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. 2 [X]
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
ACT OF 1940 [ ]
Amendment No. 3 [X]
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)
[ ] on (date) 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)
[x] 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 INTERNATIONAL FUND
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, DATED JANUARY 9, 1996
BRANDES INTERNATIONAL TRUST
12750 High Bluff Drive, Suite 420
San Diego, CA 92130
(619) 755-0239
BRANDES INTERNATIONAL 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 INTERNATIONAL 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
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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, DATED JANUARY 9, 1996
BRANDES INTERNATIONAL TRUST
12750 High Bluff Drive, Suite 420
San Diego, CA 92130
(619) 755-0239
BRANDES INTERNATIONAL 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 INTERNATIONAL 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>
BRANDES INTERNATIONAL TRUST
Statement of Additional Information
Dated April 1, 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
(ii) Amendment to Agreement and Declaration of
Trust
(2) By-Laws
(3) Not applicable
(4) Specimen stock certificate4
(5) (i) Investment Advisory Agreement
(ii) Investment Advisory Agreement relating to
the Brandes Small Cap International Fund
(6) (i) Distribution Agreement with First Fund
Distributors, Inc.1
(ii) Distribution Agreement with Worldwide
Value Distributors, Inc.
(7) Not applicable
(8) Custodian Agreement2
(9) (i) Administration Agreement
(ii) Transfer Agency Agreement2
(iii) Shareholder Service Plan
(iv) Shareholder Service Plan relating to the
Brandes Small Cap International Fund
(v) Multiple Class Plan
(10) Opinion and consent of counsel(2)
(11) Consent of independent accountants
(12) Not applicable
(13) Investment letter
(14) Individual Retirement Account forms(3)
(15) (I) Distribution Plan Pursuant to Rule 12b-1
(ii) Distribution Plan relating to the Brandes
Small Cap International Fund
(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 Pre-Effective Amendment No. 2 to the
Registration Statement on Form N-1A (File No. 33-81396), filed on January 17,
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 on August 31,
1995, and incorporated herein by reference.
(4) To be filed by amendment.
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 has duly caused this Amendment to
the Registration Statement on Form N-1A of Brandes International Fund to be
signed on its behalf by the undersigned, thereunto duly authorized in the City
of San Diego and State of California on the 7th day of January, 1996.
BRANDES INTERNATIONAL FUND
By Barry P. O'Neil
---------------------------
Barry P. O'Neil
President
This Amendment to the Registration Statement on Form N-1A of Brandes
International Fund has been signed below by the following persons in the
capacities indicated on January 7, 1996.
Barry P. O'Neil President and
- ------------------------- Trustee
Barry P. O'Neil
Charles H. Brandes Trustee
- -------------------------
Charles H. Brandes
Dewill F. Bowman* Trustee
- -------------------------
DeWitt F. Bowman
Gordon Clifford Broadhead* Trustee
- -------------------------
Gordon Clifford Broadhead
- ------------------------- Trustee
Joseph E. Coberly, Jr.
W. Daniel Larsen* Trustee
- -------------------------
W. Daniel Larsen
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
(ii) Amendment to Agreement and Declaration of
Trust
(2) By-Laws
(3) Not applicable
(4) Specimen stock certificate4
(5) (i) Investment Advisory Agreement
(ii) Investment Advisory Agreement relating to
the Brandes Small Cap International Fund
(6) (i) Distribution Agreement with First Fund
Distributors, Inc.1
(ii) Distribution Agreement with Worldwide
Value Distributors, Inc.
(7) Not applicable
(8) Custodian Agreement2
(9) (i) Administration Agreement
(ii) Transfer Agency Agreement2
(iii) Shareholder Service Plan
(iv) Shareholder Service Plan relating to the
Brandes Small Cap International Fund
(v) Multiple Class Plan
(10) Opinion and consent of counsel2
(11) Consent of independent accountants
(12) Not applicable
(13) Investment letter
(14) Individual Retirement Account forms3
(15) (I) Distribution Plan Pursuant to Rule 12b-1
(ii) Distribution Plan relating to the Brandes
Small Cap International Fund
(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 Pre-Effective Amendment No. 2 to the
Registration Statement on Form N-1A (File No. 33-81396), filed on January 17,
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 on August 31,
1995, and incorporated herein by reference.
(4) To be filed by amendment.
AGREEMENT AND DECLARATION OF TRUST
of
BRANDES INTERNATIONAL FUND
a Delaware Business Trust
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
ARTICLE I Name and Definitions
1. Name................................................. 1
2. Definitions.......................................... 1
(a) Trust....................................... 1
(b) Trust Property.............................. 1
(c) Trustees.................................... 1
(d) Shares...................................... 2
(e) Shareholder................................. 2
(f) Person...................................... 2
(g) 1940 Act.................................... 2
(h) Commission and Principal Underwriter........ 2
(i) Declaration of Trust........................ 2
(j) By-Laws..................................... 2
(k) Interested Person........................... 2
(l) Investment Manager.......................... 2
(m) Series...................................... 2
ARTICLE II Purpose of Trust............................................ 2
ARTICLE III Shares
1. Division of Beneficial Interest...................... 3
2. Ownership of Shares.................................. 3
3. Investments in the Trust............................. 4
4. Status of Shares and Limitation of
Personal Liability................................. 4
5. Power of Board of Trustees to Change
Provisions Relating to Shares...................... 4
6. Establishment and Designation of Series.............. 5
(a) Assets With Respect to a Particular Series.. 5
(b) Liabilities Held With Respect to a
Particular Series......................... 5
(c) Dividends, Distributions, Redemptions,
and Repurchases........................... 6
(d) Voting...................................... 6
(e) Equality.................................... 6
(f) Fractions................................... 7
(g) Exchange Privileges......................... 7
(h) Combination of Series....................... 7
(i) Elimination of Series....................... 7
7. Indemnification of Shareholders...................... 7
ARTICLE IV The Board of Trustees
1. Number, Election and Tenure.......................... 7
2. Effect of Death, Resignation, etc.
of a Trustee....................................... 8
3. Powers............................................... 8
4. Payment of Expenses by the Trust.................... 11
5. Payment of Expenses by Shareholders................. 12
6. Ownership of Assets of the Trust.................... 12
7. Service Contracts................................... 12
ARTICLE V Shareholders' Voting Powers and Meetings
1. Voting Powers....................................... 14
2. Voting Power and Meetings........................... 14
3. Quorum and Required Vote............................ 14
4. Action by Written Consent........................... 15
5. Record Dates........................................ 15
6. Additional Provisions............................... 16
ARTICLE VI Net Asset Value, Distributions,
and Redemptions
1. Determination of Net Asset Value, Net
Income and Distributions.......................... 16
2. Redemptions and Repurchases......................... 16
3. Redemptions at the Option of the Trust.............. 17
ARTICLE VII Compensation and Limitation of
Liability of Trustees
1. Compensation........................................ 17
2. Indemnification and Limitation of Liability......... 17
3. Trustee's Good Faith Action, Expert
Advice, No Bond or Surety......................... 17
4. Insurance........................................... 18
ARTICLE VIII Miscellaneous
1. Liability of Third Persons Dealing
with Trustees..................................... 18
2. Termination of Trust or Series...................... 18
3. Merger and Consolidation............................ 19
4. Amendments.......................................... 19
5. Filing of Copies, References, Headings.............. 19
6. Applicable Law...................................... 20
7. Provisions in Conflict with Law or Regulations...... 20
8. Business Trust Only................................. 20
<PAGE>
AGREEMENT AND DECLARATION OF TRUST
OF
BRANDES INTERNATIONAL FUND
WHEREAS, THIS AGREEMENT AND DECLARATION OF TRUST is made and entered
into as of the date set forth below by the Trustees named hereunder for the
purpose of forming a Delaware business trust in accordance with the provisions
hereinafter set forth.
NOW, THEREFORE, the Trustees hereby direct that a Certificate of Trust
be filed with the Office of the Secretary of State of the State of Delaware and
do hereby declare that the Trustees will hold IN TRUST all cash, securities and
other assets which the Trust now possesses or may hereafter acquire from time to
time in any manner and manage and dispose of the same upon the following terms
and conditions for the pro rata benefit of the holders of Shares in this Trust.
ARTICLE I
Name and Definitions
Section 1. Name. This Trust shall be known as BRANDES INTERNATIONAL
--------- ----
FUND 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.
Section 2. Definitions. Whenever used herein, unless otherwise required
--------- -----------
by the context or specifically provided:
(a) The "Trust" refers to the Delaware business trust established by
this Agreement and Declaration of Trust, as amended from time to time;
(b) The "Trust Property" means any and all property, real or personal,
tangible or intangible, which is owned or held by or for the account of the
Trust;
(c) "Trustees" refers to the persons who have signed this Agreement and
Declaration of Trust, so long as they continue in office in accordance with the
terms hereof, and all other persons who may from time to time be duly elected or
appointed to serve on the Board of Trustees in accordance with the provisions
hereof, and reference herein to a Trustee or the Trustees shall refer to such
person or persons in their capacity as trustees hereunder;
(d) "Shares" means the shares of beneficial interest into which the
beneficial interest in the Trust shall be divided from time to time and includes
fractions of Shares as well as whole Shares;
(e) "Shareholder" means a record owner of outstanding Shares;
(f) "Person" means and includes individuals, corporations,
partnerships, trusts, associations, joint ventures, estates and other entities,
whether or not legal entities, and governments and agencies and political
subdivisions thereof, whether domestic or foreign;
(g) The "1940 Act" refers to the Investment Company Act of 1940 and the
Rules and Regulations thereunder, all as amended from time to time;
(h) The terms "Commission" and "Principal Underwriter" shall have the
meanings given them in the 1940 Act;
(i) "Declaration of Trust" shall mean this Agreement and Declaration of
Trust, as amended or restated from time to time;
(j) "By-Laws" shall mean the By-Laws of the Trust as amended from time
to time and incorporated herein by reference;
(k) The term "Interested Person" has the meaning given it in Section
2(a)(19) of the 1940 Act;
(l) "Investment Manager" or "Manager" means a party furnishing services
to the Trust pursuant to any contract described in Article IV, Section 7(a)
hereof;
(m) "Series" refers to each Series of Shares established and designated
under or in accordance with the provisions of Article III.
ARTICLE II
Purpose of Trust
The purpose of the Trust is to conduct, operate and carry on the
business of a management investment company registered under the 1940 Act
through one or more Series investing primarily in securities.
ARTICLE III
Shares
Section 1. Division of Beneficial Interest. The beneficial interest in
--------- -------------------------------
the Trust shall at all times be divided into an unlimited number of Shares, with
a par value of $ .01 per Share. The Trustees may authorize the division of
Shares into separate Series and the division of Series into separate classes of
Shares. The different Series shall be established and designated, and the
variations in the relative rights and preferences as between the different
Series shall be fixed and determined, by the Trustees. If only one or no Series
(or classes ) shall be established, the Shares shall have the rights and
preferences provided for herein and in Article III, Section 6 hereof to the
extent relevant and not otherwise provided for herein, and all references to
Series (and classes) shall be construed (as the context may require) to refer to
the Trust.
Subject to the provisions of Section 6 of this Article III, each Share
shall have voting rights as provided in Article V hereof, and holders of the
Shares of any Series shall be entitled to receive dividends, when, if and as
declared with respect thereto in the manner provided in Article VI, Section 1
hereof. No Shares shall have any priority or preference over any other Share of
the same Series with respect to dividends or distributions upon termination of
the Trust or of such Series made pursuant to Article VIII, Section 4 hereof. All
dividends and distributions shall be made ratably among all Shareholders of a
particular (class of a) particular Series from the assets held with respect to
such Series according to the number of Shares of such (class of such) Series
held of record by such Shareholder on the record date for any dividend or
distribution or on the date of termination, as the case may be. Shareholders
shall have no preemptive or other right to subscribe to any additional Shares or
other securities issued by the Trust or any Series. The Trustees may from time
to time divide or combine the Shares of any particular Series into a greater or
lesser number of Shares of that Series without thereby materially changing the
proportionate beneficial interest of the Shares of that Series in the assets
held with respect to that Series or materially affecting the rights of Shares of
any other Series.
Section 2. Ownership of Shares. The ownership of Shares shall be
--------- --------------------
recorded on the books of the Trust or a transfer or similar agent for the Trust,
which books shall be maintained separately for the Shares of each Series (or
class). No certificates certifying the ownership of Shares shall be issued
except as the Board of Trustees may otherwise determine from time to time. The
Trustees may make such rules as they consider appropriate for the transfer of
Shares of each Series (or class) and similar matters. The record books of the
Trust as kept by the Trust or any transfer or similar agent, as the case may be,
shall be conclusive as to who are the Shareholders of each Series (or class) and
as to the number of Shares of each Series (or class) held from time to time by
each.
Section 3. Investments in the Trust. Investments may be accepted by the
--------- ------------------------
Trust from such Persons, at such times, on such terms, and for such
consideration as the Trustees from time to time may authorize.
Section 4. Status of Shares and Limitation of Personal Liability.
---------- ---------------------------------------------------------
Shares shall be deemed to be personal property giving only the rights provided
in this instrument. Every Shareholder by virtue of having become a Shareholder
shall be held to have expressly assented and agreed to the terms hereof and to
have become a party hereto. The death of a Shareholder during the existence of
the Trust shall not operate to terminate the Trust, nor entitle the
representative of any deceased Shareholder to an accounting or to take any
action in court or elsewhere against the Trust or the Trustees, but entitles
such representative only to the rights of said deceased Shareholder under this
Trust. Ownership of Shares shall not entitle the Shareholder to any title in or
to the whole or any part of the Trust Property or right to call for a partition
or division of the same or for an accounting, nor shall the ownership of Shares
constitute the Shareholders as partners. Neither the Trust nor the Trustees, nor
any officer, employee or agent of the Trust shall have any power to bind
personally any Shareholders, nor, except as specifically provided herein, to
call upon any Shareholder for the payment of any sum of money or assessment
whatsoever other than such as the Shareholder may at any time personally agree
to pay.
Section 5. Power of Board of Trustees to Change Provisions Relating to
--------- ------------------------------------------------------------
Shares. Notwithstanding any other provision of this Declaration of Trust and
- ------
without limiting the power of the Board of Trustees to amend the Declaration of
Trust as provided elsewhere herein, the Board of Trustees shall have the power
to amend this Declaration of Trust, at any time and from time to time, in such
manner as the Board of Trustees may determine in their sole discretion, without
the need for Shareholder action, so as to add to, delete, replace or otherwise
modify any provisions relating to the Shares contained in this Declaration of
Trust, provided that before adopting any such amendment without Shareholder
approval the Board of Trustees shall determine that it is consistent with the
fair and equitable treatment of all Shareholders or that Shareholder approval is
not otherwise required by the 1940 Act or other applicable law. If Shares have
been issued, Shareholder approval shall be required to adopt any amendments to
this Declaration of Trust which would adversely affect to a material degree the
rights and preferences of the Shares of any Series (or class) or to increase or
decrease the par value of the Shares of any Series (or class).
Subject to the foregoing Paragraph, the Board of Trustees may amend the
Declaration of Trust to amend any of the provisions set forth in paragraphs (a)
through (i) of Section 6 of this Article III.
Section 6. Establishment and Designation of Series. The establishment
--------- ---------------------------------------
and designation of any Series (or class) of Shares shall be effective upon the
resolution by a majority of the then Trustees, adopting a resolution which sets
forth such establishment and designation and the relative rights and preferences
of such Series (or class). Each such resolution shall be incorporated herein by
reference upon adoption.
Shares of each Series (or class) established pursuant to this Section
6, unless otherwise provided in the resolution establishing such Series, shall
have the following relative rights and preferences:
(a) Assets Held With Respect to a Particular Series. All consideration
------------------------------------------------
received by the Trust for the issue or sale of Shares of a particular Series,
together with all assets in which such consideration is invested or reinvested,
all income, earnings, profits, and proceeds thereof from whatever source
derived, including, without limitation, any proceeds derived from the sale,
exchange or liquidation of such assets, and any funds or payments derived from
any reinvestment of such proceeds in whatever form the same may be, shall
irrevocably be held with respect to that Series for all purposes, subject only
to the rights of creditors, and shall be so recorded upon the books of account
of the Trust. Such consideration, assets, income, earnings, profits and proceeds
thereof, from whatever source derived, including, without limitation, any
proceeds derived from the sale, exchange or liquidation of such assets, and any
funds or payments derived from any reinvestment of such proceeds, in whatever
form the same may be, are herein referred to as "assets held with respect to"
that Series. In the event that there are any assets, income, earnings, profits
and proceeds thereof, funds or payments which are not readily identifiable as
assets held with respect to any particular Series (collectively "General
Assets"), the Trustees shall allocate such General Assets to, between or among
any one or more of the Series in such manner and on such basis as the Trustees,
in their sole discretion, deem fair and equitable, and any General Asset so
allocated to a particular Series shall be held with respect to that Series. Each
such allocation by the Trustees shall be conclusive and binding upon the
Shareholders of all Series for all purposes.
(b) Liabilities Held With Respect to a Particular Series. The assets of
----------------------------------------------------
the Trust held with respect to each particular Series shall be charged against
the liabilities of the Trust held with respect to that Series and all expenses,
costs, charges and reserves attributable to that Series, and any general
liabilities of the Trust which are not readily identifiable as being held with
respect to any particular Series shall be allocated and charged by the Trustees
to and among any one or more of the Series in such manner and on such basis as
the Trustees in their sole discretion deem fair and equitable. The liabilities,
expenses, costs, charges, and reserves so charged to a Series are herein
referred to as "liabilities held with respect to" that Series. Each allocation
of liabilities, expenses, costs, charges and reserves by the Trustees shall be
conclusive and binding upon the holders of all Series for all purposes. All
Persons who have extended credit which has been allocated to a particular
Series, or who have a claim or contract which has been allocated to any
particular Series, shall look to the assets of that particular Series for
payment of such credit, claim, or contract.
(c) Dividends, Distributions, Redemptions, and Repurchases.
----------------------------------------------------------------
Notwithstanding any other provisions of this Declaration of Trust, including,
without limitation, Article VI, no dividend or distribution including, without
limitation, any distribution paid upon termination of the Trust or of any Series
(or class) with respect to, nor any redemption or repurchase of, the Shares of
any Series (or class) shall be effected by the Trust other than from the assets
held with respect to such Series, nor, except as specifically provided in
Section 7 of this Article III, shall any Shareholder of any particular Series
otherwise have any right or claim against the assets held with respect to any
other Series except to the extent that such Shareholder has such a right or
claim hereunder as a Shareholder of such other Series. The Trustees shall have
full discretion, to the extent not inconsistent with the 1940 Act, to determine
which items shall be treated as income and which items as capital; and each such
determination and allocation shall be conclusive and binding upon the
Shareholders.
(d) Voting. All Shares of the Trust entitled to vote on a matter shall
------
vote separately by Series (and, if applicable, by class): that is, the
Shareholders of each Series (or class) shall have the right to approve or
disapprove matters affecting the Trust and each respective Series (or class) as
if the Series (or classes) were separate companies. There are, however, two
exceptions to voting by separate Series (or classes). First, if the 1940 Act
requires all Shares of the Trust to be voted in the aggregate without
differentiation between the separate Series (or classes), then all the Trust's
Shares shall be entitled to vote on a one- vote-per-Share basis. Second, if any
matter affects only the interests of some but not all Series (or classes), then
only the Shareholders of such affected Series (or classes) shall be entitled to
vote on the matter.
(e) Equality. All the Shares of each particular Series shall represent
--------
an equal proportionate interest in the assets held with respect to that Series
(subject to the liabilities held with respect to that Series and such rights and
preferences as may have been established and designated with respect to classes
of Shares within such Series), and each Share of any particular Series shall be
equal to each other Share of that Series.
(f) Fractions. Any fractional Share of a Series shall carry
---------
proportionately all the rights and obligations of a whole share of that Series,
including rights with respect to voting, receipt of dividends and distributions,
redemption of Shares and termination of the Trust.
(g) Exchange Privilege. The Trustees shall have the authority to
-------------------
provide that the holders of Shares of any Series shall have the right to
exchange said Shares for Shares of one or more other Series of Shares in
accordance with such requirements and procedures as may be established by the
Trustees.
(h) Combination of Series. The Trustees shall have the authority,
----------------------
without the approval of the Shareholders of any Series unless otherwise required
by applicable law, to combine the assets and liabilities held with respect to
any two or more Series into assets and liabilities held with respect to a single
Series.
(i) Elimination of Series. At any time that there are no Shares
-----------------------
outstanding of any particular Series (or class) previously established and
designated, the Trustees may by resolution of a majority of the then Trustees
abolish that Series (or class) and rescind the establishment and designation
thereof.
Section 7. Indemnification of Shareholders. If any Shareholder or
--------- ---------------------------------
former Shareholder shall be exposed to liability by reason of a claim or demand
relating to his being or having been a Shareholder, and not because of his acts
or omissions, the Shareholder or former Shareholder (or his heirs, executors,
administrators, or other legal representatives or in the case of a corporation
or other entity, its corporate or other general successor) shall be entitled to
be held harmless from and indemnified out of the assets of the Trust against all
loss and expense arising from such claim or demand.
ARTICLE IV
The Board of Trustees
Section 1. Number, Election and Tenure. The number of Trustees
---------- ------------------------------
constituting the Board of Trustees shall be fixed from time to time by a written
instrument signed, or by resolution approved at a duly constituted meeting, by a
majority of the Board of Trustees, provided, however, that the number of
Trustees shall in no event be less than one (1) nor more than fifteen (15). The
Board of Trustees, by action of a majority of the then Trustees at a duly
constituted meeting, may fill vacancies in the Board of Trustees or remove
Trustees with or without cause. Each Trustee shall serve during the continued
lifetime of the Trust until he dies, resigns, is declared bankrupt or
incompetent by a court of appropriate jurisdiction, or is removed, or, if
sooner, until the next meeting of Shareholders called for the purpose of
electing Trustees and until the election and qualification of his successor. Any
Trustee may resign at any time by written instrument signed by him and delivered
to any officer of the Trust or to a meeting of the Trustees. Such resignation
shall be effective upon receipt unless specified to be effective at some other
time. Except to the extent expressly provided in a written agreement with the
Trust, no Trustee resigning and no Trustee removed shall have any right to any
compensation for any period following his resignation or removal, or any right
to damages on account of such removal. The Shareholders may fix the number of
Trustees and elect Trustees at any meeting of Shareholders called by the
Trustees for that purpose. Any Trustee may be removed at any meeting of
Shareholders by a vote of two-thirds of the outstanding Shares of the Trust. A
meeting of Shareholders for the purpose of electing or removing one or more
Trustees may be called (i) by the Trustees upon their own vote, or (ii) upon the
demand of Shareholders owning 10% or more of the Shares of the Trust in the
aggregate.
Section 2. Effect of Death, Resignation, etc. of a Trustee. The death,
--------- ------------------------------------------------
declination, resignation, retirement, removal, or incapacity of one or more
Trustees, or all of them, shall not operate to annul the Trust or to revoke any
existing agency created pursuant to the terms of this Declaration of Trust.
Whenever a vacancy in the Board of Trustees shall occur, until such vacancy is
filled as provided in Article IV, Section 1, the Trustees in office, regardless
of their number, shall have all the powers granted to the Trustees and shall
discharge all the duties imposed upon the Trustees by this Declaration of Trust.
As conclusive evidence of such vacancy, a written instrument certifying the
existence of such vacancy may be executed by an officer of the Trust or by a
majority of the Board of Trustees. In the event of the death, declination,
resignation, retirement, removal, or incapacity of all the then Trustees within
a short period of time and without the opportunity for at least one Trustee
being able to appoint additional Trustees to fill vacancies, the Trust's
Investment Manager(s) are empowered to appoint new Trustees subject to the
provisions of Section 16(a) of the 1940 Act.
Section 3. Powers. Subject to the provisions of this Declaration of
--------- ------
Trust, the business of the Trust shall be managed by the Board of Trustees, and
such Board shall have all powers necessary or convenient to carry out that
responsibility including the power to engage in securities transactions of all
kinds on behalf of the Trust. Without limiting the foregoing, the Trustees may:
adopt By-Laws not inconsistent with this Declaration of Trust providing for the
regulation and management of the affairs of the Trust and may amend and repeal
them to the extent that such By-Laws do not reserve that right to the
Shareholders; fill vacancies in or remove from their number, and may elect and
remove such officers and appoint and terminate such agents as they consider
appropriate; appoint from their own number and establish and terminate one or
more committees consisting of two or more Trustees which may exercise the powers
and authority of the Board of Trustees to the extent that the Trustees
determine; employ one or more custodians of the assets of the Trust and may
authorize such custodians to employ subcustodians and to deposit all or any part
of such assets in a system or systems for the central handling of securities or
with a Federal Reserve Bank, retain a transfer agent or a Shareholder servicing
agent, or both; provide for the issuance and distribution of Shares by the Trust
directly or through one or more Principal Underwriters or otherwise; redeem,
repurchase and transfer Shares pursuant to applicable law; set record dates for
the determination of Shareholders with respect to various matters; declare and
pay dividends and distributions to Shareholders of each Series from the assets
of such Series; and in general delegate such authority as they consider
desirable to any officer of the Trust, to any committee of the Trustees and to
any agent or employee of the Trust or to any such custodian, transfer or
Shareholder servicing agent, or Principal Underwriter. Any determination as to
what is in the interests of the Trust made by the Trustees in good faith shall
be conclusive. In construing the provisions of this Declaration of Trust, the
presumption shall be in favor of a grant of power to the Trustees. Unless
otherwise specified or required by law, any action by the Board of Trustees
shall be deemed effective if approved or taken by a majority of the Trustees
then in office.
Without limiting the foregoing, the Trust shall have power and
authority:
(a) To invest and reinvest cash, to hold cash uninvested, and to
subscribe for, invest in, reinvest in, purchase or otherwise acquire, own, hold,
pledge, sell, assign, transfer, exchange, distribute, write options on, lend or
otherwise deal in or dispose of contracts for the future acquisition or delivery
of fixed income or other securities, and securities of every nature and kind,
including, without limitation, all types of bonds, debentures, stocks,
negotiable or non-negotiable instruments, obligations, evidences of
indebtedness, certificates of deposit or indebtedness, commercial paper,
repurchase agreements, bankers' acceptances, and other securities of any kind,
issued, created, guaranteed, or sponsored by any and all Persons, including,
without limitation, states, territories, and possessions of the United States
and the District of Columbia and any political subdivision, agency, or
instrumentality thereof, any foreign government or any political subdivision of
the U.S. Government or any foreign government, or any international
instrumentality, or by any bank or savings institution, or by any corporation or
organization organized under the laws of the United States or of any state,
territory, or possession thereof, or by any corporation or organization
organized under any foreign law, or in "when issued" contracts for any such
securities, to change the investments of the assets of the Trust; and to
exercise any and all rights, powers, and privileges of ownership or interest in
respect of any and all such investments of every kind and description,
including, without limitation, the right to consent and otherwise act with
respect thereto, with power to designate one or more Persons, to exercise any of
said rights, powers, and privileges in respect of any of said instruments;
(b) To sell, exchange, lend, pledge, mortgage, hypothecate, lease, or
write options with respect to or otherwise deal in any property rights relating
to any or all of the assets of the Trust or any Series;
(c) To vote or give assent, or exercise any rights of ownership, with
respect to stock or other securities or property, and to execute and deliver
proxies or powers of attorney to such person or persons as the Trustees shall
deem proper, granting to such person or persons such power and discretion with
relation to securities or property as the Trustees shall deem proper;
(d) To exercise powers and right of subscription or otherwise which in
any manner arise out of ownership of securities;
(e) To hold any security or property in a form not indicating any
trust, whether in bearer, unregistered or other negotiable form, or in its own
name or in the name of a custodian or subcustodian or a nominee or nominees or
otherwise;
(f) To consent to or participate in any plan for the reorganization,
consolidation or merger of any corporation or issuer of any security which is
held in the Trust; to consent to any contract, lease, mortgage, purchase or sale
of property by such corporation or issuer; and to pay calls or subscriptions
with respect to any security held in the Trust;
(g) To join with other security holders in acting through a committee,
depositary, voting trustee or otherwise, and in that connection to deposit any
security with, or transfer any security to, any such committee, depositary or
trustee, and to delegate to them such power and authority with relation to any
security (whether or not so deposited or transferred) as the Trustees shall deem
proper, and to agree to pay, and to pay, such portion of the expenses and
compensation of such committee, depositary or trustee as the Trustees shall deem
proper;
(h) To compromise, arbitrate or otherwise adjust claims in favor of or
against the Trust or any matter in controversy, including but not limited to
claims for taxes;
(i) To enter into joint ventures, general or limited partnerships and
any other combination or associations;
(j) To borrow funds or other property in the name of the Trust
exclusively for Trust purposes;
(k) To endorse or guarantee the payment of any notes or other
obligations of any Person; to make contracts of guaranty or suretyship, or
otherwise assume liability for payment thereof;
(l) To purchase and pay for entirely out of Trust Property such
insurance as the Trustees may deem necessary or appropriate for the conduct of
the business, including, without limitation, insurance policies insuring the
assets of the Trust or payment of distributions and principal on its portfolio
investments, and insurance policies insuring the Shareholders, Trustees,
officers, employees, agents, investment advisers, principal underwriters, or
independent contractors of the Trust, individually against all claims and
liabilities of every nature arising by reason of holding Shares, holding, being
or having held any such office or position, or by reason of any action alleged
to have been taken or omitted by any such Person as Trustee, officer, employee,
agent, investment adviser, principal underwriter, or independent contractor,
including any action taken or omitted that may be determined to constitute
negligence, whether or not the Trust would have the power to indemnify such
Person against liability; and
(m) to adopt, establish and carry out pension, profit-sharing, share
bonus, share purchase, savings, thrift and other retirement, incentive and
benefit plans, trusts and provisions, including the purchasing of life insurance
and annuity contracts as a means of providing such retirement and other
benefits, for any or all of the Trustees, officers, employees and agents of the
Trust.
The Trust shall not be limited to investing in obligations maturing
before the possible termination of the Trust or one or more of its Series. The
Trust shall not in any way be bound or limited by any present or future law or
custom in regard to investment by fiduciaries. The Trust shall not be required
to obtain any court order to deal with any assets of the Trust or take any other
action hereunder.
Section 4. Payment of Expenses by the Trust. The Trustees are
---------- -------------------------------------
authorized to pay or cause to be paid out of the principal or income of the
Trust, or partly out of the principal and partly out of income, as they deem
fair, all expenses, fees, charges, taxes and liabilities incurred or arising in
connection with the Trust, or in connection with the management thereof,
including, but not limited to, the Trustees' compensation and such expenses and
charges for the services of the Trust's officers, employees, investment adviser
or manager, principal underwriter, auditors, counsel, custodian, transfer agent,
Shareholder servicing agent, and such other agents or independent contractors
and such other expenses and charges as the Trustees may deem necessary or proper
to incur.
Section 5. Payment of Expenses by Shareholders. The Trustees shall have
--------- -----------------------------------
the power, as frequently as they may determine, to cause each Shareholder, or
each Shareholder of any particular Series, to pay directly, in advance or
arrears, for charges of the Trust's custodian or transfer, Shareholder servicing
or similar agent, an amount fixed from time to time by the Trustees, by setting
off such charges due from such Shareholder from declared but unpaid dividends
owed such Shareholder and/or by reducing the number of shares in the account of
such Shareholder by that number of full and/or fractional Shares which
represents the outstanding amount of such charges due from such Shareholder.
Section 6. Ownership of Assets of the Trust. Title to all of the assets
--------- --------------------------------
of the Trust shall at all times be considered as vested in the Trust, except
that the Trustees shall have power to cause legal title to any Trust Property to
be held by or in the name of one or more of the Trustees, or in the name of the
Trust, or in the name of any other Person as nominee, on such terms as the
Trustees may determine. The right, title and interest of the Trustees in the
Trust Property shall vest automatically in each Person who may hereafter become
a Trustee. Upon the resignation, removal or death of a Trustee he shall
automatically cease to have any right, title or interest in any of the Trust
Property, and the right, title and interest of such Trustee in the Trust
Property shall vest automatically in the remaining Trustees. Such vesting and
cessation of title shall be effective whether or not conveyancing documents have
been executed and delivered.
Section 7. Service Contracts.
--------- -----------------
(a) Subject to such requirements and restrictions as may be set forth
in the By-Laws, the Trustees may, at any time and from time to time, contract
for exclusive or nonexclusive advisory, management and/or administrative
services for the Trust or for any Series with any corporation, trust,
association or other organization; and any such contract may contain such other
terms as the Trustees may determine, including without limitation, authority for
the Investment Manager or administrator to determine from time to time without
prior consultation with the Trustees what investments shall be purchased, held,
sold or exchanged and what portion, if any, of the assets of the Trust shall be
held uninvested and to make changes in the Trust's investments, or such other
activities as may specifically be delegated to such party.
(b) The Trustees may also, at any time and from time to time, contract
with any corporation, trust, association or other organization, appointing it
exclusive or nonexclusive distributor or Principal Underwriter for the Shares of
one or more of the Series (or classes) or other securities to be issued by the
Trust. Every such contract shall comply with such requirements and restrictions
as may be set forth in the By-Laws; and any such contract may contain such other
terms as the Trustees may determine.
(c) The Trustees are also empowered, at any time and from time to time,
to contract with any corporations, trusts, associations or other organizations,
appointing it or them the custodian, transfer agent and/or Shareholder servicing
agent for the Trust or one or more of its Series. Every such contract shall
comply with such requirements and restrictions as may be set forth in the
By-Laws or stipulated by resolution of the Trustees.
(d) The Trustees are further empowered, at any time and from time to
time, to contract with any entity to provide such other services to the Trust or
one or more of the Series, as the Trustees determine to be in the best interests
of the Trust and the applicable Series.
(e) The fact that:
(i) any of the Shareholders, Trustees, or officers of the Trust is
a shareholder, director, officer, partner, trustee, employee, Manager,
adviser, Principal Underwriter, distributor, or affiliate or agent of
or for any corporation, trust, association, or other organization, or
for any parent or affiliate of any organization with which an advisory,
management or administration contract, or principal underwriter's or
distributor's contract, or transfer, Shareholder servicing or other
type of service contract may have been or may hereafter be made, or
that any such organization, or any parent or affiliate thereof, is a
Shareholder or has an interest in the Trust, or that
(ii) any corporation, trust, association or other organization
with which an advisory, management or administration contract or
principal underwriter's or distributor's contract, or transfer,
Shareholder servicing or other type of service contract may have been
or may hereafter be made also has an advisory, management or
administration contract, or principal underwriter's or distributor's
contract, or transfer, shareholder servicing or other service contract
with one or more other corporations, trust, associations, or other
organizations, or has other business or interests,
shall not affect the validity of any such contract or disqualify any
Shareholder, Trustee or officer of the Trust from voting upon or executing the
same, or create any liability or accountability to the Trust or its
Shareholders, provided approval of each such contract is made pursuant to the
requirements of the 1940 Act.
ARTICLE V
Shareholders' Voting Powers and Meetings
Section 1. Voting Powers. Subject to the provisions of Article III,
--------- --------------
Section 6(d), the Shareholders shall have power to vote only (i) for the
election or removal of Trustees as provided in Article IV, Section 1, and (ii)
with respect to such additional matters relating to the Trust as may be required
by this Declaration of Trust, the By-Laws or any registration of the Trust with
the Commission (or any successor agency) or any state, or as the Trustees may
consider necessary or desirable. Each whole Share shall be entitled to one vote
as to any matter on which it is entitled to vote and each fractional Share shall
be entitled to a proportionate fractional vote. There shall be no cumulative
voting in the election of Trustees. Shares may be voted in person or by proxy. A
proxy with respect to Shares held in the name of two or more persons shall be
valid if executed by any one of them unless at or prior to exercise of the proxy
the Trust receives a specific written notice to the contrary from any one of
them. A proxy purporting to be executed by or on behalf of a Shareholder shall
be deemed valid unless challenged at or prior to its exercise and the burden of
proving invalidity shall rest on the challenger.
Section 2. Voting Power and Meetings. Meetings of the Shareholders may
--------- -------------------------
be called by the Trustees for the purpose of electing Trustees as provided in
Article IV, Section 1 and for such other purposes as may be prescribed by law,
by this Declaration of Trust or by the By-Laws. Meetings of the Shareholders may
also be called by the Trustees from time to time for the purpose of taking
action upon any other matter deemed by the Trustees to be necessary or
desirable. A meeting of Shareholders may be held at any place designated by the
Trustees. Written notice of any meeting of Shareholders shall be given or caused
to be given by the Trustees by mailing such notice at least seven (7) days
before such meeting, postage prepaid, stating the time and place of the meeting,
to each Shareholder at the Shareholder's address as it appears on the records of
the Trust. Whenever notice of a meeting is required to be given to a Shareholder
under this Declaration of Trust or the By-Laws, a written waiver thereof,
executed before or after the meeting by such Shareholder or his attorney
thereunto authorized and filed with the records of the meeting, shall be deemed
equivalent to such notice.
Section 3. Quorum and Required Vote. Except when a larger quorum is
--------- --------------------------
required by applicable law, by the By-Laws or by this Declaration of Trust,
forty percent (40%) of the Shares entitled to vote shall constitute a quorum at
a Shareholders' meeting. When any one or more Series (or classes) is to vote as
a single class separate from any other Shares, forty percent (40%) of the Shares
of each such Series (or classes) entitled to vote shall constitute a quorum at a
Shareholders's meeting of that Series. Any meeting of Shareholders may be
adjourned from time to time by a majority of the votes properly cast upon the
question of adjourning a meeting to another date and time, whether or not a
quorum is present, and the meeting may be held as adjourned within a reasonable
time after the date set for the original meeting without further notice. Subject
to the provisions of Article III, Section 6(d), when a quorum is present at any
meeting, a majority of the Shares voted shall decide any questions and a
plurality shall elect a Trustee, except when a larger vote is required by any
provision of this Declaration of Trust or the By-Laws or by applicable law.
Section 4. Action by Written Consent. Any action taken by Shareholders
--------- -------------------------
may be taken without a meeting if Shareholders holding a majority of the Shares
entitled to vote on the matter (or such larger proportion thereof as shall be
required by any express provision of this Declaration of Trust or by the
By-Laws) and holding a majority (or such larger proportion as aforesaid) of the
Shares of any Series (or class) entitled to vote separately on the matter
consent to the action in writing and such written consents are filed with the
records of the meetings of Shareholders. Such consent shall be treated for all
purposes as a vote taken at a meeting of Shareholders.
Section 5. Record Dates. For the purpose of determining the
---------- --------------
Shareholders of any Series (or class) who are entitled to vote or act at any
meeting or any adjournment thereof, the Trustees may from time to time fix a
time, which shall be not more than ninety (90) days before the date of any
meeting of Shareholders, as the record date for determining the Shareholders of
such Series (or class) having the right to notice of and to vote at such meeting
and any adjournment thereof, and in such case only Shareholders of record on
such record date shall have such right, notwithstanding any transfer of shares
on the books of the Trust after the record date. For the purpose of determining
the Shareholders of any Series (or class) who are entitled to receive payment of
any dividend or of any other distribution, the Trustees may from time to time
fix a date, which shall be before the date for the payment of such dividend or
such other payment, as the record date for determining the Shareholders of such
Series (or class) having the right to receive such dividend or distribution.
Without fixing a record date the Trustees may for voting and/or distribution
purposes close the register or transfer books for one or more Series for all or
any part of the period between a record date and a meeting of Shareholders or
the payment of a distribution. Nothing in this Section shall be construed as
precluding the Trustees from setting different record dates for different Series
(or classes).
Section 6. Additional Provisions. The By-Laws may include further
--------- ----------------------
provisions for Shareholders' votes and meetings and related matters.
ARTICLE VI
Net Asset Value, Distributions, and Redemptions
Section 1. Determination of Net Asset Value, Net Income, and
---------- ---------------------------------------------------------
Distributions. Subject to Article III, Section 6 hereof, the Trustees, in their
- -------------
absolute discretion, may prescribe and shall set forth in the By-Laws or in a
duly adopted vote of the Trustees such bases and time for determining the per
Share or net asset value of the Shares of any Series or net income attributable
to the Shares of any Series, or the declaration and payment of dividends and
distributions on the Shares of any Series, as they may deem necessary or
desirable.
Section 2. Redemptions and Repurchases. The Trust shall purchase such
--------- ----------------------------
Shares as are offered by any Shareholder for redemption, upon the presentation
of a proper instrument of transfer together with a request directed to the Trust
or a Person designated by the Trust that the Trust purchase such Shares or in
accordance with such other procedures for redemption as the Trustees may from
time to time authorize; and the Trust will pay therefor the net asset value
thereof, in accordance with the ByLaws and applicable law. Payment for said
Shares shall be made by the Trust to the Shareholder within seven days after the
date on which the request is made in proper form. The obligation set forth in
this Section 2 is subject to the provision that in the event that any time the
New York Stock Exchange (the "Exchange") is closed for other than weekends or
holidays, or if permitted by the Rules of the Commission during periods when
trading on the Exchange is restricted or during any emergency which makes it
impracticable for the Trust to dispose of the investments of the applicable
Series or to determine fairly the value of the net assets held with respect to
such Series or during any other period permitted by order of the Commission for
the protection of investors, such obligations may be suspended or postponed by
the Trustees.
The redemption price may in any case or cases be paid wholly or partly
in kind if the Trustees determine that such payment is advisable in the interest
of the remaining Shareholders of the Series for which the Shares are being
redeemed. Subject to the foregoing, the fair value, selection and quantity of
securities or other property so paid or delivered as all or part of the
redemption price may be determined by or under authority of the Trustees. In no
case shall the Trust be liable for any delay of any corporation or other Person
in transferring securities selected for delivery as all or part of any payment
in kind.
Section 3. Redemptions at the Option of the Trust. The Trust shall have
--------- --------------------------------------
the right at its option and at any time to redeem Shares of any Shareholder at
the net asset value thereof as described in Section 1 of this Article VI: (i) if
at such time such Shareholder owns Shares of any Series having an aggregate net
asset value of less than an amount determined from time to time by the Trustees
prior to the acquisition of said Shares; or (ii) to the extent that such
Shareholder owns Shares of a particular Series equal to or in excess of a
percentage of the outstanding Shares of that Series determined from time to time
by the Trustees; or (iii) to the extent that such Shareholder owns Shares equal
to or in excess of a percentage, determined from time to time by the Trustees,
of the outstanding Shares of the Trust or of any Series.
ARTICLE VII
Compensation and Limitation of Liability of Trustees
Section 1. Compensation. The Trustees as such shall be entitled to
--------- ------------
reasonable compensation from the Trust, and they may fix the amount of such
compensation. Nothing herein shall in any way prevent the employment of any
Trustee for advisory, management, legal, accounting, investment banking or other
services and payment for the same by the Trust.
Section 2. Indemnification and Limitation of Liability. The Trustees
--------- --------------------------------------------
shall not be responsible or liable in any event for any neglect or wrong-doing
of any officer, agent, employee, Manager or Principal Underwriter of the Trust,
nor shall any Trustee be responsible for the act or omission of any other
Trustee, and the Trust out of its assets shall indemnify and hold harmless each
and every Trustee from and against any and all claims and demands whatsoever
arising out of or related to each Trustee's performance of his duties as a
Trustee of the Trust; provided that nothing herein contained shall indemnify,
hold harmless or protect any Trustee from or against any liability to the Trust
or any Shareholder to which he would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his office.
Every note, bond, contract, instrument, certificate or undertaking and
every other act or thing whatsoever issued, executed or done by or on behalf of
the Trust or the Trustees or any of them in connection with the Trust shall be
conclusively deemed to have been issued, executed or done only in or with
respect to their or his capacity as Trustees or Trustee, and such Trustees or
Trustee shall not be personally liable thereon.
Section 3. Trustee's Good Faith Action, Expert Advice, No Bond or
--------- -----------------------------------------------------------
Surety. The exercise by the Trustees of their powers and discretions hereunder
- ------
shall be binding upon everyone interested. A Trustee shall be liable to the
Trust and to any Shareholder solely for his own willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the conduct of
the office of Trustee, and shall not be liable for errors of judgment or
mistakes of fact or law. The Trustees may take advice of counsel or other
experts with respect to the meaning and operation of this Declaration of Trust,
and shall be under no liability for any act or omission in accordance with such
advice nor for failing to follow such advice. The Trustees shall not be required
to give any bond as such, nor any surety if a bond is required.
Section 4. Insurance. The Trustees shall be entitled and empowered to
--------- ---------
the fullest extent permitted by law to purchase with Trust assets insurance for
liability and for all expenses reasonably incurred or paid or expected to be
paid by a Trustee or officer in connection with any claim, action, suit or
proceeding in which he becomes involved by virtue of his capacity or former
capacity with the Trust.
ARTICLE VIII
Miscellaneous
Section 1. Liability of Third Persons Dealing with Trustees. No Person
--------- ------------------------------------------------
dealing with the Trustees shall be bound to make any inquiry concerning the
validity of any transaction made or to be made by the Trustees or to see to the
application of any payments made or property transferred to the Trust or upon
its order.
Section 2. Termination of Trust or Series. Unless terminated as
---------- ---------------------------------
provided herein, the Trust shall continue without limitation of time. The Trust
may be terminated at any time by vote of a majority of the Shares of each Series
entitled to vote, voting separately by Series, or by the Trustees by written
notice to the Shareholders. Any Series may be terminated at any time by vote of
a majority of the Shares of that Series or by the Trustees by written notice to
the Shareholders of that Series.
Upon termination of the Trust (or any Series, as the case may be),
after paying or otherwise providing for all charges, taxes, expenses and
liabilities held, severally, with respect to each Series (or the applicable
Series, as the case may be), whether due or accrued or anticipated as may be
determined by the Trustees, the Trust shall, in accordance with such procedures
as the Trustees consider appropriate, reduce the remaining assets held,
severally, with respect to each Series (or the applicable Series, as the case
may be), to distributable form in cash or shares or other securities, or any
combination thereof, and distribute the proceeds held with respect to each
Series (or the applicable Series, as the case may be), to the Shareholders of
that Series, as a Series, ratably according to the number of Shares of that
Series held by the several Shareholders on the date of termination.
Section 3. Merger and Consolidation. the Trustees may cause (i) the
--------- -------------------------
Trust or one or more of its Series to the extent consistent with applicable law
to be merged into or consolidated with another Trust or company, (ii) the Shares
of the Trust or any Series to be converted into beneficial interests in another
business trust (or series thereof) created pursuant to this Section 3 of Article
VIII, or (iii) the Shares to be exchanged under or pursuant to any state or
federal statute to the extent permitted by law. Such merger or consolidation,
Share conversion or Share exchange must be authorized by vote of a majority of
the outstanding Shares of the Trust, as a whole, or any affected Series, as may
be applicable; provided that in all respects not governed by statute or
applicable law, the Trustees shall have power to prescribe the procedure
necessary or appropriate to accomplish a sale of assets, merger or consolidation
including the power to create one or more separate business trusts to which all
or any part of the assets, liabilities, profits or losses of the Trust may be
transferred and to provide for the conversion of Shares of the Trust or any
Series into beneficial interests in such separate business trust or trusts (or
series thereof).
Section 4. Amendments. This Declaration of Trust may be restated and/or
--------- ----------
amended at any time by an instrument in writing signed by a majority of the then
Trustees and, if required, by approval of such amendment by Shareholders in
accordance with Article V, Section 3 hereof. Any such restatement and/or
amendment hereto shall be effective immediately upon execution and approval. The
Certificate of Trust of the Trust may be restated and/or amended by a similar
procedure, and any such restatement and/or amendment shall be effective
immediately upon filing with the Office of the Secretary of State of the State
of Delaware or upon such future date as may be stated therein.
Section 5. Filing of Copies, References, Headings. The original or a
--------- ----------------------------------------
copy of this instrument and of each restatement and/or amendment hereto shall be
kept at the office of the Trust where it may be inspected by any Shareholder.
Anyone dealing with the Trust may rely on a certificate by an officer of the
Trust as to whether or not any such restatements and/or amendments have been
made and as to any matters in connection with the Trust hereunder; and, with the
same effect as if it were the original, may rely on a copy certified by an
officer of the Trust to be a copy of this instrument or of any such restatements
and/or amendments. In this instrument and in any such restatements and/or
amendment, references to this instrument, and all expressions like "herein",
"hereof" and "hereunder", shall be deemed to refer to this instrument as amended
or affected by any such restatements and/or amendments. Headings are placed
herein for convenience of reference only and shall not be taken as a part hereof
or control or affect the meaning, construction or effect of this instrument.
Whenever the singular number is used herein, the same shall include the plural;
and the neuter, masculine and feminine genders shall include each other, as
applicable. This instrument may be executed in any number of counterparts each
of which shall be deemed an original.
Section 6. Applicable Law. This Agreement and Declaration of Trust is
--------- ---------------
created under and is to be governed by and construed and administered according
to the laws of the State of Delaware and the Delaware Business Trust Act, as
amended from time to time (the "Act"). The Trust shall be a Delaware business
trust pursuant to such Act, and without limiting the provisions hereof, the
Trust may exercise all powers which are ordinarily exercised by such a business
trust.
Section 7. Provisions in Conflict with Law or Regulations.
--------- ----------------------------------------------
(a) The provisions of the Declaration of Trust are severable, and if
the Trustees shall determine, with the advice of counsel, that any of such
provisions is in conflict with the 1940 Act, the regulated investment company
provisions of the Internal Revenue Code or with other applicable laws and
regulations, the conflicting provision shall be deemed never to have constituted
a part of the Declaration of Trust; provided, however, that such determination
shall not affect any of the remaining provisions of the Declaration of Trust or
render invalid or improper any action taken or omitted prior to such
determination.
(b) If any provision of the Declaration of Trust shall be held invalid
or unenforceable in any jurisdiction, such invalidity or unenforceability shall
attach only to such provision in such jurisdiction and shall not in any manner
affect such provision in any other jurisdiction or any other provision of the
Declaration of Trust in any jurisdiction.
Section 8. Business Trust Only. It is the intention of the Trustees to
--------- --------------------
create a business trust pursuant to the Delaware Business Trust Act, as amended
from time to time (the "Act"), and thereby to create only the relationship of
trustee and beneficial owners within the meaning of such Act between the
Trustees and each Shareholder. It is not the intention of the Trustees to create
a general partnership, limited partnership, joint stock association,
corporation, bailment, or any form of legal relationship other than a business
trust pursuant to such Act. Nothing in this Declaration of Trust shall be
construed to make the Shareholders, either by themselves or with the Trustees,
partners or members of a joint stock association.
IN WITNESS WHEREOF, the Trustees named below do hereby make
and enter into this Declaration of Trust as of the 6th day of July, 1994.
/s/ Richard D. Burritt
-------------------------------------
Richard D. Burritt
4455 E. Camelback Rd., Suite 261E
Phoenix, AZ 85018
/s/ Deborah A. Moudy
-------------------------------------
Deborah A. Moudy
4455 E. Camelback Rd., Suite 261E
Phoenix, AZ 85018
/s/ Robert H. Wadsworth
-------------------------------------
Robert H. Wadsworth
4455 E. Camelback Rd., Suite 261E
Phoenix, AZ 85018
THE PRINCIPAL PLACE OF BUSINESS OF THE TRUST IS
12750 High Bluff Drive, Suite 420
San Diego, California 92130
AMENDMENT
to
AGREEMENT AND DECLARATION OF TRUST
of
BRANDES INTERNATIONAL FUND
Pursuant to ARTICLE VIII, Section 4 of the Declaration of Trust,
ARTICLE V, Section 2 of the Declaration of Trust is hereby amended to read as
follows:
Section 2. Voting Power and Meetings. Meetings of the Shareholders may
--------- -------------------------
be called by the Trustees for the purpose of electing Trustees as provided in
Article IV, Section 1 and for such other purposes as may be prescribed by law,
by this Declaration of Trust or by the By-Laws. Meetings of the Shareholders may
also be called by the Trustees from time to time for the purpose of taking
action upon any other matter deemed by the Trustees to be necessary or
desirable. Meetings of the Shareholders shall be called by any Trustee upon
written request of Shareholders holding, in the aggregate, not less than 10% of
the Shares, such request specifying the purpose or purposes for which such
meeting is to be called. A meeting of Shareholders may be held at any place
designated by the Trustees. Written notice of any meeting of Shareholders shall
be given or caused to be given by the Trustees by mailing such notice at least
seven (7) days before such meeting, postage prepaid, stating the time and place
of the meeting, to each Shareholder at the Shareholder's address as it appears
on the records of the Trust. Whenever notice of a meeting is required to be
given to a Shareholder under this Declaration of Trust or the By-Laws, a written
waiver thereof, executed before or after the meeting by such Shareholder or his
attorney thereunto authorized and filed with the records of the meeting, shall
be deemed equivalent to such notice.
IN WITNESS WHEREOF, the undersigned Trustees have executed this
Amendment to the Agreement and Declaration of Trust this 7th day of December,
1994.
/s/ Robert H. Wadsworth
- -----------------------
Robert H. Wadsworth
/s/ Richard D. Burritt
- -----------------------
Richard D. Burritt
/s/ Deborah A. Moudy
- -----------------------
Deborah A. Moudy
BY-LAWS
for the regulation, except as
otherwise provided by statute or the
Agreement and Declaration of Trust, of
BRANDES INTERNATIONAL FUND
a Delaware Business Trust
<PAGE>
TABLE OF CONTENTS
-----------------
Page
ARTICLE I Offices ----
-------
1. Principal Office................................................. 1
2. Delaware Office.................................................. 1
3. Other Offices.................................................... 1
ARTICLE II Meetings of Shareholders
------------------------
1. Place of Meetings............................................... 1
2. Call of Meeting................................................. 1
3. Notice of Shareholders' Meeting................................. 1
4. Manner of Giving Notice; Affidavit of Notice.................... 2
5. Adjourned Meeting; Notice....................................... 2
6. Voting.......................................................... 3
7. Waiver of Notice of Consent by Absent
Shareholders.................................................... 3
8. Shareholder Action by Written Consent Without a
Meeting......................................................... 3
9. Record Date for Shareholder Notice, Voting and
Giving Consents................................................. 4
10. Proxies......................................................... 5
11. Inspectors of Election.......................................... 5
ARTICLE III Trustees
--------
1. Powers.......................................................... 6
2. Number of Trustees.............................................. 6
3. Vacancies....................................................... 6
4. Place of Meetings and Meetings by Telephone..................... 6
5. Regular Meetings................................................ 7
6. Special Meetings................................................ 7
7. Quorum.......................................................... 7
8. Waiver of Notice................................................ 7
9. Adjournment..................................................... 8
10. Notice of Adjournment........................................... 8
11. Action Without a Meeting........................................ 8
12. Fees and Compensation of Trustees............................... 8
13. Delegation of Power to Other Trustees........................... 8
ARTICLE IV Committees
----------
1. Committees of Trustees........................................... 8
2. Meetings and Action of Committees................................ 9
ARTICLE V Officers
--------
1. Officers........................................................ 9
2. Election of Officers............................................ 10
3. Subordinate Officers............................................ 10
4. Removal and Resignation of Officers............................. 10
5. Vacancies in Offices............................................ 10
6. Chairman of the Board........................................... 10
7. President....................................................... 11
8. Vice Presidents................................................. 11
9. Secretary....................................................... 11
10. Treasurer....................................................... 12
ARTICLE VI Indemnification of Trustees, Officers
-------------------------------------
Employees and Other Agents
--------------------------
1. Agents, Proceedings and Expenses................................ 12
2. Actions Other than by Trust..................................... 12
3. Actions by the Trust............................................ 13
4. Exclusion and Indemnification................................... 13
5. Successful Defense by Agent..................................... 14
6. Required Approval............................................... 14
7. Advance of Expenses............................................. 14
8. Other Contractual Rights........................................ 15
9. Limitations..................................................... 15
10. Insurance....................................................... 15
11. Fiduciaries of Corporate Employee Benefit Plan.................. 15
ARTICLE VII Records and Reports
-------------------
1. Maintenance and Inspection of Share Register.................... 16
2. Maintenance and Inspection of By-Laws........................... 16
3. Maintenance and Inspection of Other Records..................... 16
4. Inspection by Trustees.......................................... 16
5. Financial Statements............................................ 16
ARTICLE VIII General Matters
---------------
1. Checks, Drafts, Evidence of Indebtedness........................ 17
2. Contracts and Instruments; How Executed......................... 17
3. Certificate of Shares........................................... 17
4. Lost Certificates............................................... 17
5. Representation of Shares of Other Entities
Held by Trust................................................... 18
6. Fiscal Year..................................................... 18
ARTICLE IX Amendments
----------
1. Amendment by Shareholders....................................... 18
2. Amendment by Trustees........................................... 18
3. Incorporation by Reference into Agreement and
Declaration of Trust of the Trust......................... 18
<PAGE>
BY-LAWS
OF
BRANDES INTERNATIONAL FUND
--------------------------
A Delaware Business Trust
ARTICLE I
OFFICES
-------
Section 1. PRINCIPAL OFFICE. The Board of Trustees shall fix and, from
----------------
time to time, may change the location of the principal executive office of the
Brandes International Fund (the "Trust") at any place within or outside the
State of Delaware.
Section 2. DELAWARE OFFICE. The Board of Trustees shall establish a
----------------
registered office in the State of Delaware and shall appoint as the Trust's
registered agent for service of process in the State of Delaware an individual
resident of the State of Delaware or a Delaware corporation or a corporation
authorized to transact business in the State of Delaware; in each case the
business office of such registered agent for service of process shall be
identical with the registered Delaware office of the Trust.
Section 3. OTHER OFFICES. The Board of Trustees may at any time
--------------
establish branch or subordinate offices at any place or places where the Trust
intends to do business.
ARTICLE II
MEETINGS OF SHAREHOLDERS
------------------------
Section 1. PLACE OF MEETINGS. Meetings of shareholders shall be held at
-----------------
any place designated by the Board of Trustees. In the absence of any such
designation, shareholders' meetings shall be held at the principal executive
office of the Trust.
Section 2. CALL OF MEETING. A meeting of the shareholders may be called
---------------
at any time by the Board of Trustees or by the Chairman of the Board or by the
President.
Section 3. NOTICE OF SHAREHOLDERS' MEETING. All notices of meetings of
--------------------------------
shareholders shall be sent or otherwise given in accordance with Section 4 of
this Article II not less than seven (7) nor more than seventy-five (75) days
before the date of the meeting. The notice shall specify (i) the place, date and
hour of the meeting, and (ii) the general nature of the business to be
transacted. The notice of any meeting at which Trustees are to be elected also
shall include the name of any nominee or nominees whom at the time of the notice
are intended to be presented for election.
If action is proposed to be taken at any meeting for approval of (i) a
contract or transaction in which a Trustee has a direct or indirect financial
interest, (ii) an amendment of the Agreement and Declaration of Trust of the
Trust, (iii) a reorganization of the Trust, or (iv) a voluntary dissolution of
the Trust, the notice shall also state the general nature of that proposal.
Section 4. MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE. Notice of any
---------------------------------------------
meeting of shareholders shall be given either personally or by first-class mail
or telegraphic or other written communication, charges prepaid, addressed to the
shareholder at the address of that shareholder appearing on the books of the
Trust or its transfer agent or given by the shareholder to the Trust for the
purpose of notice. If no such address appears on the Trust's books or is given,
notice shall be deemed to have been given if sent to that shareholder by
first-class mail or telegraphic or other written communication to the Trust's
principal executive office, or if published at least once in a newspaper of
general circulation in the county where that office is located. Notice shall be
deemed to have been given at the time when delivered personally or deposited in
the mail or sent by telegram or other means of written communication.
If any notice addressed to a shareholder at the address of that
shareholder appearing on the books of the Trust is returned to the Trust by the
United States Postal Service marked to indicate that the Postal Service is
unable to deliver the notice to the shareholder at that address, all future
notices or reports shall be deemed to have been duly given without further
mailing if these shall be available to the shareholder on written demand of the
shareholder at the principal executive office of the Trust for a period of one
year from the date of the giving of the notice.
An affidavit of the mailing or other means of giving any notice of any
shareholder's meeting shall be executed by the Secretary, Assistant Secretary or
any transfer agent of the Trust giving the notice and shall be filed and
maintained in the minute book of the Trust.
Section 5. ADJOURNED MEETING; NOTICE. Any shareholder's meeting,
---------------------------
whether or not a quorum is present, may be adjourned from time to time by the
vote of the majority of the shares represented at that meeting, either in person
or by proxy.
When any meeting of shareholders is adjourned to another time or place,
notice need not be given of the adjourned meeting at which the adjournment is
taken, unless a new record date of the adjourned meeting is fixed or unless the
adjournment is for more than sixty (60) days from the date set for the original
meeting, in which case the Board of Trustees shall set a new record date. Notice
of any such adjourned meeting shall be given to each shareholder of record
entitled to vote at the adjourned meeting in accordance with the provisions of
Sections 3 and 4 of this Article II. At any adjourned meeting, the Trust may
transact any business which might have been transacted at the original meeting.
Section 6. VOTING. The shareholders entitled to vote at any meeting of
------
shareholders shall be determined in accordance with the provisions of the
Agreement and Declaration of Trust of the Trust, as in effect at such time. The
shareholders' vote may be by voice vote or by ballot, provided, however, that
any election for Trustees must be by ballot if demanded by any shareholder
before the voting has begun. On any matter other than elections of Trustees, any
shareholder may vote part of the shares in favor of the proposal and refrain
from voting the remaining shares or vote them against the proposal, but if the
shareholder fails to specify the number of shares which the shareholder is
voting affirmatively, it will be conclusively presumed that the shareholder's
approving vote is with respect to the total shares that the shareholder is
entitled to vote on such proposal.
Section 7. WAIVER OF NOTICE BY CONSENT OF ABSENT SHAREHOLDERS. The
----------------------------------------------------
transactions of the meeting of shareholders, however called and noticed and
wherever held, shall be as valid as though had at a meeting duly held after
regular call and notice if a quorum be present either in person or by proxy and
if either before or after the meeting, each person entitled to vote who was not
present in person or by proxy signs a written waiver of notice or a consent to a
holding of the meeting or an approval of the minutes. The waiver of notice or
consent need not specify either the business to be transacted or the purpose of
any meeting of shareholders.
Attendance by a person at a meeting shall also constitute a waiver of
notice of that meeting, except when the person objects at the beginning of the
meeting to the transaction of any business because the meeting is not lawfully
called or convened and except that attendance at a meeting is not a waiver of
any right to object to the consideration of matters not included in the notice
of the meeting if that objection is expressly made at the beginning of the
meeting.
Section 8. SHAREHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING. Any
-------------------------------------------------------
action which may be taken at any meeting of shareholders may be taken without a
meeting and without prior notice if a consent in writing setting forth the
action so taken is signed by the holders of outstanding shares having not less
than the minimum number of votes that would be necessary to authorize or take
that action at a meeting at which all shares entitled to vote on that action
were present and voted. All such consents shall be filed with the Secretary of
the Trust and shall be maintained in the Trust's records. Any shareholder giving
a written consent or the shareholder's proxy holders or a transferee of the
shares or a personal representative of the shareholder or their respective proxy
holders may revoke the consent by a writing received by the Secretary of the
Trust before written consents of the number of shares required to authorize the
proposed action have been filed with the Secretary.
If the consents of all shareholders entitled to vote have not been
solicited in writing and if the unanimous written consent of all such
shareholders shall not have been received, the Secretary shall give prompt
notice of the action approved by the shareholders without a meeting. This notice
shall be given in the manner specified in Section 4 of this Article II. In the
case of approval of (i) contracts or transactions in which a Trustee has a
direct or indirect financial interest, (ii) indemnification of agents of the
Trust, and (iii) a reorganization of the Trust, the notice shall be given at
least ten (10) days before the consummation of any action authorized by that
approval.
Section 9. RECORD DATE FOR SHAREHOLDER NOTICE, VOTING AND GIVING
----------------------------------------------------------
CONSENTS. For purposes of determining the shareholders entitled to notice of any
- --------
meeting or to vote or entitled to give consent to action without a meeting, the
Board of Trustees may fix in advance a record date which shall not be more than
ninety (90) days nor less than seven (7) days before the date of any such
meeting as provided in the Agreement and Declaration of Trust of the Trust.
If the Board of Trustees does not so fix a record date:
(a) The record date for determining shareholders entitled to
notice of or to vote at a meeting of shareholders shall be at
the close of business on the business day next preceding the
day on which notice is given or if notice is waived, at the
close of business on the business day next preceding the day
on which the meeting is held.
(b) The record date for determining shareholders entitled to give
consent to action in writing without a meeting, (i) when no
prior action by the Board of Trustees has been taken, shall
be the day on which the first written consent is given, or
(ii) when prior action of the Board of Trustees has been
taken, shall be at the close of business on the day on which
the Board of Trustees adopt the resolution relating to that
action or the seventy-fifth day before the date of such other
action, whichever is later.
Section 10. PROXIES. Every person entitled to vote for Trustees or on
-------
any other matter shall have the right to do so either in person or by one or
more agents authorized by a written proxy signed by the person and filed with
the Secretary of the Trust. A proxy shall be deemed signed if the shareholder's
name is placed on the proxy (whether by manual signature, typewriting,
telegraphic transmission or otherwise) by the shareholder or the shareholder's
attorney-in-fact. A validly executed proxy which does not state that it is
irrevocable shall continue in full force and effect unless (i) revoked by the
person executing it before the vote pursuant to that proxy by a writing
delivered to the Trust stating that the proxy is revoked or by a subsequent
proxy executed by, or attendance at the meeting and voting in person by, the
person executing that proxy; or (ii) written notice of the death or incapacity
of the maker of that proxy is received by the Trust before the vote pursuant to
that proxy is counted; provided however, that no proxy shall be valid after the
expiration of eleven (11) months from the date of the proxy unless otherwise
provided in the proxy.
Section 11. INSPECTORS OF ELECTION. Before any meeting of shareholders,
----------------------
the Board of Trustees may appoint any persons other than nominees for office to
act as inspectors of election at the meeting or its adjournment. If no
inspectors of election are so appointed, the chairman of the meeting may and on
the request of any shareholder or a shareholder's proxy shall, appoint
inspectors of election at the meeting. The number of inspectors shall be either
one (1) or three (3). If inspectors are appointed at a meeting on the request of
one or more shareholders or proxies, the holders of a majority of shares or
their proxies present at the meeting shall determine whether one (1) or three
(3) inspectors are to be appointed. If any person appointed as inspector fails
to appear or fails or refuses to act, the Chairman of the meeting may and on the
request of any shareholder or a shareholder's proxy, shall appoint a person to
fill the vacancy.
These inspectors shall:
(a) Determine the number of shares outstanding and the voting
power of each, the shares represented at the meeting, the
existence of a quorum and the authenticity, validity and
effect of proxies;
(b) Receive votes, ballots or consents;
(c) Hear and determine all challenges and questions in any way
arising in connection with the right to vote;
(d) Count and tabulate all votes or consents;
(e) Determine when the polls shall close;
(f) Determine the result; and
(g) Do any other acts that may be proper to conduct the election
or vote with fairness to all shareholders.
ARTICLE III
TRUSTEES
--------
Section 1. POWERS. Subject to the applicable provisions of the
------
Agreement and Declaration of Trust of the Trust and these By-Laws relating to
action required to be approved by the shareholders or by the outstanding shares,
the business and affairs of the Trust shall be managed and all powers shall be
exercised by or under the direction of the Board of Trustees.
Section 2. NUMBER OF TRUSTEES. The exact number of Trustees within the
------------------
limits specified in the Agreement and Declaration of Trust of the Trust shall be
fixed from time to time by a written instrument signed or a resolution approved
at a duly constituted meeting by a majority of the Board of Trustees.
Section 3. VACANCIES. Vacancies in the Board of Trustees may be filled
---------
by a majority of the remaining Trustees, though less than a quorum, or by a sole
remaining Trustee, unless the Board of Trustees calls a meeting of shareholders
for the purposes of electing Trustees. In the event that at any time less than a
majority of the Trustees holding office at that time were so elected by the
holders of the outstanding voting securities of the Trust, the Board of Trustees
shall forthwith cause to be held as promptly as possible, and in any event
within sixty (60) days, a meeting of such holders for the purpose of electing
Trustees to fill any existing vacancies in the Board of Trustees, unless such
period is extended by order of the United States Securities and Exchange
Commission. Notwithstanding the above, whenever and for so long as the Trust is
a participant in or otherwise has in effect a Plan under which the Trust may be
deemed to bear expenses of distributing its shares as that practice is described
in Rule 12b-l under the Investment Company Act of 1940, then the selection and
nomination of the Trustees who are not interested persons of the Trust (as that
term is defined in the Investment Company Act of 1940) shall be, and is,
committed to the discretion of such disinterested Trustees.
Section 4. PLACE OF MEETINGS AND MEETINGS BY TELEPHONE. All meetings of
-------------------------------------------
the Board of Trustees may be held at any place that has been designated from
time to time by resolution of the Board. In the absence of such a designation,
regular meetings shall be held at the principal executive office of the Trust.
Any meeting, regular or special, may be held by conference telephone or similar
communication equipment, so long as all Trustees participating in the meeting
can hear one another and all such Trustees shall be deemed to be present in
person at the meeting.
Section 5. REGULAR MEETINGS. Regular meetings of the Board of Trustees
----------------
shall be held without call at such time as shall from time to time be fixed by
the Board of Trustees. Such regular meetings may be held without notice.
Section 6. SPECIAL MEETINGS. Special meetings of the Board of Trustees
----------------
for any purpose or purposes may be called at any time by the Chairman of the
Board or the President or any Vice President or the Secretary or any two (2)
Trustees.
Notice of the time and place of special meetings shall be delivered
personally or by telephone to each Trustee or sent by first-class mail or
telegram, charges prepaid, addressed to each Trustee at that Trustee's address
as it is shown on the records of the Trust. In case the notice is mailed, it
shall be deposited in the United States mail at least seven (7) calendar days
before the time of the holding of the meeting. In case the notice is delivered
personally or by telephone or to the telegraph company or by express mail or
similar service, it shall be given at least forty-eight (48) hours before the
time of the holding of the meeting. Any oral notice given personally or by
telephone may be communicated either to the Trustee or to a person at the office
of the Trustee who the person giving the notice has reason to believe will
promptly communicate it to the Trustee. The notice need not specify the purpose
of the meeting or the place if the meeting is to be held at the principal
executive office of the Trust.
Section 7. QUORUM. A majority of the authorized number of Trustees
------
shall constitute a quorum for the transaction of business, except to adjourn as
provided in Section 10 of this Article III. Every act or decision done or made
by a majority of the Trustees present at a meeting duly held at which a quorum
is present shall be regarded as the act of the Board of Trustees, subject to the
provisions of the Agreement and Declaration of Trust of the Trust. A meeting at
which a quorum is initially present may continue to transact business
notwithstanding the withdrawal of Trustees if any action taken is approved by a
least a majority of the required quorum for that meeting.
Section 8. WAIVER OF NOTICE. Notice of any meeting need not be given to
----------------
any Trustee who either before or after the meeting signs a written waiver of
notice, a consent to holding the meeting, or an approval of the minutes. The
waiver of notice or consent need not specify the purpose of the meeting. All
such waivers, consents, and approvals shall be filed with the records of the
Trust or made a part of the minutes of the meeting. Notice of a meeting shall
also be deemed given to any Trustee who attends the meeting without protesting
before or at its commencement the lack of notice to that Trustee.
Section 9. ADJOURNMENT. A majority of the Trustees present, whether or
-----------
not constituting a quorum, may adjourn any meeting to another time and place.
Section 10. NOTICE OF ADJOURNMENT. Notice of the time and place of
-----------------------
holding an adjourned meeting need not be given unless the meeting is adjourned
for more than forty-eight (48) hours, in which case notice of the time and place
shall be given before the time of the adjourned meeting in the manner specified
in Section 7 of this Article III to the Trustees who were present at the time of
the adjournment.
Section 11. ACTION WITHOUT A MEETING. Any action required or permitted
------------------------
to be taken by the Board of Trustees may be taken without a meeting if a
majority of the members of the Board of Trustees shall individually or
collectively consent in writing to that action. Such action by written consent
shall have the same force and effect as a majority vote of the Board of
Trustees. Such written consent or consents shall be filed with the minutes of
the proceedings of the Board of Trustees.
Section 12. FEES AND COMPENSATION OF TRUSTEES. Trustees and members of
---------------------------------
committees may receive such compensation, if any, for their services and such
reimbursement of expenses as may be fixed or determined by resolution of the
Board of Trustees. This Section 12 shall not be construed to preclude any
Trustee from serving the Trust in any other capacity as an officer, agent,
employee, or otherwise and receiving compensation for those services.
Section 13. DELEGATION OF POWER TO OTHER TRUSTEES. Any Trustee may, by
-------------------------------------
power of attorney, delegate his power for a period not exceeding six (6) months
at any one time to any other Trustee or Trustees; provided that in no case shall
fewer than two (2) Trustees personally exercise the powers granted to the
Trustees under this Agreement and Declaration of Trust of the Trust except as
otherwise expressly provided herein or by resolution of the Board of Trustees.
Except where applicable law may require a Trustee to be present in person, a
Trustee represented by another Trustee pursuant to such power of attorney shall
be deemed to be present for purposes of establishing a quorum and satisfying the
required majority vote.
ARTICLE IV
COMMITTEES
----------
Section 1. COMMITTEES OF TRUSTEES. The Board of Trustees may by
------------------------
resolution adopted by a majority of the authorized number of Trustees designate
one or more committees, each consisting of two (2) or more Trustees, to serve at
the pleasure of the Board. The Board may designate one or more Trustees as
alternate members of any committee who may replace any absent member at any
meeting of the committee. Any committee to the extent provided in the resolution
of the Board, shall have the authority of the Board, except with respect to:
(a) the approval of any action which under applicable law also
requires shareholders' approval or approval of the
outstanding shares, or requires approval by a majority of the
entire Board or certain members of said Board;
(b) the filling of vacancies on the Board of Trustees or in any
committee;
(c) the fixing of compensation of the Trustees for serving on the
Board of Trustees or on any committee;
(d) the amendment or repeal of the Agreement and Declaration of
Trust of the Trust or of the By-Laws or the adoption of new
By-Laws;
(e) the amendment or repeal of any resolution of the Board of
Trustees which by its express terms is not so amendable or
repealable;
(f) a distribution to the shareholders of the Trust, except at a
rate or in a periodic amount or within a designated range
determined by the Board of Trustees; or
(g) the appointment of any other committees of the Board of
Trustees or the members of these committees.
Section 2. MEETINGS AND ACTION OF COMMITTEES. Meetings and action of
----------------------------------
committees shall be governed by and held and taken in accordance with the
provisions of Article III of these By-Laws, with such changes in the context
thereof as are necessary to substitute the committee and its members for the
Board of Trustees and its members, except that the time of regular meetings of
committees may be determined either by resolution of the Board of Trustees or by
resolution of the committee. Special meetings of committees may also be called
by resolution of the Board of Trustees. Alternate members shall be given notice
of meetings of committees and shall have the right to attend all meetings of
committees. The Board of Trustees may adopt rules for the government of any
committee not inconsistent with the provisions of these By-Laws.
ARTICLE V
OFFICERS
--------
Section 1. OFFICERS. The officers of the Trust shall be a President, a
--------
Secretary, and a Treasurer. The Trust may also have, at the discretion of the
Board of Trustees, a Chairman of the Board, one or more Vice Presidents, one or
more Assistant Secretaries, one or more Assistant Treasurers, and such other
officers as may be appointed in accordance with the provisions of Section 3 of
this Article V. Any number of offices may be held by the same person.
Section 2. ELECTION OF OFFICERS. The officers of the Trust, except such
--------------------
officers as may be appointed in accordance with the provisions of Section 3 or
Section 5 of this Article V, shall be chosen by the Board of Trustees, and each
shall serve at the pleasure of the Board of Trustees, subject to the rights, if
any, of an officer under any contract of employment.
Section 3. SUBORDINATE OFFICERS. The Board of Trustees may appoint and
--------------------
may empower the President to appoint such other officers as the business of the
Trust may require, each of whom shall hold office for such period, have such
authority and perform such duties as are provided in these By-Laws or as the
Board of Trustees may from time to time determine.
Section 4. REMOVAL AND RESIGNATION OF OFFICERS. Subject to the rights,
-----------------------------------
if any, of an officer under any contract of employment, any officer may be
removed, either with or without cause, by the Board of Trustees at any regular
or special meeting of the Board of Trustees or by the principal executive
officer or by such other officer upon whom such power of removal may be
conferred by the Board of Trustees.
Any officer may resign at any time by giving written notice to the
Trust. Any resignation shall take effect at the date of the receipt of that
notice or at any later time specified in that notice; and unless otherwise
specified in that notice, the acceptance of the resignation shall not be
necessary to make it effective. Any resignation is without prejudice to the
rights, if any, of the Trust under any contract to which the officer is a party.
Section 5. VACANCIES IN OFFICES. A vacancy in any office because of
---------------------
death, resignation, removal, disqualification or other cause shall be filled in
the manner prescribed in these By-Laws for regular appointment to that office.
The President may make temporary appointments to a vacant office pending action
by the Board of Trustees.
Section 6. CHAIRMAN OF THE BOARD. The Chairman of the Board, if such an
---------------------
Officer is elected, shall if present preside at meetings of the Board of
Trustees, shall be the Chief Executive Officer of the Trust and shall, subject
to the control of the Board of Trustees, have general supervision, direction and
control of the business and the Officers of the Trust and exercise and perform
such other powers and duties as may be from time to time assigned to him by the
Board of Trustees or prescribed by the By-Laws.
Section 7. PRESIDENT. Subject to such supervisory powers, if any, as
---------
may be given by the Board of Trustees to the Chairman of the Board, if there be
such an officer, the President shall be the chief operating officer of the Trust
and shall, subject to the control of the Board of Trustees and the Chairman,
have general supervision, direction and control of the business and the officers
of the Trust. He shall preside at all meetings of the shareholders and in the
absence of the Chairman of the Board or if there be none, at all meetings of the
Board of Trustees. He shall have the general powers and duties of management
usually vested in the office of President of a corporation and shall have such
other powers and duties as may be prescribed by the Board of Trustees or these
By-Laws.
Section 8. VICE PRESIDENTS. In the absence or disability of the
----------------
President, the Vice Presidents, if any, in order of their rank as fixed by the
Board of Trustees or if not ranked, the Executive Vice President (who shall be
considered first ranked) and such other Vice Presidents as shall be designated
by the Board of Trustees, shall perform all the duties of the President and when
so acting shall have all powers of and be subject to all the restrictions upon
the President. The Vice Presidents shall have such other powers and perform such
other duties as from time to time may be prescribed for them respectively by the
Board of Trustees or the President or the Chairman of the Board or by these
By-Laws.
Section 9. SECRETARY. The Secretary shall keep or cause to be kept at
---------
the principal executive office of the Trust, or such other place as the Board of
Trustees may direct, a book of minutes of all meetings and actions of Trustees,
committees of Trustees and shareholders with the time and place of holding,
whether regular or special, and if special, how authorized, the notice given,
the names of those present at Trustees' meetings or committee meetings, the
number of shares present or represented at shareholders' meetings, and the
proceedings.
The Secretary shall keep or cause to be kept at the principal executive
office of the Trust or at the office of the Trust's transfer agent or registrar,
a share register or a duplicate share register showing the names of all
shareholders and their addresses, the number and classes of shares held by each,
the number and date of certificates issued for the same and the number and date
of cancellation of every certificate surrendered for cancellation.
The Secretary shall give or cause to be given notice of all meetings of
the shareholders and of the Board of Trustees required to be given by these
By-Laws or by applicable law and shall have such other powers and perform such
other duties as may be prescribed by the Board of Trustees or by these By-Laws.
Section 10. TREASURER. The Treasurer shall be the chief financial
---------
officer and chief accounting officer of the Trust and shall keep and maintain or
cause to be kept and maintained adequate and correct books and records of
accounts of the properties and business transactions of the Trust, including
accounts of its assets, liabilities, receipts, disbursements, gains, losses,
capital, retained earnings and shares. The books of account shall at all
reasonable times be open to inspection by any Trustee.
The Treasurer shall deposit all monies and other valuables in the name
and to the credit of the Trust with such depositaries as may be designated by
the Board of Trustees. He shall disburse the funds of the Trust as may be
ordered by the Board of Trustees, shall render to the President and Trustees,
whenever they request it, an account of all of his transactions as chief
financial officer and of the financial condition of the Trust and shall have
other powers and perform such other duties as may be prescribed by the Board of
Trustees or these By-Laws.
ARTICLE VI
INDEMNIFICATION OF TRUSTEES, OFFICERS,
--------------------------------------
EMPLOYEES AND OTHER AGENTS
--------------------------
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.
Section 11. FIDUCIARIES OF EMPLOYEE BENEFIT PLAN. This Article does not
------------------------------------
apply to any proceeding against any Trustee, investment manager or other
fiduciary of an employee benefit plan in that person's capacity as such, even
though that person may also be an agent of this Trust as defined in Section 1 of
this Article. Nothing contained in this Article shall limit any right to
indemnification to which such a Trustee, investment manager, or other fiduciary
may be entitled by contract or otherwise which shall be enforceable to the
extent permitted by applicable law other than this Article.
ARTICLE VII
RECORDS AND REPORTS
-------------------
Section 1. MAINTENANCE AND INSPECTION OF SHARE REGISTER. This Trust
----------------------------------------------
shall keep at its principal executive office or at the office of its transfer
agent or registrar, if either be appointed and as determined by resolution of
the Board of Trustees, a record of its shareholders, giving the names and
addresses of all shareholders and the number and series of shares held by each
shareholder.
Section 2. MAINTENANCE AND INSPECTION OF BY-LAWS. The Trust shall keep
-------------------------------------
at its principal executive office the original or a copy of these By-Laws as
amended to date, which shall be open to inspection by the shareholders at all
reasonable times during office hours.
Section 3. MAINTENANCE AND INSPECTION OF OTHER RECORDS. The accounting
-------------------------------------------
books and records and minutes of proceedings of the shareholders and the Board
of Trustees and any committee or committees of the Board of Trustees shall be
kept at such place or places designated by the Board of Trustees or in the
absence of such designation, at the principal executive office of the Trust. The
minutes shall be kept in written form and the accounting books and records shall
be kept either in written form or in any other form capable of being converted
into written form. The minutes and accounting books and records shall be open to
inspection upon the written demand of any shareholder or holder of a voting
trust certificate at any reasonable time during usual business hours for a
purpose reasonably related to the holder's interests as a shareholder or as the
holder of a voting trust certificate. The inspection may be made in person or by
an agent or attorney and shall include the right to copy and make extracts.
Section 4. INSPECTION BY TRUSTEES. Every Trustee shall have the
------------------------
absolute right at any reasonable time to inspect all books, records, and
documents of every kind and the physical properties of the Trust. This
inspection by a Trustee may be made in person or by an agent or attorney and the
right of inspection includes the right to copy and make extracts of documents.
Section 5. FINANCIAL STATEMENTS. A copy of any financial statements and
--------------------
any income statement of the Trust for each quarterly period of each fiscal year
and accompanying balance sheet of the Trust as of the end of each such period
that has been prepared by the Trust shall be kept on file in the principal
executive office of the Trust for at least twelve (12) months and each such
statement shall be exhibited at all reasonable times to any shareholder
demanding an examination of any such statement or a copy shall be mailed to any
such shareholder.
The quarterly income statements and balance sheets referred to in this
section shall be accompanied by the report, if any, of any independent
accountants engaged by the Trust or the certificate of an authorized officer of
the Trust that the financial statements were prepared without audit from the
books and records of the Trust.
ARTICLE VIII
GENERAL MATTERS
---------------
Section 1. CHECKS, DRAFTS, EVIDENCE OF INDEBTEDNESS. All checks,
--------------------------------------------
drafts, or other orders for payment of money, notes or other evidences of
indebtedness issued in the name of or payable to the Trust shall be signed or
endorsed in such manner and by such person or persons as shall be designated
from time to time in accordance with the resolution of the Board of Trustees.
Section 2. CONTRACTS AND INSTRUMENTS; HOW EXECUTED. The Board of
-------------------------------------------
Trustees, except as otherwise provided in these By-Laws, may authorize any
officer or officers, agent or agents, to enter into any contract or execute any
instrument in the name of and on behalf of the Trust and this authority may be
general or confined to specific instances; and unless so authorized or ratified
by the Board of Trustees or within the agency power of an officer, no officer,
agent, or employee shall have any power or authority to bind the Trust by any
contract or engagement or to pledge its credit or to render it liable for any
purpose or for any amount.
Section 3. CERTIFICATES FOR SHARES. A certificate or certificates for
------------------------
shares of beneficial interest in any series of the Trust may be issued to a
shareholder upon his request when such shares are fully paid. All certificates
shall be signed in the name of the Trust by the Chairman of the Board or the
President or Vice President and by the Treasurer or an Assistant Treasurer or
the Secretary or any Assistant Secretary, certifying the number of shares and
the series of shares owned by the shareholders. Any or all of the signatures on
the certificate may be facsimile. In case any officer, transfer agent, or
registrar who has signed or whose facsimile signature has been placed on a
certificate shall have ceased to be that officer, transfer agent, or registrar
before that certificate is issued, it may be issued by the Trust with the same
effect as if that person were an officer, transfer agent or registrar at the
date of issue. Notwithstanding the foregoing, the Trust may adopt and use a
system of issuance, recordation and transfer of its shares by electronic or
other means.
Section 4. LOST CERTIFICATES. Except as provided in this Section 4, no
-----------------
new certificates for shares shall be issued to replace an old certificate unless
the latter is surrendered to the Trust and cancelled at the same time. The Board
of Trustees may in case any share certificate or certificate for any other
security is lost, stolen, or destroyed, authorize the issuance of a replacement
certificate on such terms and conditions as the Board of Trustees may require,
including a provision for indemnification of the Trust secured by a bond or
other adequate security sufficient to protect the Trust against any claim that
may be made against it, including any expense or liability on account of the
alleged loss, theft, or destruction of the certificate or the issuance of the
replacement certificate.
Section 5. REPRESENTATION OF SHARES OF OTHER ENTITIES HELD BY TRUST.
----------------------------------------------------------
The Chairman of the Board, the President or any Vice President or any other
person authorized by resolution of the Board of Trustees or by any of the
foregoing designated officers, is authorized to vote or represent on behalf of
the Trust any and all shares of any corporation, partnership, trusts, or other
entities, foreign or domestic, standing in the name of the Trust. The authority
granted may be exercised in person or by a proxy duly executed by such
designated person.
Section 6. FISCAL YEAR. The fiscal year of the Trust shall be fixed and
-----------
refixed or changed from time to time by resolution of the Trustees. The fiscal
year of the Trust shall be the taxable year of each Series of the Trust.
ARTICLE IX
AMENDMENTS
----------
Section 1. AMENDMENT BY SHAREHOLDERS. These By-Laws may be amended or
--------------------------
repealed by the affirmative vote or written consent of a majority of the
outstanding shares entitled to vote, except as otherwise provided by applicable
law or by the Agreement and Declaration of Trust of the Trust or these By-Laws.
Section 2. AMENDMENT BY TRUSTEES. Subject to the right of shareholders
---------------------
as provided in Section 1 of this Article to adopt, amend or repeal By-Laws, and
except as otherwise provided by applicable law or by the Agreement and
Declaration of Trust of the Trust, these By-Laws may be adopted, amended, or
repealed by the Board of Trustees.
Section 3. INCORPORATION BY REFERENCE INTO AGREEMENT AND DECLARATION OF
------------------------------------------------------------
TRUST OF THE TRUST. These By-Laws and any amendments thereto shall be
- ---------------------
incorporated by reference to the Agreement and Declaration of Trust of the
Trust.
BRANDES INTERNATIONAL FUND
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made this 7th day of February, 1995, by and between BRANDES
INTERNATIONAL FUND (the "Trust"), a trust organized under the laws of the State
of Delaware, and BRANDES INVESTMENT PARTNERS, INC. (the "Advisor"), a California
corporation.
WITNESSETH:
In consideration of the mutual promises and agreements herein contained
and other good and valuable consideration, the receipt of which is hereby
acknowledged, it is hereby agreed by and between the parties hereto as follows:
l. In General
The Trust hereby appoints the Advisor to act as investment adviser to
the Trust. The Advisor agrees, all as more fully set forth herein, to provide
professional investment management with respect to the investment of the assets
of the Trust and to supervise and arrange the purchase and sale of securities
held in the portfolio of the Trust.
2. Duties and Obligations of the Advisor with respect to Management
of the Trust
(a) Subject to the succeeding provisions of this section and
subject to the direction and control of the Board of Trustees of the
Trust, the Advisor shall:
(i) Decide what securities shall be purchased or sold by
the Trust and when; and
(ii) Arrange for the purchase and the sale of securities
held in the portfolio of the Trust by placing purchase and
sale orders for the Trust.
(b) Any investment purchases or sales made by the Advisor
shall at all times conform to, and be in accordance with, any
requirements imposed by: (l) the provisions of the Investment Company
Act of 1940 (the "Act") and of any rules or regulations in force
thereunder; (2) any other applicable provisions of law; (3) the
provisions of the Declaration of Trust and By-Laws of the Trust as
amended from time to time; (4) any policies and determinations of the
Board of Trustees of the Trust; and (5) the fundamental policies of the
Trust, as reflected in its registration statement under the Act, or as
amended by the shareholders of the Trust.
(c) The Advisor shall give the Trust the benefit of its best
judgment and effort in rendering services hereunder. In the absence of
willful misfeasance, bad faith, gross negligence or reckless disregard
of obligations or duties ("disabling conduct") hereunder on the part of
the Advisor (and its officers, directors, agents, employees,
controlling persons, shareholders and any other person or entity
affiliated with the Advisor) the Advisor shall not be subject to
liability to the Trust or to any shareholder of the Trust for any act
or omission in the course of, or connected with rendering services
hereunder, including without limitation, any error of judgment or
mistake of law or for any loss suffered by any of them in connection
with the matters to which this Agreement related, except to the extent
specified in Section 36(b) of the Act concerning loss resulting from a
breach of fiduciary duty with respect to the receipt of compensation
for services. Except for such disabling conduct, the Trust shall
indemnify the Advisor (and its officers, directors, agents, employees,
controlling persons, shareholders and any other person or entity
affiliated with the Advisor) from any liability arising from the
Advisor's conduct under this Agreement to the extent permitted by the
Declaration of Trust and applicable law.
(d) Nothing in this Agreement shall prevent the Advisor or any
affiliated person (as defined in the Act) of the Advisor from acting as
investment adviser or manager and/or principal underwriter for any
other person, firm or corporation and shall not in any way limit or
restrict the Advisor or any such affiliated person from buying, selling
or trading any securities for its or their own accounts or the accounts
of others for whom it or they may be acting, provided, however, that
the Advisor expressly represents
that it will undertake no activities which, in its judgment, will
adversely affect the performance of its obligations to the Trust under
this Agreement.
(e) It is agreed that the Advisor shall have no responsibility
or liability for the accuracy or completeness of the Trust's
Registration Statement under the Act except for information supplied by
the Advisor for inclusion therein.
3. Broker-Dealer Relationships
In connection with its duties set forth in Section 2(a)(ii) of this
Agreement to arrange for the purchase and the sale of securities held by the
Trust by placing purchase and sale orders for the Trust, the Advisor shall
select such broker-dealers ("brokers") as shall, in the Advisor's judgment,
implement the policy of the Trust to achieve "best execution", i.e., prompt and
efficient execution at the most favorable securities price. In making such
selection, the Advisor is authorized to consider the reliability, integrity and
financial condition of the broker. The Advisor is also authorized to consider
whether the broker provides brokerage and/or research services to the Trust
and/or other accounts of the Advisor. The commissions paid to such brokers may
be higher than another broker would have charged if a good faith determination
is made by the Advisor that the commission is reasonable in relation to the
services provided, viewed in terms of either that particular transaction or the
Advisor's overall responsibilities as to the accounts as to which it exercises
investment discretion. The Advisor shall use its judgment in determining that
the amount of commissions paid are reasonable in relation to the value of
brokerage and research services provided and need not place or attempt to place
a specific dollar value on such services or on the portion of commission rates
reflecting such services. To demonstrate that such determinations were in good
faith, and to show the overall reasonableness of commissions paid, the Advisor
shall be prepared to show that commissions paid (i) were for purposes
contemplated by this Agreement; (ii) provide lawful and appropriate assistance
to the Advisor in the performance of its decision-making responsibilities; and
(iii) were within a reasonable range as compared to the rates charged by
qualified brokers to other institutional investors as such rates may become
known from available information. The Trust recognizes that, on any particular
transaction, a higher than usual commission may be paid due to the difficulty of
the transaction in question. The Advisor also is authorized to consider sales of
shares of the Trust as a factor in the selection of brokers to execute brokerage
and principal transactions, subject to the requirements of "best execution", as
defined above.
4. Allocation of Expenses
The Advisor agrees that it will furnish the Trust, at the Advisor's
expense, with all office space and facilities, and equipment and clerical
personnel necessary for carrying out its duties under this Agreement. The
Advisor will also pay all compensation of all Trustees, officers and employees
of the Trust who are affiliated persons of the Advisor. All costs and expenses
not expressly assumed by the Advisor under this Agreement shall be paid by the
Trust, including, but not limited to (i) interest and taxes; (ii) brokerage
commissions; (iii) insurance premiums; (iv) compensation and expenses of its
Trustees other than those affiliated with the Advisor or the Administrator; (v)
legal and audit expenses; (vi) fees and expenses of the Trust's custodian,
transfer agent and accounting services agent; (vii) expenses incident to the
issuance of its shares, including stock certificates and issuance of shares on
the payment of, or reinvestment of, dividends; (viii) fees and expenses incident
to the registration under Federal or state securities laws of the Trust or its
shares; (ix) expenses of preparing, printing and mailing reports, notices, proxy
material and prospectuses to shareholders of the Trust; (x) all other expenses
incidental to holding meetings of the Trust's shareholders; (xi) dues or
assessments of or contributions to the Investment Company Institute or any
successor or other industry association; (xii) such non-recurring expenses as
may arise, including litigation affecting the Trust and the legal obligations
which the Trust may have to indemnify its officers and Trustees with respect
thereto; (xiii) fees of the Trust's Administrator and (xiii) the organization
costs of the Trust.
5. Compensation of the Advisor
(a) The Trust agrees to pay the Advisor and the Advisor agrees to
accept as full compensation for all services rendered by the Advisor as such, an
annual management fee, payable monthly and computed on the value of the net
assets of the Trust as of the close of business each business day at the annual
rate of 1% of such net assets of the Trust.
(b) In the event the expenses of the Trust (including the fees of the
Advisor and the Administrator and amortization of organization expenses but
excluding interest, taxes, brokerage commissions, extraordinary expenses and
sales charges and distribution fees) for any fiscal year exceed the limits set
by applicable regulations of state securities commissions in states where the
Trust's shares are registered or qualified for sale, the Advisor will reduce its
fee by the amount of such excess. Any such reductions are subject to
readjustment during the year. The payment of the management fee at the end of
any month will be reduced or postponed or, if necessary, a refund will be made
to the Trust so that at no time will there be any accrued but unpaid liability
under this expense limitation.
6. Duration and Termination
(a) This Agreement shall go into effect on the date set forth above and
shall, unless terminated as hereinafter provided, continue in effect until the
earlier of February 6, 1997 or the first meeting of shareholders of the Trust
and, if approved at that meeting, until the next February 6th after that meeting
and thereafter from year to year, but only so long as such continuance is
specifically approved at least annually by the Trust's Board of Trustees,
including the vote of a majority of the Trustees who are not parties to this
Agreement or "interested persons" (as defined in the Act) of any such party cast
in person at a meeting called for the purpose of voting on such approval, or by
the vote of the holders of a "majority" (as so defined) of the outstanding
voting securities of the Trust.
(b) This Agreement may be terminated by the Advisor at any time without
penalty upon giving the Trust sixty (60) days' written notice (which notice may
be waived by the Trust) and may be terminated by the Trust at any time without
penalty upon giving the Advisor sixty (60) days' written notice (which notice
may be waived by the Advisor), provided that such termination by the Trust shall
be directed or approved by the vote of a majority of all of its Trustees in
office at the time or by the vote of the holders of a majority (as defined in
the Act) of the voting securities of the Trust. This Agreement shall
automatically terminate in the event of its assignment (as so defined).
7. General
The Advisor represents and warrants to the Trust that it is duly
qualified to conduct its business under the laws of the State of California and
is a registered investment adviser under the Investment Advisers Act of 1940 and
applicable state laws. This Agreement constitutes the entire agreement and
understanding between the parties hereto, and supersedes all prior agreements
and understandings relating to the subject matter hereof. This Agreement shall
be governed and construed in accordance with the laws of the State of California
(without regard to conflicts of law).
IN WITNESS WHEREOF, the parties hereto have caused the foregoing
instrument to be executed by duly authorized persons and their seals to be
hereunto affixed, all as of the day and year first above written.
BRANDES INTERNATIONAL FUND
By
------------------------
ATTEST:
- ------------------------
BRANDES INVESTMENT PARTNERS, INC.
By
------------------------
ATTEST:
/s/Kim S. Williams
- ------------------------
BRANDES INTERNATIONAL TRUST
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made this day of , 1996, by and between BRANDES
INTERNATIONAL TRUST (the "Trust"), a trust organized under the laws of the State
of Delaware, and BRANDES INVESTMENT PARTNERS, INC. (the "Advisor"), a California
corporation.
WITNESSETH:
Whereas, there is in existence an Investment Advisory Agreement by
and between the Trust and the Advisor, which Agreement was designed to cover
only the series of the Trust now named the Brandes International Fund (the
"International Fund"); and
Whereas, a new series of the Trust having separate assets and
liabilities has been created entitled the "Brandes International Small Cap Fund"
(hereafter the "Small Cap Fund"); and
Whereas, it is therefore desirable to have a new investment advisory
agreement (i.e., this Agreement) relating to the Small Cap Fund so that said
existing Investment Advisory Agreement will apply only to the International
Fund; this Agreement will apply only to the Small Cap Fund;
In consideration of the mutual promises and agreements herein
contained and other good and valuable consideration, the receipt of which is
hereby acknowledged, it is hereby agreed by and between the parties hereto as
follows:
l. In General
The Trust hereby appoints the Advisor to act as investment adviser to
the Trust with respect to the Small Cap Fund. The Advisor agrees, all as more
fully set forth herein, to provide professional investment management with
respect to the investment of the assets of the Trust held in the portfolio of
the Small Cap Fund and to supervise and arrange the purchase and sale of
securities held in the portfolio of the Small Cap Fund.
2. Duties and Obligations of the Advisor with respect to
Management of the Assets of the Small Cap Fund.
(a) Subject to the succeeding provisions of this section
and subject to the direction and control of the Board of Trustees of
the Trust, the Advisor shall:
(i) Decide what securities shall be purchased or
sold by the Small Cap Fund and when; and
(ii) Arrange for the purchase and the sale of
securities held in the portfolio of the Small Cap Fund by
placing purchase and sale orders for the Small Cap Fund.
(b) Any investment purchases or sales made by the Advisor
shall at all times conform to, and be in accordance with, any
requirements imposed by: (l) the provisions of the Investment Company
Act of 1940 (the "Act") and of any rules or regulations in force
thereunder; (2) any other applicable provisions of law; (3) the
provisions of the Declaration of Trust and By-Laws of the Trust as
amended from time to time; (4) any policies and determinations of the
Board of Trustees of the Trust; and (5) the fundamental policies of
the Small Cap Fund, as reflected in the Trust's registration
statement under the Act, or as amended by the shareholders of the
Trust.
(c) The Advisor shall give the Trust the benefit of its
best judgment and effort in rendering services hereunder. In the
absence of willful misfeasance, bad faith, gross negligence or
reckless disregard of obligations or duties ("disabling conduct")
hereunder on the part of the Advisor (and its officers, directors,
agents, employees, controlling persons, shareholders and any other
person or entity affiliated with the Advisor) the Advisor shall not
be subject to liability to the Trust or to any shareholder of the
Trust for any act or omission in the course of, or connected with
rendering services hereunder, including without limitation, any error
of judgment or mistake of law or for any loss suffered by any of them
in connection with the matters to which this Agreement related,
except to the extent specified in Section 36(b) of the Act concerning
loss resulting from a breach of fiduciary duty with respect to the
receipt of compensation for services. Except for such disabling
conduct, the Trust shall indemnify the Advisor (and its officers,
directors, agents, employees, controlling persons, shareholders and
any other person or entity affiliated with the Advisor) from any
liability arising from the Advisor's conduct under this Agreement to
the extent permitted by the Declaration of Trust and applicable law.
(d) Nothing in this Agreement shall prevent the Advisor or
any affiliated person (as defined in the Act) of the Advisor from
acting as investment adviser or manager and/or principal underwriter
for any other person, firm or corporation and shall not in any way
limit or restrict the Advisor or any such affiliated person from
buying, selling or trading any securities for its or their own
accounts or the accounts of others for whom it or they may be acting,
provided, however, that the Advisor expressly represents that it will
undertake no activities which, in its judgment, will adversely affect
the performance of its obligations to the Trust under this Agreement.
(e) It is agreed that the Advisor shall have no
responsibility or liability for the accuracy or completeness of the
Trust's Registration Statement under the Act except for information
supplied by the Advisor for inclusion therein.
3. Broker-Dealer Relationships
In connection with its duties set forth in Section 2(a)(ii) of this
Agreement to arrange for the purchase and the sale of securities held by the
Small Cap Fund by placing purchase and sale orders for the Small Cap Fund, the
Advisor shall select such broker-dealers ("brokers") as shall, in the Advisor's
judgment, implement the policy of the Trust to achieve "best execution", i.e.,
prompt and efficient execution at the most favorable securities price. In making
such selection, the Advisor is authorized to consider the reliability, integrity
and financial condition of the broker. The Advisor is also authorized to
consider whether the broker provides brokerage and/or research services to the
Trust and/or other accounts of the Advisor. The commissions paid to such brokers
may be higher than another broker would have charged if a good faith
determination is made by the Advisor that the commission is reasonable in
relation to the services provided, viewed in terms of either that particular
transaction or the Advisor's overall responsibilities as to the accounts as to
which it exercises investment discretion. The Advisor shall use its judgment in
determining that the amount of commissions paid are reasonable in relation to
the value of brokerage and research services provided and need not place or
attempt to place a specific dollar value on such services or on the portion of
commission rates reflecting such services. To demonstrate that such
determinations were in good faith, and to show the overall reasonableness of
commissions paid, the Advisor shall be prepared to show that commissions paid
(i) were for purposes contemplated by this Agreement; (ii) provide lawful and
appropriate assistance to the Advisor in the performance of its decision-making
responsibilities; and (iii) were within a reasonable range as compared to the
rates charged by qualified brokers to other institutional investors as such
rates may become known from available information. The Trust recognizes that, on
any particular transaction, a higher than usual commission may be paid due to
the difficulty of the transaction in question. The Advisor also is authorized to
consider sales of shares of the Trust as a factor in the selection of brokers to
execute brokerage and principal transactions, subject to the requirements of
"best execution", as defined above.
4. Allocation of Expenses
The Advisor agrees that it will furnish the Trust, at the Advisor's
expense, with all office space and facilities, and equipment and clerical
personnel necessary for carrying out its duties under this Agreement. The
Advisor will also pay all compensation of all Trustees, officers and employees
of the Trust who are affiliated persons of the Advisor. All costs and expenses
not expressly assumed by the Advisor under this Agreement shall be paid by the
Trust, including, but not limited to (i) interest and taxes; (ii) brokerage
commissions; (iii) insurance premiums; (iv) compensation and expenses of its
Trustees other than those affiliated with the Advisor or the Administrator; (v)
legal and audit expenses; (vi) fees and expenses of the Trust's custodian,
transfer agent and accounting services agent; (vii) expenses incident to the
issuance of its shares, including stock certificates and issuance of shares on
the payment of, or reinvestment of, dividends; (viii) fees and expenses incident
to the registration under Federal or state securities laws of the Trust or its
shares; (ix) expenses of preparing, printing and mailing reports, notices, proxy
material and prospectuses to shareholders of the Trust; (x) all other expenses
incidental to holding meetings of the Trust's shareholders; (xi) dues or
assessments of or contributions to the Investment Company Institute or any
successor or other industry association; (xii) such non-recurring expenses as
may arise, including litigation affecting the Trust and the legal obligations
which the Trust may have to indemnify its officers and Trustees with respect
thereto; (xiii) fees of the Trust's Administrator and (xiii) the organization
costs of the Trust.
5. Compensation of the Advisor
(a) The Trust agrees to pay the Advisor and the Advisor agrees to accept as
full compensation for all services rendered by the Advisor as such, an annual
management fee, payable monthly and computed on the value of the net assets of
the Small Cap Fund as of the close of business each business day at the annual
rate of 1% of such net assets of the Trust.
(b) In the event the expenses of the Small Cap Fund (including the fees of
the Advisor and the Administrator and amortization of organization expenses but
excluding interest, taxes, brokerage commissions, extraordinary expenses and
sales charges and distribution fees) for any fiscal year exceed the limits set
by applicable regulations of state securities commissions in states where the
shares of the Small Cap Fund are registered or qualified for sale, the Advisor
will reduce its fee by the amount of such excess. Any such reductions are
subject to readjustment during the year. The payment of the management fee at
the end of any month will be reduced or postponed or, if necessary, a refund
will be made to the Trust so that at no time will there be any accrued but
unpaid liability under this expense limitation.
6. Duration and Termination
(a) This Agreement shall go into effect on the date set forth above
and shall, unless terminated as hereinafter provided, continue in effect until
the earlier of , 1997 or the next meeting of shareholders of the Trust and, if
approved at that meeting, until the next after that meeting and thereafter from
year to year, but only so long as such continuance is specifically approved at
least annually by the Trust's Board of Trustees, including the vote of a
majority of the Trustees who are not parties to this Agreement or "interested
persons" (as defined in the Act) of any such party cast in person at a meeting
called for the purpose of voting on such approval, or by the vote of the holders
of a "majority" (as so defined) of the outstanding voting securities of the
Trust.
(b) This Agreement may be terminated by the Advisor at any time
without penalty upon giving the Trust sixty (60) days' written notice (which
notice may be waived by the Trust) and may be terminated by the Trust at any
time without penalty upon giving the Advisor sixty (60) days' written notice
(which notice may be waived by the Advisor), provided that such termination by
the Trust shall be directed or approved by the vote of a majority of all of its
Trustees in office at the time or by the vote of the holders of a majority (as
defined in the Act) of the voting securities of the Trust. This Agreement shall
automatically terminate in the event of its assignment (as so defined).
7. General
The Advisor represents and warrants to the Trust that it is duly
qualified to conduct its business under the laws of the State of California and
is a registered investment adviser under the Investment Advisers Act of 1940 and
applicable state laws. This Agreement constitutes the entire agreement and
understanding between the parties hereto, and supersedes all prior agreements
and understandings relating to the subject matter hereof. This Agreement shall
be governed and construed in accordance with the laws of the State of California
(without regard to conflicts of law).
IN WITNESS WHEREOF, the parties hereto have caused the foregoing
instrument to be executed by duly authorized persons and their seals to be
hereunto affixed, all as of the day and year first above written.
BRANDES INTERNATIONAL TRUST
By
--------------------------------
ATTEST:
- ---------------------------------------
BRANDES INVESTMENT PARTNERS, INC.
By
--------------------------------
ATTEST:
- ---------------------------------------
BRANDES INTERNATIONAL FUND
DISTRIBUTION AGREEMENT
This Agreement, made as of the 7th day of February, 1995, between
BRANDES INTERNATIONAL FUND, a Delaware business trust, (the "Trust"), and
WORLDWIDE VALUE DISTRIBUTORS, INC., a Delaware corporation (the "Distributor").
WITNESSETH:
WHEREAS, the Trust proposes to engage in business as an open-end
management investment company and is registered as such under the Investment
Company Act of 1940 (the "1940 Act"), and it is in the interest of the Trust to
offer its shares for sale continuously; and
WHEREAS, the Distributor is registered as a broker-dealer under the
Securities Exchange Act of 1934, as amended (the "1934 Act"), and has applied
for membership in the National Association of Securities Dealers, Inc. (the
"NASD"); and
WHEREAS, the Trust and the Distributor wish to enter into an agreement
with each other with respect to the continuous offering of of all classes of
shares of capital stock of the Trust (the "Shares"), to commence after the
effectiveness of the Trust's registration statement filed pursuant to the
Securities Act of 1933, as amended (the "1933 Act"), and the 1940 Act and after
the Distributor has become a member in good standing of the NASD.
NOW, THEREFORE, the parties agree as follows:
l. Appointment of Distributor. The Trust hereby appoints the
-----------------------------
Distributor as its agent to sell and to arrange for the sale of the Shares, on
the terms and for the period set forth in this Agreement, and the Distributor
hereby accepts such appointment and agrees to act hereunder directly and/or
through the Trust's transfer agent in the manner set forth in the Prospectus (as
defined below). It is understood and agreed that the services of the Distributor
hereunder are not exclusive, and the Distributor may act as principal
underwriter for the shares of any other registered investment company.
2. Services and Duties of the Distributor
--------------------------------------
(a) The Distributor agrees to sell the Shares, as agent for the
Trust, from time to time during the term of this Agreement upon the
terms described in the Trust's Prospectus. As used in this Agreement,
the term "Prospectus" shall mean the prospectus (or prospectuses) and
statement of additional information included as part of the Trust's
Registration Statement, as such prospectus (or prospectuses) and
statement of additional information may be amended or supplemented from
time to time, and the term "Registration Statement" shall mean the
Registration Statement most recently filed from time to time by the
Trust with the Securities and Exchange Commission and effective under
the 1933 Act and the 1940 Act, as such Registration Statement is
amended by any amendments thereto at the time in effect. The
Distributor shall not be obligated to sell any certain number of
Shares.
(b) Upon effectiveness of this Agreement, the Distributor will
hold itself available to receive orders, satisfactory to the
Distributor, for the purchase of the Shares and will accept such orders
and will transmit such orders and funds received by it in payment for
such Shares as are so accepted to the Trust's transfer agent or
custodian, as appropriate, as promptly as practicable. Purchase orders
shall be deemed effective at the time and in the manner set forth in
the Prospectus. The Distributor shall not make any short sales of
Shares.
(c) The net asset value and offering price (or prices) of the
Shares shall be calculated as set forth in the Prospectus. The Trust
shall furnish the Distributor, with all possible promptness, an advice
of each computation of net asset value and offering price(s).
3. Duties of the Trust.
-------------------
(a) Maintenance of Federal Registration. The Trust shall, at
------------------------------------
its expense, take from time to time all necessary action and such
steps, including payment of the related filing fees, as may be
necessary to register and maintain registration of a sufficient number
of Shares under the 1933 Act. The Trust agrees to file from time to
time such amendments, reports and other documents as may be necessary
in order that there may be no untrue statement of a material fact in a
Registration Statement or Prospectus, or necessary in order that there
may be no omission to state a material fact in the Registration
Statement or Prospectus which omission would make the statements
therein misleading.
(b) Maintenance of "Blue Sky" Qualifications. The Trust shall, at
----------------------------------------
its expense, use its best efforts to qualify and maintain the
qualification of an appropriate number of Shares for sale under the
securities laws of such states as the Distributor and the Trust may
approve, and, if necessary or appropriate in connection therewith, to
qualify and maintain the qualification of the Trust as a broker or
dealer in such states; provided that the Trust shall not be required to
amend its Declaration of Trust or By-Laws to comply with the laws of
any state, to maintain an office in any state, to change the terms of
the offering of the Shares in any state from the terms set forth in its
Prospectus, to qualify as a foreign corporation in any state or to
consent to service of process in any state other than with respect to
claims arising out of the offering and sale of the Shares. The
Distributor shall furnish such information and other material relating
to its affairs and activities as may be required by the Trust in
connection with such qualifications.
(c) Copies of Reports and Prospectus. The Trust shall, at its
--------------------------------
expense, keep the Distributor fully informed with regard to its affairs
and in connection therewith shall furnish to the Distributor copies of
all information, financial statements and other papers which the
Distributor may reasonably request for use in connection with the
distribution of Shares, including such reasonable number of copies of
its Prospectus and annual and interim reports as the Distributor may
request and shall cooperate fully in the efforts of the Distributor to
sell and arrange for the sale of the Shares and in the performance of
the Distributor under this Agreement.
4. Conformity with Applicable Law and Rules. The Distributor agrees
-----------------------------------------
that in selling Shares hereunder it shall conform in all respects with the laws
of the United States and of any state in which Shares may be offered, and with
applicable rules and regulations of the NASD.
5. Independent Contractor. In performing its duties hereunder, the
-----------------------
Distributor shall be an independent contractor and neither the Distributor, nor
any of its officers, directors, employees, or representatives is or shall be an
employee of the Trust in the performance of the Distributor's duties hereunder.
The Distributor shall be responsible for its own conduct and the employment,
control, and conduct of its agents and employees and for injury to such agents
or employees or to others through its agents or employees. The Distributor
assumes full responsibility for its agents and employees under applicable
statutes and agrees to pay all employee taxes thereunder.
6. Indemnification.
---------------
(a) Indemnification of Trust. The Distributor agrees to indemnify
------------------------
and hold harmless the Trust and each of its present or former Trustees,
officers, employees and representatives and each person, if any, who
controls or previously controlled the Trust within the meaning of
Section l5 of the 1933 Act against any and all losses, liabilities,
damages, claims or expenses (including the reasonable costs of
investigating or defending any alleged loss, liability, damage, claims
or expense and reasonable legal counsel fees incurred in connection
therewith) to which the Trust or any such person may become subject
under the 1933 Act, under any other statute, at common law, or
otherwise, arising out of the acquisition of any Shares by any person
which (i) may be based upon any wrongful act by the Distributor or any
of the Distributor's directors, officers, employees or representatives,
or (ii) may be based upon any untrue statement or alleged untrue
statement of a material fact contained in a Registration Statement,
Prospectus, shareholder report or other information covering Shares
filed or made public by the Trust or any amendment thereof or
supplement thereto, or the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to
make the statements therein not misleading if such statement or
omission was made in reliance upon information furnished to the Trust
by the Distributor. In no case (i) is the Distributor's indemnity in
favor of the Trust, or any person indemnified to be deemed to protect
the Trust or such indemnified person against any liability to which the
Trust or such person would otherwise be subject by reason of willful
misfeasance, bad faith, or gross negligence in the performance of his
duties or by reason of his reckless disregard of his obligations and
duties under this Agreement or (ii) is the Distributor to be liable
under its indemnity agreement contained in this Paragraph with respect
to any claim made against the Trust or any person indemnified unless
the Trust or such person, as the case may be, shall have notified the
Distributor in writing of the claim within a reasonable time after the
summons or other first written notification giving information of the
nature of the claim shall have been served upon the Trust or upon such
person (or after the Trust or such person shall have received notice of
such service on any designated agent). However, failure to notify the
Distributor of any such claim shall not relieve the Distributor from
any liability which the Distributor may have to the Trust or any person
against whom such action is brought otherwise than on account of the
Distributor's indemnity agreement contained in this Paragraph.
The Distributor shall be entitled to participate, at its own
expense, in the defense, or, if the Distributor so elects, to assume
the defense of any suit brought to enforce any such claim, but, if the
Distributor elects to assume the defense, such defense shall be
conducted by legal counsel chosen by the Distributor and satisfactory
to the Trust or to the persons indemnified pursuant to the foregoing
paragraph. In the event that the Distributor elects to assume the
defense of any such suit and retain such legal counsel, the Trust or
the persons indemnified pursuant to the foregoing paragraph, shall bear
the fees and expenses of any additional legal counsel retained by them.
If the Distributor does not elect to assume the defense of any such
suit, the Distributor will reimburse the Trust and the persons
indemnified pursuant to the foregoing paragraph for the reasonable fees
and expenses of any legal counsel retained by them. The Distributor
agrees to promptly notify the Trust of the commencement of any
litigation of proceedings against it or any of its officers, employees
or representatives in connection with the issue or sale of any Shares.
(b) Indemnification of the Distributor. The Trust agrees to
-----------------------------------
indemnify and hold harmless the Distributor and each of its present or
former directors, officers, employees and representatives and each
person, if any, who controls the Distributor within the meaning of
Section 15 of the 1933 Act against any and all losses, liabilities,
damages, claims or expenses (including the reasonable costs of
investigating or defending any alleged loss, liability, damage, claim
or expense and reasonable legal counsel fees incurred in connection
therewith) to which the Distributor or any such person may become
subject under the 1933 Act, under any other statute, at common law, or
otherwise, arising out of the acquisition of any Shares by any person
which (i) may be based upon any wrongful act by the Trust or any of the
Trust's Trustees, officers, employees or representatives acting in such
capacities, or (ii) may be based upon any untrue statement or alleged
untrue statement of a material fact contained in a Registration
Statement, Prospectus, shareholder report or other information covering
Shares filed or made public by the Trust or any amendment thereof or
supplement thereto, or the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to
make the statements therein not misleading unless such statement or
omission was made in reliance upon information furnished to the Trust
by the Distributor. In no case (i) is the Trust's indemnity in favor of
the Distributor, or any person indemnified to be deemed to protect the
Distributor or such indemnified person against any liability to which
the Distributor or such person would otherwise be subject by reason of
willful misfeasance, bad faith, or gross negligence in the performance
of his duties or by reason of his reckless disregard of his obligations
and duties under this Agreement, or (ii) is the Trust to be liable
under its indemnity agreement contained in this Paragraph with respect
to any claim made against Distributor, or person indemnified unless the
Distributor, or such person, as the case may be, shall have notified
the Trust in writing of the claim within a reasonable time after the
summons or other first written notification giving information of the
nature of the claim shall have been served upon the Distributor or upon
such person (or after the Distributor or such person shall have
received notice of such service on any designated agent). However,
failure to notify the Trust of any such claim shall not relieve the
Trust from any liability which the Trust may have to the Distributor or
any person against whom such action is brought otherwise than on
account of the Trust's indemnity agreement contained in this Paragraph.
The Trust shall be entitled to participate, at its own expense, in
the defense, or, if the Trust so elects, to assume the defense of any
suit brought to enforce any such claim, but if the Trust elects to
assume the defense, such defense shall be conducted by legal counsel
chosen by the Trust and satisfactory to the Distributor or to the
persons indemnified pursuant to the foregoing paragraph. In the event
that the Trust elects to assume the defense of any such suit and retain
such legal counsel, the Distributor or the persons indemnified pursuant
to the foregoing paragraph shall bear the fees and expenses of any
additional legal counsel retained by them. If the Trust does not elect
to assume the defense of any such suit, the Trust will reimburse the
Distributor and the persons indemnified pursuant to the foregoing
paragraph for the reasonable fees and expenses of any legal counsel
retained by them. The Trust agrees to promptly notify the Distributor
of the commencement of any litigation or proceedings against it or any
of its directors, officers, employees or representatives in connection
with the issue or sale of any Shares.
7. Authorized Representations. The Distributor is not authorized by the
--------------------------
Trust to give on behalf of the Trust any information or to make any
representations in connection with the sale of Shares other than the information
and representations contained in the Registration Statement or Prospectus or
contained in shareholder reports or other material that may be prepared by or on
behalf of the Trust for the Distributor's use. This shall not be construed to
prevent the Distributor from preparing and distributing tombstone ads and sales
literature or other material as it may deem appropriate. After the effectiveness
of this Agreement, no person other than the Distributor is authorized to act as
principal underwriter (as such term is defined in the 1940 Act) for the Trust.
8. Payments to the Distributor. The Distributor shall receive and may
---------------------------
retain any portion of any sales charge imposed on sales and redemptions of
Shares not reallowed to dealers as set forth in the Prospectus.
9. Term of Agreement. The term of this Agreement shall begin on the
------------------
date that the Distributor becomes a member in good standing of the NASD, and,
unless sooner terminated as hereinafter provided, this Agreement shall remain in
effect through February 6, 1997. Thereafter, this Agreement shall continue in
effect from year to year, subject to the termination provisions and all other
terms and conditions thereof, so long as such continuation shall be specifically
approved at least annually by the Board of Trustees or by vote of a majority of
the outstanding voting securities of the Trust and, concurrently with such
approval by the Board of Trustees or prior to such approval by the holders of
the outstanding voting securities of the Trust, as the case may be, by the vote,
cast in person at a meeting called for the purpose of voting on such approval,
of a majority of the Trustees of the Trust who are not parties to this Agreement
or interested persons of any such party. The Distributor shall furnish to the
Trust, promptly upon its request, such information as may reasonably be
necessary to evaluate the terms of this Agreement or any extension, renewal or
amendment hereof.
10. Amendment or Assignment of Agreement. This Agreement may not be
-------------------------------------
amended or assigned except as permitted by the 1940 Act, and this Agreement
shall automatically and immediately terminate in the event of its assignment.
11. Termination of Agreement. This Agreement may be terminated by
--------------------------
either party hereto, without the payment of any penalty, on not more than upon
60 days' nor less than 30 days' prior notice in writing to the other party;
provided, that in the case of termination by the Trust such action shall have
been authorized by resolution of a majority of the Trustees of the Trust who are
not parties to this Agreement or interested persons of any such party, or by
vote of a majority of the outstanding voting securities of the Trust.
12. Miscellaneous. The captions in this Agreement are included for
-------------
convenience of reference only and in no way define or delineate any of the
provisions hereof or otherwise affect their construction or effect. This
Agreement constitutes the entire agreement and understanding between the parties
hereto, and it shall be governed and construed in accordance with the laws of
the State of California (without regard to conflicts of law).
This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
Nothing herein contained shall be deemed to require the Trust to take
any action contrary to its Declaration of Trust or By-Laws, or any applicable
statutory or regulatory requirement to which it is subject or by which it is
bound, or to relieve or deprive the Board of Trustees of the Trust of
responsibility for and control of the conduct of the affairs of the Trust.
13. Definition of Terms. Any question of interpretation of any term or
-------------------
provision of this Agreement having a counterpart in or otherwise derived from a
term or provision of the 1940 Act shall be resolved by reference to such term or
provision of the 1940 Act and to interpretations thereof, if any, by the United
States courts or, in the absence of any controlling decision of any such court,
by rules, regulations or orders of the Securities and Exchange Commission
validly issued pursuant to the 1940 Act. Specifically, the terms "vote of a
majority of the outstanding voting securities", "interested persons",
"assignment", and "affiliated person", as used in Paragraphs 8, 9 and 10 hereof,
shall have the meanings assigned to them by Section 2(a) of the 1940 Act. In
addition, where the effect of a requirement of the 1940 Act reflected in any
provision of this Agreement is modified by a rule, regulation or order of the
Securities and Exchange Commission, whether of special or of general
application, such provision shall be deemed to incorporate the effect of such
rule, regulation or order.
14. Compliance with Securities Laws. The Trust represents that it is
--------------------------------
registered as an open-end management investment company under the 1940 Act, and
agrees that it will comply with all the provisions of the 1940 Act and of the
rules and regulations thereunder. The Trust and the Distributor each agree to
comply with all of the applicable terms and provisions of the 1940 Act, the 1933
Act and, subject to the provisions of Section 4(d), all applicable "Blue Sky"
laws. The Distributor agrees to comply with all of the applicable terms and
provisions of the 1934 Act.
15. Notices. Any notice required to be given pursuant to this Agreement
------
shall be deemed duly given if delivered or mailed by registered mail, postage
prepaid, to the Trust at 12750 High Bluff Drive, Suite 420, San Diego, CA 92130
or to the Distributor at 4455 E. Camelback Road, Suite 261E, Phoenix, AZ 85018.
16. Governing Law. This Agreement shall be governed and construed in
-------------
accordance with the laws of the State of California (without regard to conflicts
of law).
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed by their duly authorized representatives and their respective seals to be
hereunto affixed, as of the day and year first above written.
BRANDES INTERNATIONAL FUND
By: /s/Betsy M. Blodgett
Attest: /s/Kim S. Williams -----------------------------
---------------------
WORLDWIDE VALUE DISTRIBUTORS, INC.
By:
Attest: /s/ Maya Pudwill -----------------------------
---------------------
BRANDES INTERNATIONAL FUND
ADMINISTRATION AGREEMENT
AGREEMENT made this 7th day of February, 1995, by and between BRANDES
INTERNATIONAL FUND (the "Trust"), a trust organized under the laws of the State
of Delaware, and INVESTMENT COMPANY ADMINISTRATION CORPORATION (the
"Administrator"), a Delaware corporation.
WITNESSETH:
In consideration of the mutual promises and agreements herein contained
and other good and valuable consideration, the receipt of which is hereby
acknowledged, it is hereby agreed by and between the parties hereto as follows:
l. In General.
The Trust hereby appoints Investment Company Administration Corporation
as Administrator, subject to the overall supervision of the Board of Trustees of
the Trust for the period and on the terms set forth in this Agreement. The
Administrator hereby accepts such appointment and agrees during such period to
render the services herein described and to assume the obligations set forth
herein, for the compensation herein provided.
2. Duties and Obligations of the Administrator.
(a) Subject to the direction and control of the Board of
Trustees of the Trust, the Administrator shall be responsible for
providing such services as the Trustees may reasonably request,
including but not limited to (i) maintaining the Trust's books and
records (other than financial or accounting books and records
maintained by any custodian, transfer agent or accounting services
agent); (ii) overseeing the Trust's insurance relationships; (iii)
preparing for the Trust (or assisting counsel and/or auditors in the
preparation of) all required tax returns, proxy statements and reports
to the Trust's shareholders and Trustees and reports to and other
filings with the Securities and Exchange Commission and any other
governmental agency (the Trust agreeing to supply or cause to be
supplied to the Administrator all necessary financial and other
information in connection with the foregoing); (iv) preparing such
applications and reports as may be necessary to register or maintain
the Trust's registration and/or the registration of the shares of the
Trust under the securities or "blue sky" laws of the various states
selected by the Trust (the Trust agreeing to pay all filing fees or
other similar fees in connection therewith); (v) responding to all
inquiries or other communications of shareholders, if any, which are
directed to the Administrator, or if any such inquiry or communication
is more properly to be responded to by the Trust's custodian, transfer
agent or accounting services agent, overseeing their response thereto;
(vi) overseeing all relationships between the Trust and any
custodian(s), transfer agent(s) and accounting services agent(s),
including the negotiation of agreements and the supervision of the
performance of such agreements; 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. All services to be furnished by the
Administrator under this Agreement may be furnished through the medium
of any such directors, officers or employees of the Administrator.
(b) In the absence of willful misfeasance, bad faith, gross
negligence or reckless disregard of obligations or duties ("disabling
conduct") hereunder on the part of the Administrator (and its officers,
directors, agents, employees, controlling persons, shareholders and any
other person or entity affiliated with the Administrator) the
Administrator shall not be subject to liability to the Trust or to any
shareholder of the Trust for any act or omission in the course of, or
connected with, rendering services hereunder, including, without
limitation, any error of judgment or mistake of law or for any loss
suffered by any of them in connection with the matters to which this
Agreement relates, except to the extent specified in Section 36(b) of
the Investment Company Act of 1940 (the "Act") concerning loss
resulting from a breach of fiduciary duty with respect to the receipt
of compensation for services. Except for such disabling conduct, the
Trust shall indemnify the Administrator (and its officers, directors,
agents, employees, controlling persons, shareholders and any other
person or entity affiliated with the Administrator) from any liability
arising from the Administrator's conduct under this Agreement to the
extent permitted by the Trust's Declaration of Trust and applicable
law.
(c) It is agreed that the Administrator shall have no
responsibility or liability for the accuracy or completeness of the
Trust's Registration Statement under the Act except for information
supplied by the Administrator for inclusion therein.
3. Allocation of Expenses.
The Administrator agrees that it will furnish the Trust, at the
Administrator's expense, with all office space and facilities, and equipment and
clerical personnel necessary for carrying out its duties under this Agreement.
The Administrator will also pay all compensation of all Trustees, officers and
employees of the Trust who are affiliated persons of the Administrator. All
costs and expenses not expressly assumed by the Administrator under this
Agreement shall be paid by the Trust, including, but not limited to (i) interest
and taxes; (ii) brokerage fees and commissions; (iii) insurance premiums; (iv)
compensation and expenses of the Trust's Trustees other than those affiliated
with the Advisor or the Administrator; (v) legal and auditing fees and expenses;
(vi) fees and expenses of the Trust's custodian, transfer agent and accounting
services agent; (vii) expenses incident to the issuance of the Trust's shares,
including issuance on the payment of, or reinvestment of, dividends; (viii) fees
and expenses incident to the registration under Federal or state securities laws
of the Trust or its shares; (ix) expenses of preparing, printing and mailing
reports and notices and proxy material to shareholders of the Trust; (x) all
other expenses incidental to holding meetings of the Trust's shareholders; (xi)
dues or assessments of or contributions to the Investment Company Institute or
any successor; (xii) such non-recurring expenses as may arise, including
litigation affecting the Trust and the legal obligations which the Trust may
have to indemnify its officers and Trustees with respect thereto; and (xiii)
organization costs of the Trust.
4. Compensation of the Administrator.
The Trust agrees to pay the Administrator and the Administrator agrees
to accept as full compensation for all services rendered by the Administrator as
such, an annual fee, payable monthly, computed on the value of the net assets of
the Trust as of the close of business each business day at the annual rate of
0.10 of 1% of the first $100 million of such net assets, 0.05 of 1% of the next
$100 million of such net assets and 0.03 of 1% of such net assets of the Trust
in excess of $200 million, subject to a minimum annual fee of $50,000 for the
first class of shares and $10,000 for each additional class of shares.
5. Duration and Termination.
(a) This Agreement shall become effective on the date set
forth above and shall remain in force until terminated pursuant to the
provisions of paragraph (b) hereof.
(b) This Agreement may be terminated by the Administrator at
any time without penalty upon giving the Trust not less than sixty (60)
days' written notice (which notice may be waived by the Trust) and may
be terminated by the Trust at any time without penalty upon giving the
Administrator not less than sixty (60) days' written notice (which
notice may be waived by the Administrator), provided that such
termination by the Trust shall be directed or approved by the vote of a
majority of all of its Trustees in office at the time or by the vote of
the holders of a majority (as defined in the Act) of the voting
securities of the Trust.
6. Governing Law.
This Agreement constitutes the entire agreement and understanding
between the parties hereto, and it shall be governed and construed in accordance
with the laws of the State of Arizona (without regard to conflicts of law).
IN WITNESS WHEREOF, the parties hereto have caused the foregoing
instrument to be executed by duly authorized persons and their seals to be
hereunto affixed, all as of the day and year first above written.
BRANDES INTERNATIONAL FUND
By
-------------------------------
ATTEST:
---------------------
INVESTMENT COMPANY ADMINISTRATION
CORPORATION
By
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ATTEST: /s/Richard D. Burritt
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BRANDES INTERNATIONAL FUND
SHAREHOLDER SERVICE PLAN
W H E R E A S:
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Brandes International Fund (the "Trust") is registered as an open-end
investment company under the Investment Company Act of 1940 (the "Act"),
currently has two classes of its shares of beneficial interest (designated Class
A Shares and Class C Shares), and the Board of Trustees may establish additional
series or classes of its shares in the future.
The Trust intends to distribute its shares and desires to adopt a Plan
to provide services to shareholders of the Trust.
The Trust employs First Fund Distributors, Inc. (the "Initial
Distributor") as a principal underwriter of its shares pursuant to a
Distribution Agreement dated February 7, 1995; the Trust also intends to employ
Worldwide Value Distributors, Inc. (the "Successor Distributor") as a principal
underwriter of its shares in the future. (Either principal underwriter may be
referred to herein as a "Distributor"; collectively, both principal underwriters
may be referred to as the "Distributors.")
NOW, THEREFORE, in consideration of the foregoing, the Trust hereby
adopts this Plan on the following terms and conditions:
1. The Trust will pay 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 Trust,
including but not limited to shareholder servicing provided by the Distributor
at facilities dedicated to the Trust, provided that such shareholder servicing
is not duplicative of the servicing otherwise provided on behalf of the Trust.
2. The Trust will also reimburse 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
Trust ("Clients"). Such services may include, but are not limited to, (a)
establishing and maintaining accounts and records relating to Clients who invest
in the Trust; (b) aggregating and processing orders involving the shares of the
Trust; (c) processing dividend and other distribution payments from the Trust on
behalf of Clients; (d) providing information to Clients as to their ownership of
shares of the Trust or about other aspects of the operations of the Trust; (e)
preparing tax reports or forms on behalf of Clients; (f) forwarding
communications from the Trust to Clients; (g) assisting Clients in changing the
Trust's records as to their addresses, dividend options, account registrations
or other data; and (h) providing such other similar services as the Distributor
may reasonable request to the extent the Service Organization is permitted to do
so under applicable statutes, rules or regulations.
3. The Trust shall reimburse the Distributors, for their services, an
annual rate of 0.25 of 1% of the average daily net assets of the Trust. The
Trust may make such payments monthly, and payments to either Distributor may
exceed the amount expended by that Distributor during the month or the year to
date, provided that no amount may be carried over for use beyond the end of a
fiscal year. In the event that payments to a Distributor during a fiscal year
exceed the amounts expended (or accrued, in the case of payments to Service
Organizations) during a fiscal year, that Distributor will promptly refund to
the Trust any such excess. Payments to a Distributor may be discontinued, or the
rate amended, at any time by the Board of Trustees of the Trust, in its sole
discretion.
Each Distributor may make final and binding decisions as to all matters
relating to payments to Service Organizations, including but not limited to (i)
the identity of Service Organizations; and (ii) what shares of the Trust, if
any, are to be attributed to a particular Service Organization, to a different
Service Organization or to no Service Organization.
4. While this Plan is in effect, the Distributors shall report in
writing at least quarterly to the Trust's Board of Trustees, and the Board shall
review, the amounts expended under this Plan and the purposes for which such
expenditures were made.
5. This Plan has been approved by a vote of the Board of Trustees of
the Trust, including a majority of the Trustees who are not "interested persons"
(as defined in the Act) of the Trust and who have no direct or indirect
financial interest in the operation of this Plan (the "Disinterested Trustees"),
cast in person at a meeting called for the purpose of voting on this Plan. This
Plan shall, unless terminated as hereinafter provided, continue in effect until
February 6, 1996, and from year to year thereafter only so long as such
continuance is specifically approved at least annually by the Trust's Board of
Trustees including the Disinterested Trustees cast in person at a meeting called
for the purpose of voting on such continuance.
This Plan may be terminated at any time by a vote of a majority of the
Disinterested Trustees or by the vote of the holders of a "majority" (as defined
in the Act) of any class or series of the outstanding voting securities of the
Trust.
BRANDES INTERNATIONAL TRUST
SHAREHOLDER SERVICE PLAN
W H E R E A S:
Brandes International Trust (the "Trust") is registered as an
open-end investment company under the Investment Company Act of 1940 (the
"Act"), currently has two classes of its shares of beneficial interest
(designated Class A Shares and Class C Shares), and the Board of Trustees may
establish additional series or classes of its shares in the future.
There is in existence a Shareholder Service Plan, which Plan was
designed to cover only the series of the Trust now named the Brandes
International Fund (the "International Fund"); and
A new series of the Trust having separate assets and liabilities has
been created entitled the Brandes International Small Cap Fund (hereafter the
"Small Cap Fund").
It is therefore desirable to have a new Shareholder Service Plan
(i.e., this Plan) relating to the Small Cap Fund so that said existing Plan will
apply only to the the International Fund; this Plan will apply only to the Small
Cap Fund.
The Trust intends to distribute its shares and desires to adopt this
Plan to provide services to shareholders of the Small Cap Fund.
The Trust employs Worldwide Value Distributors, Inc. (the
"Distributor") as the principal underwriter of the shares of the Small Cap Fund.
NOW, THEREFORE, in consideration of the foregoing, the Trust hereby
adopts this Plan on the following terms and conditions:
1. The Trust will pay 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 Small
Cap Fund, including but not limited to shareholder servicing provided by the
Distributor at facilities dedicated to the Trust, provided that such shareholder
servicing is not duplicative of the servicing otherwise provided on behalf of
the Trust.
2. The Trust will also reimburse 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
Small Cap 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 Small Cap Fund; (b) aggregating and processing orders involving
the shares of the Small Cap Fund; (c) processing dividend and other distribution
payments from the Small Cap Fund on behalf of Clients; (d) providing information
to Clients as to their ownership of shares of the Small Cap Fund or about other
aspects of the operations of the Small Cap Fund; (e) preparing tax reports or
forms on behalf of Clients; (f) forwarding communications from the Trust to
Clients; (g) assisting Clients in changing the Trust's records as to their
addresses, dividend options, account registrations or other data; and (h)
providing such other similar services as the Distributor may reasonable request
to the extent the Service Organization is permitted to do so under applicable
statutes, rules or regulations.
3. The Trust shall reimburse the Distributors, for their services, an
annual rate of 0.25 of 1% of the average daily net assets of the Small Cap Fund.
The Trust may make such payments monthly, and payments to either Distributor may
exceed the amount expended by that Distributor during the month or the year to
date, provided that no amount may be carried over for use beyond the end of a
fiscal year. In the event that payments to a Distributor during a fiscal year
exceed the amounts expended (or accrued, in the case of payments to Service
Organizations) during a fiscal year, that Distributor will promptly refund to
the Trust any such excess. Payments to a Distributor may be discontinued, or the
rate amended, at any time by the Board of Trustees of the Trust, in its sole
discretion.
The Distributor may make final and binding decisions as to all
matters relating to payments to Service Organizations, including but not limited
to (i) the identity of Service Organizations; and (ii) what shares of the Small
Cap Fund, if any, are to be attributed to a particular Service Organization, to
a different Service Organization or to no Service Organization.
4. While this Plan is in effect, the Distributor shall report in
writing at least quarterly to the Trust's Board of Trustees, and the Board shall
review, the amounts expended under this Plan and the purposes for which such
expenditures were made.
5. This Plan has been approved by a vote of the Board of Trustees of
the Trust, including a majority of the Trustees who are not "interested persons"
(as defined in the Act) of the Trust and who have no direct or indirect
financial interest in the operation of this Plan (the "Disinterested Trustees"),
cast in person at a meeting called for the purpose of voting on this Plan. This
Plan shall, unless terminated as hereinafter provided, continue in effect until
, and from year to year thereafter only so long as such continuance is
specifically approved at least annually by the Trust's Board of Trustees
including the Disinterested Trustees cast in person at a meeting called for the
purpose of voting on such continuance.
This Plan may be terminated at any time by a vote of a majority of
the Disinterested Trustees or by the vote of the holders of a "majority" (as
defined in the Act) of any class of the outstanding voting securities of the
Small Cap Fund.
BRANDES INTERNATIONAL TRUST
MULTIPLE CLASS PLAN
This Multiple Class Plan ("Plan") has been prepared, pursuant to the
requirements of rule 18f-3(d) under the Investment Company Act of 1940
("Investment Company Act" or "Act"), in connection with the offer and sale of
shares of Brandes International Trust (the "Company"). The Company is a multiple
class fund within the meaning of rule 18f-3.
In accordance with the requirements of rule 18f-3, this Plan describes
the differences among the classes of shares that are issued by the Company,
including the various services offered to shareholders, the distribution
arrangement that pertains to each class, the methods of allocating expenses
relating to those differences, and the conversion features or exchange
privileges relating to the classes.
This Plan shall become effective immediately upon filing with the
Securities and Exchange Commission as an exhibit to the Form N-1A filed for
registering shares of the Company.
I. Background
The Company is an open-end investment company registered under the
Investment Company Act. The Company currently has two series of shares (each a
"Fund"). Each Fund seeks long-term capital appreciation by investing principally
in equity securities of foreign issuers.
Each Fund has three classes of shares, Class A, Class C, and
Institutional Class. The classes of each Fund represent interests in the same
portfolio of investments held by the Fund and, except as described below, are
identical in all respects. The classes differ in the following respects: (1) in
the manner in which an investor may pay for the distribution of shares of the
Fund; (2) in the expenses that may be incurred by one class as compared to the
others, and in the method of allocating expenses among the classes; and (3) in
the voting rights accorded to each class. These differences are discussed below
in more detail.
II. Discussion of Differences
A. Distribution and Service Arrangements
Any investor in a Fund which does not qualify for the purchase of
Institutional Class shares may pay for the distribution of Fund shares in one of
two ways: by paying a front-end sales load in connection with the purchase of
Class A shares, or by paying a "contingent deferred sales charge" in connection
with the purchase of Class C shares. These two arrangements permit such an
investor to choose the method of purchasing shares that the investor determines
is most beneficial given the amount of the purchase, the length of time the
investor expects to hold the shares, and other circumstances.
For example, an investor who intends to remain invested for the
long-term may decide to purchase a Class A share and pay a front-end sales load
since, over the long-term, as described below, a purchaser of Class C shares may
pay more under a "contingent deferred sales charge" design than an investor who
pays a front-end sales load in connection with the purchase of Class A shares.
In addition, an investor who may qualify for a significantly reduced sales load
in connection with the purchase of Class A shares, as described below, may find
it more advantageous to purchase such shares.
A Class A shareholder of the Fund pays a distribution fee and a
front-end sales charge of up to 4.75% of the offering price at time of investing
in the Fund. The offering price is based on the Fund's net asset value per share
plus the front-end sales load. (A Class A shareholder of the Fund who pays no
front-end sales charge as a result of purchasing shares in excess of $1,000,000,
and who redeems such shares within twelve months of the date of purchase, pays a
"contingent deferred sales load" ("CDSL") at the level of 1.00% of the lesser of
the current market value or the cost of the shares being redeemed.) The
distribution fee is assessed pursuant to a Distribution Plan adopted by the
Board of Trustees of the Company in accordance with the requirements of rule
12 under the Investment Company Act. This fee is assessed at the current
annual rate of 0.25% of the average net assets of the Fund. In addition, a Class
A shareholder of the Fund pays a shareholder servicing fee assessed at the
annual rate of 0.10% of the average net assets of the Fund. The shareholder
servicing fee is deducted pursuant to a Shareholder Service Plan that has been
adopted by the Board of Trustees of the Company.
A Class C shareholder of the Fund pays a "contingent deferred sales
charge" consisting of a distribution fee and a CDSL. The CDSL is assessed upon
the redemption of Class C shares within twelve months of the date of their
purchase, and has been established at the level of 1.00% of the lesser of the
current market value or the cost of the shares being redeemed. A Class C
shareholder of a Fund also pays an annual distribution fee of 0.75% of average
net assets, and a shareholder servicing fee assessed at a rate of 0.25% of the
average annual net assets of the Fund.
An institutional investor in a Fund may purchase Institutional Class
shares of the Fund. Institutional Class shares have no front-end or deferred
sales charge, and do not pay distribution or shareholder service fees.
Institutional investors include qualified retirement plans, foundations,
endowments, corporations, and other taxable and tax-exempt investors that would
otherwise generally qualify as advisory clients of Brandes Investment Partners,
Inc., the investment advisor to the Company.
The net income attributable to Class A shares and Class C shares and
the dividends payable on Class A shares and Class C shares will be reduced by
the amount of the respective distribution and shareholder servicing fees
attributable to such shares. The net income attributable to all classes of
shares will also be reduced by certain incremental expenses, as described below.
Over time, the accumulated continuing distribution and shareholder
servicing fees related to Class C shares may exceed the initial sales load and
ongoing distribution and shareholder servicing fees related to Class A shares.
Such ongoing fees, however, will be offset to the extent any return is realized
on the additional funds that will be invested under the "contingent deferred
sales charge" distribution alternative when compared with the funds invested
under the front-end sales load method of paying for distribution.
Sales personnel may receive different compensation for selling Class
A, Class C and Institutional Class shares, and only Class A, Class C or
Institutional Class shares may be available for purchase through certain
securities dealers.
B. Paying for Expenses
1. Expenses Allocated to a Particular Class
Certain expenses of each Fund will be allocated solely to a
particular class of shares of the Fund because they relate only to the
distribution of shares of that class. Such expenses include:
(a) distribution expenses associated with the sale of Class A and
Class C shares and for which a distribution fee will be
assessed;
(b) shareholder servicing expenses associated with the servicing of
Class A and Class C shareholders and for which a shareholder
servicing fee will be assessed;
(c) incremental transfer agent fees identified by the transfer agent
as being attributable to a specific class;
(d) printing and postage expenses related to preparing and
distributing materials such as shareholder reports,
prospectuses, and proxies to shareholders of a particular class;
(e) blue sky registration fees incurred by a particular class;
(f) SEC registration fees incurred by a particular class;
(g) the expenses of administrative personnel and services as
required to support the shareholders of a particular class;
(h) litigation or other legal expenses relating to one class;
(i) trustees' fees incurred as a result of issues relating to one
class;
(j) any other incremental expenses subsequently identified that
should be properly allocated to one class of shares.
2. Expenses Allocated to All Classes
Other expenses of each Fund will be allocated to all classes of
shares of the Fund in accordance with the requirements of rule 18f-3(c). These
include the management fee paid to Brandes Investment Partners, Inc., the
advisor to the Fund; the custodial fee; and certain other expenses of the Fund.
These expenses will be allocated to each class of the Fund based on the net
asset value of such class in relation to the net asset value of the Fund.
C. Differences in Services Offered
Holders of Class A shares of a Fund may obtain a reduced sales
charge by purchasing shares with an aggregate price in excess of $50,000.
Holders of Class A shares are also permitted, under a right of accumulation, to
obtain a reduced sales charge when purchasing such shares by aggregating their
current purchase with existing share holdings in order to qualify for a quantity
discount. Under this right, Class A shareholders may aggregate only those
existing shares on which a sales load was paid. Alternatively, a Class A
shareholder may obtain a reduced sales load by means of a written letter of
intent expressing such shareholder's non-binding commitment to invest, in the
aggregate, $50,000 or more within a thirteen month period.
Holders of Class C shares are not eligible for any quantity
discounts or other reductions in sales load. Holders of Institutional Class
shares pay no sales load.
C. Voting of Class Shares
Class A and Class C shareholders of each Fund have exclusive
voting rights with respect to the approval of the Distribution Plan with respect
to their class. In all other respects, the voting rights of a Class A, Class C
and Institutional Class shareholder of a Fund are the same. Each shareholder is
entitled to one vote for each full share held and fractional votes for
fractional shares held. Shareholders will vote in the aggregate and not by class
or series, except as noted above and where otherwise required by law (or when
permitted by the Board of Trustees).
Dated: _________, 1996
THIS PAGE MUST BE KEPT AS THE LAST PAGE OF THE DOCUMENT.
SoftSolution Network ID: LA-BLD:B36271.2 Type: MISC
CONSENT OF INDEPENDENT AUDITORS
To the Board of Trustees of
Brandes International Fund
We consent to the inclusion in Post-Effective Amendment No. 2 to the
Registration Statement of Brandes International Fund 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
December 21, 1995
SUBSCRIPTION AGREEMENT
BRANDES INTERNATIONAL FUND (the "Trust"), an open-end management
investment company, and CHARLES H. BRANDES (the "Investor"), intending to be
legally bound, hereby agree as follows:
1. In order to provide the Trust with its initial capital, the Trust
hereby sells to the Investor, and the Investor hereby purchases 8,000 shares of
beneficial interest of the Trust (the "Shares") at a price of $12.50 per share.
The Trust hereby acknowledges receipt from the Investor of funds in the amount
of $100,000 in full payment for the Shares.
2. The Investor represents and warrants to the Trust that the Shares
are being acquired for investment and not with a view to distribution thereof
and that the Investor has no present intention to redeem or dispose of any of
the Shares.
3. The Investor agrees that in the event that the Trust liquidates
before the deferred organizational expenses are fully amortized, then the
redemption price of the Shares may be subject to reduction in the amount of a
proportionate share of such unamortized organizational expenses.
IN WITNESS WHEREOF, the parties have executed this agreement this 11th
day of January, 1995.
BRANDES INTERNATIONAL FUND
By /s/ Charles H. Brandes
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Charles H. Brandes
BRANDES INTERNATIONAL FUND
DISTRIBUTION PLAN PURSUANT TO RULE 12b-1
This Plan (the "Plan") dated the 7th day of February, 1995, is the
written plan contemplated by Rule 12b-1 (the "Rule") under the Investment
Company Act of 1940 (the "Act") of Brandes International Fund (the "Trust").
W H E R E A S:
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The Trust is registered as an open-end investment company under the
Act, currently has two classes of its shares of beneficial interest (designated
Class A Shares and Class B Shares), and the Board of Trustees may establish
additional series or classes of its shares in the future.
The Trust intends to distribute its shares and desires to adopt a Plan
pursuant to Rule 12b-1 under the Act, and the Trustees have determined, in the
exercise of their reasonable business judgment and in light of their fiduciary
duty, that there is a reasonable likelihood that this Plan will benefit the
Trust and its shareholders.
The Trust employs First Fund Distributors, Inc. (the "Initial
Distributor") as a principal underwriter of its shares pursuant to a
Distribution Agreement dated February 7, 1995; the Trust also intends to employ
Worldwide Value Distributors, Inc. (the "Successor Distributor") as a principal
underwriter of its shares in the future. (Either principal underwriter may be
referred to herein as a "Distributor"; collectively, both principal underwriters
may be referred to as the "Distributors.")
NOW, THEREFORE, in consideration of the foregoing, the Trust hereby
adopts this Plan in accordance with Rule 12b-1 under the Act on the following
terms and conditions:
1. Definitions. As used in this Plan, the following terms shall have
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the following meanings:
(a) "Qualified Recipient" shall mean any broker-dealer or
other "person" (as that term is defined in the Act) which (i) has
entered into a written agreement (a "related agreement") that complies
with the Rule with either of the Trust's Distributors and (ii) has
rendered distribution assistance (whether direct, administrative or
both) in the distribution of the Trust's shares.
(b) "Qualified Holdings" shall mean all shares of the Trust
beneficially owned by (i) a Qualified Recipient, (ii) the customers
(brokerage or other) of a Qualified Recipient, (iii) the clients
(investment advisory or other) of a Qualified Recipient, (iv) the
accounts as to which a Qualified Recipient has a fiduciary or custodial
relationship, and (v) the members of a Qualified Recipient, if such
Qualified Recipient is an association or union; provided that the
Qualified Recipient shall have been instrumental in the purchase of
such Fund by, or shall have provided administrative assistance to, such
customers, clients, accounts or members in relation thereto. The
Distributors may make final and binding decisions as to all matters
relating to Qualified Holdings and Qualified Recipients, including but
not limited to (i) the identity of Qualified Recipients; (ii) whether
or not any shares of the Trust are to be considered as Qualified
Holdings of any particular Qualified Recipient; and (iii) what shares
of the Trust, if any, are to be attributed to a particular Qualified
Recipient, to a different Qualified Recipient or to no Qualified
Recipient.
(c) "Qualified Trustees" shall mean the Trustees of the Trust
who are not interested persons, as defined in the Act, of the Trust and
who have no direct or indirect financial interest in the operation of
this Plan or any agreement related to this Plan. While this Plan is in
effect, the selection and nomination of Qualified Trustees shall be
committed to the discretion of the Trustees who are not interested
persons of the Trust. Nothing herein shall prevent the involvement of
others in such selection and nomination if the final decision on any
such selection and nomination is approved by a majority of such
disinterested Trustees.
(d) "Permitted Payments" shall mean payments by a Distributor
to Qualified Recipients as permitted by this Plan.
2. Payments Authorized. The Distributors are authorized, pursuant to
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this Plan, to make Permitted Payments to any Qualified Recipient under a related
agreement on either or both of the following bases:
(a) as reimbursement for direct expenses incurred in the
course of distributing shares of the Trust or providing administrative
assistance to the Trust or its shareholders, including, but not limited
to, advertising, printing and mailing promotional material, telephone
calls and lines, computer terminals, and personnel: and/or
(b) at a rate specified in the related agreement with the
Qualified Recipient in question based on the average value of the
Qualified Holdings of such Qualified Recipient.
3. Expenses Authorized. The Distributors are authorized, pursuant to
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this Plan, to make expenditures in connection with advertising and marketing
shares of the Trust, including but not limited to the purchase of advertising of
shares of the Trust, payment for sales literature and other promotional
material, payments to sales personnel affiliated with either of them and the
cost of telemarketing or direct mail solicitations. Any advertising and sales
material may include references to other open-end investment companies or other
investments and any sales personnel so paid are not required to devote their
time solely to the sale of shares of the Trust.
4. Compensation of Distributors. The Trust shall pay to a Distributor a
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fee to cover its expenses for distribution of the shares of the Trust at an
annual rate of 0.25 of 1% of the average daily net assets of the Class A Shares,
and an annual rate of 0.75% of the average daily net assets of the Class C
Shares, of the Trust. Payment of this fee shall be subject to any limitations
set forth in applicable regulations of the National Association of Securities
Dealers, Inc.
The fees payable to the Distributors are payable even if the amount
paid exceeds the actual expenses incurred by the Distributors. If in any year a
Distributor's expenses incurred for distribution exceed the distribution fees
paid by the Trust to the Distributor, the Distributor will recover such excess
only if this Plan continues to be in effect in some later year when the
distribution fees exceed the Distributor's expenses. There is no limit on the
periods during which unreimbursed expenses may be carried forward, although the
Trust is not obligated to repay any unreimbursed expenses that may exist at such
time, if any, as this Plan terminates. No interest, carrying or finance charges
will be imposed on any amounts carried forward.
5. Reports. While this Plan is in effect, the Distributors shall report
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in writing at least quarterly to the Trust's Board of Trustees, and the Board
shall review, the amounts expended under the Plan and the purposes for which
such expenditures were made.
6. Effectiveness, Continuation, Termination and Amendment. This Plan
--------------------------------------------------------
has been approved (i) by a vote of the Board of Trustees of the Trust and of the
Qualified Trustees, cast in person at a meeting called for the purpose of voting
on this Plan; and (ii) by a vote of holders of at least a "majority" (as defined
in the Act) of the outstanding voting securities of the Trust. This Plan shall
become effective on the date set forth above and, unless terminated as
hereinafter provided, shall continue in effect until February 6, 1996, and from
year to year thereafter only so long as such continuance is specifically
approved at least annually by the Trust's Board of Trustees and its Qualified
Trustees cast in person at a meeting called for the purpose of voting on such
continuance.
This Plan may be terminated at any time with respect to either or both
of the Class A Shares and Class C Shares (or any additional class or series of
shares) by a vote of a majority of the Qualified Trustees or by the vote of the
holders of a "majority" (as defined in the Act) of the outstanding voting
securities of the respective class or series of shares of the Trust.
This Plan may not be amended to increase materially the amount of
payments to be made without shareholder approval, as set forth in (ii) above,
and all amendments must be approved in the manner set forth under (i) above.
BRANDES INTERNATIONAL TRUST
DISTRIBUTION PLAN PURSUANT TO RULE 12b-1
This Plan (the "Plan") dated the day of , 1996, is the written plan
contemplated by Rule 12b-1 (the "Rule") under the Investment Company Act of 1940
(the "Act") of Brandes International Trust (the "Trust") relating to the series
of the Trust named the Brandes International Small Cap Fund (the "Small Cap
Fund").
W H E R E A S:
The Trust is registered as an open-end investment company under the
Act, currently has two classes of its shares of beneficial interest (designated
Class A Shares and Class B Shares), and the Board of Trustees may establish
additional series or classes of its shares in the future.
There is in existence a Plan covering only the series of the Trust
now named the Brandes International Fund (the "International Fund").
A new series of the Trust, the Small Cap Fund, having separate assets
and liabilities has been created.
It is therefore desirable to have a separate Plan (i.e., this Plan)
relating to the Small Cap Fund so that said existing Plan will apply only to the
International Fund; this Plan will apply only to the Small Cap Fund.
The Trust intends to distribute the shares of the Small Cap Fund and
desires to adopt a Plan pursuant to Rule 12b-1 under the Act relating to the
Small Cap Fund, and the Trustees have determined, in the exercise of their
reasonable business judgment and in light of their fiduciary duty, that there is
a reasonable likelihood that this Plan will benefit the Trust and the
shareholders of the Small Cap Fund.
The Trust employs Worldwide Value Distributors, Inc. (the
"Distributor") as the principal underwriter of the shares of the
Small Cap Fund.
NOW, THEREFORE, in consideration of the foregoing, the Trust hereby
adopts this Plan in accordance with Rule 12b-1 under the Act on the following
terms and conditions:
1. Definitions. As used in this Plan, the following terms
shall have the following meanings:
(a) "Qualified Recipient" shall mean any broker-dealer or
other "person" (as that term is defined in the Act) which (i) has
entered into a written agreement (a "related agreement") that
complies with the Rule with the Trust's Distributor and (ii) has
rendered distribution assistance (whether direct, administrative or
both) in the distribution of the shares of the Small Cap Fund.
(b) "Qualified Holdings" shall mean all shares of the Small
Cap Fund beneficially owned by (i) a Qualified Recipient, (ii) the
customers (brokerage or other) of a Qualified Recipient, (iii) the
clients (investment advisory or other) of a Qualified Recipient, (iv)
the accounts as to which a Qualified Recipient has a fiduciary or
custodial relationship, and (v) the members of a Qualified Recipient,
if such Qualified Recipient is an association or union; provided that
the Qualified Recipient shall have been instrumental in the purchase
of such Fund by, or shall have provided administrative assistance to,
such customers, clients, accounts or members in relation thereto. The
Distributor may make final and binding decisions as to all matters
relating to Qualified Holdings and Qualified Recipients, including
but not limited to (i) the identity of Qualified Recipients; (ii)
whether or not any shares of the Small Cap Fund are to be considered
as Qualified Holdings of any particular Qualified Recipient; and
(iii) what shares of the Small Cap Fund, if any, are to be attributed
to a particular Qualified Recipient, to a different Qualified
Recipient or to no Qualified Recipient.
(c) "Qualified Trustees" shall mean the Trustees of the
Trust who are not interested persons, as defined in the Act, of the
Trust and who have no direct or indirect financial interest in the
operation of this Plan or any agreement related to this Plan. While
this Plan is in effect, the selection and nomination of Qualified
Trustees shall be committed to the discretion of the Trustees who are
not interested persons of the Trust. Nothing herein shall prevent the
involvement of others in such selection and nomination if the final
decision on any such selection and nomination is approved by a
majority of such disinterested Trustees.
(d) "Permitted Payments" shall mean payments by a
Distributor to Qualified Recipients as permitted by this Plan.
2. Payments Authorized. The Distributor is authorized, pursuant to
this Plan, to make Permitted Payments to any Qualified Recipient under a related
agreement on either or both of the following bases:
(a) as reimbursement for direct expenses incurred in the
course of distributing shares of the Small Cap Fund or providing
administrative assistance to the Trust or the shareholders of the
Small Cap Fund, including, but not limited to, advertising, printing
and mailing promotional material, telephone calls and lines, computer
terminals, and personnel; and/or
(b) at a rate specified in the related agreement with the
Qualified Recipient in question based on the average value of the
Qualified Holdings of such Qualified Recipient.
3. Expenses Authorized. The Distributor is authorized, pursuant to
this Plan, to make expenditures in connection with advertising and marketing
shares of the Small Cap Fund, including but not limited to the purchase of
advertising of shares of the Small Cap Fund, payment for sales literature and
other promotional material, payments to sales personnel affiliated with either
of them and the cost of telemarketing or direct mail solicitations. Any
advertising and sales material may include references to other open-end
investment companies or other investments and any sales personnel so paid are
not required to devote their time solely to the sale of shares of the Small Cap
Fund.
4. Compensation of Distributor. The Trust shall pay to the
Distributor a fee to cover its expenses for distribution of the shares of the
Small Cap Fund at an annual rate of 0.25 of 1% of the average daily net assets
of the Class A Shares, and an annual rate of 0.75% of the average daily net
assets of the Class C Shares, of the Small Cap Fund. Payment of this fee shall
be subject to any limitations set forth in applicable regulations of the
National Association of Securities Dealers, Inc.
The fees payable to the Distributor are payable even if the amount
paid exceeds the actual expenses incurred by the Distributor. If in any year the
Distributor's expenses incurred for distribution exceed the distribution fees
paid by the Trust to the Distributor, the Distributor will recover such excess
only if this Plan continues to be in effect in some later year when the
distribution fees exceed the Distributor's expenses. There is no limit on the
periods during which unreimbursed expenses may be carried forward, although the
Trust is not obligated to repay any unreimbursed expenses that may exist at such
time, if any, as this Plan terminates. No interest, carrying or finance charges
will be imposed on any amounts carried forward.
5. Reports. While this Plan is in effect, the Distributor shall
report in writing at least quarterly to the Trust's Board of Trustees, and the
Board shall review, the amounts expended under the Plan and the purposes for
which such expenditures were made.
6. Effectiveness, Continuation, Termination and Amendment. This Plan
has been approved (i) by a vote of the Board of Trustees of the Trust and of the
Qualified Trustees, cast in person at a meeting called for the purpose of voting
on this Plan; and (ii) by a vote of holders of at least a "majority" (as defined
in the Act) of the outstanding voting securities of the Trust. This Plan shall
become effective on the date set forth above and, unless terminated as
hereinafter provided, shall continue in effect until __________________________,
and from year to year thereafter only so long as such continuance is
specifically approved at least annually by the Trust's Board of Trustees and its
Qualified Trustees cast in person at a meeting called for the purpose of voting
on such continuance.
This Plan may be terminated at any time with respect to either or
both of the Class A Shares and Class C Shares of the Small Cap Fund by a vote of
a majority of the Qualified Trustees or by the vote of the holders of a
"majority" (as defined in the Act) of the outstanding voting securities of the
respective Class of the Small Cap Fund.
This Plan may not be amended to increase materially the amount of
payments to be made without shareholder approval, as set forth in (ii) above,
and all amendments must be approved in the manner set forth under (i) above.
