As filed with the Securities and Exchange Commission on March 24, 2000
File No. 33-81396
File No. 811-08614
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
Registration Statement Under the Securities Act of 1933
Post-Effective Amendment No. 12 [X]
and
Registration Statement Under the Investment Company Act of 1940
Amendment No. 13 [X]
BRANDES INVESTMENT TRUST
(formerly Brandes International Fund)
(Exact Name of Registrant as Specified in Charter)
12750 High Bluff Drive
San Diego, California 92130
(Address of Principal Executive Office)
(619) 755-0239
Registrant's Telephone Number, Including Area Code)
MICHAEL GLAZER, ESQ.
c/o Paul, Hastings, Janofsky & Walker, LLP
555 South Flower Street, 23rd Floor
Los Angeles, California 90071
(Name and Address of Agent for Service)
It is proposed that this filing will become effective: (check appropriate box)
[X] immediately upon filing pursuant to Rule 485(b)
[ ] on _______________, pursuant to Rule 485(b)
[ ] 60 days after filing pursuant to Rule 485(a)(1)
[ ] 75 days after filing pursuant to Rule 485(a)(2)
[ ] on ________________, pursuant to Rule 485(a)
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PART A
PROSPECTUS
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BRANDES
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BRANDES INSTITUTIONAL GLOBAL EQUITY FUND
Prospectus
March 24, 2000
As with all mutual funds, the Securities and Exchange Commission doesn't
guarantee that the information in this prospectus is accurate or complete, nor
has it judged this fund for investment merit. It is a criminal offense to state
otherwise.
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BRANDES INSTITUTIONAL GLOBAL EQUITY FUND
Table of Contents
This important section summarizes the 1 Risk/Return Summary and Fund
Fund's investments, risks, past Expenses
performance, and fees.
This section provides details about the 4 Investment Objectives, Policies
Fund's investment strategies and risks. and Risks
Review this section for information about Fund Management
the organizations and people who oversee
the Fund. 9 The Investment Advisor
10 Other Service Providers
This section explains how shares are Shareholder Information
valued, how to purchase and sell shares,
and payments of dividends and 10 Pricing of Fund Shares
distributions.
11 Purchasing and Adding to Your
Shares
11 Minimum Initial Investment
14 Selling Your Shares
16 Dividends, Distributions and
Taxes
This section provides information about 16 Prior Performance of the Advisor
the past performance of the Fund and
other global equity accounts
managed by the Advisor
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RISK/RETURN SUMMARY AND FUND EXPENSES
Risk/Return Summary
INVESTMENT OBJECTIVE:
Long term capital appreciation
PRINCIPAL INVESTMENT STRATEGIES:
The Fund invests principally in common and preferred stocks of U.S. and foreign
companies and securities that are convertible into such common stocks. These
companies generally have market capitalizations (market value of publicly traded
securities) greater than $1 billion. Under normal conditions, the Fund invests
at least 65% of its total assets measured at the time of purchase in equity
securities of issuers located in at least three countries, one of which may be
the United States. Up to 20% 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. Up to 10% of the Fund's total assets, measured at
the time of purchase, may be invested in securities of small capitalization
companies (those whose market value of publicly traded securities totals $1
billion or less measured at the time of purchase). The Investment Advisor uses
the principles of value investing to analyze and select equity securities for
the Fund's investment portfolio.
PRINCIPAL INVESTMENT RISKS:
Because the values of the Fund's investments will fluctuate with market
conditions, so will the value of your investment in the Fund. You could lose
money on your investment in the Fund, or the Fund could underperform other
investments.
The values of the Fund's investments fluctuate in response to the activities of
individual companies and general stock market and economic conditions. In
addition, the performance of foreign securities depends on the political and
economic environments and other overall economic conditions in the countries
where the Fund invests. Emerging country markets involve greater risk and
volatility than more developed markets.
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Some emerging markets countries may have fixed or managed currencies that are
not free-floating against the U.S. dollar. Certain of these currencies have
experienced, and may experience in the future, substantial fluctuations or a
steady devaluation relative to the U.S. dollar. The values of the Fund's
convertible securities are also affected by interest rates; if rates rise, the
values of convertible securities may fall.
WHO MAY WANT TO INVEST?
Consider investing in the Fund if you:
* want potential capital appreciation and are willing to accept the
higher risks associated with investing in foreign stocks
* want professional portfolio management
* are investing for long-term goals
The Fund is not appropriate for anyone seeking:
* safety of principal
* a short-term investment
* regular income
MINIMUM INITIAL INVESTMENT:
$1,000,000
HOW HAS THE FUND PERFORMED?
The Fund is new and does not have a full calendar year of investment returns as
of the date of this Prospectus.
As an investor in the Fund, you will pay the following fees and
expenses based on the Fund's last fiscal year. Annual Fund operating expenses
are paid out of Fund assets, and are reflected in the share price. If you
purchase shares through a bank, broker or other investment representative, they
may charge you an account-level fee for additional services provided to you in
connection with your investment in the Fund.
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FEES AND EXPENSES
SHAREHOLDER FEES
(FEES PAID DIRECTLY FROM YOUR INVESTMENT)
Maximum Sales Charge (Load) Imposed on Purchases None
Maximum Sales Charge (Load) Imposed on Reinvested Dividends None
Maximum Contingent Deferred Sales Charge None
Redemption Fee None
ANNUAL FUND OPERATING EXPENSES
(FEES PAID FROM FUND ASSETS)
Management fees 1.00%
Other expenses 0.76%
Total Annual Fund operating expenses 1.76%
Fee Waiver and/or Expense Reimbursement(1) 0.56%
Net Expenses(1) 1.20%
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(1) The Advisor has agreed with Brandes Investment Trust (the "Trust") to limit
the Fund's annual operating expenses to 1.20% of the Fund's average daily
net assets through the Fund's fiscal year ended October 31, 2000. Because
this Fund is new, "the other expenses" and "total annual fund operating
expenses" percentages are estimates.
Use this table to compare fees and expenses of the Fund with those of other
funds. It illustrates the amount of fees and expenses you would pay assuming the
following:
* $10,000 investment in the Fund
* 5% annual return
* redemption at the end of each period
* no changes in the Fund's operating expenses
Because this example is hypothetical and for comparison only, your
actual costs will be different.
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Expense Example
1 Year 3 Years
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$122 $500
INVESTMENT OBJECTIVE, POLICIES AND RISKS
The Fund's investment objective is long-term capital appreciation. It
seeks to achieve this objective by investing principally in a diversified
portfolio of equity securities of foreign companies.
GLOBAL INVESTING
During the past decade foreign capital markets have grown
significantly. Today, over half of the world's equity value is located outside
of the United States. Brandes Investment Partners, L.P., the investment advisor
to the Fund (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 (market value of publicly traded
securities) greater than $1 billion at the time of purchase. The Fund does not
invest more than 20% of its total assets, measured at the time of purchase, in
securities of companies located in emerging securities markets. The Fund does
not invest more than 10% of its total assets, measured at the time of purchase,
in small capitalization companies (those with market capitalizations of $1
billion or less measured at the time of purchase).
Equity securities include common stocks, preferred stocks and
securities convertible into common stocks. The Fund invests in these securities
directly, or indirectly through other investment companies or trusts that invest
the majority of their assets in foreign companies.
Under normal circumstances, the Fund invests at least 65% of its total
assets at the time of purchase in equity securities of companies located in at
least three countries, one of which may be the United States. The Fund may
invest in countries in Western Europe, North and South America, Australia,
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Africa and Asia. The Fund may invest in any one particular country or industry
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. However, the Fund may not invest more than 25% of its
total assets, calculated at the time of purchase, in any one industry (other
than U.S. Government securities). In addition, the Fund may not invest more than
20% of the value of its total assets, measured at the time of purchase, in
securities of companies located in countries with emerging securities markets.
The Advisor selects stocks for the Fund based on their individual
merits and not necessarily on their geographic locations. In selecting foreign
securities, the Advisor does not attempt to match the security allocations of
foreign stock market indices. Therefore, the Fund's country weightings may
differ significantly from country weightings found in published foreign stock
indices. For example, the Advisor may decide not to invest the Fund's assets in
a country whose stock market, at the time, comprises a large portion of a
published foreign stock market index. At the same time, the Advisor may invest
the Fund's assets in countries whose representation in the index is small or
non-existent.
VALUE INVESTING
The Advisor uses the Graham and Dodd Value Investing approach as
introduced in the classic book SECURITY ANALYSIS. Applying this philosophy, the
Advisor views stocks as parts of businesses which are for sale. It seeks to
purchase a diversified group of these businesses when they are undervalued -- at
prices its research indicates are well below their true long-term, or intrinsic,
values. By purchasing stocks whose current prices it believes are considerably
below their intrinsic values, 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.
MAIN RISKS
The value of your investment in the Fund will go up and down, which
means you could lose money. You should consider an investment in the Fund as a
long-term investment.
STOCKS
The values of stocks fluctuate in response to the activities of
individual companies and general stock market and economic conditions, and stock
prices may go down over short or even extended periods. Stocks are more volatile
- -- likely to go up or down in price, sometimes suddenly--and are riskier than
some other forms of investment, such as short-term high-grade fixed income
securities.
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RISKS OF GLOBAL 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 it is more likely to find undervalued
companies.
Because most foreign securities are traded primarily in foreign
currencies, foreign investing involves the risk of fluctuation in the value of
such currencies against the U.S. dollar. However, 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, and is not 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
that risk.
Before investing in the Fund, you should also consider the other risks
of global investing, including political or economic instability in the country
of issue and the possible imposition of currency exchange controls or other
adverse laws or restrictions. In addition, securities prices in foreign markets
are generally subject to different economic, financial, political and social
factors than 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 then 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.
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.
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EMERGING MARKETS AND RELATED RISKS
The Fund may invest up to 20% of its assets, as measured at time of
purchase, 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 global 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, Hong Kong, Singapore, 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 reduce the value of your investment in 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, 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, investors may face 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 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
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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.
SMALL CAPITALIZATION COMPANIES
The Fund may invest up to 10% of its assets, as measured at time of
purchase, in small capitalization companies, i.e., companies with market
capitalizations of $1 billion or less, measured at time of purchase.
Small capitalization companies often have limited product lines,
markets or financial resources and may be dependent on one person or a few key
persons for management. The securities of these companies may be subject to more
volatile market movements than securities of larger, more established companies,
both because the securities typically are traded in lower volume and because the
issuers typically are more subject to changes in earnings and prospects.
SHORT-TERM INVESTMENTS
The Fund may invest from time to time in short-term cash equivalent
securities either as part of its overall investment strategy or for temporary
defensive purposes in response to adverse market, economic, political or other
conditions which in the Advisor's discretion require investments inconsistent
with the Fund's principal investment strategies. As a result of taking such
temporary defensive positions, the Fund may not achieve its investment
objective.
OTHER INVESTMENT TECHNIQUES AND RESTRICTIONS
The Fund will use certain other investment techniques, and has adopted
certain investment restrictions, which are described fully in the Statement of
Additional Information. Like the Fund's investment objective, certain of these
investment restrictions are fundamental and may be changed only by a majority
vote of the Fund's outstanding shares.
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FUND MANAGEMENT
The Board of Trustees decides 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 INVESTMENT ADVISOR
The Advisor has been in business, through various predecessor entities,
since 1974. As of December 31, 1999, the Advisor managed over $42 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,
Brandes Investment Partners, Inc., serves as a Trustee of the Trust. The
Advisor's offices are at 12750 High Bluff Drive, San Diego, California 92130.
Subject to the direction and control of the Trustees, the Advisor
develops and implements an investment program for the Fund, including
determining which securities are bought and sold. The Fund's investment
portfolio is team-managed by an investment committee of the Advisor, whose
members are senior portfolio management professionals of the firm. The Advisor
also provides certain officers for the Trust. For its services, the Fund pays
the Advisor an annual fee, payable monthly, 1.00% of its average daily net
assets. The Advisor has signed a contract with the Trust in which the Advisor
has agreed that during the Fund's fiscal year ended October 31, 2000, the
Advisor will waive management fees and reimburse operating expenses of the Fund
to the extent necessary to ensure that the expenses of the Fund do not exceed
during the fiscal year 1.20% of the average daily net assets of the Fund (the
"Expense Cap"). The Trust has agreed that the amount of any waiver or
reimbursement will be repaid to the Advisor at any time unless that repayment
would cause the aggregate operating expenses of the fund to exceed the Expense
Cap for that fiscal year.
OTHER SERVICE PROVIDERS
Investment Company Administration, L.L.C. (the "Administrator") is the
Fund's administrator. Its address is 2020 East Financial Way, Suite 100,
Glendora, California 91741. First Fund Distributors, Inc., an affiliate of the
Administrator (the "Distributor") is the Fund's distributor. Its address is 4455
East Camelback Road, Suite 261 E, Phoenix, Arizona 85018.
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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. Its address is 200 Clarendon Street, Boston, Massachusetts
02116.
The Statement of Additional Information has more information about the
Advisor and the Fund's other service providers.
SHAREHOLDER INFORMATION
PRICING OF FUND SHARES
The price of the Fund's shares is based on its per share net asset
value ("NAV"). The NAV is calculated by adding the total value of the Fund's
investments and other assets, subtracting its liabilities, and dividing the
result by the number of outstanding shares of the Fund:
NAV = Total Assets-Liabilities
Number of Shares
Outstanding
The Fund values its investments at 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 or under the direction of the Board of
Trustees.
The Fund calculates its NAV 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. The Fund invests in securities that are
primarily listed on foreign exchanges which may be open for trading on weekends
and other days when the Fund does not price its shares. As a result, the Fund's
NAV may change on days when you will not be able to purchase or redeem Fund
shares.
PURCHASING AND ADDING TO YOUR SHARES
WHO MAY INVEST IN THE FUND
The Fund sells shares only to certain institutional investors. Except
as indicated below, individual investors may not purchase shares, either
directly or through brokerage accounts.
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Institutions which may invest in the Fund include 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. Others who may invest in
the Fund include Trustees of the Trust, officers and employees of the Advisor,
the Administrator and the Distributor, and their immediate family members, and
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 maintains an
omnibus account with the Fund's Transfer Agent). If you purchase or redeem
shares through a trust department, broker, dealer, agent, financial planner,
financial services firm or investment advisor, you may pay an additional service
or transaction fee to that institution.
PRICE OF SHARES
The Fund sells shares without a sales charge at the NAV which is next
computed (1) after your selected dealer or other authorized intermediary
receives the order which is promptly transmitted to the Fund, or (2) after the
Transfer Agent receives your order 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). You may pay a fee if you buy Fund shares
through a broker or agent.
MINIMUM INITIAL INVESTMENT
The minimum initial investment in the Fund is $1 million; there is no
minimum subsequent investment. The Distributor may waive the minimum investment
for institutions making continuing investments in the Fund and from time to time
for other investors, including retirement plans and employees of the Advisor.
PURCHASES THROUGH A SECURITIES DEALER
You may purchase shares of the Fund through a securities dealer which
has an agreement with the Distributor (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 price your order at the
Fund's net asset value next computed after it is 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. A selected dealer may
impose postage and handling charges on your order.
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PURCHASES THROUGH THE TRANSFER AGENT
To purchase shares of the Fund directly from the Transfer Agent,
complete the Application Form (available from the Transfer Agent or a selected
dealer) and mail it to the Transfer Agent at the address shown on the
Application Form. You may pay by a check with the Application Form, or by a wire
transfer of funds as described below. You can make additional investments by
wire or by mailing a check, together with the investment form from a recent
account statement.
PAYMENT BY WIRE
To pay for an initial investment in the Fund by wire, 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 for an
account number. The Transfer Agent will want to know your name, address, tax
identification number, amount being wired and wiring bank. You can 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
International Equity Fund, for further credit to [your name and account number].
Make sure that the wiring bank includes the name of the Fund and the account
number with the wire. If the Transfer Agent receives your funds before the
Fund's net asset value is calculated, your 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, you should
write your new account number on the Application Form and mail the Form promptly
to the Transfer Agent.
To make an additional purchase by wire, call the Transfer Agent at
(617) 946- 1945 before the wire is sent. Otherwise, your purchase may be delayed
indefinitely. Wire funds to the Transfer Agent, care of Investors Bank & Trust
Company, as described above, including the name of the Fund and your account
number with the wire.
RETIREMENT PLAN PARTICIPANTS
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 plan and any arrangements that the plan sponsor
may have made for special processing services.
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AUTOMATIC REINVESTMENT
The Fund reinvests dividends and capital gain distributions on your
shares without any sales charge in additional shares unless you indicate
otherwise on the Application Form. You may elect to have dividends or capital
gain distributions paid in cash on your Application Form or by written request
to the Transfer Agent.
OTHER
The Transfer Agent credits shares to your account, and does not issue
stock certificates unless you request them. 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.
You may also purchase shares of the Fund by paying "in-kind" in the
form of securities, provided that such securities are of the type which the Fund
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 the purchase has been approved by the
Advisor.
SELLING YOUR SHARES
HOW TO REDEEM SHARES
Your shares may be redeemed only by instructions from the registered
owner of your shareholder account. If you are a participant in a retirement or
other plan, direct your redemption requests to the plan sponsor or
administrator, which may have special procedures for processing such requests
and is responsible for forwarding requests to the Transfer Agent.
You may redeem shares by contacting your selected dealer or authorized
intermediary. The selected dealer can arrange for the repurchase of the shares
through the Fund's distributor at the net asset value next determined after the
selected dealer receives your instructions. The dealer may charge you for this
service. If your shares are held in a dealer's "street name," you must redeem
them through the dealer.
You 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
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Floor, Boston, MA 02116. The instructions must specify the name of the Fund, the
number of shares or dollar amount to be redeemed and your name and account
number. A corporation, partnership, trust or fiduciary redeeming shares must
submit written evidence of authority acceptable to the Transfer Agent. The price
you will receive for the Fund shares redeemed is the next determined net asset
value for the shares after the Transfer Agent has received a completed
redemption request.
TELEPHONE REDEMPTIONS. You may establish telephone redemption
privileges by checking the appropriate box and supplying the necessary
information on the Application Form. You can then redeem shares 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.
If the Transfer Agent receives your redemption request before 4:00 p.m. Eastern
time on a day when the New York Stock Exchange is open for trading, it will
process your request that day; otherwise, it will process your request on the
next business day. Institutional investors may also make special arrangements
with the Transfer Agent for designating personnel 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. You 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 telephone redemption.
REDEMPTION PAYMENTS
Redemption payments 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.
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Redemption proceeds are generally paid by check. However, at your
request, the Transfer Agent will wire redemption proceeds of $300 or more to
your 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 your investment in the Fund falls below $100,000
because of redemptions, the Trust may notify you, and if your investment value
remains below $100,000 for a continuous 60-day period, the Trust may redeem your
shares. However, the Fund will not redeem shares based solely upon changes in
the market that reduce the net asset value of your shares. The 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 Trust reserves the right
to modify or terminate these involuntary redemption features at any time upon
60-days' notice.
DIVIDENDS, DISTRIBUTIONS AND TAX STATUS
The Fund expects to pay income dividends annually, and to make
distributions of net capital gains, if any, at least annually. The Board of
Trustees may decide to pay dividends and distributions more frequently.
The Fund automatically reinvests dividends and capital gain
distributions in additional shares at the net asset value per share on the
reinvestment date unless you have previously requested cash payment in writing
to the Transfer Agent.
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. If you purchase shares shortly before the record
date of a dividend or distribution, the shares will be subject to income taxes
as discussed below even though the dividend or distribution represents, in
substance, a partial return of your capital.
Distributions made by the Fund will be taxable to shareholders whether
received in shares (through dividend reinvestment) or in cash. Distributions
derived from net investment income, including net short-term capital gains, are
taxable to shareholders as ordinary income. Distributions designated as capital
gains dividends are taxable as long- term capital gains regardless of the length
of time shares of the Fund have been held. Although distributions are generally
taxable when received, certain distributions made in January are taxable as if
received in the prior December. The Fund will inform you annually of the amount
and nature of its distributions.
-15-
<PAGE>
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%. However,
under certain circumstances you may be able to claim credits against your U.S.
taxes for such foreign taxes. The Trust will also notify you each year of the
amounts available as credits.
The Statement of Additional Information contains information about
taxes. Consult your own advisers about federal, state and local taxation of
distributions from the Fund.
PRIOR PERFORMANCE OF THE ADVISOR
The table below contains performance data provided by the Advisor
relating to the historical performance of its clients and the Fund. The
Advisor's composite results include all actual, fee-paying and non-fee-paying,
fully discretionary global equity accounts that had the same investment
objective as the Fund and were managed by the same team that manages the Fund's
portfolio, using substantially similar, though not identical, investment
strategies, policies and techniques as those used in managing the Fund. This
composite information illustrates 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 included in the Advisor's composite are not subject to the same
types of expenses as the Fund nor to the diversification requirements, specific
tax restrictions and investment limitations imposed on the Fund by the
Investment Company Act of 1940, as amended, (the "1940 Act"), or Subchapter M of
the Internal Revenue Code. 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. You should not consider this performance data as an indication of future
performance of the Fund or of the Advisor.
-16-
<PAGE>
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 depends 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, 1999
Fifteen Years Five Years Three Years One Year
------------- ---------- ----------- --------
Advisor's Composite* 19.94%** 20.94% 20.51% 20.79%
MSCI World Index*** 16.45% 19.76% 21.61% 24.96%
- ----------
* The net quarterly and annual returns presented above for the Brandes Global
Equity composite were calculated on a time-weighted and asset-weighted,
total return basis, including reinvestment 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 Brandes Global
Equity composite results include all actual, fee-paying and non-fee-paying,
fully discretionary Global Equity accounts which have substantially the same
investment objectives, policies, techniques and restrictions. In the period
beginning 1/1/80 through 12/31/97 the Brandes Global Equity composite
results include accounts under management after one year. Beginning 1/1/98,
the Brandes Global Equity composite results include accounts under
management after one month. The weighted annualized management fee during
the period 1/1/80 through 12/31/98 was 1.07% per year. Brandes' investment
advisory fees are detailed in Part 1 of its Form ADV. Securities
transactions are accounted for on the trade date. Cash and cash equivalents
are included in performance returns. Net annual total returns for the
Brandes Global Equity composite for the calendar year periods 1985 through
1991 have been attested by independent accounting firms. Starting with
calendar year 1992 through calendar year 1998, the Brandes Global Equity
composite has been examined by a Big Five accounting firm in accordance with
AIMR Level 11 verification standards. Copies of the reports of independent
accountants and a complete list and description of Brandes' composites are
available on request. Brandes Investment Partners, L.P. is an independent
investment management firm registered with the Securities and Exchange
Commission, and is not affiliated with any parent organization. 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 1998 are 6.08%, 5.39%, 4.84%, 10.12% 6.41%, 5.63%,
7.56%, 3.98%, 4.56%, 2.52%, 3.04%, 2.23%, 3.32%, 3.11%, respectively.
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.
** Inception date for the Advisor's composite and MSCI World Index is 1/1/80.
*** The MSCI World Index is an unmanaged index consisting of securities listed
on exchanges in European, Australasian and Far Eastern markets and includes
dividends and distributions, but does not reflect fees, brokerage commission
or other expenses of investing.
-17-
<PAGE>
FOR MORE INFORMATION ABOUT THE BRANDES INSTITUTIONAL GLOBAL EQUITY FUND, THE
FOLLOWING DOCUMENTS ARE AVAILABLE FREE UPON REQUEST:
ANNUAL/SEMIANNUAL REPORTS:
The Fund's annual and semi-annual reports to shareholders contain detailed
information on the Fund's investments. The annual report includes a discussion
of the market conditions and investment strategies that significantly affected
the Fund's performance during its last fiscal year.
STATEMENT OF ADDITIONAL INFORMATION (SAI):
The SAI provides more detailed information about the Fund, including operations
and investment policies. It is incorporated by reference and is legally
considered a part of this prospectus.
You can get free copies of the Reports and the SAI, or request other information
and discuss your questions about the Fund, by contacting us at:
BRANDES INSTITUTIONAL GLOBAL EQUITY FUND
12750 HIGH BLUFF DRIVE
SAN DIEGO, CA 92130
800-331-2979
You can also review the Fund's reports and SAI at the Public Reference Room of
the Securities and Exchange Commission. You can obtain information on the
operation of the Public Reference Room by calling 1-202-942-8090. In addition,
you can get text-only copies:
* For a fee, by writing the Public Reference Section of the Commission,
Washington, D.C. 20549-6009 or e-mailing the Commission at:
[email protected].
* Free from the Commission's Website at http://www.sec.gov.
Investment Company Act file No. 811- 8614.
<PAGE>
--------------------------------------------
PART B
STATEMENT OF ADDITIONAL INFORMATION
--------------------------------------------
<PAGE>
BRANDES INVESTMENT TRUST
BRANDES INSTITUTIONAL GLOBAL EQUITY FUND
Statement of Additional Information
March 24, 2000
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 March 24, 2000. The Fund is a diversified
series of Brandes Investment Trust (the "Trust"), a registered open-end
management investment company or mutual fund. Brandes Investment Partners, L.P.
(the "Advisor") is the investment advisor to the Fund. Copies of the prospectus
may be obtained from the Fund at 12750 High Bluff Drive, San Diego, CA 92130 or
by calling 1-800-237-7119.
TABLE OF CONTENTS
Page
----
Investment Objective and Policies........................................B-2
Investment Restrictions..................................................B-2
Other Securities and Investment Techniques...............................B-4
Management...............................................................B-9
Investment Advisory and Other Services...................................B-11
Advisory Agreement.....................................................B-11
Administration Agreement...............................................B-12
Portfolio Transactions and Brokerage.....................................B-12
Net Asset Value..........................................................B-14
Redemptions..............................................................B-14
Taxation ................................................................B-15
Performance Information..................................................B-17
Custodian, Transfer and Dividend Disbursing Agent,
Independent Auditors and Legal Counsel.................................B-18
General Information......................................................B-18
B-1
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INVESTMENT OBJECTIVE AND POLICIES
The following discussion supplements the discussion of the Fund's
investment objective and policies as set forth in the Fund's prospectus. No one
can ensure that the Fund's investment objective will be achieved.
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, or other adverse developments
affecting these trading partners, could have a significant adverse effect on the
securities markets of such countries.
Because most of the securities in which the Fund invests 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 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, and
for the purposes of this calculation, limited in respect of any one issuer to an
B-2
<PAGE>
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.
OPERATING RESTRICTIONS
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.
The Fund may not:
1. Purchase any security if as a result the Fund would then hold more
than 10% of any class of voting securities of an issuer (taking all common stock
issues as a single class, all preferred stock issues as a single class, and all
debt issues as a single class), except that the Fund reserves the right to
invest all of its assets in a class of voting securities of another investment
company;
B-3
<PAGE>
2. Invest more than 10% of its assets in the securities of other
investment companies or purchase more than 3% of any other investment company's
voting securities or make any other investment in other investment companies
except as permitted by federal and state law, except that the Fund reserves the
right to invest all of its assets in another investment company;
3. Invest more than 15% of its net assets in unseasoned securities and
illiquid securities, including Rule 144A securities.
OTHER SECURITIES AND INVESTMENT TECHNIQUES
CONVERTIBLE SECURITIES
The Fund may purchase convertible securities that are fixed-income debt
securities or preferred stocks, and which may be converted at a stated price
within a specific period of time into a certain quantity of common stock of the
same or other issuers. Convertible securities are usually subordinated in right
of payment to nonconvertible debt securities of the same issuer, but are senior
to common stocks in an issuer's capital structure. Their prices tend to be
influenced by changes in interest rates (in the same manner as for debt
securities) as well as changes in the market value of the common stock into
which they can be converted.
SHORT-TERM INVESTMENTS
At times the Fund may invest in short-term cash equivalent securities
either for temporary, defensive purposes or as part of its overall investment
strategy. These securities consist of high quality debt obligations maturing in
one year or less from the date of purchase, such as U.S. Government securities,
certificates of deposit, bankers' acceptances and commercial paper. High quality
means the obligations have been rated at least A-1 by Standard & Poor's
Corporation ("S&P") or Prime-1 by Moody's Investor's Service, Inc. ("Moody's"),
have an outstanding issue of debt securities rated at least AA by S&P or Aa by
Moody's, or are of comparable quality in the opinion of the Advisor.
REPURCHASE AGREEMENTS
Short-term investments also include repurchase agreements with respect
to the high quality debt obligations listed above. A repurchase agreement is a
transaction in which the Fund purchases a security and, at the same time, the
seller (normally a commercial bank or broker-dealer) agrees to repurchase the
same security (and/or a security substituted for it under the repurchase
agreement) at an agreed-upon price and date in the future. The resale price is
in excess of the purchase price, 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 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 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 Fund's risk is limited to
the ability of the seller to pay the agreed-upon sum on the delivery date.
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, the
B-4
<PAGE>
purchaser's ability to sell the collateral might be restricted 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.
U.S. GOVERNMENT SECURITIES
The Fund may, but is not obligated under any circumstances to, 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 obligations of the
Student Loan Marketing Association, are supported only by the credit of the
instrumentality. In the case of securities not backed by the full faith and
credit of the United States, the investor must look principally to the agency
issuing or guaranteeing the obligation for ultimate repayment and may not be
able to assert a claim against the United States itself in the event the agency
or instrumentality does not meet its commitment.
WHEN-ISSUED SECURITIES
The Fund may from time to time purchase securities on a "when-issued"
or delayed delivery basis, generally in connection with an underwriting or other
offering. 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, beyond normal
settlement dates, generally from 15 to 45 days after the transaction. During the
period between purchase and settlement, the Fund does not pay the issuer and no
interest accrues to the Fund. To the extent that the Fund holds assets in cash
pending the settlement of a purchase of securities, the Fund would earn no
income. These transactions involve the risk 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. While the Fund may sell when-issued securities 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 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.
ILLIQUID AND RESTRICTED SECURITIES
The Fund may invest up to 15% of its net assets at the time of purchase
in illiquid securities, including (i) securities with no readily available
market; (ii) securities 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.
B-5
<PAGE>
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 affect 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 Advisor may
determine that such securities, up to a limit of 10% of the Fund's total net
assets, are not illiquid notwithstanding their legal or contractual restrictions
on resale.
SECURITIES LENDING
The fund may lend its securities in an amount up to 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 present regulatory requirements, 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 U.S. Government securities. 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 if the borrower of the securities fails
financially. However, the Fund will lend securities only when, in the Advisor's
opinion, the income to be earned from the loans justifies the risks involved.
The Fund or the borrower may terminate Loans.
OPTIONS
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 to hedge against the risk of unfavorable price movements adversely
affecting the value of the Fund's securities or securities the Fund intends to
buy. The Fund may also purchase call options in closing transactions, to
terminate option positions written by the Fund. The Fund may write (sell)
covered call options on individual securities and on stock indices and engage in
related closing transactions.
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 selling the option, 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.
B-6
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The buyer of a typical put option will 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 will
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.
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.
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 write a put option and purchase 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. 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 the types of exchange-traded
options contracts are limited, the standardized contracts available likely 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 succeed 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.
B-7
<PAGE>
LIQUIDITY OF OPTIONS. No one can assure that a liquid secondary market
will exist for any particular options contract at any particular time. Options
may have relatively low trading volume and liquidity if their strike prices are
not close to the underlying instrument's current price. In addition, exchanges
may establish daily price fluctuation limits for options contracts, and may halt
trading if a contract's price moves up or down 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, the Fund may not be able 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. Options on stock indices have 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, to successfully
use options on a stock index, the Advisor must be able 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. The Fund's policy is 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.
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. Futures contracts are traded on designated "contract markets"
which, through their clearing corporations, guarantee performance of the
contracts. 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. On the contract's expiration date, a final cash settlement occurs.
Changes in the market value of a particular stock index futures contract reflect
changes in the specified index of equity securities on which the future is
based. If the Advisor expects general stock market prices to rise, it might
purchase a stock index future 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 future contract.
B-8
<PAGE>
No one can ensure that it will be possible at any particular time to
close a futures position. If the Fund could not close a futures position and the
value of the position declined, the Fund would have to continue to make daily
cash payments to the other party to the contract to offset the decline in value
of the position. No one can ensure 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.
The use of futures contracts includes several risks. If the index 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, a variety of factors may affect the market prices of
futures contracts. First, all participants in the futures market are subject to
margin deposit and maintenance requirements. Rather than meeting additional
margin deposit requirements, investors may close futures contracts through
offsetting transactions which could distort the normal relationship between the
securities and futures markets. Second, from the point of view of speculators,
the deposit requirements in the futures market are less onerous than margin
requirements in the securities market. Therefore, increased participation by
speculators in the futures market may also cause temporary price distortions.
Finally, positions in futures contracts may be closed out only on an
exchange or board of trade which provides a secondary market for such futures.
No one can ensure 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 amount of margin deposits on the Fund's
existing futures positions would exceed 5% of the market value of the Fund's net
assets.
MANAGEMENT
The Board of Trustees is responsible for the overall management of the
Trust's business. 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
Board of Trustees delegates the day-to-day operations of the Trust to its
officers, subject to the Fund's investment objective and policies and to general
supervision by the Board.
The Trustees and officers of the Trust, their business addresses and
principal occupations during the past five years are:
Jeffery A. Busby, C.F.A.* (age 39) PRESIDENT AND TRUSTEE. Managing Partner
12750 High Bluff Drive since May 1996 and Managing Director of
San Diego, CA 92130 its predecessor.
DeWitt F. Bowman, C.F.A, (age 69) TRUSTEE. Principal, Pension Investment
79 Eucalyptus Knoll Consulting, since 1994. Director,
Mill Valley, CA 94941 Dresdner RCM Capital Funds, Inc. and
Dresdner RCM Global Funds, Inc.(mutual
funds) since 1996; RREEF America REIT,
Inc. since 1995; Wilshire Target Funds,
Inc. (mutual fund) since 1996. Trustee,
Pacific Gas and Electric Nuclear
Decommissioning Trust since 1995.
Formerly Chief Investment Officer of
the California Public Employees
Retirement System (1989 to 1994).
Charles H. Brandes * (age 56) TRUSTEE. Managing Partner of the
12750 High Bluff Drive Advisor since May 1996 and Managing
San Diego, CA 92130 Director of its predecessor.
B-9
<PAGE>
Gordon Clifford Broadhead (age 75) TRUSTEE. Marine biologist and
P.O. Box 1427 consultant in fisheries.
Rancho Santa Fe, CA 92067
Joseph E. Coberly, Jr. (age 81) TRUSTEE. Former Managing Partner, Red
P.O. Box 944 Tail Golf Association (real estate
Rancho Santa Fe, CA 92067 developer).
W. Daniel Larsen (age 72) TRUSTEE. Retired. Former Honorary
1405 Savoy Circle Danish Consul for San Diego.
San Diego, CA 92107
Debra McGinty-Poteet (age 44) VICE PRESIDENT. Mutual Fund/Sub-
12750 High Bluff Advisory Group Manager. Formerly Chief
San Diego, CA 92130 Operating Officer for North American
Trust Company; Senior Vice President
and Managing Director for Bank of
America Funds Management.
Glenn R. Carlson (age 38) SECRETARY. Managing Partner of the
12750 High Bluff Advisor since May 1996 and Managing
San Diego, CA 92130 Director of its predecessor prior
thereto.
Gary Iwamura (age 42) TREASURER. Financial Resources Officer
12750 High Bluff Drive of the Advisor since 1994. Formerly
San Diego, CA 92130 Chief Administrative Officer, National
Mutual Funds Management from 1992 to
1996 and Chief Operating Officer, Axe-
Houghton Management from 1991 to 1992.
- ----------
* Denotes "interested person" of the Trust as defined in the 1940 Act.
The Trust pays a fee of $800 per meeting to Trustees who are not
"interested persons" of the Trust. They 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.
The table below shows the compensation paid to each Trustee for the
fiscal year ended October 31, 1999:
<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>
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
For a short period following the Fund's commencement of operations, a
control person of or affiliate of the Fund (such as the Adviser) is expected to
own 25 percent or more of its outstanding shares.
B-10
<PAGE>
INVESTMENT ADVISORY AND OTHER SERVICES
ADVISORY AGREEMENT
Subject to the supervision of the Board of Trustees, the Advisor
provides investment management and services to the Fund, 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 Board of Trustees or the holders of a majority of the outstanding
voting securities of the Fund can terminate the Advisory Agreement with respect
to the Fund at any time without penalty, on 60 days written notice to the
Advisor. The Advisor may also terminate the Advisory Agreement on 60 days
written notice to the Fund. The Advisory Agreement terminates automatically upon
its assignment (as defined in the 1940 Act).
Because the Fund is new, no fees have been paid to the Advisor as of
the date of this Statement of Additional Information.
The Advisor has signed a contract with the Trust in which the Advisor
has agreed that during the Fund's fiscal years ended October 31, 2000 the
Advisor will waive management fees and reimburse operating expenses of the Fund
to the extent necessary to ensure that the expenses of the Fund do not exceed
during each such fiscal year 1.20% of the average daily net assets of the
B-11
<PAGE>
Fund (the "Expense Cap"). The Trust has agreed that the amount of any waiver or
reimbursement will be repaid to the Advisor without interest at any time before
the later of (i) December 31, 2003, and (ii) the end of the fifth full fiscal
year of the Fund after the fiscal year in which the waiver or reimbursement
occurred, unless that repayment would cause the aggregate operating expenses of
the Fund to exceed the Expense Cap for that fiscal year.
The Fund does not invest in any security for the purpose of exercising
control or management. When the Fund receives a proxy from a company in which it
invests, the Advisor will vote that proxy 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.
ADMINISTRATION AGREEMENT
Investment Company Administration, L.L.C. ("ICA") 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 0.05% of the first $250 million of the Fund's
average daily net assets, 0.04% of the next $250 million of average daily net
assets and 0.03% thereafter, subject to a $40,000 annual minimum.
Because the Fund is new, no fees have been paid to the Administrator as
of the date of this Statement of Additional Information.
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.
B-12
<PAGE>
The Fund may purchase portfolio securities directly from issuers or
from underwriters. Where possible, it makes purchases and sales through dealers
(including banks) which specialize in the types of securities involved, 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.
It considers the full range and quality of services available 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 the Advisor concludes 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, it
may consider 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 it is required to perform under the Agreement, to be useful in varying
degrees, but of indeterminable value. The Board of Trustees reviews brokerage
allocations where services other than best price/execution capabilities are a
factor to ensure that the other services provided meet the tests outlined above
and produce a benefit to the 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.
The Advisor makes investment decisions for the Fund independently from
those of the Advisor's other client accounts. Nevertheless, at times the same
securities may 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 the Fund and one or more of
such other client accounts simultaneously purchases or sells the same security,
the Advisor allocates each day's transactions in such security between the Fund
and all such client accounts as it decides is fair, taking into account the
respective sizes of the accounts, the amount being purchased or sold and other
factors it deems relevant. 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, the ability of the Fund to participate in volume
transactions may produce better executions for the Fund.
B-13
<PAGE>
NET ASSET VALUE
The net asset value of the Fund's shares fluctuates 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. Currently, the Exchange is not 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.
The Fund values options and futures contracts which are traded on
exchanges 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 Fund values the options or futures traded on it 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.
Foreign securities markets normally complete trading 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. Calculations of net asset value will not
reflect 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 unless the Board of Trustees deems that the particular event would
materially affect net asset value, in which case the Fund will make an
adjustment. The Fund translates assets or liabilities expressed in foreign
currencies 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.
The Fund values 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,
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 expect to make any
part of a redemption payment in securities, if such payment were made, an
investor would 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.
B-14
<PAGE>
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) 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 (3) at the close of each
quarter of the Fund's taxable year, not more than 25% of the value of its assets
may be invested in securities (other than U.S. Government securities or the
securities of other RICs) of any one issuer.
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
B-15
<PAGE>
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. 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 of income taxable as
ordinary income distributed to shareholders.
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.
B-16
<PAGE>
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 Fund will update the time periods used in advertising 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 JOURNAL, MONEY Magazine, FORBES, BUSINESS WEEK,
FINANCIAL WORLD and BARRON'S.
B-17
<PAGE>
CUSTODIAN, TRANSFER AND DIVIDEND DISBURSING AGENT,
INDEPENDENT AUDITORS AND LEGAL COUNSEL
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 and dividend disbursing agent.
The Trust's independent auditors, Ernst & Young LLP, 725 South Figueroa, Los
Angeles, California 90017, 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
Trust and the Advisor.
GENERAL INFORMATION
The Trust was organized as a Delaware business trust on July 6, 1994
and is an open-end management investment company. The Board of Trustees of the
Trust has authority to issue an unlimited number of shares of beneficial
interest of separate series. The Fund is currently one of two series of the
Trust. The Fund commenced operation January 2, 1997. 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'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.
You can examine the Trust's Registration Statement on Form N-1A 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.
B-18
<PAGE>
SHARES OF BENEFICIAL INTEREST
Rule 18f-2 under the Investment Company Act provides that any matter
required to be submitted to the holders of the outstanding voting securities of
an investment company such as the Trust will not be deemed to have been
effectively acted upon unless approved by a majority of the outstanding shares
of the series of the Trust affected by the matter. Thus, on any matter submitted
to a vote of shareholders of the Trust, all shares of the affected series will
vote unless otherwise permitted by the Investment Company Act, in which case all
shares of the Trust will vote in the aggregate. For example, a change in the
Fund's fundamental investment policies would be voted upon by shareholders of
the Fund, as would the approval of any advisory or distribution contract for the
Fund. However, all shares of the Trust will vote together in the election or
selection of Trustees and accountants for the Trust.
As used in the Fund's prospectus and in this Statement of Additional
Information, the term "majority," when referring to approvals to be obtained
from shareholders of the Fund, means the vote of the lesser of (i) 67% of the
shares of the Fund represented at a meeting if the holders of more than 50% of
the outstanding shares of the Fund are present in person or by proxy, or (ii)
more than 50% of the outstanding shares of the Fund. The term "majority," when
referring to the approvals to be obtained from shareholders of the Trust, means
the vote of the lesser of (i) 67% of the Trust's shares represented at a meeting
if the holders of more than 50% of the Trust's outstanding shares are present in
person or by proxy, or (ii) more than 50% of the Trust's outstanding shares.
Shareholders are entitled to one vote for each full share held and fractional
votes for fractional shares held. Unless otherwise provided by law (for example,
by Rule 18f-2 discussed above) or by the Trust's Declaration of Trust or Bylaws,
the Trust may take or authorize any action upon the favorable vote of the
holders of more than 50% of the outstanding shares of the Trust.
The Trust does not hold annual shareholder meetings of the Fund. The
Trust will not normally hold 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 requested in writing by the shareholders of record owning at
least 10% of the Trust's outstanding shares Trust and to assist in communicating
with other shareholders as required by Section 16(c) of the Investment Company
Act.
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. Shareholders are not entitled to any
preemptive rights. All shares, when issued, will be fully paid and nonassessable
by the Trust.
B-19
<PAGE>
--------------------------------------------
PART C
OTHER INFORMATION
--------------------------------------------
<PAGE>
PART C
OTHER INFORMATION
ITEM 23. EXHIBITS.
The following exhibits are included with this Post-Effective Amendment,
except as noted:
(a) (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)
(b) By-Laws(1)
(c) Not applicable
(d) (i) Investment Advisory Agreement relating to the Brandes
Institutional International Equity Fund(3)
(ii) Form of Investment Advisory Agreement relating to the
Brandes Institutional Global Equity Fund(4)
(iii) Operating Expense Letter (5)
(e) Distribution Agreement with First Fund Distributors, Inc.(5)
(f) Not applicable
(g) Custodian Agreement(2)
(h) (i) Administration Agreement(2)
(ii) Transfer Agency Agreement(3)
(i) Opinion and consent of counsel(3)
(j) Consent of independent accountants - N/A
(k) Not applicable
(l) Investment letter(2)
(m) Not applicable
(n) Not applicable
(o) Not applicable
(p) (i) Code of Ethics - filed herewith
(ii) Code of Ethics - filed herewith
(iii) Code of Ethics - filed herewith
(iv) Code of Ethics - filed herewith
- ----------
(1) Previously filed with Post-Effective Amendment No. 1 to the Registration
Statement on Form N-1A (File No. 33-81396), filed on January 9, 1996, and
incorporated herein by reference.
(2) Previously filed with Post-Effective Amendment No. 2 to the Registration
Statement on Form N-1A (File No. 33-81396), filed on February 7, 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 October 2, 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 March 23, 1998, and
incorporated herein by reference.
(5) Previously filed with Post-Effective Amendment No. 9 to the Registration
Statement on Form N1-A (File No. 33-81396), filed on and incorporated by
reference.
ITEM 24. 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 25. 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.
C-1
<PAGE>
Section 2. ACTIONS OTHER THAN BY TRUST. This Trust shall indemnify any
person who was or is a party or is threatened to be made a party to any
proceeding (other than an action by or in the right of this Trust) by reason of
the fact that such person is or was an agent of this Trust, against expenses,
judgments, fines, settlements and other amounts actually and reasonably incurred
in connection with such proceeding, if it is determined that person acted in
good faith and reasonably believed:
(a) in the case of conduct in his official capacity as a Trustee of the
Trust, that his conduct was in the Trust's best interests, and
(b) in all other cases, that his conduct was at least not opposed to
the Trust's best interests, and
(c) in the case of a criminal proceeding, that he had no reasonable
cause to believe the conduct of that person was unlawful.
The termination of any proceeding by judgment, order, settlement,
conviction or upon a plea of nolo contendere or its equivalent shall not of
itself create a presumption that the person did not act in good faith and in a
manner which the person reasonably believed to be in the best interests of this
Trust or that the person had reasonable cause to believe that the person's
conduct was unlawful.
Section 3. ACTIONS BY THE TRUST. This Trust shall indemnify any person
who was or is a party or is threatened to be made a party to any threatened,
pending or completed action by or in the right of this Trust to procure a
judgment in its favor by reason of the fact that 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 an only to the extent that the court in which that action
was brought shall determine upon application that in view of all the
circumstances of the case, that person was not liable by reason of the disabling
conduct set forth in the preceding paragraph and is fairly and reasonably
entitled to indemnity for the expenses which the court shall determine; or
(c) of amounts paid in settling or otherwise disposing of a threatened
or pending action, with or without court approval, or of expenses incurred in
defending a threatened or pending action which is settled or otherwise disposed
of without court approval, unless the required approval set forth in Section 6
of this Article is obtained.
C-2
<PAGE>
Section 5. SUCCESSFUL DEFENSE BY AGENT. To the extent that an agent of
this Trust has been successful on the merits in defense of any proceeding
referred to in Sections 2 or 3 of this Article or in defense of any claim, issue
or matter therein, before the court or other body before whom the proceeding was
brought, the agent shall be indemnified against expenses actually and reasonably
incurred by the agent in connection therewith, provided that the Board of
Trustees, including a majority who are disinterested, non-party Trustees, also
determines that based upon a review of the facts, the agent was not liable by
reason of the disabling conduct referred to in Section 4 of this Article.
Section 6. REQUIRED APPROVAL. Except as provided in Section 5 of this
Article, any indemnification under this Article shall be made by this Trust only
if authorized in the specific case on a determination that indemnification of
the agent is proper in the circumstances because the agent has met the
applicable standard of conduct set forth in Sections 2 or 3 of this Article and
is not prohibited from indemnification because of the disabling conduct set
forth in Section 4 of this Article, by:
(a) A majority vote of a quorum consisting of Trustees who are not
parties to the proceeding and are not interested persons of the Trust (as
defined in the Investment Company Act of 1940); or
(b) A written opinion by an independent legal counsel.
Section 7. ADVANCE OF EXPENSES. Expenses incurred in defending any
proceeding may be advanced by this Trust before the final disposition of the
proceeding upon a written undertaking by or on behalf of the agent, to repay the
amount of the advance if it is ultimately determined that he or she is not
entitled to indemnification, together with at least one of the following as a
condition to the advance: (i) security for the undertaking; or (ii) the
existence of insurance protecting the Trust against losses arising by reason of
any lawful advances; or (iii) a determination by a majority of a quorum of
Trustees who are not parties to the proceeding and are not interested persons of
the Trust, or by an independent legal counsel in a written opinion, based on a
review of readily available facts that there is reason to believe that the agent
ultimately will be found entitled to indemnification. Determinations and
authorizations of payments under this Section must be made in the manner
specified in Section 6 of this Article for determining that the indemnification
is permissible.
Section 8. OTHER CONTRACTUAL RIGHTS. Nothing contained in this Article
shall affect any right to indemnification to which persons other than Trustees
and officers of this Trust or any subsidiary hereof may be entitled by contract
or otherwise.
Section 9. LIMITATIONS. No indemnification or advance shall be made
under this Article, except as provided in Sections 5 or 6 in any circumstances
where it appears:
(a) that it would be inconsistent with a provision of the Agreement and
Declaration of Trust of the Trust, a resolution of the shareholders, or an
agreement in effect at the time of accrual of the alleged cause of action
asserted in the proceeding in which the expenses were incurred or other amounts
were paid which prohibits or otherwise limits indemnification; or
(b) that it would be inconsistent with any condition expressly imposed
by a court in approving a settlement.
C-3
<PAGE>
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 26. 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 by Brandes Investment
Partners, L.P. (File No. 801-24896), which is incorporated herein by reference.
ITEM 27. PRINCIPAL UNDERWRITERS.
(a) First Fund Distributors, Inc. currently serves as distributor of
the shares of:
Advisors Series Trust
Brandes Investment Funds
Builders Fixed Income Fund, Inc.
Dessauer Global Equity Fund, Inc.
Fleming Mutual Fund Group, Inc.
Fremont Mutual Funds
Guinness Flight Investment Funds
Investors Research Fund, Inc.
Jurika & Voyles Mutual Funds
Kayne Anderson Mutual Funds
Masters' Select Funds Trust
O'Shaughnessy Funds, Inc.
PIC Investment Trust
Professionally Managed Portfolios
Puget Sound Alternative Investment Series Trust
Rainier Investment Management Mutual Funds
Rochdale Investment Trust
RNC Mutual Fund Group, Inc.
The Purisima Funds
Trust For Investment Managers
C-4
<PAGE>
(b) The following information is furnished with respect to the officers
and directors of First Fund Distributors, Inc.:
Position and Offices Position and
Name and Principal with Principal Offices with
Business Address Underwriter Registrant
- ---------------- ----------- ----------
Robert H. Wadsworth President, Assistant
4455 E. Camelback Rd, Treasurer and Secretary
Suite 261E Director
Phoenix, AZ 85018
Steven J. Paggioli Vice President, Assistant
915 Broadway, Suite 1605 Secretary and Secretary
New York, New York 10010 Director
Eric M. Banhazl Vice President Assistant
2020 E. Financial Way, Suite 100 and Director Treasurer
Glendora, CA 91741
(c) Not applicable.
ITEM 28. 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 2020 East Financial Way, Suite 100,
Glendora, CA 91741, and all other records will be maintained by the Custodian at
200 Clarendon Street, 16th Floor, Boston, MA 02116.
ITEM 29. MANAGEMENT SERVICES.
Not applicable.
ITEM 30. 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-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Post-Effective Amendment pursuant to
Rule 485(b) under the Securities Act of 1933 and has duly caused this Amendment
to its Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of San Diego and State of California on
the 23rd day of March 2000.
BRANDES INVESTMENT TRUST
By /s/ Jeffrey A. Busby
--------------------------
Jeffrey A. Busby
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 February 25, 2000.
/s/ Jeffrey A. Busby President and Trustee March 23, 2000
- ------------------------------
Jeffrey A. Busby
Charles H. Brandes* Trustee March 23, 2000
- ------------------------------
Charles H. Brandes
DeWitt F. Bowman* Trustee March 23, 2000
- ------------------------------
DeWitt F. Bowman
Gordon Clifford Broadhead* Trustee March 23, 2000
- ------------------------------
Gordon Clifford Broadhead
Joseph E. Coberly, Jr.* Trustee March 23, 2000
- ------------------------------
Joseph E. Coberly, Jr.
W. Daniel Larsen* Trustee March 23, 2000
- ------------------------------
W. Daniel Larsen
Gary Iwamura* Treasurer (Principal Financial March 23, 2000
- ------------------------------ and Accounting Officer)
Gary Iwamura
* Robert H. Wadsworth
-----------------------------
By: Robert H. Wadsworth
Attorney-in-fact
C-6
<PAGE>
EXHIBIT INDEX
Item No. Description
- -------- -----------
P. (i) Code of Ethics - Brandes Investment Partners, L.P.
(ii) Amendment to Code of Ethics - Brandes Investment Partners, L.P.
(iii) Code of Ethics - Brandes Investment Trust
(iv) Code of Ethics - Investment Company Administration, L.L.C.
BRANDES INVESTMENT PARTNERS, L.P.
CODE OF ETHICS
APRIL 1, 1997
A. PREAMBLE.
This Code of Ethics is being adopted to effectuate the purposes and objectives
of Sections 204A and Section 206 of the Investment Advisers Act of 1940 ( the
"Advisers Act") and Rule 204-2 under the Advisers Act and Rule 17j-1 of the
Investment Company Act of 1940. Section 204A of the Advisers Act requires the
establishment and enforcement of policies and procedures reasonably designed to
prevent the misuse of material, nonpublic information by investment advisers.
Rule 204-2 imposes record keeping requirements with respect to personal
securities transactions of certain persons employed by investment advisers.
Section 206 of the Advisers Act makes it unlawful, among other things, for an
investment adviser "to employ any device, scheme or artifice to defraud any
client or prospective clients; to engage in any transaction, practice or course
of business which operates or would operate as a fraud or deceit upon any client
or prospective client; ...or to engage in any act, practice, or course of
business which is fraudulent, deceptive or manipulative."
Rule 17j-1 makes it unlawful for any employee of Brandes Investment Partners,
L.P., or its subsidiaries (all such entities hereafter referred to as "Brandes")
in connection with the purchase or sale, directly or indirectly, by such person
of a security held or to be acquired, as defined in this section, by such
registered investment company (1) to employ any device, scheme or artifice to
defraud such registered investment company; (2) to make to such registered
investment company any untrue statement of a material fact or omit to state to
such registered investment company a material fact necessary in order to make
the statements made, in light of the circumstances under which they are made,
not misleading; (3) to engage in any act, practice, or course of business which
operates or would operate as a fraud or deceit upon any such registered
investment company; or (4) to engage in any manipulative practice with respect
to such registered investment company.
For purposes of Rule 17j-1, "security held or to be acquired" by a registered
investment company means any security which, within the most recent 15 days, (i)
is or has been held by such company, or (ii) is being or has been considered by
such company or its investment adviser for purchase by such company.
Brandes owes its clients the highest duty of trust and fair dealing. A
fiduciary, Brandes places clients' interests ahead of its own and holds the
fundamental principle that Brandes personnel should not take inappropriate
advantage of their positions.
<PAGE>
Brandes has certain responsibilities to its clients. These include assuring that
accounts are managed in a suitable manner, providing regular communications
regarding the progress of accounts, providing accurate performance numbers and
refraining from certain practices. These practices include over-trading the
account, purchasing inappropriate issues for the account, making guarantees
about future performance, making unauthorized transactions and borrowing
clients' funds or securities. Brandes maintains trading authorization only and
does not have custody of clients' funds or securities.
Brandes recognizes that its own long-term interests lie in strict adherence to
ethical treatment of its clients, thereby maintaining its reputation for honest
and fair dealing. Employees are expected to act in accordance with this basic
tenet.
While many firms forbid their employees to make investments on behalf of their
own personal accounts, Brandes believes this is an unnecessarily punitive
measure. Brandes permits its employees to trade their own accounts when the
trades are done in such a manner as to avoid conflicts of interest with clients'
transactions. Brandes regularly monitors its employees' trading activity to
assure compliance with the firm's policy.
This Code contains provisions reasonably necessary to prevent persons from
engaging in acts in violation of the law and rules and to assure that Brandes'
clients' interests are considered first. This Code also establishes procedures
reasonably necessary to prevent violations of this Code.
Each shareholder, officer, partner and employee of the administrator for Brandes
Investment Trust (the "Fund"), Investment Company Administration Corporation
(the "Administrator"), is exempt from the reporting and other requirements of
this Code of Ethics, but is required to comply with the reporting and other
requirements of the Administrator's or the Fund's code of ethics, as applicable.
B. PERSONAL TRADES POLICY
DEFINITIONS.
1. Directed Trade.
A directed trade is one for a specific security which the employee must
initiate.
2. Employee-related account.
An "employee-related account" refers to an account for any of the following
persons:
a. the employee;
b. the employee's spouse;
c. the employee's minor child or children;
d. any other relative of the employee or employee's spouse, sharing the same
home as the employee;
e. any other person whose account is managed, controlled or influenced by or
through the employee, or to whom the employee gives advice with regard to
the acquisition or disposition of securities, other than a Brandes client;
examples of such accounts are accounts where the employee is acting as
trustee, executor, pledgee, agent or in any similar capacity;
f. any other account in which the employee has a beneficial ownership
interest; such beneficial interest (unless otherwise exempted) may arise
where an employee has a beneficial interest in securities under a trust,
will, partnership or other arrangement, or through a closely held
corporation or investment club.
3. Security.
"Security" shall have the meaning set forth in Section 202(a)(18) of the
Advisers Act.
C. PROHIBITED TRANSACTIONS.
1. No employee shall violate Section 206 of the Advisers Act or rule 17j-1 of
the Investment Company Act.
2. No Brandes employee shall receive during any calendar year any gift or other
consideration in merchandise, services or otherwise having a value of more
that $250 from any single person, firm, corporation, association or other
entity that does, or is seeking to do, business with or on behalf of the
Firm. Employees receiving gifts from such sources of over $50 during any
calendar year must report them promptly to the Compliance Department.
3. No employee shall give or offer to give anything of value to any person for
the purpose of influencing the price of any security.
4. No employee shall serve on a Board of Directors of any public company without
the prior approval of the majority of the voting members of the Investment
Committee.
<PAGE>
5. No employee shall purchase any securities in an initial public offering
unless a waiver has been granted by any two of the following: Charles H.
Brandes, Glenn R. Carlson, Jeffrey A. Busby. Any person authorized to
purchase securities in an initial public offering shall disclose that
investment when s/he plays a part in any subsequent consideration by Brandes
of an investment in the issuer of such securities.
6. No employee shall purchase any securities in a private placement without
prior written approval of any two of the following: Charles H. Brandes, Glenn
R. Carlson, Jeffrey A. Busby.
7. No employee-related account may sell a security purchased within the previous
60 calendar days, except a security held for at least 30 days may be sold at
a loss. Trades made in violation of this prohibition should be canceled to an
error account, if possible.
8. No employee-related account shall purchase or sell any securities on the
"Watch List." The Watch List is comprised of securities Brandes is closely
observing and anticipating imminent action in on behalf of clients' accounts.
D. EXEMPTED TRANSACTIONS.
1. The prohibitions of Sections C7 shall not apply to:
a. Sales of U.S. government securities; and
b. Withdrawals from open-end mutual funds, if the employee or
employee-related account owns less than 5% of the outstanding shares of
such fund;
2. The prohibitions of Sections C8 shall not apply to:
a. Purchases which are part of an automatic dividend reinvestment plan;
b. Purchases effected upon the exercise of rights issued by an issuer pro
rata to all holders of a class of its securities and sales of such rights
so acquired; and
c. Any other purchases or sales as described at Section E, INFRA.
<PAGE>
E. THE WATCH LIST
THE WATCH LIST IS COMPRISED OF SECURITIES BRANDES IS CLOSELY OBSERVING AND
ANTICIPATING IMMINENT ACTION IN ON BEHALF OF CLIENTS' ACCOUNTS AND, THEREFORE,
SECURITIES IN WHICH EMPLOYEES ARE GENERALLY PROHIBITED FROM TRADING.
I. CONSTRUCTION PROCEDURES
1. Investment Committee designates a Watch List control person charged with
creating the weekly Watch List ("Control Person").
2. On each business day immediately preceding the regular weekly Investment
Committee meeting, the Control Person circulates the previous week's Watch
List to all members of the Portfolio Management Department asking them each
to (a) add the name of each and every security for which such person is
preparing a formal recommendation(1) where it is expected that such
recommendation will be presented for Investment Committee consideration
within the next two weeks; and (b) delete from the Watch List any and all
securities of which such person is aware that its consideration for
investment purposes has been indefinitely suspended(2) or terminated for any
reason whatsoever. Members of the Portfolio Management Department will have
their responses sent back to the Control Person prior to the Investment
Committee meeting. The Control Person revises the Watch List accordingly.
3. On each business day immediately preceding the regular weekly Investment
Committee meeting, the Control Person circulates the previous week's Watch
List to a representative of the Trading Department asking him to (a) delete
from the Watch List any and all securities in which system-wide trading has
been completed for clients' accounts as directed by the Investment Committee;
(b) add to the Watch List those securities which are the subject of any
current and open firm-wide re-balancing or other activity in clients'
accounts(3); and (c) delete from the Watch List any securities which were the
subject of any firm-wide re-balancing or other activity in clients' accounts
and in which trading has been completed with respect to such securities in
such accounts over the past week. The representative of the Trading
department will have his/her response sent back to the Control Person prior
to the Investment Committee meeting. The Control Person revises the Watch
List accordingly.
- ----------
1 The term "formal recommendation" here is shorthand to mean those activities
engaged in by the PM department that are necessary and proximate to
presenting a security for the Investment Committee's consideration. At this
point in the process we should strive to identify and isolate only those
securities which WILL or ARE SCHEDULED TO be brought to the Investment
Committee's attention for definite action within the next two weeks.
Securities that are scheduled to be merely reviewed by or discussed with the
Investment Committee but are not in a price range which a member of the PM
staff believes would result in any action by the Investment Committee need
not be included on the Watch List.
2 Indefinitely suspended, at a minimum, should refer to the case where any
definitive decision regarding the purchase or sale of a security is unlikely
to occur for more than a two-week period.
3 "Other activity in clients' accounts" should not be interpreted to mean
purchase or sale activity in connection with account opening transactions on
behalf of new wrap or non-institutional separate account clients to the firm.
The focus here should be on identifying securities in which purchase or sale
activity was or will be conducted for clients across the board in any given
investment product offered by Brandes. Securities to be purchased in
connection with account opening activities for institutional clients should
be on the Watch List in advance of such transactions given the potential
impact that such trading could have on the market for those securities.
<PAGE>
4. At the conclusion of the Investment Committee meeting, the Control Person
shall delete from the Watch List any and all securities which were presented
to the Investment Committee in the form of a recommendation for purchase or
sale on behalf of clients' accounts and with respect to which a final
decision not to purchase or sell, respectively, was made by the Investment
Committee. Presumably, the Control Person will not need to add to the Watch
List any of the securities which the Investment Committee voted to purchase
or sell on behalf of clients' accounts since these securities have been on
the Watch List for at least two weeks at this point. All securities selected
by the Investment Committee for purchase or sale activity at the Tuesday
meeting will be placed on the Watch List and will remain on the Watch List
until the Trading Department has indicated that trading in such securities
has been completed for clients' accounts.
5. On the business day immediately following the Investment Committee's meeting,
the Control Person updates the Watch List according to the foregoing and
circulates it to appropriate employees of the firm.
II. SPECIAL SITUATIONS
1. At any time it is concluded (outside of a regularly scheduled Investment
Committee meeting) that Brandes will engage in transactions in a particular
security for client accounts, a voting member of the Investment Committee
will instruct the Control Person to add such security to the Watch List. Such
security will remain on the Watch List until the Trading Department has
indicated that trading in such security has been completed for clients'
accounts.
2. Blanket Prohibitions: In the interest of facilitating the "pre-clearance" of
employee trading as required herein, any blanket prohibition regarding
certain categories or types of securities in which employees are prohibited
from effectuating any personal transactions should contain a level of
specificity that minimizes interpretive variance among those charged with
approving employee trades. The Investment Committee, the Trading Department
and the Legal Department should arrive at a clear and exact understanding
regarding the terms of the application of any blanket prohibition prior to
the effectiveness of such prohibition.
<PAGE>
F. COMPLIANCE PROCEDURES.
1. PRE-CLEARANCE FOR 24 HOURS ONLY.
All employee-related accounts shall receive prior written approval from the
Trading Strategist or the Compliance Officer before purchasing or selling any
securities except U.S. government securities; shares of registered open-end
mutual funds; securities in employee-related accounts managed by, and maintained
by the firm; securities itemized at Section D2 (a) and (b). In the absence of
these individuals, or if they are the persons requesting approval, the Trading
Strategist's designate or a Managing Partner may give the approval. Such
approval shall be for a 24-hour period only. If an employee-related account is
unable to complete the approved transaction within a 24-hour period, the
employee-related account must receive another approval from the individuals
named above before purchasing or selling securities. If an employee places a
"limit order" on the transaction and the order is not completed during the day
on which the approval is given, the remaining order must be re-approved by
either the Trading Strategist or by the Legal/Compliance Department.
When requesting approval of a transaction for an employee-related account, the
employee shall disclose to the person to whom s/he is requesting approval of any
conflict of interest of which the employee is aware concerning the proposed
transaction, such as the existence of any economic relationship between the
transaction which is the subject of the pre-clearance request and securities
held or to be acquired by any Brandes client including any mutual fund portfolio
managed by Brandes.
Certain employee-related accounts may be released from the obligation to
pre-clear and report personal trades. This exemption will apply to
employee-related accounts where total investment discretion is with a
non-employee third-party where such third-party does not confer with the
employee regarding trades in such account. This exemption must be obtained in
writing from the Compliance Department.
<PAGE>
2. DISCLOSURE OF PERSONAL HOLDINGS AND EMPLOYEE REPORTING REQUIREMENTS.
a. Upon employment at Brandes, employees are required to disclose interests in
any corporation of which they are an officer or director or which they, or a
family member, hold 5% or more of the outstanding stock. They are also
required to disclose any outside business ventures.
b. Each employee shall arrange to have duplicate confirms or statements
forwarded to the Compliance Manager for each employee-related brokerage
account.
c. Each employee shall complete a Personal Securities Transaction Quarterly
Report for each calendar quarter even if the employee does not have any
personal securities transactions to report and submit the Report to the
Compliance Department no later than 10 days after the end of each calendar
quarter.
d. Quarterly, the Compliance Officer will review employee-related transactions,
the Personal Securities Transaction Quarterly Reports from each employee, and
report the findings to the Chief Compliance Officer.
e. If an employee-related account of a person attending an Investment Committee
meeting or if a member of the Investment Committee holds a security, or a
security economically related thereto, being considered for purchase or sale
by Brandes client accounts, such person shall disclose to the Investment
Committee his holdings of the security at the first occasion upon which the
employee becomes aware that Brandes is considering the security for purchase
for its clients including any mutual fund portfolio managed by Brandes.
3. ANNUAL CERTIFICATION OF COMPLIANCE.
Each employee shall certify annually that: (a) s/he has read and understands the
Code of Ethics and recognizes s/he is subject thereto; (b) s/he has complied
with the requirements of the Code of Ethics; (c) s/he has reported all personal
securities transactions required to be reported pursuant to the requirements of
the Code of Ethics; and (d) other than as disclosed on the annual certification,
s/he has no knowledge of the existence of any personal conflict of interest
which may involve Brandes clients, such as any economic relationship between
his/her transactions and securities held or to be acquired by Brandes clients
including any mutual fund portfolio managed by Brandes.
G. REPORTS.
1. The Compliance Department shall submit an annual report on compliance with
the Code of Ethics to Brandes' Managing Partners.
2. The Compliance Department shall submit a quarterly report on compliance with
the Code of Ethics to the General Council and Chief Compliance Officer.
<PAGE>
3. The Compliance Department or anyone who becomes aware of an apparent
violation of the Code of Ethics shall promptly report such apparent violation
to the Chief Compliance Officer.
4. The Chief Compliance Officer shall review each report of an apparent
violation and make a written determination of whether the apparent violation
could reasonably be found to have resulted in a fraud, deceit or manipulative
practice in violation of Section 206 of the Advisers Act or Rule 17j-1 of the
Investment Company Act. The written determination shall include the Chief
Compliance Officer's reasons for his decision. If the Chief Compliance
Officer finds a violation, he shall report such violation to Brandes'
Managing Partners.
5. Brandes' Managing Partners shall review the report of a violation from the
Chief Compliance Officer and determine what sanctions, if any, should be
imposed.
H. SANCTIONS.
The sanctions for violation of the Code of Ethics may include a letter of
censure, temporary suspension of employment, termination of employment,
disgorgement of any ill-gotten profits, and/or any other sanction deemed
appropriate by Brandes' Managing Partners.
I. RETENTION OF RECORDS.
This Code of Ethics, a copy of each report made by an employee hereunder, each
report made by the Compliance Department, each determination by the Chief
Compliance Officer and any action taken as a result of a violation, shall be
maintained by Brandes.
<PAGE>
I. POLICY STATEMENT ON INSIDER TRADING.
Every officer, partner and employee is responsible for knowing and abiding by
the terms of this policy statement.
Brandes Investment Partners, L.P., forbids any trading on behalf of
employee-related accounts (see the personal Trades Policy for a definition) or
clients accounts (such as mutual funds and private accounts managed by Brandes)
on material nonpublic information, or communicating material nonpublic
information to others in violation of the law. This conduct is referred to as
"insider trading." Brandes' policy applies to every officer, partner and
employee and extends to activities within as well as outside of their duties at
Brandes. Any questions regarding Brandes' policy and procedure should be
referred to General Counsel.
The term "insider trading" is not defined in the federal securities laws, but
generally is used to refer to the use of material nonpublic information to trade
in securities (whether or not one is an "insider") or the communication of such
material nonpublic information to others. Although United States law governs
insider trading, this law applies to information about foreign companies as well
as domestic companies. Thus, if an employee receives nonpublic material
information about a foreign company, the employee is prohibited from trading for
accounts based on that information and from communicating such information to
others.
While the law concerning insider trading is not static, it is generally
understood that the law prohibits:
1. trading by an insider, while in possession of material nonpublic
information;
2. trading by a non-insider, while in possession of material nonpublic
information, where the information either was disclosed to the non-insider
in violation of an insider's duty to keep it confidential or was
misappropriated;
3. communicating material nonpublic information to others;
The elements of insider trading and the penalties for such unlawful conduct are
discussed below.
WHO IS AN "INSIDER"?
The concept of "insider" is broad. It includes officers, directors and employees
of a company. In addition, a person can be a "temporary insider" if he or she
enters into a special confidential relationship in the conduct of a company's
affairs and as a result is given access to information solely for the company's
purposes. A temporary insider can include, among others, a company's attorney,
accountants, consultants, bank lending officers and the employees of such
organizations. In addition, Brandes may become a temporary insider of a company
it advises or for which it performs other services. According to the Supreme
Court, the company must expect the outsider to keep the disclosed nonpublic
information confidential and the relationship must at least imply such a duty
before the outsider will be considered an insider.
<PAGE>
WHAT IS "MATERIAL INFORMATION"?
Trading on inside information is not a basis for liability unless the
information is material. "Material information" is defined generally as
information which a reasonable investor would consider substantially important
in making his or her investment decisions, or information that is reasonably
certain to have a substantial effect on the price of a company's securities.
Information that officers, directors and employees should consider material
includes, but is not limited to: dividend changes, earnings estimates, changes
in previously released estimates, significant merger or acquisition proposals or
agreements, major litigation, liquidation problems and extraordinary management
developments.
Material information does not have to relate to a company's business. For
example, not yet released news items which might have a significant effect on
prices have been found to be material information.
No simple "bright line" test exists to determine when information is material;
assessments of materiality involve a highly fact-specific inquiry. For this
reason, you should direct any questions about whether information is material to
the General Counsel, or his designated representative, in the legal department.
WHAT IS "NONPUBLIC INFORMATION"?
Information is nonpublic until it has been effectively communicated to the
market place. One must be able to point to some fact to show that the
information is generally public. For example, information found in a report
filed with the SEC, or appearing in Dow Jones, Reuters Economic Services, The
Wall Street Journal, or other publications of general circulation would be
considered public.
BASES FOR LIABILITY
FIDUCIARY DUTY
In 1980, the Supreme Court found that there is no general duty to disclose
before trading on material nonpublic information, but that such a duty arises
only where there is a fiduciary relationship. That is, there must be a
relationship between the parties to the transaction such that one party has a
right to expect that the other party will disclose any material nonpublic
information or refrain from trading. Non-insiders can acquire the fiduciary
duties of insiders by entering into a confidential relationship with the company
through which they gain information (e.g. attorneys, accountants), or they can
acquire a fiduciary duty to the company's shareholders as "tippees" if they are
aware or should have been aware that they have been given confidential
information by an insider who has violated his fiduciary duty to the company's
shareholders.
<PAGE>
However, in the "tippee" situation, a breach of duty occurs only if the insider
personally benefits, directly or indirectly, from the disclosure. The benefit
does not have to be pecuniary, but can be a gift, reputational benefit that will
translate into future earnings or even evidence of a relationship that suggests
a quid pro quo.
MISAPPROPRIATION
Another basis for insider trading liability is trading which occurs on material
nonpublic information that was stolen or misappropriated from any other person.
It should be noted that "misappropriation" can be used to include a variety of
individuals not previously thought to be encompassed under the fiduciary duty.
PENALTIES FOR INSIDER TRADING
Penalties for trading on or communicating material nonpublic information are
severe, both for individuals involved in such unlawful conduct and their
employers. A person can be subject to some or all of the penalties below even if
he or she does not personally benefit from the violation. Penalties include:
* civil injunctions
* treble damages
* disgorgement of profits
* jail sentences
* fines for the person who committed the violation of up to three times
the profit gained or losses avoided, whether or not the person actually
benefited;
* fines for the employer or other controlling person of $1,000,000 or
three times the amount of the profit gained or loss avoided, whichever
is greater.
In addition, any violation of this policy statement can be expected to result in
serious sanctions by Brandes, including termination.
IDENTIFYING INSIDE INFORMATION
Before recommending or executing any trade for yourself or others, including
client accounts, you must determine whether you have access to material
nonpublic information. If you think that you might have access to material
nonpublic information, you should take the following steps:
<PAGE>
a. Report the information and proposed trade immediately to the General
Counsel, or his designate.
b. Do not purchase or sell the securities on behalf of yourself or others,
including employee-related accounts and client accounts.
c. Do not communicate the information inside or outside Brandes, other
than to Brandes' attorneys.
d. After the General Counsel, or his designate, has reviewed the issue,
the firm will determine whether the information is material and
nonpublic and, if so, what action the firm should take.
You should consult with General Counsel, or his designate, or Brandes' outside
counsel before taking any action.
CONTACTS WITH PUBLIC COMPANIES
Contacts with public companies represent an important part of Brandes' research
efforts. Brandes may make investment decisions on the basis of the firm's
conclusions formed through such contacts and analysis of publicly available
information. Difficult legal issues arise, however, when, in the course of these
contacts, a Brandes employee becomes aware of material nonpublic information.
This could happen, for example, if a company's Chief Financial Officer
prematurely discloses quarterly results to an analyst or an investor relations
representative makes a selective disclosure of adverse news to a handful of
investors. In such situations, Brandes must make a judgment as to its further
conduct. To protect yourself, your clients and Brandes, you should contact
immediately General Counsel, or his designate, if you believe that you may have
received material nonpublic information.
TENDER OFFERS
Tender offers represent a particular concern in the law of insider trading for
two reasons. First, tender offer activity often produces extraordinary gyrations
in the price of the target company's securities. Trading during this time period
is more likely to attract regulatory attention (and produces a disproportionate
percentage of insider trading cases). Second, the SEC has adopted a rule which
expressly forbids trading and "tipping" while in possession of material
nonpublic information regarding a tender offer received from the tender offerer,
the target company or anyone acting on behalf of either. Brandes employees
should exercise particular caution any time they become aware of nonpublic
information relating to a tender offer.
<PAGE>
SUPERVISORY PROCEDURES
The role of General Counsel is critical to the implementation and maintenance of
Brandes' policy and procedures against insider trading. Supervisory procedures
can be divided into two classifications - prevention of insider trading and
detection of insider trading.
PREVENTION OF INSIDER TRADING
To prevent insider trading, General Counsel should:
1. provide, on a regular basis, an educational program to familiarize officers,
partners and employees with Brandes' policy and procedures;
2. answer questions regarding Brandes' policy and procedures;
3. resolve issues of whether information received by an officer, partner or
employee of Brandes is material and nonpublic;
4. regularly review and update Brandes' policy and procedures;
5. implement measures to prevent dissemination of material nonpublic
information, or restrict trading of the securities involved, when it has been
determined that an officer, partner or employee of Brandes has material
nonpublic information;
6. provide that all employees obtain approval from the trading department at
Brandes prior to trades as described in the Code of Ethics. This is an area
of great concern to the SEC and Brandes.
SPECIAL REPORTS TO COUNSEL
Promptly upon learning of a potential violation of this policy statement,
General Counsel should prepare a written report to Brandes' outside counsel
providing full details, which may include:
1. the name of particular securities involved, if any;
2. the date General Counsel learned of the potential violation and began
investigating;
3. the accounts and individuals involved;
4. actions taken as a result of the investigation, if any; and
5. recommendations for further action;
<PAGE>
DETECTION OF INSIDER TRADING
To detect insider trading General Counsel should:
1. review the trading activity reports filed by each officer, partner and
employee;
2. review the trading activity of accounts managed by Brandes
3. review trading activity of Brandes' own account;
<PAGE>
BRANDES INVESTMENT PARTNERS, L.P.
ANNUAL CERTIFICATION FORM
CODE OF ETHICS
To the Compliance Department of Brandes Investment Partners, L.P., I hereby
certify that:
1. I have read and understand the Code of Ethics and recognize that I am
subject thereto;
2. I have complied with the requirements of the Code of Ethics;
3. I have reported all personal securities transactions required to be
reported pursuant to the requirements of the Code of Ethics;
4. Except as noted on disclosure document, I have no knowledge of the
existence of any personal conflict of interest relationship which may
involve Brandes clients, such as any economic relationship between my
transactions and securities held or to be acquired by Brandes clients
including the Brandes Investment Trust.
Date:_________________ Signature:_________________________
Printed Name:______________________
Title:_____________________________
FOR COMPLIANCE USE ONLY
DATE INITIALS
CM Review
Input
Data
Employee
Record
<PAGE>
DISCLOSURE OF HOLDINGS
(This section to be filled out by members of Investment Committee [all pms,
apms, rms, managing partners and institutional group, or personnel with
subsidiaries filling comparable positions], all Trading and Compliance
personnel.)
Date:_______________________________
Name:_______________________________
If all of your securities holdings are directed by Brandes, please so note and
disregard the remainder of the form. Otherwise, please disclose all securities
holdings, whether public or private.
Name of brokerage account(s) and account number(s):
Where account is custodied:
List any securities privately held:
All employees filling out this disclosure are reminded that copies of all
brokerage statements generated on the accounts listed above must be forwarded to
Compliance. If you would like to set up an automatic interested party mailing,
please contact compliance personnel for information.
<PAGE>
QUESTIONNAIRE
(This form is to be completed by all employees.)
Date:____________________________
Name:____________________________
1. List any corporation, public or private, for profit or not for profit, of
which you, or a member of your immediate family, are an officer or director
or hold 5% or more of its outstanding stock. Briefly describe the business.
2. List any partnership of which you are either a general or limited partner and
briefly describe for each its business activities and your status as a
general or limited partner.
3. List any joint venture or any other businesses in which you participate,
other than your employment with Brandes.
4. List any trustee or executor relationships you have, other than those
pertaining to your immediate family.
5. List any investment clubs of which you are a member.
<PAGE>
TOPICS REQUIRING REGISTRATION
(This form is to be completed by all employees.)
The following topics may require registration before they can be discussed. They
should be avoided by unlicensed personnel.
Performance
Specific Stocks or Bonds
Buying/Selling
Outlook
Markets (Foreign or US)
Fees (our own or broker's)
Account Size
Related Accounts, (how we trade, process, etc.)
Management Style
Any Recent Publications
Any discussion about other clients, accounts, etc.
Printed information may be forwarded about these topics by unregistered
personnel in response to unsolicited requests, but other reports and in-depth
conversations or explanations may be provided only by registered persons.
If these topics come up in a conversation and you are not licensed, DO NOT
attempt to address them even if you think you know the answer, but pass person
to a licensed employee - all Portfolio Managers, Associate Portfolio Mangers,
Managing Directors, Regional Managers and the Institutional Group are licensed.
Violations to this policy may result in disciplinary action.
I have read and understand the above policy.
- ---------------------------------------- ----------------------
Signature Date
- ----------------------------------------
Printed Name
<PAGE>
GIFT REPORTING
This form is required for all employees who receive any gift as explained in the
Code of Ethics of $50 or more.
Date:______________________
Name:______________________
Description of Gift (date, outside party(ies) involved, approx. value):
BRANDES INVESTMENT PARTNERS, L.P.
AMENDMENT TO CODE OF ETHICS (DATED APRIL 1, 1997)
EFFECTIVE MARCH 1, 2000
The Code of Ethics for Brandes Investment Partners, L.P. and affiliates, dated
April 1, 1997, is amended hereby to include the following substantive provisions
effective March 1, 2000.
I. POLICY ON PARTICIPATION OF EMPLOYEE-RELATED ACCOUNTS IN INITIAL PUBLIC
OFFERINGS, HOT IPOS AND PRIVATE PLACEMENTS
INITIAL PUBLIC OFFERINGS ("IPO") AND HOT IPOS.
No Employee-Related Account may purchase any securities in an IPO or Hot
IPO; provided, however, an Employee-Related Account may, upon the prior
written approval of Brandes, participate in the following IPOs:
(i) an IPO in connection with the de-mutualization of a savings bank or
the de-mutualization of a mutual insurance company in which the
holder of the Employee-Related Account owns a life insurance policy;
(ii) an IPO of a spin-off company where the Employee-Related Account owns
stock in the company that spins off the issuer;
(iii) an IPO of a company in which the Employee-Related Account owns stock
in the company and the stock was acquired through participation in a
private placement previously approved by Brandes; and
(iv) an IPO of the employer of the holder of the Employee-Related
Account.
An IPO generally means an offering of securities registered with the
Securities and Exchange Commission ("SEC"), the issuer of which,
immediately before the registration, was not required to file reports with
the SEC. See, rule 17j-1(a)(6).
Hot IPOs are securities of a public offering that trade at a premium in the
secondary market whenever such secondary market begins.
PRIVATE PLACEMENTS
No Employee-Related Account may purchase any securities in a private
placement except upon the prior written approval of Brandes.
<PAGE>
PROCEDURES FOR OBTAINING PRIOR WRITTEN APPROVAL OF THE FIRM WITH RESPECT TO IPOS
AND PRIVATE PLACEMENTS
With respect to the participation in private placements or the permissible
IPOs listed above, an Employee-Related Account may obtain "the prior
written approval of Brandes" by first submitting a written request for
approval to the Legal/Compliance Department using the REQUEST TO
PARTICIPATE IN AN IPO/PRIVATE PLACEMENT IN AN EMPLOYEE-RELATED ACCOUNT Form
(attached hereto). The Legal/Compliance Department shall review the
proposed transaction to determine whether the proposed transaction would
create any material conflicts of interests. If the Legal/Compliance
Department determines that the proposed transaction would create no
material conflicts of interests, the Legal/Compliance Department shall then
seek written approval for the transaction from two managing partners. Such
written approval shall include written justification for the decision of
the managing partners approving the transaction.
Any person authorized to purchase securities in an IPO or private placement
shall disclose that investment when s/he plays a part in any subsequent
consideration by Brandes of an investment in the issuer of such securities.
II. INFORMATION REQUIRED IN QUARTERLY EMPLOYEE TRANSACTION REPORT
Each quarterly transaction report filed for the calendar quarter ending March
31, 2000 (due April 10, 2000), and for subsequent quarters must now include all
information required under amended rule 17j-1(d)(1)(ii).(1) Quarterly Employee
Transaction Reports shall be filed with the Legal/Compliance Department no later
than 10 days after the end of a calendar quarter and must contain the following
information:
(A) With respect to any transaction during the quarter in a Security
reportable under the Code in which the employee or Employee Related
Person (as defined below) had any direct or indirect beneficial
ownership:
(1) The date of the transaction, the title, the interest rate and
maturity date (if applicable), the number of shares and the
principal amount of each Security involved;
(2) The nature of the transaction (I.E., purchase, sale or any other
type of acquisition or disposition);
- ----------
(1) The additional information required under this amendment is: (i) the date
that the quarterly transaction report is filed; (ii) the name of any
Employee Related Account established by an employee or Employee Related
Person during that quarter; and (iii) the date the account was established.
See, amended rule 17j-1(d)(1)(ii)(A)(5) and (B).
<PAGE>
(3) The price of the Security at which the transaction was effected;
(4) The name of the broker, dealer or bank with or through which the
transaction was effected; and
(5) The date that the report is submitted by the employee.
(B) With respect to any Employee Related Account established by the
employee or Employee Related Person in which any Securities were held
during the quarter for the direct or indirect benefit of the employee
or Employee Related Person:
(1) The name of the broker, dealer or bank with whom the employee or
Employee Related Person established the account;
(2) The date the account was established; and
(3) The date that the report is submitted by the employee.
Note that employees need not file a quarterly transaction report if the
information would duplicate information that Brandes has received in a broker's
confirmation or account statement. See, amended rule 17j-1(d)(2)(v). Amended
Quarterly Employee Transaction Reports will be distributed for subsequent
reporting usage by March 31, 2000.
An Employee Related Person is any non-employee who has an Employee Related
Account as defined in the Code to which the Code's pre-clearance and reporting
procedures with respect to Securities transactions therein applies.
<PAGE>
REQUEST TO PARTICIPATE IN AN IPO/PRIVATE PLACEMENT IN AN EMPLOYEE-RELATED
ACCOUNT*
Date: ___________________________
I, _______________________________, intend to subscribe in an initial public
NAME OF EMPLOYEE
offering/Private
Placement of the security referenced below for ______________________________-
NAME ON ACCOUNT
_______________ account. I will execute the transaction only upon receiving
ACCOUNT #
prior approval of the intended activity.
Security:__________________________________
APPROVED [ ] DENIED [ ]
Reviewed by: _______________________________ Date:_________________________
Legal/Compliance Department
Reviewed by:________________________________ Date:_________________________
MANAGING PARTNER
Reviewed by:________________________________ Date:_________________________
MANAGING PARTNER
Justification for Approval:
* Please attach prospectus or offering memorandum if available.
REMINDER: No Employee Related Account may sell a security purchased within the
previous 60 calendar days, except a security held for at least 30 days may be
sold at a loss.
LEGAL/COMPLIANCE DEPARTMENT - ORIGINAL COPY
EMPLOYEE - RETAIN COPY FOR PERSONAL RECORDS
CODE OF ETHICS
of
BRANDES INVESTMENT TRUST
ADOPTION OF THIS CODE. This Code of Ethics ("Code") has been adopted by
BRANDES INVESTMENT TRUST (the "Trust") and BRANDES INVESTMENT PARTNERS (the
"Advisor") pursuant to Rule 17j-1 (the "Rule") under the Investment Company Act
of 1940 (the "1940 Act").
INCORPORATION OF THE ADVISOR'S CODE OF ETHICS. This Code incorporates the
Advisor's Code of Ethics for use in connection with the requirements of the Rule
with respect to the Trust. All provisions of the Advisor's Code of Ethics,
including but not limited to the quarterly reporting of securities transactions,
apply to investment activities of any "access person" of the Trust as defined
below.
DEFINITION OF "ACCESS PERSON". "Access person" of the Trust means any
Trustee, officer or "advisory person" of the Fund. "Advisory person" means any
employee of the Fund, the Advisor, or the Fund's Distributor or Administrator
who, in connection with his or her regular functions or duties, makes,
participates in, or obtains information regarding the purchase or sale of a
security by the Trust, or whose functions relate to the making of any
recommendations with respect to such purchases or sales.
REPORTING REQUIREMENTS AS TO INDEPENDENT TRUSTEES. Notwithstanding the
definition of access person set forth above, each independent Trustee (that is,
one who is not an "interested person" of the Trust as defined in the 1940 Act)
must file a report under the applicable reporting provisions of the Advisor's
Code only if at the time of entering into a transaction involving the purchase
or sale of securities the independent Trustee knew, or in the ordinary course of
fulfilling his or her official duties as a Trustee of the Trust should have
known, that, during the 15-day period immediately preceding or after the date of
the transaction in a security by the individual such security is or was
purchased or sold by the Trust or was considered for such purchase or sale.
REPORTING REQUIREMENTS AS TO OTHERS. With respect to those access
persons or advisory persons of the Trust who are also officers of the Trust's
Advisor, Administrator, Distributor, or Administrator, the reporting
requirements of this Code may be satisfied by their compliance with the
reporting requirements of the Advisor's, Distributor's or Administrator's Code
of Ethics.
CODE OF ETHICS
This Code of Ethics (the "Code") has been adopted by Investment Company
Administration L.L.C ("ICALLC") and First Fund Distributors, Inc. ("FFD") in
accordance with Rule 17j-1 under the Investment Company Act of 1940 (the "1940
Act").
I. LEGAL REQUIREMENT
Rule 17j-1 makes it unlawful for certain persons, in connection with the
purchase or sale by such person of a security held or to be acquired by a Fund:
(1) To employ any device, scheme, or artifice to defraud the Fund;
(2) To make to the Fund any untrue statement of a material fact or omit to
state to the Fund a material fact necessary in order to make the statements
made, in light of the circumstances under which they are made, not misleading;
(3) To engage in any act, practice, or course of business which operates or
would operate as a fraud or deceit upon the Fund; or
(4) To engage in any manipulative practice with respect to the Fund.
II. DEFINITIONS
(a) "Fund" means any investment company registered under the 1940 Act, or
any series or class of shares of such an investment company, which has a
contractual relationship with ICALLC or FFD.
(b) "Access person" means any employee of ICALLC or FFD who, in connection
with his regular functions or duties, obtains information that a security is
held or to be acquired by a Fund.
(c) A security is "held or to be acquired" if within the most recent 15 days
it (i) is or has been held by a Fund, or (ii) is being or has been considered by
the Fund or its investment adviser for purchase by a Fund. A purchase or sale
includes the writing of an option to purchase or sell.
(d) A security is "being considered for purchase or sale" when a
recommendation to purchase or sell a security has been made and communicated.
(e) "Beneficial ownership" shall be interpreted in the same manner as it
would be in determining whether a person is subject to the provisions of Section
16 of the Securities Exchange Act of 1934 and the rules and regulations
thereunder, except that the determination of direct or indirect beneficial
ownership shall apply to all securities which an access person has or acquires.
(f) "Control" shall have the same meaning as that set forth in Section
2(a)(9) of the 1940 Act.
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(g) "Security" shall have the meaning set forth in Section 2(a)(36) of the
1940 Act, except that it shall not include securities issued by the Government
of the United States, bankers' acceptances, bank certificates of deposit,
commercial paper and shares of registered open-end investment companies.
III. EXEMPTED TRANSACTIONS
The prohibitions of Section IV of this Code shall not apply to:
(a) Purchases or sales effected in any account over which the access person
has no direct or indirect influence or control.
(b) Purchases or sales of securities which are not eligible for purchase or
sale by a Fund.
(c) Purchases or sales which are non-volitional on the part of either the
access person or the Fund.
(d) Purchases which are part of an automatic dividend reinvestment plan.
(e) Purchases effected upon the exercise of rights issued by an issuer pro
rata to all holders of a class of its securities, to the extent such rights were
acquired from such issuer, and sales of such rights so acquired.
IV. PROHIBITED PURCHASES AND SALES
(a) No access person shall knowingly purchase or sell, directly or
indirectly, any security held or to be acquired by a Fund until the first
business day after such Fund completes all of its intended trades in such
security.
(b) In order to avoid making a prohibited purchase or sale of a security, no
access person shall purchase or sell any security, except as indicated below,
without obtaining advance written clearance of such transaction from a person
designated by ICALLC and FFD to grant such advance clearance.
(c) Advance clearance is not required for the purchase or sale of 500 shares
or less (during a rolling 30 day period) of an equity security which (i) is
listed on the New York Stock Exchange or the NASDAQ National Market System; or
(ii) has a market capitalization of $1 billion or more at the time of purchase
or sale.
(d) No access person may purchase a security in an initial public offering
without the prior written approval of the President or the Compliance Officer of
FFD.
(e) No access person shall engage in any act, practice or course of conduct
that would violate the provisions of Rule 17j-1 as set forth in Section I above.
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V. REPORTING
Every access person shall report to the Compliance Officer of ICALLC or FFD
the information described in this below with respect to transactions in any
security in which such access person has, or by reason of such transaction
acquires, any direct or indirect beneficial ownership in the security; provided,
however, that an access person shall not be required to make a report with
respect to transactions effected for any account over which such person does not
have any direct or indirect influence.
Every report shall be made not later than 10 days after the end of the
calendar quarter in which the transaction to which the report relates was
effected, and shall contain the following information:
(i) The date of the transaction, the title and the number of shares, and the
principal amount of each security involved;
(ii) The nature of the transaction (i.e., purchase, sale, or any other type
of acquisition or disposition);
(iii) The price at which the transaction was effected; and
(iv) The name of the broker, dealer, or bank with or through whom the
transaction was effected.
VI. SANCTIONS
Upon discovering a violation of this Code, ICAC or FFD may impose such
sanctions as it deems appropriate, including, inter alia, a letter of censure,
suspension, or termination of the employment of the violator, and/or a
disgorging of any profits made by the violator.
