that it shall identify on its books as belonging to the Bank the
securities so deposited.
(d) Agreements with Foreign Banking Institutions. Each of the
agreements pursuant to which a foreign banking institution holds assets of the
Fund (each, a "Foreign Sub-Custodian Agreement") shall be substantially in the
form previously made available to the Fund and shall provide that: (a) the
Fund's assets will not be subject to any right, charge, security interest, lien
or
<PAGE>
21
claim of any kind in favor of the foreign banking institution or its creditors
or agent, except a claim of payment for their safe custody or administration
(including, without limitation, any fees or taxes payable upon transfers or
reregistration of securities); (b) beneficial ownership of the Fund's assets
will be freely transferable without the payment of money or value other than for
custody or administration (including, without limitation, any fees or taxes
payable upon transfers or reregistration of securities); (c) adequate records
will be maintained identifying the assets as belonging to the Fund; (d) officers
of or auditors employed by, or other representatives of the Bank, including to
the extent permitted under applicable law, the independent public accountants
for the Fund, will be given access to the books and records of the foreign
banking institution relating to its actions under its agreement with the Bank;
and (e) assets of the Fund held by the Selected Foreign Sub-Custodian will be
subject only to the instructions of the Bank or its agents.
(e) Access of Independent Accountants of the Fund. Upon request of
the Fund, the Bank will use its best efforts to arrange for the independent
accountants of the Fund to be afforded access to the books and records of any
foreign banking institution employed as a Selected Foreign Sub-Custodian insofar
as such books and records relate to the performance of such foreign banking
institution under its Foreign Sub-Custodian Agreement.
(f) Reports by Bank. The Bank will supply to the Fund from time to
time, as mutually agreed upon, statements in respect of the securities and other
assets of the Fund held by Selected Foreign Sub-Custodians, including but not
limited to an identification of entities having possession of the Foreign
Portfolio Securities and other assets of the Fund.
(g) Transactions in Foreign Custody Account. Transactions with
respect to the assets of the Fund held by a Selected Foreign Sub-Custodian shall
be effected pursuant to Proper Instructions from the Fund to the Bank and shall
be effected in accordance with the applicable Foreign Sub-Custodian Agreement.
If at any time any Foreign Portfolio Securities shall be registered in the name
of the nominee of the Selected Foreign Sub-Custodian, the Fund agrees to hold
any such nominee harmless from any liability by reason of the registration of
such securities in the name of such nominee.
Notwithstanding any provision of this Agreement to the contrary,
settlement and payment for Foreign Portfolio Securities received for the account
of the Fund and delivery of Foreign Portfolio Securities maintained for the
account of the Fund may be effected in accordance with the customary established
securities trading or securities processing practices and procedures in the
jurisdiction or market in which the transaction occurs, including, without
limitation, delivering securities to the purchaser thereof or to a dealer
therefor (or an agent for such purchaser or dealer) against a receipt with the
expectation of receiving later payment for such securities from such purchaser
or dealer.
In connection with any action to be taken with respect to the
Foreign Portfolio Securities held hereunder, including, without limitation, the
exercise of any voting rights, subscription rights, redemption rights, exchange
rights, conversion rights or tender rights, or any
<PAGE>
22
other action in connection with any other right, interest or privilege with
respect to such Securities (collectively, the "Rights"), the Bank shall promptly
transmit to the Fund such information in connection therewith as is made
available to the Bank by the Foreign Sub-Custodian, and shall promptly forward
to the applicable Foreign Sub-Custodian any instructions, forms or
certifications with respect to such Rights, and any instructions relating to the
actions to be taken in connection therewith, as the Bank shall receive from the
Fund pursuant to Proper Instructions. Notwithstanding the foregoing, the Bank
shall have no further duty or obligation with respect to such Rights, including,
without limitation, the determination of whether the Fund is entitled to
participate in such Rights under applicable U.S. and foreign laws, or the
determination of whether any action proposed to be taken with respect to such
Rights by the Fund or by the applicable Foreign Sub-Custodian will comply with
all applicable terms and conditions of any such Rights or any applicable laws or
regulations, or market practices within the market in which such action is to be
taken or omitted.
(h) Liability of Selected Foreign Sub-Custodians. Each Foreign
Sub-Custodian Agreement with a foreign banking institution shall require the
institution to exercise reasonable care in the performance of its duties and to
indemnify, and hold harmless, the Bank and each Fund from and against certain
losses, damages, costs, expenses, liabilities or claims arising out of or in
connection with the institution's performance of such obligations, all as set
forth in the applicable Foreign Sub-Custodian Agreement. The Fund acknowledges
that the Bank, as a participant in Euro-clear, is subject to the Terms and
Conditions Governing the Euro-Clear System, a copy of which has been made
available to the Fund. The Fund acknowledges that pursuant to such Terms and
Conditions, Morgan Guaranty Brussels shall have the sole right to exercise or
assert any and all rights or claims in respect of actions or omissions of, or
the bankruptcy or insolvency of, any other depository, clearance system or
custodian utilized by Euro-clear in connection with the Fund's securities and
other assets.
(i) Liability of Bank. The Bank shall have no more or less
responsibility or liability on account of the acts or omissions of any Selected
Foreign Sub-Custodian employed hereunder than any such Selected Foreign
Sub-Custodian has to the Bank and, without limiting the foregoing, the Bank
shall not be liable for any loss, damage, cost, expense, liability or claim
resulting from nationalization, expropriation, currency restrictions, or acts of
war or terrorism, political risk (including, but not limited to, exchange
control restrictions, confiscation, insurrection, civil strife or armed
hostilities) other losses due to Acts of God, nuclear incident or any loss where
the Selected Foreign Sub-Custodian has otherwise exercised reasonable care.
(j) Monitoring Responsibilities. The Bank shall furnish annually
to the Fund, information concerning the Selected Foreign Sub-Custodians employed
hereunder for use by the Fund in evaluating such Selected Foreign Sub-Custodians
to ensure compliance with the requirements of Rule 17f-5 of the Act. In
addition, the Bank will promptly inform the Fund in the event that the Bank is
notified by a Selected Foreign Sub-Custodian that there appears to be a
substantial likelihood that its shareholders' equity will decline below $200
million (U.S. dollars or the equivalent thereof) or that its shareholders'
equity has declined below $200 million (in each
<PAGE>
23
case computed in accordance with generally accepted U.S. accounting principles)
or any other capital adequacy test applicable to it by exemptive order, or if
the Bank has actual knowledge of any material loss of the assets of the Fund
held by a Foreign Sub-Custodian.
(k) Tax Law. The Bank shall have no responsibility or liability
for any obligations now or hereafter imposed on the Fund or the Bank as
custodian of the Fund by the tax laws of any jurisdiction, and it shall be the
responsibility of the Fund to notify the Bank of the obligations imposed on the
Fund or the Bank as the custodian of the Fund by the tax law of any non-U.S.
jurisdiction, including responsibility for withholding and other taxes,
assessments or other governmental charges, certifications and governmental
reporting. The sole responsibility of the Custodian with regard to such tax law
shall be to use reasonable efforts to assist the Fund with respect to any claim
for exemption or refund under the tax law of jurisdictions for which the Fund
has provided such information.
13.4 Insurance. The Bank shall use the same care with respect to the
safekeeping of Portfolio Securities and cash of the Fund held by it as it uses
in respect of its own similar property but it need not maintain any special
insurance for the benefit of the Fund.
13.5. Fees and Expenses of Bank. The Fund will pay or reimburse the
Bank from time to time for any transfer taxes payable upon transfer of Portfolio
Securities made hereunder, and for all necessary proper disbursements, expenses
and charges made or incurred by the Bank in the performance of this Agreement
(including any duties listed on any Schedule hereto, if any) including any
indemnities for any loss, liabilities or expense to the Bank as provided above.
For the services rendered by the Bank hereunder, the Fund will pay to the Bank
such compensation or fees at such rate and at such times as shall be agreed upon
in writing by the parties from time to time. The Bank will also be entitled to
reimbursement by the Fund for all reasonable expenses incurred in conjunction
with termination of this Agreement by the Fund.
13.6 Advances by Bank. The Bank may, in its sole discretion, advance
funds on behalf of the Fund to make any payment permitted by this Agreement upon
receipt of any proper authorization required by this Agreement for such payments
by the Fund. Should such a payment or payments, with advanced funds, result in
an overdraft (due to insufficiencies of the Fund's account with the Bank, or for
any other reason) this Agreement deems any such overdraft or related
indebtedness, a loan made by the Bank to the Fund payable on demand and bearing
interest at the current rate charged by the Bank for such loans unless the Fund
shall provide the Bank with agreed upon compensating balances. The Fund agrees
that the Bank shall have a continuing lien and security interest to the extent
of any overdraft or indebtedness, in and to any property at any time held by it
for the Fund's benefit or in which the Fund has an interest and which is then in
the Bank's possession or control (or in the possession or control of any third
party acting on the Bank's behalf). The Fund authorizes the Bank, in its sole
discretion, at any time to
<PAGE>
24
charge any overdraft or indebtedness, together with interest due thereon against
any balance of account standing to the credit of the Fund on the Bank's books.
14. Termination.
14.1 This Agreement may be terminated at any time without penalty upon
sixty days written notice delivered by either party to the other by means of
registered mail, and upon the expiration of such sixty days this Agreement will
terminate; provided, however, that the effective date of such termination may be
postponed to a date not more than ninety days from the date of delivery of such
notice (i) by the Bank in order to prepare for the transfer by the Bank of all
of the assets of the Fund held hereunder, and (ii) by the Fund in order to give
the Fund an opportunity to make suitable arrangements for a successor custodian.
At any time after the termination of this Agreement, the Fund will, at its
request, have access to the records of the Bank relating to the performance of
its duties as custodian.
14.2 In the event of the termination of this Agreement, the Bank will
immediately upon receipt or transmittal, as the case may be, of notice of
termination, commence and prosecute diligently to completion the transfer of all
cash and the delivery of all Portfolio Securities duly endorsed and all records
maintained under Section 11 to the successor custodian when appointed by the
Fund. The obligation of the Bank to deliver and transfer over the assets of the
Fund held by it directly to such successor custodian will commence as soon as
such successor is appointed and will continue until completed as aforesaid. If
the Fund does not select a successor custodian within ninety (90) days from the
date of delivery of notice of termination the Bank may, subject to the
provisions of subsection (14.3), deliver the Portfolio Securities and cash of
the Fund held by the Bank to a bank or trust company of its own selection which
meets the requirements of Section 17(f)(1) of the 1940 Act and has a reported
capital, surplus and undivided profits aggregating not less than $2,000,000, to
be held as the property of the Fund under terms similar to those on which they
were held by the Bank, whereupon such bank or trust company so selected by the
Bank will become the successor custodian of such assets of the Fund with the
same effect as though selected by the Board.
14.3 Prior to the expiration of ninety (90) days after notice of
termination has been given, the Fund may furnish the Bank with an order of the
Fund advising that a successor custodian cannot be found willing and able to act
upon reasonable and customary terms and that there has been submitted to the
shareholders of the Fund the question of whether the Fund will be liquidated or
will function without a custodian for the assets of the Fund held by the Bank.
In that event the Bank will deliver the Portfolio Securities and cash of the
Fund held by it, subject as aforesaid, in accordance with one of such
alternatives which may be approved by the requisite vote of shareholders, upon
receipt by the Bank of a copy of the minutes of the meeting of
<PAGE>
25
shareholders at which action was taken, certified by the Fund's Secretary and an
opinion of counsel to the Fund in form and content satisfactory to the Bank.
15. Confidentiality. Both parties hereto agree than any non-public
information obtained hereunder concerning the other party is confidential and
may not be disclosed to any other person without the consent of the other party,
except as may be required by applicable law or at the request of a governmental
agency. The parties further agree that a breach of this provision would
irreparably damage the other party and accordingly agree that each of them is
entitled, without bond or other security, to an injunction or injunctions to
prevent breaches of this provision.
16. Notices. Any notice or other instrument in writing authorized or
required by this Agreement to be given to either party hereto will be
sufficiently given if addressed to such party and mailed or delivered to it at
its office at the address set forth below; namely:
(a) In the case of notices sent to the Fund to:
Brandes International Fund
12750 High Bluff Drive
Suite 420
San Diego, CA 92130
Attention: Barry P. O'Neil
(b) In the case of notices sent to the Bank to:
Investors Bank & Trust Company
89 South Street
Boston, Massachusetts 02111
Attention: Hank Joyce
or at such other place as such party may from time to time designate in
writing.
17. Amendments. This Agreement may not be altered or amended, except by an
instrument in writing, executed by both parties, and in the case of the Fund,
such alteration or amendment will be authorized and approved by its Board.
18. Parties. This Agreement will be binding upon and shall inure to the
benefit of the parties hereto and their respective successors and assigns;
provided, however, that this Agreement will not be assignable by the Fund
without the written consent of the Bank or by the Bank without the written
consent of the Fund, authorized and approved by its Board; and provided further
that
<PAGE>
26
termination proceedings pursuant to Section 14 hereof will not be deemed to be
an assignment within the meaning of this provision.
19. Governing Law. This Agreement and all performance hereunder will be
governed by the laws of the Commonwealth of Massachusetts.
20. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but such
counterparts shall, together, constitute only one instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the day
and year first written above.
Brandes International Fund
By: ____________________________________
Name:___________________________________
Title: _________________________________
ATTEST:
________________________
Investors Bank & Trust Company
By: ____________________________________
Name: __________________________________
Title: _________________________________
ATTEST:
________________________
DATE: __________________
BRANDES INTERNATIONAL FUND
RODNEY SQUARE MANAGEMENT CORPORATION
TRANSFER AGENCY AGREEMENT
THIS TRANSFER AGENCY AGREEMENT is made as of the 7th day of February,
1995, between the Brandes International Fund a Delaware business Trust
(hereinafter the "Fund"), having its principal place of business in San Diego,
California and Rodney Square Management Corporation, a corporation organized
under the laws of the State of Delaware (hereinafter "Rodney Square"), having
its principal place of business in Wilmington, Delaware.
WHEREAS, the Fund is registered under the Investment Company Act of
1940, as amended (the "1940 Act"), as an open-end management investment company
and offers for public sale one or more distinct series of shares of beneficial
interest ("Series"), par value $0.01 per share, each corresponding to a distinct
portfolio;
WHEREAS, each share of the Fund represents an undivided interest in the
assets, subject to the liabilities, allocated to the Fund;
WHEREAS, at the present time, the Fund has established and/or
anticipates it or will establish one Series;
WHEREAS, the Fund desires to employ the services of Rodney Square to
serve as the Fund's transfer agent; and
WHEREAS, Rodney Square is willing to furnish such services to the Fund
with respect to each Series listed on Schedule A to this Agreement (each a
"Portfolio" and two or more together, "Portfolios") on the terms and conditions
hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, the Fund and Rodney Square agree as follows:
1. Appointment. The Fund hereby appoints Rodney Square as transfer
agent, registrar and dividend disbursing agent for the shares of beneficial
interest of the Fund (the "Shares") and as servicing agent in connection with
the disbursements of dividends and distributions and as shareholders' servicing
agent for the Fund, each such appointment to take effect as of the date first
written above, and Rodney Square shall act as such and perform its obligations
thereof upon the terms and conditions hereafter set forth and in accordance with
the principles of principal and agent enunciated by the common law.
2. Documents. The Fund has furnished Rodney Square with copies properly
certified or authenticated of each of the following:
a. The Fund's Declaration of Trust/Master Trust Agreement filed
with the Secretary of the State of Delaware on July 6, 1994, and all amendments
thereto and restatements thereof;
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<PAGE>
b. The Fund's By-laws and all amendments thereto and restatements
thereof (such By- laws, as presently in effect and as they shall from time to
time be amended or restated, are herein called "By- laws");
c. Resolutions of the Fund's Board of Trustees authorizing the
appointment of Rodney Square to provide certain transfer agency services to the
Fund and approving this Agreement;
d. The Fund's Notification of Registration filed pursuant to
Section 8(a) of the 1940 Act as filed with the Securities and Exchange
Commission ("SEC") on July 11, 1994;
e. The Fund's most recent Registration Statement on Form N-1A
under the Securities Act of 1933 (the "1933 Act") [(File No. 33-81396) and under
the 1940 Act (File No. 811-8614)], as filed with the SEC relating to shares of
beneficial interest of the Fund, and all amendments thereto;
f. The Fund's most current Prospectus(es) and Statement(s) of
Additional Information ("SAI") relating to the Portfolio(s);
g. The Fund's Agreements listed on Schedule B attached to this
Agreement; and
h. If required, a copy of either (i) a filed notice of eligibility
to claim the exclusion from the definition of "commodity pool operator"
contained in Section 2(a)(1)(A) of the Commodity Exchange Act ("CEA") that is
provided in Rule 4.5 under the CEA, together with all supplements as are
required by the Commodity Futures Trading Commission ("CFTC"), or (ii) a letter
which has been granted the Fund by the CFTC which states that the Fund will not
be treated as a "pool" as defined in Section 4.10(d) of the CFTC's General
Regulations, or (iii) a letter which has been granted the Fund by the CFTC which
states that CFTC will not take any enforcement action if the Fund does not
register as a "commodity pool operator."
The Fund will furnish Rodney Square from time to time with copies,
properly certified or authenticated, of all additions, amendments or supplements
to the foregoing, if any.
3. Instructions Consistent with Declaration of Trust/Master Trust
Agreement.
a. Unless otherwise provided in this Agreement, Rodney Square
shall act only upon Oral and Written Instructions. ("Oral Instructions" used in
this Agreement shall mean oral instructions actually received by Rodney Square
from an Authorized Person or from a person reasonably believed by Rodney Square
to be an Authorized Person. "Written Instructions" used in this Agreement shall
mean written instructions signed by two Authorized Persons delivered by hand,
mail, telegram, cable, telex or facsimile, and received by Rodney Square.
"Authorized Person" used in this Agreement means any officer of the Fund and any
other person, whether or not any such person is an officer of the Fund, duly
authorized by the Board of Trustees of the Fund to give Oral and Written
Instructions on behalf of the Portfolio(s) and certified by the Secretary or an
Assistant Secretary of the Fund or any amendment thereto as may be received by
Rodney Square from time to time.) Rodney Square in its capacity under this
Agreement may assume that any Oral or Written Instructions received hereunder
are not in any way inconsistent with any provisions of such Declaration of
Trust/Master Trust Agreement or By-laws or any vote, resolution or proceeding of
the shareholders, or of the Board of Trustees, or of any committee thereof.
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<PAGE>
b. Rodney Square shall be entitled to rely upon any Oral
Instructions and any Written Instructions actually received by Rodney Square
pursuant to this Agreement. The Fund agrees to forward to Rodney Square Written
Instructions confirming Oral Instructions in such manner that the Written
Instructions are received by Rodney Square, whether by hand delivery, telex,
facsimile or otherwise, by the close of business of the same day that such Oral
Instructions are given to Rodney Square. The Fund agrees that the fact that such
confirming Written Instructions are not received by Rodney Square shall in no
way affect the validity of the transactions or enforceability of the
transactions authorized by the Fund by giving Oral Instructions. The Fund agrees
that Rodney Square shall incur no liability to the Fund in acting upon Oral
Instructions given to Rodney Square hereunder concerning such transactions
provided such instructions reasonably appear to have been received from an
Authorized Person.
4. Transactions Not Requiring Instructions. In the absence of contrary
Written Instructions, Rodney Square is authorized to take the following actions:
a. Issuance of Shares. Upon receipt of a purchase order from the
Distributor, as defined in the Distribution Agreement between the Fund and the
Distributor or a prospective shareholder for the purchase of Shares and
sufficient information to enable Rodney Square to establish a shareholder
account or to issue Shares to an existing shareholder account, and after
confirmation of receipt or crediting of Federal funds for such order from Rodney
Square's designated bank, Rodney Square shall issue and credit the account of
the investor or other record holder with Shares in the manner described in the
Prospectus. Rodney Square shall deposit all checks received from prospective
shareholders into an account on behalf of the Fund, and shall promptly transfer
all Federal funds received from such checks to the Custodian, as defined in the
Custodian Agreement between the Fund and the Custodian. (References herein to
"Custodian" shall also be construed to refer to a "Sub-Custodian" if such
appointment has been made.) If so directed by the Distributor, the confirmation
supplied to the shareholder to mark such issuance will be accompanied by a
Prospectus.
b. Transfer of Shares; Uncertificated Securities. Where a
shareholder does not hold a certificate representing the number of Shares in its
account and does provide Rodney Square with instructions for the transfer of
such Shares which include a signature guaranteed by a commercial bank, trust
company or member firm of a national securities exchange and such other
appropriate documentation to permit a transfer, then Rodney Square shall
register such Shares and shall deliver them pursuant to instructions received
from the transferor, pursuant to the rules and regulations of the SEC, and the
laws of the State of Delaware relating to the transfer of shares of beneficial
interest.
c. Share Certificates. If at any time the Portfolio issues share
certificates, the following provisions will apply:
(1) The Fund will supply Rodney Square with a
sufficient supply of share certificates representing
Shares, in the form approved from time to time by the
Trustees of the Fund, and, from time to time, shall
replenish such supply upon request of Rodney Square.
Such share certificate shall be properly signed,
manually or by facsimile signature, by the duly
authorized officers of the Fund, and shall bear the
corporate seal or facsimile thereof of the Fund, and
notwithstanding the death, resignation or removal of
any officer of the Fund, such executed certificates
bearing
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<PAGE>
the manual or facsimile signature of such officer
shall remain valid and may be issued to shareholders
until Rodney Square is otherwise directed by Written
Instructions.
(2) In the case of the loss or destruction of any
certificate representing Shares, no new certificate
shall be issued in lieu thereof, unless there shall
first have been furnished an appropriate bond of
indemnity issued by a surety company approved by
Rodney Square.
(3) Upon receipt of signed share certificates, which
shall be in proper form for transfer, and upon
cancellation or destruction thereof, Rodney Square
shall countersign, register and issue new
certificates for the same number of Shares and shall
deliver them pursuant to instructions received from
the transferor, the rules and regulations of the SEC,
and the laws of the State of Delaware relating to the
transfer of shares of beneficial interest.
(4) Upon receipt of the share certificates, which
shall be in proper form for transfer, together with
the shareholder's instructions to hold such share
certificates for safekeeping, Rodney Square shall
reduce such Shares to uncertificated status, while
retaining the appropriate registration in the name of
the shareholder upon the transfer books.
(5) Upon receipt of written instructions from a
shareholder of uncertificated securities for a
certificate in the number of shares in its account,
Rodney Square will issue such share certificates and
deliver them to the shareholder.
d. Redemption of Shares. Upon receipt of a redemption order from
the Distributor or a shareholder, Rodney Square shall redeem the number of
Shares indicated thereon from the redeeming shareholder's account and receive
from the Fund's Custodian and disburse pursuant to the instructions of a
redeeming shareholder or his or her agent the redemption proceeds therefor, or
arrange for direct payment of redemption proceeds by the Custodian to the
redeeming shareholder or as instructed by the shareholder or his or her agent,
in accordance with such procedures and controls as are mutually agreed upon from
time to time by and among the Fund, Rodney Square and the Fund's Custodian.
5. Authorized Issued and Outstanding Shares. The Fund agrees to notify
Rodney Square promptly of any change in the number of authorized Shares and of
any change in the number of Shares registered under the 1933 Act, as amended or
termination of the Fund's declaration under Rule 24f-2 of the 1940 Act. The Fund
has advised Rodney Square, as of the date hereof, of the number of Shares (i)
held in any redemption or repurchase account, and (ii) registered under the 1933
Act, as amended, which are unsold. In the event that the Fund shall declare a
stock dividend, a stock split or a reverse stock split, the Fund shall deliver
to Rodney Square a certificate, upon which Rodney Square shall be entitled to
rely for all purposes, certifying (i) the number of Shares involved, (ii) that
all appropriate corporate action has been taken, and (iii) that any amendment to
the Fund's Declaration of Trust/Master Trust Agreement which may be required has
been filed and is effective. Such certificate shall be accompanied by an opinion
of counsel to the Fund relating to the legal adequacy and effect of the
transaction.
- 4 -
<PAGE>
6. Dividends and Distributions.
a. The Fund shall furnish Rodney Square with appropriate evidence
of action by the Fund's Trustees authorizing the declaration and payment of
dividends and distributions as described in the Prospectus. After deducting any
amount required to be withheld by any applicable tax laws, rules and regulations
or other applicable laws, rules and regulations, Rodney Square shall in
accordance with the instructions in proper form from a shareholder and the
provisions of the Fund's Declaration of Trust/Master Trust Agreement and
Prospectus, issue and credit the account of the shareholder with Shares, or, if
the shareholder so elects, pay such dividends or distributions in cash to the
shareholder in the manner described in the Prospectus. In lieu of receiving from
the Fund's Custodian and paying to shareholders cash dividends or distributions,
Rodney Square may arrange for the direct payment of cash dividends and
distributions to shareholders by the Custodian, in accordance with such
procedures and controls as are mutually agreed upon from time to time by and
among the Fund, Rodney Square and the Fund's Custodian.
b. Rodney Square shall prepare, file with the Internal Revenue
Service and other appropriate taxing authorities, and address and mail to
shareholders such returns and information relating to dividends and
distributions paid by the Fund as are required to be so prepared, filed and
mailed by applicable laws, rules and regulations, or such substitute form of
notice as may from time to time be permitted or required by the Internal Revenue
Service. On behalf of the Fund, Rodney Square shall mail certain requests for
shareholders' certifications under penalties of perjury and pay on a timely
basis to the appropriate Federal authorities any taxes to be withheld on
dividends and distributions paid by the Fund, all as required by applicable
Federal tax laws and regulation.
c. In accordance with the Prospectus, resolutions of the Fund's
Trustees that are not inconsistent with this Agreement and are provided to
Rodney Square from time to time, and such procedures and controls as are
mutually agreed upon from time to time by and among the Fund, Rodney Square and
the Fund's Custodian, Rodney Square shall arrange for issuance of Shares
obtained through transfers of funds from shareholders' accounts at financial
institutions.
7. Communications with Shareholders.
a. Communications to Shareholders. Rodney Square will address and
mail all communications by the Fund to its shareholders, including reports to
shareholders, confirmations of purchases and sales of Shares, monthly
statements, dividend and distribution notices and proxy material for its
meetings of shareholders. Rodney Square will receive and tabulate the proxy
cards for shareholder meetings.
b. Correspondence. Rodney Square will answer such correspondence
from shareholders, securities brokers and others relating to its duties
hereunder and such other correspondence as may from time to time be mutually
agreed upon between Rodney Square and the Fund.
8. Services to be Performed. Rodney Square shall be responsible for
administering and/or performing transfer agent functions, for acting as service
agent in connection with dividend and distribution functions and for performing
shareholder account functions in connection with the issuance, transfer and
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<PAGE>
redemption or repurchase (including coordination with the Fund's custodian bank
in connection with shareholder redemption by check) of the Fund's Shares as set
forth in Schedule C to this Agreement. The details of the operating standards
and procedures to be followed shall be determined from time to time by agreement
between Rodney Square and the Fund and may be expressed in written schedules
which shall constitute attachments to this Agreement.
9. Recordkeeping and Other Information.
a. Rodney Square shall maintain records of the accounts for each
Shareholder showing the items listed in Schedule D to this Agreement.
b. Rodney Square shall create and maintain all necessary records
in accordance with all applicable laws, rules and regulations, including but not
limited to records required by Section 31(a) of the 1940 Act and the rules
thereunder and any applicable regulations of the Federal Deposit Insurance
Corporation ("FDIC") or any successor regulatory authority, as the same may be
amended from time to time, and those records pertaining to the various functions
performed by it hereunder. All records shall be the property of the Fund at all
times and shall be available for inspection and use by the Fund or the Fund's
authorized representatives. Upon reasonable request of the Fund copies of such
records shall be provided by Rodney Square to the Fund or the Fund's authorized
representatives at the Fund's expense. Where applicable, such records shall be
maintained by Rodney Square for the periods and in the places required by Rule
31a-2 under the 1940 Act and any applicable regulations of the FDIC or any
successor regulatory authority.
Rodney Square shall not be responsible for the records required to
be maintained by any predecessor transfer agency service provider except those
provided to Rodney Square together with proper documentation and accepted in
writing by Rodney Square. Rodney Square shall not be required to bear the cost
of any necessary conversion of any records or data nor shall Rodney Square
assume any responsibility for the having available and maintaining any computer
systems required to read or otherwise interpret any predecessor transfer agency
service provider's computer-formatted records.
10. Audit, Inspection and Visitation. Rodney Square shall make
available during regular business hours all records and other data created and
maintained pursuant to this Agreement for reasonable audit and inspection by the
Fund or any person retained by the Fund. Upon reasonable notice by the Fund,
Rodney Square shall make available during regular business hours its facilities
and premises employed in connection with its performance of this Agreement for
reasonable visitation by the Fund, or any person retained by the Fund.
11. Right to Receive Advice.
a. Advice of Fund. If Rodney Square shall be in doubt as to any
action to be taken or omitted by it, it may request, and shall receive, from the
Fund directions or advice, including Oral or Written Instructions where
appropriate.
b. Advice of Counsel. If Rodney Square shall be in doubt as to any
question of law involved in any action to be taken or omitted by Rodney Square,
it may request advice from counsel of its own choosing (who may be the regularly
retained counsel for the Fund or Rodney Square or the in-house counsel for
Rodney Square, at the option of Rodney Square) at the Fund's expense.
- 6 -
<PAGE>
c. Conflicting Advice. In case of conflict between directions,
advice or Oral or Written Instructions received by Rodney Square pursuant to
subsection a of this Section and advice received by Rodney Square pursuant to
subsection b. of this Section, Rodney Square shall be entitled to rely on and
follow the advice received pursuant to the latter provision alone.
d. Protection of Rodney Square. Rodney Square shall be protected
in any action or inaction which it takes in reliance on any directions, advice
or Oral or Written Instructions received pursuant to subsections a. or b. of
this Section which Rodney Square, after receipt of any such directions, advice
or Oral or Written Instructions, in good faith believes to be consistent with
such directions, advice or Oral or Written Instructions, as the case may be.
However, nothing in this Section shall be construed as imposing upon Rodney
Square any obligation (i) to seek such direction, advice or Oral or Written
Instructions, or (ii) to act in accordance with such directions, advice or Oral
or Written Instructions when received, unless, under the terms of another
provision of this Agreement, the same is a condition to Rodney Square's properly
taking or omitting to take such action. Nothing in this subsection shall excuse
Rodney Square when an action or omission on the part of Rodney Square
constitutes willful misfeasance, bad faith, negligence or reckless disregard by
Rodney Square of its duties under this Agreement.
12. Compliance with Governmental Rules and Regulations. Except as
otherwise provided herein, the Advisor and/or the Fund assumes full
responsibility for ensuring that the Fund complies with all applicable
requirements of the 1933 Act, the Securities Exchange Act of 1934 (the "1934
Act"), the 1940 Act, the CEA and any laws, rules and regulations of governmental
authorities having jurisdiction.
13. Compensation.
a. Compensation for services and duties performed pursuant to this
Agreement is provided in Schedule A hereto. Certain other fees due and expenses
incurred pursuant to this Agreement are payable by the Fund or the shareholder
on whose behalf the service is performed and are also listed in Schedule A.
b. The Fund shall reimburse Rodney Square for all reasonable
out-of-pocket expenses incurred by Rodney Square or its agents in the
performance of its obligations hereunder. Such reimbursement for expenses
incurred in any calendar month shall be made on or before the tenth day of the
next succeeding month.
c. The term "out-of-pocket expenses" shall mean the following
expenses incurred by Rodney Square in the performance of its obligations
hereunder: the cost of stationery and forms (including but not limited to
checks, proxy cards, and envelopes), the cost of postage, the cost of insertion
of non-standard size materials in mailing envelopes and other special mailing
preparation by outside firms, the cost of first-class mailing insurance, the
cost of external electronic communications as approved by the Trustees (to
include telephone and telegraph equipment and an allocable portion of the cost
of personnel responsible for the maintenance of such equipment), toll charges,
data communications equipment and line charges and the cost of microfilming of
shareholder records (including both the cost of storage as well as charges for
access to such records). If Rodney Square shall undertake the responsibility for
microfilming shareholder records, it may be separately compensated therefor in
an amount agreed upon by the principal financial
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<PAGE>
officer of the Fund and Rodney Square, such amount not to exceed the amount
which would be paid to an outside firm for providing such microfilming services.
14. Use of Rodney Square's Name. The Fund shall not use the name of
Rodney Square or any of its affiliates in any Prospectus, SAI, sales literature
or other material relating to the Fund in a manner not approved prior thereto in
writing by Rodney Square, provided, however, that Rodney Square shall approve
all uses of its and its affiliates' names that merely refer in accurate terms to
their appointments hereunder or that are required by the SEC or a state
securities commission and, provided further, that in no event shall such
approval be unreasonably withheld.
15. Use of Fund's Name. Rodney Square shall not use the name of the
Fund or the Portfolios of the Fund or material relating to the Fund or the
Portfolios on any checks, bank drafts, bank statements or forms for other than
internal use in a manner not approved prior thereto, provided, however, that the
Fund shall approve all uses of its name which merely refer in accurate terms to
the appointment of Rodney Square hereunder or which are required by the FDIC,
the SEC or a state securities commission, and, provided, further, that in no
event shall such approval be unreasonably withheld.
16. Liability of Rodney Square or Affiliates. Rodney Square and its
affiliates shall not be liable for any error of judgment or mistake of law or
for any loss suffered by the Fund in connection with the matters to which this
Agreement relates, except to the extent of a loss resulting from willful
misfeasance, bad faith, negligence or reckless disregard of their obligations
and duties under this Agreement. Any person, even though also an officer,
trustee, employee or agent of Rodney Square or any of its affiliates who may be
or become an officer or trustee of the Fund, shall be deemed, when rendering
services to the Fund as such officer or acting on any business of the Fund in
such capacity (other than services or business in connection with Rodney
Square's duties under this Agreement), to be rendering such services to or
acting solely for the Fund and not as an officer, Trustee, employee or agent or
one under the control or direction of Rodney Square or any of its affiliates,
even though paid by one of those entities. Rodney Square shall not be liable or
responsible for any acts or omissions of any predecessor administrator or any
other persons having responsibility for matters to which this Agreement relates
nor shall Rodney Square be responsible for reviewing any such act or omissions.
Rodney Square shall, however, be liable for its own acts and omissions
subsequent to assuming responsibility under this Agreement as herein provided.
17. Security. Rodney Square represents and warrants that the various
procedures and systems which Rodney Square has implemented with regard to
safeguarding from loss or damage attributable to fire, theft or any other cause
(including provision for twenty-four hours a day restricted access) the Fund's
blank checks, records and other data and Rodney Square's records, data,
equipment, facilities and other property used in the performance of its
obligations hereunder are adequate and that it will make such changes therein
from time to time as in its judgment are required for the secure performance of
its obligations hereunder. The parties shall review such systems and procedures
on a periodic basis.
18. Insurance. Upon request Rodney Square shall provide the Fund with
details regarding its insurance coverage, and Rodney Square shall notify the
Fund should any of its insurance coverage be materially changed. Such
notification shall include the date of change and the reason or reasons
therefor. Rodney Square shall notify the Fund of any material claims against it,
whether or not they may be covered by insurance and shall notify the Fund from
time to time as may be appropriate of the total outstanding claims made by
Rodney Square under its insurance coverage.
19. Indemnification.
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<PAGE>
a. The Fund agrees to indemnify and hold harmless Rodney Square,
its trustees, officers, employees, agents and representatives from all taxes,
charges, expenses, assessments, claims and liabilities including, without
limitation, liabilities arising under the 1940 Act, the 1933 Act, the 1934 Act
and any applicable state and foreign laws, and amendments thereto (the
"Securities Laws"), and expenses, including without limitation reasonable
attorneys' fees and disbursements arising directly or indirectly from any action
or omission to act which Rodney Square takes (i) at the request of or on the
direction of or in reliance on the advice of the Fund or (ii) upon Oral or
Written Instructions. Neither Rodney Square nor any of its nominees shall be
indemnified against any liability (or any expenses incident to such liability)
arising out of Rodney Square's or its trustees', officers', employees', agents'
and representatives own willful misfeasance, bad faith, negligence or reckless
disregard of its duties and obligations under this Agreement.
b. Rodney Square agrees to indemnify and hold harmless the Fund
from all taxes, charges, expenses, assessments, claims and liabilities arising
from Rodney Square's obligations pursuant to this Agreement (including, without
limitation, liabilities arising under the Securities Laws) and expenses,
including (without limitation) reasonable attorneys' fees and disbursements
arising directly or indirectly out of Rodney Square's or its trustees',
officers', employees', agents' and representatives own willful misfeasance, bad
faith, negligence or reckless disregard of its duties and obligations under this
Agreement.
c. In order that the indemnification provisions contained in this
Section 19 shall apply, upon the assertion of a claim for which either party may
be required to indemnify the other, the party seeking indemnification shall
promptly notify the other party of such assertion, and shall keep the other
party advised with respect to all developments concerning such claim. The party
who may be required to indemnify shall have the option to participate with the
party seeking indemnification in the defense of such claim. The party seeking
indemnification shall in no case confess any claim or make any compromise in any
case in which the other party may be required to indemnify it except with the
other party's prior written consent.
20. Responsibility of Rodney Square. Rodney Square shall be under no
duty to take any action on behalf of the Fund except as specifically set forth
herein or as may be specifically agreed to by Rodney Square in writing. In the
performance of its duties hereunder, Rodney Square shall be obligated to
exercise care and diligence and to act in good faith and to use its best efforts
within reasonable limits in performing services provided for under this
Agreement. Rodney Square shall be responsible for its own negligent failure to
perform its duties under this Agreement, but to the extent that duties,
obligations and responsibilities are not expressly set forth in this Agreement,
Rodney Square shall not be liable for any act or omission which does not
constitute willful misfeasance, bad faith or negligence on the part of Rodney
Square or reckless disregard by Rodney Square of such duties, obligations and
responsibilities. Without limiting the generality of the foregoing or of any
other provision of this Agreement, Rodney Square, in connection with its duties
under this Agreement, shall not be under any duty or obligation to inquire into
and shall not be liable for or in respect of (i) the validity or invalidity or
authority or lack thereof of any Oral or Written Instruction, notice or other
instrument which conforms to the applicable requirements of this Agreement, and
which Rodney Square reasonably believes to be genuine; or (ii) delays or errors
or loss of data occurring by reason of circumstances beyond Rodney Square's
control, including acts of civil or military authority, national emergencies,
labor difficulties, fire, mechanical breakdown (except as provided in Section
21), flood or catastrophe, acts of God, insurrection, war, riots or failure of
the mails, transportation, communication or
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<PAGE>
power supply, which circumstances Rodney Square shall take minimal actions to
minimize loss of data therefor.
21. Acts of God/Equipment Failure. Rodney Square shall not be liable
for delays or errors occurring by reason of circumstances beyond its control,
including but not limited to acts of civil or military authority, national
emergencies, labor difficulties, fire, flood or catastrophe, acts of God,
insurrection, war, riots, or failure of the mails, transportation, communication
or power supply. In the event of equipment breakdowns beyond its control, Rodney
Square shall, at no additional expense to the Fund, take reasonable steps to
minimize service interruptions but shall have no liability with respect thereto.
Rodney Square shall enter into and shall maintain in effect with appropriate
parties one or more agreements making reasonable provision for emergency use of
electronic data processing equipment to the extent appropriate equipment is
available.
22. Duration and Termination.
a. Neither this Agreement nor any provisions hereof may be
changed, waived, discharged or terminated orally, but only by written instrument
which shall make specific reference to this Agreement and which shall be signed
by the party against which enforcement of such change, waiver, discharge or
termination is sought.
b. This Agreement shall become effective as of the date first
written above, and unless terminated as provided, shall continue in force for
three (3) years from the date of its execution and thereafter from year to year.
This Agreement may be terminated after the initial three (3) year period as of
any anniversary date on ninety (90) days' written notice given to Rodney Square
or by Rodney Square on ninety (90) days' written notice given to the Fund;
provided, however, that the foregoing provisions of this Agreement may be
terminated immediately at any time in the event of a breach of any provision
thereof either by the Fund or by Rodney Square in the event that such breach
shall have remained unremedied for ninety (90) days or more after receipt of
written specification of such breach.
c. Upon the termination of this Agreement, the Fund shall pay to
Rodney Square such compensation as may be payable for the period prior to the
effective date of such termination, including reimbursement for any
out-of-pocket expenses reasonably incurred by Rodney Square to such date. In the
event that the Fund designates a successor to any of Rodney Square's obligations
hereunder, Rodney Square shall, at the expense and direction of the Fund,
transfer to such successor all relevant books, records and other data
established or maintained by Rodney Square under the foregoing provisions.
d. Upon the termination of this Agreement within the initial three
(3) year term by the Fund or the Fund's Board of Trustees, the Fund shall pay to
Rodney Square such compensation in liquidated damages in accordance with the fee
arrangements described in Schedule A attached hereto, as such schedule may be
amended from time to time.
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<PAGE>
23. Registration as a Transfer Agent. Rodney Square represents that it
is currently registered with the appropriate Federal agency for the registration
of transfer agents, and that it will remain so registered for the duration of
this Agreement. Rodney Square agrees that it will promptly notify the Fund in
the event of any material change in its status as a registered transfer agent.
Should Rodney Square fail to be registered with the FDIC or any successor
regulatory authority as a transfer agent at any time during this Agreement, the
Fund may, on written notice to Rodney Square, immediately terminate this
Agreement, without paying liquidated damages.
24. Appointment of Agents. Neither this Agreement nor any rights or
obligations hereunder may be assigned by Rodney Square without the written
consent of the Fund. Rodney Square may, however, at any time or times in its
discretion appoint (and may at any time remove) any other bank or trust company,
which is itself qualified under the Securities Exchange Act of 1934 (the "1934
Act") to act as a transfer agent, as its agent to carry out such of the services
to be performed under this Agreement as Rodney Square may from time to time
direct; provided, however, that the appointment of any such agent shall not
relieve Rodney Square of any of its responsibilities or liabilities hereunder.
25. Delegation. On thirty (30) days' prior written notice to the Fund,
Rodney Square may assign any part or all its rights and delegate its duties
hereunder to any affiliate provided that (i) the delegate agrees with Rodney
Square to comply with all relevant provisions of the 1940 Act and applicable
rules and regulations; (ii) Rodney Square shall remain responsible for the
performance of all of its duties under this Agreement; (iii) Rodney Square and
such delegate shall promptly provide such information as the Fund may request;
and (iv) Rodney Square shall respond to such questions as the Fund may ask,
relative to the delegation, including (without limitation) the capabilities for
the delegate.
26. Amendments. This Agreement or any part hereof may be changed or
waived only by an instrument in writing signed by the party against which
enforcement of such change or waiver is sought.
Rodney Square and the Fund shall regularly consult with each other
regarding Rodney Square's performance of its obligations and its compensation
hereunder. In connection therewith, the Fund shall submit to Rodney Square at a
reasonable time in advance of filing with the SEC copies of any amended or
supplemented registration statements (including exhibits) under the 1933 Act and
the 1940 Act, and a reasonable time in advance of their proposed use, copies of
any amended or supplemented forms relating to any plan, program or service
offered by the Fund. Any change in such material which would require any change
in Rodney Square's obligations hereunder shall be subject to Rodney Square's
approval, which shall not be unreasonably withheld. In the event that such
change materially increases the cost to Rodney Square of performing its
obligations hereunder, Rodney Square shall be entitled to receive reasonable
compensation therefor.
27. Notice. Any notice under this Agreement shall be given in writing
addressed and delivered or mailed, postage prepaid, to the other party to this
Agreement at its principal place of business.
28. Severability. If any provision of this Agreement shall be held or
made invalid by a court decision, statute, rule or otherwise, the remainder of
this Agreement shall not be affected thereby.
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<PAGE>
29. Governing Law. To the extent that state law has not been preempted
by the provisions of any law of the United States heretofore or hereafter
enacted, as the same may be amended from time to time, this Agreement shall be
administered, construed and enforced according to the laws of the State of
Delaware.
30. Shareholder Liability. Rodney Square is hereby expressly put on
notice of the limitation of shareholder liability as set forth in the Fund's
Declaration of Trust/Agreement of Trust and agrees that obligations assumed by
the Fund pursuant to this Agreement shall be limited in all cases to the Fund
and its assets. Rodney Square agrees that it shall not seek satisfaction of any
such obligation from the shareholders or any individual shareholder of the Fund,
nor from the Trustees or any individual Trustee of the Fund.
31. Miscellaneous. Each party agrees to perform such further acts and
execute such further documents as are necessary to effectuate the purposes
hereof. The captions in this Agreement are included for convenience of reference
only and in no way define or delimit any of the provisions hereof or otherwise
affect their construction or effect. This Agreement may be executed
simultaneously in two [or more] counterparts, each of which taken together shall
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have duly executed this agreement as of
the day and year first above written.
BRANDES INTERNATIONAL FUND
By: _____________________________
Barry P. O'Neil, President
RODNEY SQUARE MANAGEMENT
CORPORATION
By: _____________________________
Martin L. Klopping, President
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<PAGE>
TRANSFER AGENCY AGREEMENT
SCHEDULE A
BRANDES INTERNATIONAL FUND
PORTFOLIO LISTING AND FEE SCHEDULE
For the services Rodney Square provides under the Transfer Agency Agreement
attached hereto, the Brandes International Fund (the "Fund") agrees to pay
Rodney Square a fee for transfer agency services as follows, subject to a
minimum of $26,250 for the first year of this agreement1 and $30,000 for each
subsequent year with respect to each class of the Portfolio listed below
beginning at each class of the Portfolio's commencement of operations, per
annum, plus out-of-pocket expenses, all payable monthly:
Fee per Annum
Type of Fund/Account per Account
-------------------- ------------
Annual Dividend $12.00
Semi-Annual Dividend $12.00
Monthly Dividend $15.00
Portfolio Listing:
-----------------
The Brandes International Fund (Class A)
The Brandes International Fund (Class C)
Out-of-Pocket Expenses (estimates based on actual costs):
- - --------------------------------------------------------
Out-of-pocket expenses shall be reimbursed by the Fund to Rodney Square
or paid directly by the Fund. Such expenses include but are not limited
to the following:
a. Toll-free lines (if required)
b. Forms, envelopes, checks, checkbooks
c. Postage (bulk, pre-sort, first-class at current prevailing rates)
d. Hardware/phone lines for remote terminal(s) (if required)
e. Microfiche/Microfilm
f. Wire fees for receipt or disbursement $ 7.00 per wire
g. Mailing fees $30.00 per 1,000 items
h. Cost of proxy solicitation, mailing and
tabulation
i. Certificates issuance $ 2.00 per certificate
j. Record retention storage $15.00 per cubic foot per year
k. Development/programming costs/special
projects Negotiated time and material
l. ACH transaction charges $ 0.25 per transaction
m. "B" notice mailings $ 5.00 per item
n. Locating lost shareholders in
anticipation of escheating $ 5.00 per name
- - -------------------
1 To arrive at the minimum fee for the first year, each of the first three
months minimum fees of $2,500 have been reduced to $1,250.
A - 1
<PAGE>
National Securities Clearing Corporation (NSCC) Charges
- - -------------------------------------------------------
1. - FUND/SERV
Participation Fee $50.00 per month
CPU Access Fee $40.00 per month
Transaction Fee $ .50 per transaction
NSCC will deduct it's monthly fee on the 15th of each month from Rodney
Square's cash settlement that day. These charges will be included on the
next month's T/A bill as out-of-pocket expenses.
2. - Networking
Participation Fee $250.00 per month
CPU Access Fee $ 40.00 per month
Account Fee $ .045 per month on
monthly dividend funds
$ .030 per month on all
other dividend payables
Rodney Square System Access Charges for NSCC
- - --------------------------------------------
1. - FUND/SERV
Base Facility Use Fee $500.00 per month
Transaction Fee $ .25 per transaction
Plus: out-of-pocket expenses for settlements, wire charges, NSCC pick-up
charges, etc.
2. - Networking
Base Facility Use Fee $500.00 per month
Matrix Level Charges:
Level 1, 2 or 4 $ .24 per account per month
Level 3 $ .06 per account per month
Rodney Square Wire Order Desk:
Master/Omnibus Account $ 1.00 Per Purchase/redemption
transaction
Additional Expenses (which may be paid by shareholder):
- - ------------------------------------------------------
a. IRA/Keogh processing $10.00 per account per annum
$ 5.00 new account set-up fee
(waived)
$ 2.50 per distribution
$10.00 per plan transfer out
b. Exchange Fees $ 5.00 per transaction
Payment
The above will be billed within the first five (5) business days of each
month and will be paid by wire within five (5) business days of receipt.
LIQUIDATED DAMAGES: Upon the termination of the attached Agreement within the
initial three (3) year term by the Fund or the Fund's Board of Trustees, the
Fund shall pay to Rodney Square liquidated damages with respect to each
Portfolio in an amount equal to 120 days of base fees as determined in the
manner set forth above.
A - 2
<PAGE>
TRANSFER AGENCY AGREEMENT
SCHEDULE B
BRANDES INTERNATIONAL FUND
FUND AGREEMENTS SCHEDULE
1. The Investment Advisory Agreement between Brandes International
Fund, a Delaware business Trust (the "Fund") and Brandes Investment Partners,
Inc. (the "Investment Advisor"), dated February 7, 1995;
2. The Distribution Agreements between the Fund and First Fund
Distributors, Inc., dated February 7, 1995; and
3. The Fund's Distribution Plan adopted pursuant to Rule 12b-1
under the Investment Company Act of 1940.
B - 1
<PAGE>
TRANSFER AGENCY AGREEMENT
SCHEDULE C
BRANDES INTERNATIONAL FUND
SERVICES TO BE PERFORMED
Rodney Square will perform the following functions as transfer agent on an
ongoing basis with respect to each Portfolio:
a. furnish state-by-state registration reports;
b. provide toll-free lines for direct shareholder use, plus customer
liaison staff with on-line inquiry capacity;
c. mail duplicate confirmations to dealers and other financial
institutions ("Service Organization") of their clients' activity,
whether executed through the Service Organization or directly with
Rodney Square;
d. provide detail for underwriter or Service Organization confirmations
and other Service Organization shareholder accounting, in accordance
with such procedures as may be agreed upon between the Fund and Rodney
Square;
e. provide shareholder lists and statistical information concerning
shareholder accounts to the Fund;
f. provide timely notification of Portfolio activity and such other
information as may be agreed upon from time to time between Rodney
Square and the Portfolio or the Custodian, to the Fund or the
Custodian;
g. with respect to dividends and distributions, prepare and file
required reports with the Internal Revenue Service ("IRS"), prepare and
mail reports to shareholders as required by the IRS and described in
the Prospectus and Statement of Additional Information; and
h. provide sources of shares sales and total assets listed by dealer
and representive on at least a monthly basis calculated for each period
year to date and cumulitive since inception as may be requested by the
Fund.
C - 1
<PAGE>
TRANSFER AGENCY AGREEMENT
SCHEDULE D
BRANDES INTERNATIONAL FUND
SHAREHOLDER RECORDS
Rodney Square shall maintain records of the accounts for each shareholder
showing the following information:
a. name, address and United States Tax Identification or Social
Security number;
b. number of Shares held and number of Shares for which certificates,
if any, have been issued, including certificate numbers and
denominations;
c. historical information regarding the account of each shareholder,
including dividends and distributions paid and the date and price for
all transactions on a shareholder's account;
d. any stop or restraining order placed against a shareholder's
account;
e. any correspondence relating to the current maintenance of a
shareholder's account;
f. information with respect to withholding; and,
g. any information required in order for Rodney Square to perform any
calculations contemplated or required by this Agreement.
D - 1
[PAUL, HASTINGS, JANOFSKY & WALKER LETTERHEAD]
January 13, 1996
Writer's Direct Dial Number Our File No.
(213) 683-6207 22876.65646
Brandes International Fund
Suite 420
12750 High Bluff Drive
San Diego, California 92130
Ladies and Gentlemen:
We have acted as counsel to Brandes International Fund, a Delaware
business trust (the "Trust"), in connection with the issuance of an indefinite
number of shares of beneficial interest ("Shares") in the Trust in a public
offering pursuant to a Registration Statement on form N-1A (Registration No.
33-81396), as amended, filed with the Securities and Exchange commission under
the Securities Act of 1933, as amended (the "Registration Statement").
In our capacity as counsel for the Trust, we have examined the
Agreement and Declaration of Trust of the Trust dated July 6, 1994, as amended,
and bylaws of the Trust, the Certificateof Trust of the Trust dated July 6,
1994, originals or copies of actions of the Trustees as furnished to us by the
Trust, certificates of public officials, statutes and such other documents,
records and certificates as we have deemed necessary for the purposes of this
opinion.
Based upon our examination as aforesaid, we are of the opinion that the
Shares are duly authorized and, when purchased] and paid for as described in the
Registration Statement, will be validly issued, fully paid and nonassessable.
<PAGE>
Brandes International Fund
January 12, 1995
Page 2
We hereby consent to the filing of this opinion of counsel as an
exhibit to the Registration Statement.
Very truly yours,
Paul, Hastings, Janofsky & Walker
CONSENT OF INDEPENDENT AUDITORS
To the Board of Trustees of
Brandes Investment Trust
We consent to the inclusion in Post-Effective Amendment No. 2 to the
Registration Statement of Brandes Investment Trust on Form N-1A (File No.
33-81396) of our report dated December 14, 1995 on our audit of the financial
statements and financial highlights of the Fund, which report is included in the
Annual Report to Shareholders for the year ended October 31, 1995 which is
included in the Registration Statement. We also consent to the reference to our
Firm under the caption "Experts".
ERNST & YOUNG LLP
Los Angeles, California
February 5, 1996
