File No. 33-81396
811-8614
- --------------------------------------------------------------------------------
================================================================================
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. 8 [X]
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
ACT OF 1940 [ ]
Amendment No. 9 [X]
BRANDES INVESTMENT TRUST
(formerly Brandes International Fund)
(Exact name of registrant as specified in charter)
12750 High Bluff Drive, Suite 420
San Diego, CA 92130
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number (including area code): (619) 755-0239
Charles H. Brandes
Brandes Investment Partners, L.P.
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.
- --------------------------------------------------------------------------------
================================================================================
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)
[X] 75 days after filing pursuant to paragraph (a)(ii)
[ ] on (date) 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.
- --------------------------------------------------------------------------------
================================================================================
<PAGE>
BRANDES INVESTMENT TRUST
FORM N-1A
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
Form N-1A
Item No.
Part Location in Prospectus
A Item of Institutional Global Equity Fund
- --- ---- -----------------------------------
<S> <C> <C>
1. Cover Page Cover page
2. Synopsis "Expense Table"
3. Condensed Financial Information Not applicable
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 Not applicable
Performance
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
<CAPTION>
Part Location in
B Item Statement of Additional Information
- --- ---- -----------------------------------
<S> <C> <C>
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 Not applicable
</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>
PROSPECTUS
BRANDES INSTITUTIONAL GLOBAL EQUITY FUND
12750 High Bluff Drive
San Diego, CA 92130
(619) 755-0239
The BRANDES INSTITUTIONAL GLOBAL EQUITY FUND (the "Fund") seeks to
achieve long-term capital appreciation by investing principally in equity
securities of U.S. and foreign issuers. The Fund invests primarily in equity
securities of companies with market capitalizations greater than $1 billion.
Brandes Investment Partners, L.P. (the "Advisor") serves as investment advisor
to the Fund.
The Fund is not insured or guaranteed by the U.S. Government or any
other person.
This Prospectus sets forth basic information about the Fund that
prospective investors should know before investing. It should be read and
retained for future reference. The Fund is a series of Brandes Investment Trust.
A Statement of Additional Information ("SAI") dated , 1998,
as may be amended from time to time, has been filed with the Securities and
Exchange Commission and is incorporated herein by reference. The SAI is
available without charge by calling the number listed above or upon written
request to the Fund at the address given above. The SEC maintains an internet
site (http://www.sec.gov) that contains the SAI, other material incorporated by
reference and other information about companies that file electronically with
the SEC.
TABLE OF CONTENTS
Expense Table 2
Investment Objective, Policies and Risks 3
Other Securities and Investment Techniques and Risks 6
Investment Restrictions 10
Organization and Management 10
Purchases 11
Shareholder Services 14
Redeeming Shares 14
Dividends, Distributions and Tax Status 16
Performance Information 17
Prior Performance of the Advisor 18
General Information 19
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
Prospectus dated , 1998
<PAGE>
The BRANDES INSTITUTIONAL GLOBAL EQUITY FUND (the "Fund") is a
diversified series of Brandes Investment Trust ( the "Trust"), a registered
open-end management investment company or mutual fund. The investment objective
of the Fund is long-term capital appreciation. The minimum initial investment in
the Fund is $1 million; there is no minimum subsequent investment. If a
shareholder reduces his total investment in shares to less than $100,000, the
investment may be subject to redemption. See "Redeeming Shares - Redemption of
Small Accounts."
Like all equity investments, an investment in the Fund involves certain
risks. The value of the Fund's shares will fluctuate with market conditions, and
an investor's shares when redeemed may be worth more or less than their original
cost. International investing, especially in emerging market countries, also is
subject to certain additional risks, which are described on page 5. The Fund may
invest in certain options and stock index futures which are derivative
securities that involve special risks. These transactions and the related risks
are described under "Options" and "Stock Index Futures" at pages 8 and 9 of the
prospectus.
EXPENSE TABLE
Expenses are among several factors to consider when investing in the
Fund. The purpose of the following fee table is to provide an understanding of
the various costs and expenses which may be borne directly or indirectly by an
investment in the Fund. The expenses shown are estimated for the first fiscal
year of the Fund.
Shareholder Transaction Expenses
Maximum sales charge on purchases (as % of offering price) None
Sales charge on reinvested dividends None
Maximum contingent deferred sales charge
(as % of redemption proceeds) None
Redemption fee None
Total Annual Fund Operating Expenses
(as a % of average net assets)
Management fees 1.00%
Other expenses (after reimbursement)(1) 0.20%
Total operating expenses (after reimbursement)(1) 1.20%
(1) The Advisor has voluntarily agreed to reimburse the Fund through at least
October 31, 1998 to ensure that the Fund's total annual operating expenses will
not exceed 1.20%. Shareholders will receive 30 days notice prior to any change
in this policy. In the absence of this reimbursement, "Other expenses" of the
Fund are estimated to be 0.76%, and "Total operating expenses" are estimated to
be 1.76%. To the extent that the Advisor reimburses the Fund, the Fund may repay
the Advisor when operating expenses (before reimbursement) are less than the
expense limitation during the following three years. Thus, overall operating
expenses in the future may not fall below the expense limitation until the
Advisor has been fully repaid for all of its reimbursements to the Fund; see
"Operating Expenses; Expense Limitation," in this prospectus.
2
<PAGE>
The purpose of the preceding table is to assist the investor in
understanding the various costs and expenses that an investor in the Fund will
bear directly or indirectly. For more information regarding costs and expenses,
see "Organization and Management" in this Prospectus.
Example of Effect of Fund Expenses
An investor would directly or indirectly pay the following expenses on
a $1,000 investment in the Fund, assuming a 5% annual return:
1 Year 3 Years 5 Years 10 Years
$ 12 $ 38 $ 65 $144
The Example shown above should not be considered a representation of
past or future expenses, and actual expenses may be greater or less than those
shown. In addition, although federal regulations require use of an assumed 5%
annual return in preparing the Example, the Fund's actual return may be higher
or lower. See "Organization and Management," page 10.
INVESTMENT OBJECTIVE, POLICIES AND RISKS
The Fund has the investment objective of long-term capital
appreciation, and the Fund seeks to achieve its objective by investing
principally in equity securities of U.S. and foreign issuers. No assurance can
be given that the Fund will achieve its investment objective. Brandes Investment
Partners, L.P. serves as investment advisor to the Fund.
Global Investing
During the past decade, there has been significant growth in foreign
capital markets. Because of this growth, over half of the world's equity value
is located outside of the United States. Accordingly, the Advisor believes that
significant investment opportunities exist throughout the world.
The Fund normally invests at least 65% of its total assets in equity
securities with market capitalizations greater than $1 billion. The Fund will
not invest more than 5% of its total assets at the time of purchase in small
capitalization companies, i.e., those with market capitalizations of $1 billion
or less.
Under normal circumstances, the Fund will invest at least 65% of its
total assets at the time of purchase in equity securities of issuers located in
at least three countries one of which may be the United States. Countries in
which the Fund may invest include, but are not limited to, the nations of
Western Europe, North and South America, Australia, Africa and Asia. With
respect to Fund investments in any particular country or industry, the Fund may
invest up to the greater of either (a) 20% of total Fund assets at the time of
purchase, or (b) 150% of the weighting of such country or industry as
represented in the Morgan Stanley Capital International ("MSCI") World Index at
the time of purchase; but in no event may the Fund invest more than 25% of its
total assets, calculated at the time of purchase, in any one industry (other
than U.S.
3
<PAGE>
Government securities). No more than 20% of the value of the Fund's total
assets, measured at the time of purchase, may be invested in securities of
companies located in countries with emerging securities markets.
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 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 to the holders of such securities and, accordingly, there may not be
a correlation between such information and the market value of the Depositary
Receipts.
In seeking out securities for purchase, the Advisor does not attempt to
match the security allocations of stock market indices. Therefore, the Fund's
country weightings may differ significantly from country weightings found in
published stock indices. For example, the Advisor may choose not to invest the
Fund's assets in a country whose stock market, at any given time, may comprise a
large portion of a published global stock market index. At the same time, the
Advisor may invest the Fund's assets in countries whose representation in such
an index may be small or non-existent. The Advisor selects stocks for the Fund
based on their individual merits and not necessarily on their geographic
locations.
The Advisor applies the principles of value investing in the analysis
and selection of securities of companies for the Fund's investment portfolios.
Value Investing
The Advisor is committed to the use of the Graham and Dodd Value
Investing approach as introduced in the classic book Security Analysis.
Utilizing this philosophy, the Advisor views stocks as parts of businesses which
are for sale. It seeks to purchase a diversified group of these businesses at
prices its research indicates are well below their true long-term, or intrinsic,
value. By purchasing stocks whose current prices are believed to be considerably
below their intrinsic value, the Advisor believes it can buy not only a possible
margin of safety against price declines, but also an attractive opportunity for
profit over the business cycle.
In estimating a company's true long-term value, the Advisor uses
sources of information such as company reports, filings with the Securities and
Exchange Commission (the "SEC"), computer databases, industry publications,
general and business publications, brokerage firm research reports, and
interviews with company management. The Advisor's analysis is focused on
fundamental characteristics of a company, including, but not limited to, book
value, cash flow and capital structure, as well as management's record and broad
industry issues. Once the intrinsic value of a company is estimated, this value
is compared to the price of the stock. If the price is judged to be sufficiently
lower than the estimated intrinsic value, the stock may be purchased. The
Advisor believes that the margin between current price and estimated intrinsic
value should provide a margin of safety against price declines. In addition,
over a business cycle
4
<PAGE>
of three to five years, the Advisor believes the market should begin to
recognize the company's value and drive its price up toward its intrinsic value.
As a result, the investor could realize profits. Of course, there can be no
assurance that companies selected using the value investing approach will
generate profits or that the Advisor's assessment of intrinsic value will be
correct.
Risks of International Investing
Investments in foreign securities involve special risks. These include
currency fluctuation, 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.
Because the Advisor searches 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 Fund. Moreover, securities of foreign issuers
generally will not be registered with the SEC, and such issuers will generally
not be subject to the SEC's reporting requirements. Accordingly, there is likely
to be less publicly available information concerning certain of the foreign
issuers of securities held by the Fund than is available concerning U.S.
companies. Foreign companies are also generally not subject to uniform
accounting, auditing and financial reporting standards or to practices and
requirements comparable to those applicable to U.S. companies. There may also be
less government supervision and regulation of foreign broker-dealers, financial
institutions and listed companies than exists in the U.S. These factors could
make foreign investments, especially those in developing countries, more
volatile than U.S. investments. All of the above issues should be considered
before investing in the Fund.
The Fund may from time to time invest a substantial portion of the
total value of its assets in securities of issuers located in particular
countries and/or associated with particular industries. During such periods, the
Fund may be more susceptible to risks associated with a single economic,
political or regulatory occurrences than more diversified portfolios.
Emerging Markets and Related Risks
The Fund may invest up to 20% 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
5
<PAGE>
international financial community. There are currently over 130 such countries,
approximately 40 of which currently have investable stock markets. Those
countries generally include every nation in the world except the United States,
Canada, Japan, Australia, New Zealand and most nations located in Western
Europe. Currently, investing in many emerging market countries is not feasible
or may involve unacceptable risks. As opportunities to invest in other emerging
markets countries develop, the Fund expects to expand and diversify further the
countries in which it invests.
Investing in emerging market securities involves risks which are in
addition to the usual risks inherent in foreign investments. Some emerging
markets countries may have fixed or managed currencies that are not
free-floating against the U.S. dollar. Further, certain currencies may not be
traded internationally. Certain of these currencies have experienced substantial
fluctuations or a steady devaluation relative to the U.S. dollar. Any
fluctuations or devaluations in the currencies in which the Fund's portfolio
securities are denominated may have a detrimental impact on the Fund.
Some countries with emerging securities markets have experienced
substantial, and in some periods extremely high, rates of inflation for many
years. Inflation and rapid fluctuations in inflation rates have had and may
continue to have negative effects on the economies and securities markets of
certain countries. Moreover, the economies of some countries may differ
favorably or unfavorably from the U.S. economy in such respects as rate of
growth of gross domestic product, the rate of inflation, capital reinvestment,
resource self-sufficiency, number and depth of industries forming the economy's
base, condition and stability of financial institutions, 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 than in the U.S.
Emerging securities markets typically have substantially less volume
than U.S. markets, securities in many of such markets are less liquid, and their
prices often are more volatile than securities of comparable U.S. companies.
Such markets often have different clearance and settlement procedures for
securities transactions, and in some markets there have been times when
settlements have been unable to keep pace with the volume of transactions,
making it difficult to conduct transactions. Delays in settlement could result
in temporary periods when assets which the Fund desires to invest in emerging
markets may be uninvested. Settlement problems in emerging markets countries
also could cause the Fund to miss attractive investment opportunities.
Satisfactory custodial services may not be available in some emerging markets
countries, which may result in the Fund's incurring additional costs and delays
in the transportation and custody of such securities.
OTHER SECURITIES AND INVESTMENT TECHNIQUES AND RISKS
Short-Term Investments
At times the Fund may invest in short-term cash equivalent securities
either for temporary, defensive purposes or as part of its overall investment
strategy. These securities consist of high quality debt obligations maturing in
one year or less from the date of purchase,
6
<PAGE>
such as U.S. Government securities, certificates of deposit, bankers'
acceptances and commercial paper. High quality means the obligations have been
rated at least A-1 by Standard & Poor's Corporation ("S&P") or Prime-1 by
Moody's Investor's Service, Inc. ("Moody's"), have an outstanding issue of debt
securities rated at least AA by S&P or Aa by Moody's, or are of comparable
quality in the opinion of the Advisor.
Repurchase Agreements
Short-term investments also include repurchase agreements with respect
to the high quality debt obligations listed above. A repurchase agreement is a
transaction in which the Fund purchases a security and, at the same time, the
seller (normally a commercial bank or broker-dealer) agrees to repurchase the
same security (and/or a security substituted for it under the repurchase
agreement) at an agreed-upon price and date in the future. The resale price is
in excess of the purchase price, as it reflects an agreed-upon market interest
rate effective for the period of time during which the Fund holds the
securities. 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 is required to provide additional collateral so
that at all times the collateral is at least equal to the repurchase price.
The majority of these transactions run from day to day and not more
than seven days from the original purchase. The Fund's risk is limited to the
ability of the seller to pay the agreed-upon sum on the delivery date; in the
event of bankruptcy or default by the seller, there may be possible delays and
expenses in liquidating the instrument purchased, decline in its value and loss
of interest. The securities will be marked to market every business day so that
their value is at least equal to the amount due from the seller, including
accrued interest. The Advisor will also consider the credit-worthiness of any
bank or broker-dealer involved in repurchase agreements under procedures adopted
by the Trust's Board of Trustees.
U.S. Government Securities
The Fund may invest in securities issued or guaranteed by the U.S.
Government, its agencies and instrumentalities. U.S. Government securities
include direct obligations issued by the United States Treasury, such as
Treasury bills, certificates of indebtedness, notes and bonds. U.S. Government
agencies and instrumentalities that issue or guarantee securities include, but
are not limited to, the Federal Home Loan Banks, the Federal National Mortgage
Association, and the Student Loan Marketing Association. 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
7
<PAGE>
not be able to assert a claim against the United States itself in the event the
agency or instrumentality does not meet its commitment.
When-Issued Securities
The Fund may purchase securities on a when-issued or delayed-delivery
basis, generally in connection with an underwriting or other offering.
When-issued and delayed-delivery transactions occur when securities are bought
with payment for and delivery of the securities scheduled to take place at a
future time, beyond normal settlement dates, generally from 15 to 45 days after
the transaction. No interest accrues to the purchaser during the period before
delivery. There is a risk in these transactions that the value of the securities
at settlement may be more or less than the agreed upon price, or that the party
with which the Fund enters into such a transaction may not perform its
commitment. The Fund will segregate liquid assets, such as cash, U.S. Government
securities and other liquid securities in an amount sufficient to meet its
payment obligations with respect to these transactions.
Securities Lending
The Fund may lend its securities in an amount not exceeding 30% of its
total assets at the time of the loan to financial institutions such as banks and
brokers if the loan is collateralized in accordance with applicable regulations.
Under the present regulatory requirements which govern loans of portfolio
securities, the loan collateral must, on each business day, at least equal the
value of the loaned securities and must consist of cash, letters of credit of
domestic banks or domestic branches of foreign banks, or securities of the U.S.
Government. Loans of securities involve risks of delay in receiving additional
collateral or in recovering the securities loaned or even loss of rights in the
collateral should the borrower of the securities fail financially. However, such
securities lending will be made only when, in the opinion of the Advisor, the
income to be earned from the loans justifies the attendant risks. Loans are
subject to termination at the option of the Fund or the borrower.
Options
The Fund may write (sell) covered call options on individual securities
and on stock indices and engage in related closing transactions. A covered call
option on a security is an agreement by the Fund, in exchange for a premium, to
sell a particular portfolio security if the option is exercised at a specified
price before a set date. An option on a stock index gives the option holder the
right to receive, upon exercising the option, a cash settlement amount based on
the difference between the exercise price and the value of the underlying stock
index. Risks associated with writing covered options include the possible
inability to effect closing transactions at favorable prices and a limit on the
appreciation of the securities set aside for settlement. The 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.
The Fund may purchase put and call options with respect to securities
which are eligible for purchase by the Fund and with respect to various stock
indices for the purpose of hedging
8
<PAGE>
against the risk of unfavorable price movements adversely affecting the value of
the Fund's securities or securities the Fund intends to buy. A put option on a
security is an agreement by the writer of the option, in exchange for a premium,
to purchase the security from the Fund, if the option is exercised, at a
specified price before a set date.
Special risks are associated with the use of options. There can be no
guarantee of a correlation between price movements in the option and in the
underlying securities or index. A lack of correlation could result in a loss on
both the Fund's portfolio holdings and the option so that the Fund's return
might have been better had the option not been purchased or sold. There can be
no assurance that a liquid market will exist at a time when the Fund seeks to
close out an option position. The Fund may purchase a put or call option only if
the value of its premium, when aggregated with the premiums on all other options
held by the Fund, does not exceed 5% of the Fund's total assets at the time of
purchase.
Stock Index Futures
The Fund may buy and sell stock index futures contracts for bona fide
hedging purposes, e.g., in order to hedge against changes in prices of the
Fund's securities. No more than 25% of the Fund's total assets at the time of
any such transaction will be hedged with stock index futures contracts.
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, but profits and
losses resulting from changes in the market value of the contract are credited
or debited at the close of each trading day to the accounts of the parties to
the contract. If the Advisor expects 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 wants 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 expects general stock market
prices to decline, it might sell a futures contract on the index. If that index
did in fact decline, the value of some or all of the equity securities held by
the Fund might also be expected to decline, but that decrease would be offset in
part by the increase in the value of the futures contract.
There is no assurance that it will be possible at any particular time
to close a futures position. In the event that the Fund could not close a
futures position and the value of the position declined, the Fund would be
required to continue to make daily cash payments to the other party to the
contract to offset the decline in value of the position. There can be no
assurance that hedging transactions will be successful, as there may be an
imperfect correlation between movements in the prices of the futures contracts
and of the securities being hedged, or price distortions due to market
conditions in the futures markets. Successful use of futures contracts is
subject to the Advisor's ability to predict correctly movements in the direction
of interest rates, market prices and other factors affecting the value of
securities.
9
<PAGE>
Illiquid and Restricted Securities
The Fund may invest up to 5% of its net assets at the time of purchase
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.
INVESTMENT RESTRICTIONS
The Fund has adopted certain investment restrictions, which are
described fully in the Statement of Additional Information. Like the Fund's
investment objective, certain of these restrictions are fundamental and may be
changed only by a majority vote of the Fund's outstanding shares.
ORGANIZATION AND MANAGEMENT
The Trust's Board of Trustees decides on matters of general policy and
reviews the activities of the Advisor, Distributor and Administrator. The
Trust's officers conduct and supervise its daily business operations.
The Advisor
The Advisor is a limited partnership organized in May 1996 as the
successor to an investment advisor which was founded in 1974. As of December 31,
1997, the Advisor managed over $15 billion in assets for various clients,
including corporations, public and corporate pension plans, foundations and
charitable endowments, and individuals. Charles H. Brandes, who owns a
controlling interest in the Advisor's general partner, serves as a Trustee of
the Trust. The Advisor's offices are located at 12750 High Bluff Drive, San
Diego, California 92130.
Management Fee. Subject to the direction and control of the Trustees,
the Advisor formulates and implements an investment program for the Fund,
including determining which securities should be bought and sold. The Advisor
also provides certain officers for the Trust. For its services, the Advisor
receives a fee, accrued daily and paid monthly at the annual rate of 1.00% of
the Fund's average net assets.
Managers of the Fund. The Fund is team-managed by the Advisor's
Investment Committee, whose members are senior portfolio management
professionals of the firm.
Operating Expenses; Expense Limitation
The Fund is responsible for paying its operating expenses, including,
but not limited to, management and administrative fees, legal and auditing fees,
fees and expenses of its custodian,
10
<PAGE>
accounting services and shareholder servicing agents, Trustees' fees, the cost
of communicating with shareholders and registration fees. However, the Advisor
has voluntarily agreed through at least October 31, 1998 to limit the Fund's
operating expenses to 1.20% of average net assets. Any such reductions made by
the Advisor in its fees or reimbursement of expenses are subject to
reimbursement by the Fund, provided that the Fund is able to effect such
reimbursement while remaining within the expense limitation. Shareholders will
receive 30 days prior notice in the event the Advisor determines not to maintain
this voluntary limit in the future. The Board of Trustees has determined that it
is possible, but not probable, that the Fund will be large enough in the future
for the expense ratio to be sufficiently reduced to permit reimbursement of the
Advisor.
Portfolio Transactions and Brokerage
The Advisor considers a number of factors in determining which brokers
or dealers to use for the Fund's portfolio transactions. These factors include,
but are not limited to, the reasonableness of commissions, quality of services
and execution, and the availability of research which the Advisor may lawfully
and appropriately use in its investment management and advisory capacities.
Provided the Fund receives prompt execution at competitive prices, the Advisor
may also consider the sale of shares of the Fund as a factor in selecting
broker-dealers for the Fund's portfolio transactions.
The Administrator
Investment Company Administration Corporation (the "Administrator"),
pursuant to an administration agreement with the Trust, supervises the overall
administration of the Fund including, among other responsibilities, the
preparation and filing of documents required for compliance by the Fund with
applicable laws and regulations, arranging for the maintenance of books and
records of the Fund, and supervision of other organizations that provide
services to the Fund. Certain officers of the Trust are provided by the
Administrator. For its services, the Administrator receives a fee from the Trust
at the annual rate of 0.10% of the Fund's average net assets, subject to a
minimum of $40,000 per year.
PURCHASES
General
Shares of the Fund are offered on a continuous basis to certain
institutional investors, including qualified retirement and deferred
compensation plans and trusts used to fund those plans, including, but not
limited to, those defined in section 401(a), 403(b), or 457 of the Internal
Revenue Code (the "Code"), "rabbi trusts," foundations, endowments, corporations
and other taxable and tax-exempt investors that would otherwise generally
qualify as advisory clients of the Advisor. Shares may also be purchased by
Trustees of the Trust, officers and employees of the Advisor, the Administrator
and the Distributor, and their immediate family members, as well as by certain
other persons determined from time to time by the Distributor, including
investment advisors or financial planners or their clients who may clear
transactions through a broker-dealer, bank or trust company which may maintain
an omnibus account with the Transfer Agent.
11
<PAGE>
Investors who purchase or redeem shares through a trust department, broker,
dealer, agent, financial planner, financial services firm or investment advisor
may be charged an additional service or transaction fee by that institution.
Shares of the Fund are sold without a sales charge at the net asset
value per share which is next computed (1) after the investor's selected dealer
or other authorized intermediary receives the order which is promptly
transmitted to the Fund, or (2) after receipt of an order by the Transfer Agent
from the shareholder directly in proper form (which generally means a completed
Application Form together with a negotiable check in U.S. dollars or a wire
transfer of funds). The Fund and the Distributor reserve the right to refuse any
order for the purchase of shares. The Fund's Distributor is First Fund
Distributors, Inc., an affiliate of the Administrator. The minimum initial
investment in the Fund is $1 million; there is no minimum subsequent investment.
The minimum investment may be waived by the Distributor for institutions making
continuing investments in the Fund and from time to time for other investors,
including retirement plans. Investors may be charged a fee if they effect
transactions in Fund shares through a broker or agent.
Purchases through a Securities Dealer
Shares of the Fund may be purchased through a securities broker or
dealer which has executed an agreement with the Distributor of the Fund (a
"selected dealer"). Selected dealers are authorized to designate other
intermediaries to accept purchase and redemption orders on the Fund's behalf.
The Fund will be deemed to have received a purchase or redemption order when a
selected dealer or, if applicable, a dealer's authorized designee, accepts the
order. Customer orders will be priced the Fund's net asset value next computed
after they are accepted by an authorized dealer or the dealer's authorized
designee. The Fund and the Distributor reserve the right to cancel an order for
which payment is not received from a selected dealer by the third business day
following the order. An order placed with a selected dealer may be subject to
fees imposed by the dealer.
Purchases through the Transfer Agent
An investor who wishes to purchase shares of the Fund directly from the
Transfer Agent may do so by completing the Application form (available from the
Transfer Agent or a selected dealer) and mailing it to the Transfer Agent at the
address shown on the Application Form. Payment may be made by a check that
accompanies the Application Form, or it may be made by a wire transfer of funds,
as described below. Subsequent investments may be made by mailing a check,
together with the investment form from a recent account statement. Subsequent
investments may also be made by wire, as described below.
Payment by Wire
For payment by wire of an initial investment in the Fund, the investor
should first call the Transfer Agent at (617) 946-1945 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,
12
<PAGE>
amount being wired and wiring bank. The investor should then instruct the wiring
bank to transfer funds by wire to: Investors Bank & Trust Company, ABA
#0110-01438, DDA #6691-36913, for credit to Brandes Institutional Global Equity
Fund, for further credit to [Investor's name and account number]. The investor
should also ensure that the wiring bank includes the name of the Fund and the
account number with the wire. If the funds are received by the Transfer Agent
prior to the time that the Fund's net asset value is calculated, the funds will
be invested on that day at the net asset value next calculated: otherwise, they
will be invested on the next business day at the net asset value next
calculated. 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.
Subsequent Purchases
To make a subsequent purchase by wire, the investor should call the
Transfer Agent at (617) 946-1945 before the wire is sent. Failure to do so may
cause the purchase to be delayed indefinitely. The investor should wire funds to
the Transfer Agent, care of Investors Bank & Trust Company, in the manner
described above, including the name of the Fund and the investor's account
number with the wire.
Retirement Plans
Individual participants in qualified retirement plans should purchase
shares of the Fund through their plan sponsor or administrator, which is
responsible for transmitting orders. The procedures for investing in the Fund
depend on the provisions of the qualified retirement plan and any arrangements
that the plan sponsor may have made for special processing services, including
subaccounting.
Other
Shares are credited to an investor's account, and certificates are
generally not issued. The Trust and the Distributor each reserve the right to
reject any purchase order or suspend or modify the offering of the Fund's
shares.
In addition to cash purchases, shares of the Fund may be purchased by
tendering payment "in-kind" in the form of securities, provided that any such
securities are of the type which the Fund can or may legally purchase and are
consistent with the Fund's investment objective and policies, are liquid,
unrestricted and have a readily determinable value by exchange or NASDAQ
listing, and that such a purchase has been approved by the Advisor in its sole
discretion.
Net Asset Value
To determine the net asset value per share of the Fund, the current
value of the Fund's total assets, less all its liabilities, is divided by the
total number of shares outstanding, and the result is rounded to the nearer
cent. The Fund values its investments on the basis of their market value.
Securities and other assets for which market prices are not readily available
are valued at fair value as determined in good faith by the Board of Trustees.
Debt securities with remaining
13
<PAGE>
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 are valued at their face amounts. Interest is recorded as
accrued, and dividends are recorded on their ex-dividend date.
The Fund calculates 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, Martin
Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Thanksgiving Day and Christmas Day.
SHAREHOLDER SERVICES
Automatic Reinvestment
Dividends and capital gain distributions are reinvested without any
sales charge in additional shares unless indicated otherwise on the Application
Form. A shareholder may elect to have dividends or capital gain distributions
paid in cash.
Shareholder Reports
Shareholders will receive an audited annual report and an unaudited
semiannual report, both of which present the financial statements of the Fund.
REDEEMING SHARES
How to Redeem Shares
Shares may be redeemed only by instructions from the registered owner
of a shareholder account. Individuals who are participants in a retirement or
other plan should direct redemption requests to the plan sponsor or
administrator, which may have special procedures for processing such requests
and which is responsible for forwarding requests to the Transfer Agent.
A shareholder may redeem shares of the Fund by contacting the
shareholder's selected dealer or authorized intermediary. The selected dealer
may arrange for the repurchase of the shares through the Fund's distributor at
the net asset value next determined after receipt by the selected dealer of
instructions from the shareholder. The dealer may charge the shareholder for
this service. Shares held in street name must be redeemed through the dealer
holding the shares.
A shareholder may also redeem shares by mailing instructions to the
Transfer Agent, Investors Bank & Trust Company, P.O. Box 9130, Boston, MA
02117-9130, or by delivering instructions to the Transfer Agent at 200 Clarendon
Street, 16th Floor, Boston, MA 02116. 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
14
<PAGE>
Transfer Agent must be submitted before such request will be accepted. 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 (617) 946-1945, 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 the Fund is not reasonably practicable or it is not
reasonably practicable for the Trust fairly to determine the value of the Fund's
net assets, or during any other period when the SEC, by order, so permits.
Redemption proceeds are generally paid by check. However, at the
shareholder's request, redemption proceeds of $300 or more may be wired by the
Transfer Agent to the shareholder's bank account. Requests for redemption by
wire should include the name, location and ABA or bank routing number (if known)
of the designated bank and the shareholder's bank account number.
Redemption of Small Accounts
If the value of a shareholder's investment falls below $100,000 because
of shareholder redemption(s), the Fund may notify the shareholder, and if his
investment value remains below
15
<PAGE>
$100,000 for a continuous 60-day period, the shares are subject to redemption by
the Fund. The Fund, however, will not redeem shares based solely upon changes in
the market that reduce the net asset value of the shares. The foregoing minimum
account size requirements do not apply to shares held by officers or employees
of the Advisor or its affiliates or Trustees of the Trust.
The Fund reserves the right to modify or terminate the involuntary
redemption features of the shares as stated above at any time upon 60-days'
notice to shareholders.
DIVIDENDS, DISTRIBUTIONS AND TAX STATUS
Dividends and Distributions
The Fund expects to pay income dividends annually. Distributions of net
capital gains, if any, will be made at least annually. The Board of Trustees may
determine to declare dividends and make distributions more frequently.
Dividends and capital gain distributions are automatically reinvested
in additional shares at the net asset value per share on the reinvestment date
unless the shareholder has previously requested in writing to the Transfer Agent
that payment be made in cash.
Any dividend or distribution paid by the Fund has the effect of
reducing the net asset value per share on the reinvestment date by the amount of
the dividend or distribution. Investors should note that a dividend or
distribution paid on shares purchased shortly before such dividend or
distribution was declared will be subject to income taxes as discussed below
even though the dividend or distribution represents, in substance, a partial
return of capital to the shareholder.
Tax Status
The Fund intends to qualify and elect to be treated as a regulated
investment company under Subchapter M of the Code. As long as the Fund continues
to qualify, and as long as the Fund distributes all of its income each year to
shareholders, the Fund will not be subject to any federal income or excise
taxes. The distributions made by the Fund will be taxable to shareholders
whether received in shares (through dividend reinvestment) or in cash.
Distributions derived from net investment income, including net short-term
capital gains, are taxable to shareholders as ordinary income. Distributions
designated as capital gains dividends are taxable as long-term capital gains
regardless of the length of time shares of the Fund have been held. The maximum
capital gains rate for individuals is 28% with respect to assets held for more
than 12 months, but not more than 18 months, and 20% with respect to assets held
more than 18 months. The maximum capital gains rate for corporate shareholders
is the same as the maximum tax rate for ordinary income. 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
16
<PAGE>
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 net short-term capital gains distributions to foreign
shareholders may be subject to U.S. withholding at a rate of up to 30%.
Dividends and interest earned by the Fund may be subject to withholding
and other taxes imposed by foreign countries, at rates from 10% to 40%, which
taxes would reduce the Fund's investment income. However, under certain
circumstances shareholders may be able to claim credits against their U.S. taxes
for such foreign taxes. The Trust will also notify shareholders each year as to
the amounts available as credits.
Additional information about taxes is set forth in the Statement of
Additional Information. Shareholders should consult their own advisers
concerning federal, state and local taxation of distributions from the Fund.
PERFORMANCE INFORMATION
From time to time, the Trust may publish the total return of the Fund
in advertisements and communications to investors. Total return information will
include the Fund's average annual compounded rate of return over the four most
recent calendar quarters and over the period from the Fund's inception of
operations. The Trust may also advertise aggregate and average total return
information of the Fund over different periods of time. The Fund's total return
will be based upon the value of the shares acquired through a hypothetical
$1,000 investment at the beginning of the specified period and the net asset
value of those shares at the end of the period, assuming reinvestment of all
distributions. Total return figures will reflect all recurring charges against
Fund income. Investors should note that the investment results of the Fund will
fluctuate over time, and any presentation of the 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 rates 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 the Fund's
performance in comparison to the performance of various indices and investments
for which reliable performance data are available, and may advertise relative
rankings or other information prepared by mutual fund ranking services such as
Lipper Analytical Services or Morningstar, Inc. The Fund's annual report may
contain additional performance information and will be available to shareholders
upon request without charge. The investment return and principal value of an
investment in the Fund will fluctuate and an investor's proceeds upon redeeming
Fund shares may be more or less than the original cost of the shares.
17
<PAGE>
PRIOR PERFORMANCE OF THE ADVISOR
Set forth below are certain performance data provided by the Advisor
relating to the composite of global equity accounts of clients of the Advisor.
The global equity accounts in the Advisor's composite had the same investment
objective as the Fund and were managed by the same team that manages the Fund's
securities, using substantially similar, though not identical, investment
strategies, policies and techniques as those used in managing the Fund. See
"Investment Objective, Policies and Risks." This composite information is
provided to illustrate the past performance of the Advisor in managing similar
accounts as measured against the Morgan Stanley Capital International (MSCI)
World Index, a standard global equity investment benchmark. The accounts that
are included in the Advisor's composite are not subject to the same types of
expenses to which the Fund is subject nor to the diversification requirements,
specific tax restrictions and investment limitations imposed on the Fund by the
Investment Company Act of 1940 or Subchapter M of the Code. Consequently, the
performance results for the Advisor's composite could have been adversely
affected if the accounts included in the composite had been regulated as
investment companies. The data below regarding the Advisor's composite of global
equity accounts do not represent the performance of the Fund. An investor should
not consider this performance data as an indication of future performance of the
Fund or of the Advisor.
The results presented below may not necessarily equate with the return
experienced by any particular account of the Advisor or shareholder of the Fund
as a result of timing of investments and redemptions. In addition, the effect of
taxes on any client or shareholder will depend on such person's tax status, and
the results have not been reduced to reflect any income tax which may have been
payable.
Annualized Total Return
For Periods Ended December 31, 1997
Inception Ten Years Five Years One Year
Advisor's Composite* 17.41% 20.81% 27.59%
MSCI World Index** 10.56% 15.34% 15.76%
* The net annualized returns presented above for the Advisor's global equity
composite were calculated on a time-weighted and asset-weighted total return
basis, including investment of all dividends, interest and income, realized and
unrealized gains or losses and are net of applicable investment advisory fees,
brokerage commissions and execution costs, custodial fees and any applicable
foreign withholding taxes, without provision for federal and state income taxes,
if any. The Advisor's composite results include all actual, fee-paying, fully
discretionary global equity accounts under management by the Advisor for at
least one year beginning 1/1/80, having substantially the same investment
objectives, policies, techniques and restrictions, other than client accounts
denominated in currencies other than U.S. dollars. The weighted annualized
management fee during the period from 1/1/80 through 12/31/97 was 1.08% per
year. Securities transactions are accounted for on the trade date. Cash and cash
equivalents are included in performance returns. For calendar years 1985 through
1996, the net annual total returns for the Advisor's composite were examined by
independent accounting firms, and for the years 1992
18
<PAGE>
through 1996, the composite returns were examined in accordance with AIMR Level
II verification standards. The examination for 1997 has not been completed as of
the date of this prospectus. Copies of the accountants' reports and a complete
list and description of the Advisor's composites are available on request. The
results for individual accounts and for different periods may vary. The
asset-weighted standard deviation measure of dispersion for the annual periods
1985 through 1996 are 6.08%, 5.39%, 4.84%, 10.12%, 8.41%, 5.63%, 7.58%, 3.98%,
4.56%, 2.52%, 3.04% and 2.23%, respectively; the calculation for 1997 has not
been completed as of the date of this prospectus. Investors should not rely on
prior performance results as a reliable indication of future results. Brandes
has prepared and presented this information in compliance with The Performance
Presentation Standards of AIMR. AIMR has not been involved with the preparation
or review of this information.
**The MSCI World Index is an unmanaged index consisting of securities listed on
exchanges in the major European and Asian countries, Australia and the U.S. and
includes dividends and distributions, but does not reflect fees, brokerage
commission or other expenses of investing.
GENERAL INFORMATION
The Trust was organized as a Delaware business trust on July 6, 1994.
The Trustees have authority to issue an unlimited number of shares of beneficial
interest of separate series, par value $.01 per share. The Fund is currently one
of two series of the Trust. Although it has no present intention to do so, the
Trust has reserved the right to convert to a master-feeder structure in the
future by investing all of the Fund's assets in the securities of another
investment company, upon notice to and approval of shareholders.
The Trust does not hold annual shareholder meetings of the Fund. There
normally will be no meetings of shareholders to elect Trustees unless fewer than
a majority of the Trustees holding office have been elected by shareholders.
Shareholders of record holding at least two-thirds of the outstanding shares of
the Trust may remove a Trustee by votes cast in person or by proxy at a meeting
called for that purpose. The Trustees are required to call a meeting of
shareholders for the purpose of voting upon the question of removal of any
Trustee when so requested in writing by the shareholders of record owning at
least 10% of the Trust's outstanding shares. Each share of the Fund has equal
voting rights. Each share of the Fund is entitled to participate equally in
dividends and distributions and the proceeds of any liquidation from the Fund.
Year 2000 Risk. Like other business organizations around the world, the
Fund could be adversely affected if the computer systems used by its Advisor and
other service providers do not properly process and calculate information
related to dates beginning January 1, 2000. This is commonly known as the "Year
2000 Issue." The Fund's Advisor is taking steps that it believes are reasonably
designed to address the Year 2000 Issue with respect to its own computer
systems, and it has obtained assurances from the Fund's other service providers
that they are taking comparable steps. However, there can be no assurance that
these actions will be sufficient to avoid any adverse impact on the Fund.
19
<PAGE>
Custodian and Transfer Agent. Investors Bank & Trust Company is the
custodian of the Fund's assets and employs foreign sub-custodians to provide
custody of the Fund's foreign assets. Investors Bank & Trust Company is also the
Fund's transfer and dividend disbursing agent.
<PAGE>
Subject to Completion. Preliminary Statement of Additional Information dated
, 1998
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 any
offers to buy be accepted prior to the time the registration statement becomes
effective. This Statement of Additional Information does not constitute a
prospectus.
BRANDES INSTITUTIONAL GLOBAL EQUITY FUND
Statement of Additional Information
Dated , 1998
This Statement of Additional Information is not a prospectus, and it
should be read in conjunction with the prospectus of Brandes Institutional
Global Equity Fund (the "Fund") dated , 1998. Brandes
Investment Partners, L.P. (the "Advisor") is the Advisor to the Fund. Copies of
the prospectus may be obtained from the Fund at 12750 High Bluff Drive, Suite
420, San Diego, CA 92130 or by calling 1-800-237-7119.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Cross-reference
to page in
Page Prospectus:
---- -----------
<S> <C> <C>
Investment Objective and Policies............................. B-2 4
Investment Restrictions....................................... B-2 10
Other Securities and Investment Techniques.................... B-4 7
Repurchase Agreements................................ B-4 7
When-Issued Securities............................... B-4 8
Rule 144A Securities................................. B-5 9
Put and Call Options................................. B-5 8
Futures Contracts.................................... B-8 9
Management.................................................... B-8 10
Advisory Agreement................................... B-10 10
Administration Agreement............................. B-11 11
Portfolio Transactions and Brokerage.......................... B-11 11
Net Asset Value............................................... B-13 13
Redemptions................................................... B-13 13
Taxation...................................................... B-14 15
Dividends and Distributions................................... B-15 15
Performance Information....................................... B-16 16
Financial Statements.......................................... B-16 3
General Information........................................... B-16 18
Appendix...................................................... B-17
</TABLE>
B-1
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
Brandes Institutional Global Equity Fund (the "Fund") is a diversified
series of Brandes Investment Trust (the "Trust"), a registered open-end
management investment company or mutual fund. The investment objective is
long-term capital appreciation. The 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 Fund. If such restrictions should be reinstituted, the Board of Trustees of
the Trust would consider alternative arrangements, including reevaluation of the
Fund's investment objective and policies. However, the 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 property 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 Fund 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 Fund's assets which are denominated in that currency. Such changes
will also affect the Fund's income. The values of the Fund's 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 Fund 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 the Fund in addition to the policies and
restrictions discussed in the prospectus. The policies and restrictions listed
below cannot be changed without approval by the holders of a majority of the
outstanding voting securities of the Fund. As a matter of fundamental policy,
the
B-2
<PAGE>
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, the Fund may not:
1. Issue senior securities, borrow money or pledge its assets, except
that the 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 the 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 the 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 the 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 the 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 the 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 the Fund may engage in foreign exchange forward
contracts, although it has no current intention to use such contracts except to
settle transactions in securities requiring foreign currency;
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;
The 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
B-3
<PAGE>
positions taken by federal and state regulatory authorities:
The Fund may not 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 law, except that the Fund reserves the
right to invest all of its assets in another investment company;
OTHER SECURITIES AND INVESTMENT TECHNIQUES
Repurchase Agreements
Repurchase agreements are transactions in which the 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, the 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, the Fund intends to comply with provisions under such Code that would
allow it immediately to resell the collateral.
When-Issued Securities
The 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
the Fund's net asset value or income will be adversely affected by the purchase
of securities on a when-issued basis. The 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.
B-4
<PAGE>
Rule 144A Securities
As noted in the prospectus, the 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 the Fund might not be
able to dispose of such securities promptly or at reasonable prices and might
thereby experience difficulty satisfying redemptions. The 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 the
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, the 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. The 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. The 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.
B-5
<PAGE>
Writing Options. When the 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. The 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. The 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. The Fund may purchase and write options in
combination with each other to adjust the risk and return characteristics of the
overall position. For example, the 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 Fund's current or anticipated investments
exactly. The 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 Fund's 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. The 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 the 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
B-6
<PAGE>
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 the 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,
the 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
the 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 organizations 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 the 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 Fund 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
The 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 the Fund may be exposed to risk of unlimited 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.
B-7
<PAGE>
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.
The 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, the Fund will not purchase or sell
futures if, immediately thereafter, more than 25% of its net assets would be
hedged. In addition, the Fund will not 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 Fund's 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:
<TABLE>
<CAPTION>
<S> <C>
Barry P. O'Neil,* (age 49) President and Trustee Managing Partner of the Advisor since May
12750 High Bluff Drive 1996, and Managing Director of its
San Diego, CA 92130 predecessor since 1991; formerly Vice
President, Investment Brokerage of Dean
Witter & Co.
DeWitt F. Bowman, C.F.A, (age 66) Trustee Principal, Pension Investment Consulting, since
79 Eucalyptus Knoll 1994; Director, RCM Capital Funds, Inc. and
Mill Valley, CA 94941 RCM Equity Funds, Inc.(mutual funds) since
1996. Director, RREEF America REIT, Inc.
since 1995; Formerly Chief Investment
Officer of the California Public Employees
Retirement System. Director, RCM Equity
Funds, Inc. Director, Wilshire Target Funds,
Inc. since 1996.
Charles H. Brandes,* (age 53) Trustee Managing Partner of the Advisor since May
12750 High Bluff Drive 1996 and Managing Director of its
San Diego, CA 92130 predecessor prior thereto.
Gordon Clifford Broadhead, (age 72) Trustee Marine biologist and consultant in fisheries.
P.O. Box 1427
Rancho Santa Fe, CA 92067
</TABLE>
B-8
<PAGE>
<TABLE>
<S> <C>
Joseph E. Coberly, Jr., (age 79) Trustee Managing Partner, Red Tail Golf Association
P.O. Box 944 (real estate developer).
Rancho Santa Fe, CA 92067
W. Daniel Larsen, (age 69) Trustee Retired. Honorary Danish Consul for San
1405 Savoy Circle Diego.
San Diego, CA 92107
Betsy M. Blodgett, (age 39) Vice President Manager, Product Development of the Advisor
85 Altura since May 1996 and Vice President of its
Greenbrae, CA 94904 predecessor since 1994. Formerly Principal,
Cameron Capital Management (investment
adviser) from 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, (age 35) Secretary Managing Partner of the Advisor since May
12750 High Bluff Drive 1996 and Managing Director of its
San Diego, CA 92130 predecessor prior thereto.
Gary Iwamura, (age 41) Treasurer Financial Resources Officer of the Advisor
12750 High Bluff Drive since 1994. Formerly Chief Administrative
San Diego, CA 92130 Officer for National Mutual Funds Management
from 1992 to 1996 and Chief Operating
Officer of Axe-Houghton Management from
1991 to 1992.
- --------------------------------------------------------
</TABLE>
* Denotes "interested person" of the Trust as defined in the 1940 Act.
The table below illustrates the compensation paid to each Trustee for
the Trust's most recently completed fiscal year:
<TABLE>
<CAPTION>
Aggregate Pension or Estimated Total
Compensation Retirement Benefits Annual Compensation
from the Accrued as Part of Benefits Upon from the Trust
Name of Person Trust Fund Expenses Retirement Paid to Trustees
- -------------- ----- ------------- ---------- ----------------
<S> <C> <C> <C> <C>
DeWitt F. Bowman $3,200 $0 $0 $3,200
Gordon Clifford
Broadhead $3,200 $0 $0 $3,200
Joseph E. Coberly, Jr. $3,200 $0 $0 $3,200
W. Daniel Larsen $3,200 $0 $0 $3,200
</TABLE>
The Trust pays a fee of $800 per meeting to Trustees who are not "interested
persons" of the Trust. Such Trustees also receive a fee of $800 for any
committee meetings held on dates other than scheduled Board meeting dates, and
are reimbursed for any expenses incurred in attending meetings. For the period
ended October 31, 1997, the Trust paid $12,800 to the Trustees.
B-9
<PAGE>
Advisory Agreement
Subject to the supervision of the Board of Trustees, investment
management and services are provided to the 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 the 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, the 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 the Fund for any error of judgment by the Advisor or any loss
sustained by the Fund, 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 the 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 the 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).
The Fund does not invest in a security for the purpose of exercising
control or management. When the 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 the Fund in voting proxies. Because voting proxies of
foreign securities may entail additional costs to the Fund, the Advisor
considers the costs and benefits to the Fund in deciding whether or not to vote
a particular proxy.
B-10
<PAGE>
Administration Agreement
Investment Company Administration Corporation serves as Administrator
for the Fund, 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 Fund'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 Fund's insurance relationships; (iii) preparing for the Fund (or
assisting counsel and/or auditors in the preparation of) all required tax
returns, proxy statements and reports to the Fund's 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 Fund's registration and/or the
registration of the shares of the Fund 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 Fund 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 the Fund's average net assets, subject to a
$40,000 annual minimum.
PORTFOLIO TRANSACTIONS AND BROKERAGE
In all purchases and sales of securities for the Fund, 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 the 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 the 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 Fund 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
B-11
<PAGE>
to ensure that the other services provided meet the tests outlined above and
produce a benefit to the Fund.
The placement of portfolio transactions with broker-dealers who sell
shares of the Fund is subject to rules adopted by the National Association of
Securities Dealers, Inc. ("NASD"). Provided the Trust's officers are satisfied
that the Fund is receiving the most favorable price and execution available, the
Advisor may also consider the sale of the Fund's shares as a factor in the
selection of broker-dealers to execute its portfolio transactions.
Investment decisions for the Fund 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 the Fund and for one or more of such
client accounts. To the extent any of these client accounts and the 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 the 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 the Fund is
concerned. In other cases, however, it is believed that the ability of the Fund
to participate in volume transactions may produce better executions for the
Fund.
The Fund does 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 the Fund. However, as
stated above, broker-dealers who execute transactions for the Fund may from time
to time effect purchases of shares of the Fund for their customers.
NET ASSET VALUE
The net asset value of the Fund's shares 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, Martin Luther
King, Jr. 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 the 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
B-12
<PAGE>
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 Fund 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
The 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 the Fund does not anticipate 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. The 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 Fund intends to elect to qualify for treatment as a regulated
investment company ("RIC") under Subchapter M of the Internal Revenue Code (the
"Code"). In each taxable year that the 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, the 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
B-13
<PAGE>
(other than U.S. Government securities or the securities of other RICs) of any
one issuer.
The 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 Fund 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 the Fund. If more than 50% in value of the 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.
The 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 Fund
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 the 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 the 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 Fund may make certain elections available under the Code which
are applicable to straddles. If the Fund makes such elections, recognition of
gains or losses from certain straddle positions may be accelerated.
The tests which the 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
B-14
<PAGE>
of income taxable as ordinary income distributed to shareholders.
DIVIDENDS AND DISTRIBUTIONS
Dividends from the 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 the 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
the 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.
The 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. The 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 the 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 the 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
the Fund will fluctuate, and an investor's redemption proceeds may be more or
less than the original investment amount. In advertising and promotional
materials the Fund may compare its performance with data published by Lipper
Analytical Services, Inc. ("Lipper"), Morningstar, Inc. ("Morningstar") or CDA
Investment Technologies, Inc.("CDA"). The 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
B-15
<PAGE>
Journal, Money Magazine, Forbes, Business Week, Financial World and Barron's
FINANCIAL STATEMENTS
The unaudited semi-annual report to shareholders of the Fund for the period
ended April 30, 1997 is a separate document supplied with this Statement of
Additional Information and the financial statements and accompanying notes
appearing therein are incorporated by reference in this Statement of Additional
Information.
GENERAL INFORMATION
The Trust's custodian, Investors Bank & Trust Company, 200 Clarendon
Street, 16th Floor, Boston, Massachusetts 02116, is responsible for holding the
Fund's assets and also acts as the Fund's accounting services agent. Investors
Bank & Trust Company acts as the Fund's transfer agent. The Trust's independent
accountants, Ernst & Young, LLP, 515 South Flower Street, Los Angeles,
California 90071, examine the Fund's financial statements annually and prepare
the Fund's tax returns. Paul, Hastings, Janofsky & Walker LLP, 555 South Flower
Street, Los Angeles, California 90071, acts as legal counsel for the Advisor.
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 Fund 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.
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.
B-16
<PAGE>
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.
B-17
<PAGE>
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits.
(a) Financial Statements:
(b) Exhibits:
The following exhibits are included with this Post- Effective
Amendment, except as noted:
(1) (i) Agreement and Declaration of Trust(2)
(ii) Amendment to Agreement and Declaration of
Trust(2)
(iii) Amendment to Agreement and Declaration of
Trust(3)
(2) By-Laws(2)
(3) Not applicable
(4) Specimen stock certificate(3)
(5) (i) Investment Advisory Agreement relating to
the Brandes Institutional International
Equity Fund(4)
(ii) Form of Investment Advisory Agreement
relating to the Brandes Institutional Global
Equity Fund
(6) Distribution Agreement with First Fund Distributors,
Inc.(6)
(7) Not applicable
(8) Custodian Agreement(6)
(9) (i) Administration Agreement(2)
(ii) Transfer Agency Agreement(3)
(10) Opinion and consent of counsel(3)
(11) Consent of independent accountants(5)
(12) Not applicable
(13) Investment letter2
(14) Individual Retirement Account forms(1)
(15) Not applicable
(16) Not applicable
(17) Not applicable
(18) Not applicable
(1) 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.
C-1
<PAGE>
(2) Previously filed with Post-Effective Amendment No. 2 to the
Registration Statement on Form N-1A (File No. 33-81396), filed on January 9,
1996, and incorporated herein by reference.
(3) Previously filed with Post-Effective Amendment No. 3 to the
Registration Statement on Form N-1A (File No. 33-81396), filed on February 7,
1996, and incorporated herein by reference.
(4) Previously filed with Post-Effective Amendment No. 4 to the
Registration Statement on Form N-1A (File No. 33-81396), filed on October 2,
1996, and incorporated herein by reference.
(5) Previously filed with Post-Effective Amendment No. 7 to the
Registration Statement on Form N-1A (File No. 33-81396), filed on March 2, 1998,
relating to the Brandes Institutional International Equity Fund series of the
Trust, and incorporated herein by reference.
(6) 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 March 3, 1998 the Brandes Institutional International Equity Fund
had 10 shareholders of record.
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:
C-2
<PAGE>
(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 the 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-3
<PAGE>
(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.
C-4
<PAGE>
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, L.P. 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, L.P. 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
C-5
<PAGE>
by Brandes Investment Partners, L.P. (File No. 801-24896), which is incorporated
herein by reference.
Item 29. Principal Underwriters.
(a) First Fund Distributors, Inc. also acts as principal underwriter
for the following investment companies:
Advisors Series Trust
Guinness Flight Investment Funds, Inc.
Fremont Mutual Funds, Inc.
Fleming Capital Mutual Fund Group, Inc.
The Pursima Fund
Professionally Managed Portfolios
Jurika & Voyles Fund Group
Kayne Anderson Mutual Funds
Masters' Select Investment Trust
O'Shaughnessy Funds, Inc.
PIC Investment Trust
Rainier Investment Management Mutual Funds
RNC Mutual Fund Group, Inc.
(b) The following information is furnished with respect to the officers
and directors of First Fund Distributors, Inc.:
<TABLE>
<CAPTION>
Position and Offices Position and
Name and Principal with Principal Offices with
Business Address Underwriter Registrant
- ------------------ -------------------- ------------
<S> <C> <C>
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
</TABLE>
C-6
<PAGE>
(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
200 Clarendon Street, 16th Floor, Boston, MA 02116.
Item 31. Management Services.
Not applicable.
Item 32. Undertakings.
(a) 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.
(b) 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.
(c) File a post-effective amendment for the Brandes Institutional
Global Equity Fund series, using financial statements which
may not be certified, within four to six months of the
effective date of this Registration Statement as such
requirement is interpreted by the staff of the Commission.
C-7
<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 Investment Trust to be signed
on its behalf by the undersigned, thereunto duly authorized in the City of San
Diego and State of California on the 19 day of March, 1998.
BRANDES INVESTMENT TRUST
By: Barry P. O'Neil*
----------------------
Barry P. O'Neil
President
This Amendment to the Registration Statement on Form N-1A of Brandes Investment
Trust has been signed below by the following persons in the capacities indicated
on March 19, 1998.
Barry P. O'Neil* President and
- -------------------------------- Trustee
Barry P. O'Neil
Trustee
- --------------------------------
Charles H. Brandes
DeWitt F. Bowman* Trustee
- --------------------------------
DeWitt F. Bowman
Gordon Clifford Broadhead* Trustee
- --------------------------------
Gordon Clifford Broadhead
Joseph E. Coberly, Jr.* Trustee
- --------------------------------
Joseph E. Coberly, Jr.
W. Daniel Larsen* Trustee
- --------------------------------
W. Daniel Larsen
Gary Iwamura * Treasurer (Principal Financial
- -------------------------------- and Accounting Officer)
Gary Iwamura
* Robert H. Wadsworth
-----------------------------
By: Robert H. Wadsworth
Attorney-in-fact
BRANDES INVESTMENT TRUST
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made this day of , 1998, by and between
BRANDES INVESTMENT TRUST (the "Trust"), a trust organized under the laws of the
State of Delaware, and BRANDES INVESTMENT PARTNERS, L.P.(the "Advisor"), a
California corporation.
WITNESSETH:
Whereas, there is in existence an Investment Advisory Agreements by and
between the Trust and Brandes Investment Partners, L.P., which Agreement is
designed to cover the series of the Trust named Brandes Institutional
International Equity Fund (the "International Fund"); and
Whereas, a new series of the Trust having separate assets and
liabilities has been created entitled the "Brandes Institutional Global Equity
Fund" (hereafter the "Global Equity Fund"); and
Whereas, it is therefore desirable to have a new investment advisory
agreement (i.e., this Agreement) relating to the Global Equity Fund so that said
existing Investment Advisory Agreement will apply only to the International
Fund; this Agreement will apply only to the Global Equity Fund;
Now, therefore, 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 Global Equity 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 Global Equity Fund and to supervise and arrange the purchase
and sale of securities held in the portfolio of the Global Equity Fund.
2. Duties and Obligations of the Advisor with respect to Management of
the Global Equity Fund
<PAGE>
(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 Global Equity Fund and when; and
(ii) Arrange for the purchase and the sale of
securities held in the portfolio of the Global Equity Fund by
placing purchase and sale orders for the Global Equity 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
Global Equity Fund, as reflected in the Trust's registration statement
under the Act, or as amended by the shareholders of the Global Equity
Fund.
(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 Global Equity Fund
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
2
<PAGE>
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
Global Equity Fund by placing purchase and sale orders for the Global Equity
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
3
<PAGE>
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 Global Equity Fund 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 Global Equity Fund'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 Global Equity Fund or its shares; (ix) expenses of preparing, printing and
mailing reports, notices, proxy material and prospectuses to shareholders of the
Global Equity Fund; (x) all other expenses incidental to holding meetings of the
Global Equity Fund's shareholders; (xi) dues or
4
<PAGE>
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 Global Equity Fund's Administrator and (xiv) the
organization costs of the Global Equity Fund.
5. Compensation of the Advisor
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 Global Equity Fund as of the close of business each business day at the
annual rate of 1% of such net assets of the Global Equity Fund.
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 , 2000 or the first meeting of shareholders of the Global Equity Fund
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 Global Equity Fund.
(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 Global Equity Fund. This Agreement
shall
5
<PAGE>
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 INVESTMENT TRUST
By
--------------------------------------
ATTEST:
- -----------------------------------
BRANDES INVESTMENT PARTNERS, L.P.
By
--------------------------------------
ATTEST:
- -----------------------------------
6
