DFA INVESTMENT DIMENSIONS GROUP INC, 497, 1995-07-12

DFA INVESTMENT DIMENSIONS GROUP INC
497, 1995-07-12

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PROSPECTUS
JUNE 30, 1995
DFA INVESTMENT DIMENSIONS GROUP INC.

DFA INVESTMENT DIMENSIONS GROUP INC. (the "Fund"), 1299 Ocean Avenue,
11th Floor, Santa Monica, California 90401, (310) 395-8005, is an open-end
management investment company whose shares are offered, without a sales
charge, generally to institutional investors and clients of registered
investment advisers.

The Fund issues twenty series of shares, each of which represents a
separate class ("Portfolio") of the Fund's common stock, having its own
investment objective and policies. The investment objective of each of the
Domestic and International Equity Portfolios, except U.S. Large Company
Portfolio, is to achieve long-term capital appreciation. The investment
objective of U.S. Large Company Portfolio is to approximate the investment
performance of the Standard & Poor's 500 Composite Stock Index. The
investment objectives of the Fixed Income Portfolios are: DFA One-Year Fixed
Income Portfolio, to achieve stable real value of capital with a minimum of
risk by investing in high quality obligations; DFA Five-Year Government
Portfolio, to maximize total returns available from the universe of U.S.
Government and U.S. Government Agency obligations which mature within five
years from the date of settlement; DFA Intermediate Government Fixed Income
Portfolio, to earn current income consistent with preservation of capital;
and DFA Global Fixed Income Portfolio, to provide a market rate of return for
a global fixed income portfolio with low relative volatility of returns.

DOMESTIC EQUITY PORTFOLIOS

U.S. 9-10 Small Company Portfolio U.S. Small Cap Value Portfolio
U.S. 6-10 Small Company Portfolio U.S. Large Cap Value Portfolio
U.S. Large Company Portfolio DFA/AEW Real Estate Securities Portfolio

INTERNATIONAL EQUITY PORTFOLIOS

Japanese Small Company Portfolio Continental Small Company Portfolio
Pacific Rim Small Company Portfolio Large Cap International Portfolio
United Kingdom Small Company Portfolio DFA International High Book to Market
Emerging Markets Portfolio Portfolio
DFA International Small Cap Value Portfolio

FIXED INCOME PORTFOLIOS

DFA One-Year Fixed Income Portfolio
DFA Five-Year Government Portfolio
DFA Global Fixed Income Portfolio
DFA Intermediate Government Fixed Income Portfolio

THE U.S. 6-10 SMALL COMPANY, U.S. LARGE COMPANY, DFA ONE-YEAR FIXED
INCOME, U.S. SMALL CAP VALUE, U.S. LARGE CAP VALUE, DFA INTERNATIONAL HIGH
BOOK TO MARKET AND EMERGING MARKETS PORTFOLIOS (COLLECTIVELY THE "FEEDER
PORTFOLIOS"), UNLIKE MANY OTHER INVESTMENT COMPANIES WHICH DIRECTLY ACQUIRE
AND MANAGE THEIR OWN PORTFOLIO OF SECURITIES, EACH SEEKS TO ACHIEVE ITS
INVESTMENT OBJECTIVE BY INVESTING ALL OF ITS INVESTABLE ASSETS IN A
CORRESPONDING SERIES OF SHARES OF THE DFA INVESTMENT TRUST COMPANY (THE
"TRUST"), AN OPEN-END, MANAGEMENT INVESTMENT COMPANY THAT ISSUES SERIES
HAVING THE SAME INVESTMENT OBJECTIVE, POLICIES AND LIMITATIONS AS EACH OF
THOSE PORTFOLIOS. THE INVESTMENT EXPERIENCE OF EACH FEEDER PORTFOLIO WILL
CORRESPOND DIRECTLY WITH THE INVESTMENT EXPERIENCE OF ITS CORRESPONDING
SERIES. INVESTORS SHOULD CAREFULLY CONSIDER THIS INVESTMENT APPROACH. FOR
ADDITIONAL INFORMATION, SEE "THE FEEDER PORTFOLIOS".

This prospectus sets forth concisely information about the Fund that
prospective investors should know before investing and should be read
carefully and retained for future reference. A statement of additional
information about the Fund, dated June 30, 1995, which is incorporated herein
by reference, has been filed with the Securities and Exchange Commission and
is available upon request, without charge, by writing or calling the Fund at
the above address or telephone number.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION NOR HAS THE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.

<PAGE>

TABLE OF CONTENTS
Page
----
HIGHLIGHTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1

CONDENSED FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . .7

THE FEEDER PORTFOLIOS . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7

SMALL COMPANY PORTFOLIOS. . . . . . . . . . . . . . . . . . . . . . . . . . . .8
Investment Objective and Policies. . . . . . . . . . . . . . . . . . . . .8

PORTFOLIO CHARACTERISTICS AND POLICIES -
SMALL COMPANY PORTFOLIOS . . . . . . . . . . . . . . . . . . . . . . . . . . .8
U.S. 6-10 Small Company Portfolio . . . . . . . . . . . . . . . . . . . .8
U.S. 9-10 Small Company Portfolio. . . . . . . . . . . . . . . . . . . . .9
Japanese Small Company Portfolio . . . . . . . . . . . . . . . . . . . . .9
United Kingdom Small Company Portfolio . . . . . . . . . . . . . . . . . .9
Continental Small Company Portfolio. . . . . . . . . . . . . . . . . . . 10
Pacific Rim Small Company Portfolio. . . . . . . . . . . . . . . . . . . 10
Portfolio Structure. . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Portfolio Transactions . . . . . . . . . . . . . . . . . . . . . . . . . 12

U.S. LARGE COMPANY PORTFOLIO. . . . . . . . . . . . . . . . . . . . . . . . . 12
Investment Objective and Policies. . . . . . . . . . . . . . . . . . . . 12

LARGE CAP INTERNATIONAL PORTFOLIO . . . . . . . . . . . . . . . . . . . . . . 13
Investment Objective and Policies. . . . . . . . . . . . . . . . . . . . 13

DFA/AEW REAL ESTATE SECURITIES PORTFOLIO. . . . . . . . . . . . . . . . . . . 15
Portfolio Characteristics and Policies . . . . . . . . . . . . . . . . . 15
Portfolio Structure. . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Portfolio Transactions . . . . . . . . . . . . . . . . . . . . . . . . . 16

VALUE PORTFOLIOS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Portfolio Characteristics and Policies . . . . . . . . . . . . . . . . . 16
Portfolio Structure. . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Portfolio Transactions . . . . . . . . . . . . . . . . . . . . . . . . . 17

DFA INTERNATIONAL HIGH BOOK TO MARKET
PORTFOLIO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Investment Objective and Policies. . . . . . . . . . . . . . . . . . . . 18

DFA INTERNATIONAL SMALL CAP VALUE PORTFOLIO . . . . . . . . . . . . . . . . . 19
Investment Objective and Policies. . . . . . . . . . . . . . . . . . . . 19

EMERGING MARKETS PORTFOLIO. . . . . . . . . . . . . . . . . . . . . . . . . . 21
Investment Objective and Policies. . . . . . . . . . . . . . . . . . . . 21
Portfolio Structure. . . . . . . . . . . . . . . . . . . . . . . . . . . 22

SECURITIES LOANS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

INVESTMENT OBJECTIVES AND POLICIES -
THE FIXED INCOME PORTFOLIOS . . . . . . . . . . . . . . . . . . . . . . . . . 23
DFA One-Year Fixed Income Portfolio. . . . . . . . . . . . . . . . . . . 23
DFA Global Fixed Income Portfolio. . . . . . . . . . . . . . . . . . . . 23
DFA Five-Year Government Portfolio . . . . . . . . . . . . . . . . . . . 24
DFA Intermediate Government Fixed Income Portfolio . . . . . . . . . . . 24
Description of Investments . . . . . . . . . . . . . . . . . . . . . . . 24

<PAGE>

Investments in the Banking Industry. . . . . . . . . . . . . . . . . . . 25
Portfolio Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

RISK FACTORS - ALL PORTFOLIOS . . . . . . . . . . . . . . . . . . . . . . . . 27

MANAGEMENT OF THE FUND. . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Investment Services - United Kingdom and Continental Small
Company Portfolios . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Investment Services - Japanese and Pacific Rim
Small Company Portfolios . . . . . . . . . . . . . . . . . . . . . . . 31
Investment Services - DFA/AEW Real Estate Securities Portfolio . . . . . 32
Administrative Services - The Feeder Portfolios. . . . . . . . . . . . . 32
Client Service Agent - DFA International High Book to Market Portfolio . 32
Directors and Officers . . . . . . . . . . . . . . . . . . . . . . . . . 33

DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAXES. . . . . . . . . . . . . . . 33

PURCHASE OF SHARES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
In Kind Purchases . . . . . . . . . . . . . . . . . . . . . . . . . . . 35

VALUATION OF SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Public Offering Price. . . . . . . . . . . . . . . . . . . . . . . . . . 37

DISTRIBUTION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37

EXCHANGE OF SHARES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38

REDEMPTION OF SHARES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38

GENERAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39

<PAGE>

HIGHLIGHTS

PAGE
THE FUND

The Fund offers twenty separate Portfolios. Each Portfolio, in effect,
represents a separate mutual fund with its own investment objective and
policies. The investment objective of each Portfolio is a fundamental policy
and may not be changed without the affirmative vote of a majority of its
outstanding securities. Investors may choose to invest in one or more of the
Portfolios. Proceeds from the sale of shares of a Portfolio will be invested
in accordance with that Portfolio's investment objective and policies. A
shareholder will be entitled to a pro rata share of all dividends and
distributions arising from the assets of the Portfolio in which he invests.
Upon redeeming shares a shareholder will receive the current net asset value
per share of the Portfolio represented by the redeemed shares.

INVESTMENT OBJECTIVES - SMALL COMPANY PORTFOLIOS 8

The investment objective of each of these Portfolios: U.S. 9-10 Small
Company Portfolio, U.S. 6-10 Small Company Portfolio, Japanese Small Company
Portfolio, United Kingdom Small Company Portfolio, Continental Small Company
Portfolio and Pacific Rim Small Company Portfolio (the "Small Company
Portfolios") is to achieve long-term capital appreciation by investing in
marketable stocks of small companies. The size of a company will be measured
by its relative market capitalization. Each of these Portfolios (U.S. 6-10
Small Company Portfolio indirectly through ownership of the corresponding
Trust Series) will be structured by generally basing the amount of each
security purchased on the issuer's relative market capitalization, applied on
a basis of descending values, with a view to achieving a reasonable
reflection of the relative market capitalizations of its portfolio companies.
(See "PORTFOLIO CHARACTERISTICS AND POLICIES - THE SMALL COMPANY
PORTFOLIOS".)

INVESTMENT OBJECTIVE - U.S. LARGE COMPANY PORTFOLIO 12

The investment objective of U.S. Large Company Portfolio is to approximate
the investment performance of Standard & Poor's 500 Composite Stock Index
(the "S&P 500 Index"). The Portfolio invests all of its assets in U.S. Large
Company Series of the Trust, which in turn invests in the stocks which
comprise the S&P 500 Index in approximately the same proportions as they are
represented in the S&P 500 Index.

INVESTMENT OBJECTIVE - LARGE CAP INTERNATIONAL PORTFOLIO 13

The investment objective of Large Cap International Portfolio is to achieve
long-term capital appreciation. The Portfolio will invest in a market-weighted
portfolio of the stocks of large non-U.S. companies.

INVESTMENT OBJECTIVE - DFA/AEW REAL ESTATE SECURITIES PORTFOLIO 15

The investment objective of DFA/AEW Real Estate Securities Portfolio is to
achieve long-term capital appreciation. The Portfolio will invest in readily
marketable equity securities of companies whose principal business is in the
real estate industry.

INVESTMENT OBJECTIVES - VALUE PORTFOLIOS 16

The investment objective of both U.S. Large Cap Value Portfolio and U.S.
Small Cap Value Portfolio (collectively the "Value Portfolios") is to achieve
long-term capital appreciation. U.S. Large Cap Value Portfolio and U.S.
Small Cap Value Portfolio will invest all of their assets in U.S. Large Cap
Value Series and U.S. Small Cap Value Series (collectively the "Value
Series") of the Trust, respectively, which in turn will invest in common
stocks of U.S. companies that have a high book value in relation to their
market value.

1
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INVESTMENT OBJECTIVE - DFA INTERNATIONAL HIGH BOOK TO MARKET PORTFOLIO 18

The investment objective of the DFA International High Book to Market
Portfolio is to achieve long-term capital appreciation. The Portfolio will
invest all of its assets in The DFA International Value Series of the Trust,
which in turn will invest in the stocks of large non-U.S. companies that have
a high book value in relation to their market value.

INVESTMENT OBJECTIVE - DFA INTERNATIONAL SMALL CAP VALUE PORTFOLIO 19

The investment objective of the Portfolio is to achieve long-term capital
appreciation. The Portfolio will invest in the stocks of small non-U.S.
companies that have a high book value in relation to their market value.

INVESTMENT OBJECTIVE - EMERGING MARKETS PORTFOLIO 21

The investment objective of the Emerging Markets Portfolio is to achieve
long-term capital appreciation. The Portfolio will invest all of its assets
in the Emerging Market Series of the Trust, which in turn invests in the
equity securities of companies in emerging markets.

INVESTMENT OBJECTIVES - FIXED INCOME PORTFOLIOS 23

The investment objective of DFA One-Year Fixed Income Portfolio is to
achieve stable real value of capital with a minimum of risk. The Portfolio
invests all of its assets in DFA One-Year Fixed Income Series of the Trust.
Generally, the Series will acquire high quality obligations which mature
within one year from the date of settlement; however, when greater returns
are available substantial investments may be made in securities maturing
within two years from the date of settlement as well. In addition, the
Series intends to concentrate investments in the banking industry under
certain circumstances. (See "INVESTMENT OBJECTIVES AND POLICIES - THE FIXED
INCOME PORTFOLIOS" and "Investments in the Banking Industry".)

The investment objective of DFA Five-Year Government Portfolio is to
maximize total returns available from the universe of high quality debt
obligations. The Portfolio will invest only in obligations of the U.S.
Government and U.S. Government Agencies which mature within five years from
the date of settlement and repurchase agreements.

The investment objective of DFA Intermediate Government Fixed Income
Portfolio is to earn current income consistent with preservation of capital.
The Portfolio will invest in non-callable obligations of the U.S. Government
and U.S. Government Agencies, AAA-rated dollar-denominated obligations of
foreign governments and supranational organizations, and futures contracts on
U.S. Treasury securities.

RISK FACTORS 27

Japanese Small Company Portfolio, United Kingdom Small Company Portfolio,
Continental Small Company Portfolio, Pacific Rim Small Company Portfolio,
Large Cap International Portfolio, the DFA International Small Cap Value
Portfolio, the DFA International High Book to Market Portfolio and the
Emerging Markets Portfolio (the last two Portfolios indirectly through their
investment in the corresponding Series of the Trust) (collectively, the
"International Equity Portfolios") and DFA Global Fixed Income Portfolio
invest in foreign securities which are traded abroad. DFA One-Year Fixed
Income Series of the Trust, in which the corresponding Fund Portfolio
invests, is authorized to invest in dollar-denominated obligations of U.S.
subsidiaries and branches of foreign banks and dollar-denominated obligations
of foreign issuers traded in the U.S. and also is authorized to concentrate
investments in the banking industry in certain circumstances. DFA/AEW Real
Estate Securities Portfolio will concentrate its investments in the real
estate industry. DFA Intermediate Government Fixed Income Portfolio may
invest in futures contracts on obligations of the U.S. Government. Large Cap
International Portfolio, the DFA International High Book to Market Portfolio
and DFA/AEW Real Estate

2
<PAGE>

Securities Portfolio may invest in stock index futures contracts and options
thereon and the U.S. Large Company and the Value Series of the Trust, in
which the corresponding Portfolios invest, also may purchase and sell index
futures and options thereon. All of the Portfolios are authorized to invest
in repurchase agreements. All of the above described policies involve
certain risks. The policy of the Feeder Portfolios to invest in the shares of
corresponding Series of the Trust also involves certain risks. (See "RISK
FACTORS - ALL PORTFOLIOS" and "THE FEEDER PORTFOLIOS".)

MANAGEMENT AND ADMINISTRATIVE SERVICES 29

Dimensional Fund Advisors Inc. (the "Advisor") serves as investment
advisor to each of the Portfolios, except the Feeder Portfolios, and to each
Series of the Trust. Dimensional Fund Advisors Ltd. serves as sub-advisor of
United Kingdom and Continental Small Company Portfolios. DFA Australia Pty
Limited serves as sub-advisor of Japanese and Pacific Rim Small Company
Portfolios. Aldrich, Eastman & Waltch L.P. ("AEW") serves as sub-advisor of
DFA/AEW Real Estate Securities Portfolio. The Advisor provides each Feeder
Portfolio with certain administrative services. Reinhardt Werba Bowen
Advisory Services serves as client service agent to the DFA International
High Book to Market Portfolio. (See "MANAGEMENT OF THE FUND".)

DIVIDEND POLICY 33

The Domestic and International Equity Portfolios, except for U.S. Large
Company Portfolio and U.S. Large Cap Value Portfolio, each distribute
substantially all of their own net investment income in November and December
of each year. U.S. Large Company Portfolio, U.S. Large Cap Value Portfolio,
DFA Intermediate Government Fixed Income Portfolio and DFA Global Fixed
Income Portfolio distribute dividends from their net investment income
quarterly. DFA One-Year Fixed Income Portfolio distributes dividends from
its net investment income monthly. DFA Five-Year Government Portfolio
distributes dividends from net investment income semi-annually. The
Portfolios will make any distributions from realized net capital gains on an
annual basis. (See "DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAXES".)

PURCHASE, VALUATION AND REDEMPTION OF SHARES 35

Shares of the International Equity Portfolios, except United Kingdom Small
Company Portfolio, Large Cap International Portfolio and the DFA
International High Book to Market Portfolio, may be purchased at a public
offering price, which is equal to the net asset value of their shares, plus a
reimbursement fee, equal to 1% of such value of the shares of Continental and
Pacific Rim Small Company Portfolios; 0.50% of the net asset value of the
shares of Japanese Small Company Portfolio and Emerging Markets Portfolio;
and 0.70% of the net asset value of the shares of DFA International Small Cap
Value Portfolio. The reimbursement fee is paid to the Portfolio whose shares
are purchased and used to defray the costs associated with investment of the
proceeds from the sale of its shares. The shares of the remaining Portfolios
are sold at net asset value. The redemption price of the shares of all of
the Portfolios is equal to the net asset value of their shares.

The value of the shares issued by a Feeder Portfolio will fluctuate in
relation to the investment experience of its corresponding Series. The value
of the shares issued by all other Portfolios will fluctuate in relation to
their own investment experience. Unlike money market funds, the shares of
DFA One-Year Fixed Income Portfolio will tend to reflect fluctuations in
interest rates because the corresponding Series of the Trust in which the
Portfolio invests does not seek to stabilize the price of its shares by use
of the "amortized cost" method of securities valuation. (See "PURCHASE OF
SHARES," "VALUATION OF SHARES" and "REDEMPTION OF SHARES".)

3
<PAGE>

SHAREHOLDER TRANSACTION EXPENSES

Reimbursement Fees (as percentage of original purchase price)(1)

Japanese Small Company Portfolio 0.50%

Continental Small Company Portfolio 1.00%

Pacific Rim Small Company Portfolio 1.00%

Emerging Markets Portfolio 0.50%

DFA International Small Cap Value Portfolio 0.70%
_____________________________________
(1) Reimbursement fees are charged to purchasers of shares and paid to
these Portfolios. They serve to offset costs incurred by a Portfolio when
investing the proceeds from the sale of its shares, and therefore stabilize
the return of the Portfolio for all existing shareholders. (See "VALUATION OF
SHARES - Public Offering Price" for a more complete description of
reimbursement fees.)

With the exception of the Emerging Markets Portfolio and the DFA
International Small Cap Value Portfolio, the expenses in the expense table
below are based on those incurred by the Portfolios and Series for the fiscal
year ended November 30, 1994.

ANNUAL FUND OPERATING EXPENSES MANAGEMENT ADMINISTRATION OTHER TOTAL OPERATING
(AS A PERCENTAGE OF AVERAGE NET ASSETS) FEE FEE EXPENSES EXPENSES
---------- -------------- -------- ---------------
<S> <C> <C> <C> <C>
U.S. 9-10 Small Company 0.50% 0.15% 0.65%

U.S. 6-10 Small Company* 0.03% 0.32% 0.18% 0.53%

U.S. Large Company* 0.025% 0.215% 0.00% 0.24%

U.S. Small Cap Value* 0.20% 0.30% 0.16% 0.66%

U.S. Large Cap Value* 0.10% 0.15% 0.19% 0.44%

DFA/AEW Real Estate Securities 0.50% 0.40% 0.90%

Japanese Small Company 0.50% 0.26% 0.76%

Pacific Rim Small Company 0.50% 0.45% 0.95%

United Kingdom Small Company 0.50% 0.24% 0.74%

Emerging Markets* 0.10% 0.40% 0.75% 1.25%

Continental Small Company 0.50% 0.27% 0.77%

Large Cap International 0.25% 0.41% 0.66%

<FN>
_____________________________________
* Feeder Portfolio.
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
MANAGEMENT ADMINISTRATION OTHER TOTAL OPERATING
FEE FEE EXPENSES EXPENSES
---------- -------------- -------- ---------------
<S> <C> <C> <C> <C>
DFA International High Book to Market* 0.17% 0.19% 0.33% 0.69%

DFA International Small Cap Value 0.65% 0.39% 1.04%

DFA One-Year Fixed Income* 0.05% 0.10% 0.06% 0.21%

DFA Five-Year Government 0.20% 0.11% 0.31%

DFA Global Fixed Income 0.25% 0.24% 0.49%

DFA Intermediate Government Fixed Income 0.15% 0.14% 0.29%
<FN>
______________________________
* Feeder Portfolio
</TABLE>

EXAMPLE

You would pay the following transaction and annual operating expenses on a
$1,000 investment in each Portfolio, assuming a 5% annual return over each of
the following time periods and redemption at the end of each time period:

<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
U.S. 9-10 Small Company $ 7 $ 21 $ 36 $ 81

U.S. 6-10 Small Company 5 17 30 66

U.S. Large Company 2 8 14 31

U.S. Small Cap Value 7 21 37 82

U.S. Large Cap Value 5 14 25 55

DFA/AEW Real Estate Securities 9 29 50 111

Japanese Small Company 13 29 47 99

Pacific Rim Small Company 20 40 62 125

United Kingdom Small Company 8 24 41 92

Emerging Markets 18 44 n/a n/a

Continental Small Company 18 34 52 104

Large Cap International 7 21 37 82

DFA International High Book to
Market 7 22 38 86

DFA International Small Cap Value 18 40 n/a n/a
<FN>
______________________________
* Feeder Portfolio
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
DFA One-Year Fixed Income 2 7 12 27

DFA Five-Year Government 3 10 17 39

DFA Global Fixed Income 5 16 27 62

DFA Intermediate Government Fixed Income 3 9 16 37
</TABLE>

The purpose of the above expense table and Example is to assist investors
in understanding the various costs and expenses that an investor in the
Portfolios will bear directly or indirectly. With respect to the Feeder
Portfolios, the table summarizes the aggregate estimated annual operating
expenses of both the Portfolios and the corresponding Trust Series. (See
"MANAGEMENT OF THE FUND" for a description of Portfolio and Series expenses.)
The Board of Directors of the Fund has considered whether such expenses will
be more or less than they would have been if the Feeder Portfolios were to
have invested directly in the securities held by the Trust Series. The
aggregate amount of expenses for a Feeder Portfolio and the corresponding
Trust Series may be greater than it would have been if the Portfolio were to
invest directly in the securities held by the corresponding Trust Series.
However, the total expense ratios for the Feeder Portfolios and the Trust
Series are expected to be less over time than such ratios would have been if
the Portfolios had continued to invest directly in the underlying securities.
This is because this arrangement enables various institutional investors,
including the Feeder Portfolios, to pool their assets, which may be expected
to result in economies by spreading certain fixed costs over a larger asset
base. Each shareholder in a Trust Series, including a Feeder Portfolio, will
pay its proportionate share of the expenses of that Trust Series.

The example should not be considered a representation of past or future
expenses. Actual expenses may be greater or lesser than those shown. The
Emerging Markets Portfolio and its Trust Series and the DFA International
Small Cap Value Portfolio are new and, therefore, the expenses of those
Portfolios and Series included in the table are the estimated annualized
expenses that are expected to be incurred through the fiscal year ending
November 30, 1995 and the above example is based on estimated expenses for
the current and next two fiscal years and does not extend those estimates
over five and ten year periods.

The Advisor has agreed to bear all of the ordinary operating expenses of
U.S. Large Company Portfolio and its corresponding Series, except the
investment advisory fee of the Series and the administration fee of the
Portfolio. These expenses are not subject to reimbursement by the Series and
the Portfolio. Absent this arrangement, the annualized ratio of expenses to
average net assets for U.S. Large Company Portfolio for the fiscal year ended
November 30, 1994 would have been .66%. Beginning December 1, 1993, the
Advisor agreed to waive its fee under the Investment Management Agreement
with respect to the DFA International Value Series to the extent necessary to
keep the cumulative annual expenses of the Series to not more than 0.45% of
average net assets of the Series on an annualized basis. Through February
15, 1994, the Advisor waived its fee under the Investment Management
Agreement with respect to the DFA International High Book to Market Portfolio
to the extent necessary to keep the cumulative annual expenses of the
Portfolio to not more than 0.65% of average net assets of the Portfolio on an
annualized basis. Absent the waivers, the annualized ratio of expenses to
average net assets for the DFA International High Book to Market Portfolio
for the fiscal year ended November 30, 1994 would have been 0.73%.

For the year ended November 30, 1994, Japanese Small Company Portfolio
received net revenue from a securities lending program which equalled
$800,000, which was .27% of average daily net assets of the Portfolio. The
other International Equity Portfolios also implemented lending programs
during the year. The income generated in the other portfolios for the fiscal
year ended November 30, 1994 is not representative of the income that would
be earned over a full year because of seasonality of the foreign securities
markets.

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<PAGE>

CONDENSED FINANCIAL INFORMATION

The data set forth under the heading "Financial Highlights" in the Fund's
audited annual report to stockholders for the fiscal year ended November 30,
1994 is incorporated herein by reference. The data in the Fund's audited
annual report is covered by the Report of Independent Accountants which is
contained therein and may be obtained by shareholders upon request.
Information regarding the DFA International Small Cap Value Portfolio has not
been provided in the Fund's audited annual report because that Portfolio had
not commenced operations as of November 30, 1994.

With respect to DFA International Small Cap Value Portfolio, the data set
forth under the heading "Financial Highlights" in the unaudited financial
statements contained in the report to shareholders of the Portfolio, dated
May 31, 1995, is incorporated herein by reference. A shareholder of DFA
International Small Cap Value Portfolio may obtain a copy of the report, upon
request and without charge, by contacting the Fund at the address or
telephone number appearing on the cover of the Prospectus.

THE FEEDER PORTFOLIOS

Each of the seven Feeder Portfolios, unlike many other investment
companies which directly acquire and manage their own portfolio of
securities, seeks to achieve its investment objective by investing all of its
investable assets in a corresponding Series of the Trust, an open-end,
management investment company, registered under the Investment Company Act of
1940, that issues Series having the same investment objective as each of
those Portfolios. The investment objective of a Feeder Portfolio may not be
changed without the approval of its shareholders and the investment objective
of a Series of the Trust may not be changed without approval of the
shareholders of that Series. Shareholders of a Feeder Portfolio will receive
written notice thirty days prior to the effective date of any change in the
investment objective of its corresponding Trust Series.

This prospectus describes the investment objective, policies and
restrictions of each Feeder Portfolio and its corresponding Series. (See
"PORTFOLIO CHARACTERISTICS AND POLICIES - THE SMALL COMPANY PORTFOLIOS - U.S.
6-10 Small Company Portfolio"; "U.S. LARGE COMPANY PORTFOLIO - Investment
Objective and Policies"; "THE VALUE PORTFOLIOS - Portfolio Characteristics
and Policies"; "INVESTMENT OBJECTIVES AND POLICIES - THE FIXED INCOME
PORTFOLIOS - The DFA One-Year Fixed Income Portfolio"; "DFA INTERNATIONAL
HIGH BOOK TO MARKET PORTFOLIO -Investment Objective and Policies"; and
"EMERGING MARKETS PORTFOLIO - Investment Objective and Policies"). In
addition, an investor should read "MANAGEMENT OF THE FUND" for a description
of the management and other expenses associated with the Feeder Portfolios'
investment in the Trust. Other institutional investors, including other
mutual funds, may invest in each Series and the expenses of such other funds
and, correspondingly, their returns may differ from those of the Feeder
Portfolios. Please contact the Trust at 1299 Ocean Avenue, 11th Floor, Santa
Monica, CA 90401, (310) 395-8005 for information about the availability of
investing in a Series of the Trust other than through a Feeder Portfolio.

The shares of the Trust Series will be offered to institutional investors
for the purpose of increasing the funds available for investment, to reduce
expenses as a percentage of total assets and to achieve other economies that
might be available at higher asset levels. While investment in a Series by
other institutional investors offers potential benefits to the Series and,
through their investment in the Series, the Feeder Portfolios also,
institutional investment in the Series also entails the risk that economies
and expense reductions might not be achieved and additional investment
opportunities, such as increased diversification, might not be available if
other institutions do not invest in the Series. Also, if an institutional
investor were to redeem its interest in a Series, the remaining investors in
that Series could experience higher pro rata operating expenses, thereby
producing lower returns, and the Series' security holdings may become less
diverse, resulting in increased risk. Institutional investors that have a
greater pro rata ownership interest in a Series than the corresponding Feeder
Portfolio could have effective voting control over the operation of the
Series.

Further, if a Series changes its investment objective in a manner which is
inconsistent with the investment objective of a corresponding Feeder
Portfolio and the shareholders of the Portfolio fail to approve a similar
change in the investment objective of the Portfolio, the Portfolio would be
forced to withdraw its investment in the Series and either seek to invest its
assets in another registered investment company with the same

7
<PAGE>

investment objective as the Portfolio, which might not be possible, or retain
an investment advisor to manage the Portfolio's assets in accordance with its
own investment objective, possibly at increased cost. A withdrawal by a
Feeder Portfolio of its investment in the corresponding Series could result
in a distribution in kind of portfolio securities (as opposed to a cash
distribution) to the Portfolio. Should such a distribution occur, the
Portfolio could incur brokerage fees or other transaction costs in converting
such securities to cash in order to pay redemptions. In addition, a
distribution in kind to the Portfolio could result in a less diversified
portfolio of investments and could affect adversely the liquidity of the
Portfolio.

Finally, the Feeder Portfolios investment in the shares of a registered
investment company such as the Trust is relatively new and results in certain
operational and other complexities. However, management believes that the
benefits to be gained by shareholders outweigh the additional complexities
and that the risks attendant to such investment are not inherently different
from the risks of direct investment in securities of the type in which the
Trust Series invest.

SMALL COMPANY PORTFOLIOS

INVESTMENT OBJECTIVE AND POLICIES

Each Small Company Portfolio and U.S. 6-10 Small Company Series of the
Trust (the "6-10 Series"), operates as a diversified investment company whose
investment objective is to achieve long-term capital appreciation. The Small
Company Portfolios provide investors with access to securities portfolios
consisting of small U.S., Japanese, United Kingdom, European and Pacific Rim
companies. Company size will be determined for purposes of these Portfolios
and the 6-10 Series of the Trust solely on the basis of a company's market
capitalization. "Market capitalization" will be calculated with respect to
domestic securities, by multiplying the price of a company's stock by the
number of its shares of common stock, or with respect to foreign securities
similar stocks which are outstanding.

Each of these Portfolios (U.S. 6-10 Small Company Portfolio indirectly
through ownership of the corresponding Trust Series) will be structured to
reflect reasonably the relative market capitalizations of its portfolio
companies. The Advisor believes that over the long term the investment
performance of small companies is superior to large companies, not only in
the U.S. but in other developed countries as well, and that investment in the
Portfolios is an effective way to improve global diversification.
Institutional investors which, for a variety of reasons, may choose not to
make substantial, or any, direct investment in companies whose securities
will be held by the Portfolios, may participate indirectly in the investment
performance of these companies through ownership of a Portfolio's stock.

PORTFOLIO CHARACTERISTICS AND POLICIES-
SMALL COMPANY PORTFOLIOS

U.S. 6-10 SMALL COMPANY PORTFOLIO

U.S. 6-10 Small Company Portfolio pursues its investment objective by
investing all of its assets in the 6-10 Series, which has the same investment
objective and policies as the Portfolio. U.S. 6-10 Series will invest in a
broad and diverse group of small U.S. companies having readily marketable
securities. References in this prospectus to a "small U.S. company" means a
company whose securities are traded in the U.S. securities markets and whose
market capitalization is not larger than the largest of those in the smaller
one half (deciles 6 through 10) of companies listed on the New York Stock
Exchange ("NYSE"). The 6-10 Series will purchase common stocks of companies
whose shares are listed on the NYSE, the American Stock Exchange (the "AMEX")
and traded in the over-the-counter market ("OTC"). The 6-10 Series may
invest in securities of foreign issuers which are traded in the U.S.
securities markets, but such investments may not exceed 5% of the gross
assets of the Series. It is the intention of the 6-10 Series to acquire a
portion of the common stock of each eligible NYSE, AMEX and OTC company on a
market capitalization weighted basis. (See "PORTFOLIO CHARACTERISTICS AND
POLICIES - THE SMALL COMPANY PORTFOLIOS - Portfolio Structure".) In the
future, the 6-10 Series may purchase common stocks of small U.S. companies
which are listed on other U.S. securities exchanges. In addition, the 6-10
Series is authorized to invest in private placements of interest-

8
<PAGE>

bearing debentures that are convertible into common stock ("privately placed
convertible debentures"). Such investments are considered illiquid and the
value thereof together with the value of all other illiquid investments may
not exceed 15% of the value of the Series' total assets at the time of
purchase.

U.S. 9-10 SMALL COMPANY PORTFOLIO

U.S. 9-10 Small Company Portfolio will invest in a broad and diverse
segment of small U.S. companies having readily marketable stocks, and whose
market capitalization is not larger than the largest of those in the quintile
of companies listed on the NYSE having the smallest market capitalizations
(smallest 20%). The Portfolio will purchase stocks of companies whose shares
are listed on the NYSE, AMEX and traded OTC. The Portfolio may invest in
securities of foreign issuers which are traded in the U.S. securities
markets, but such investments may not exceed 5% of the gross assets of the
Portfolio. There is some overlap in the companies in which U.S. 9-10 Small
Company Portfolio and the U.S. 6-10 Series invest. It is the intention of
U.S. 9-10 Small Company Portfolio to acquire a portion of the stock of each
eligible NYSE, AMEX and OTC company on a market capitalization weighted
basis. (See "PORTFOLIO CHARACTERISTICS AND POLICIES -SMALL COMPANY
PORTFOLIOS - Portfolio Structure".) In the future, U.S. 9-10 Small Company
Portfolio may include stocks of small U.S. companies which are listed on
other U.S. securities exchanges. The Portfolio is authorized to invest in
privately placed convertible debentures and the value thereof together with
the value of all other illiquid investments may not exceed 10% of the value
of the Portfolio's total assets at the time of purchase.

JAPANESE SMALL COMPANY PORTFOLIO

Japanese Small Company Portfolio will invest in a broad and diverse group
of readily marketable stocks of Japanese small companies which are traded in
the Japanese securities markets. Reference in this prospectus to the term
"Japanese small company" means a company located in Japan whose market
capitalization is not larger than the largest of those in the smaller
one-half (deciles 6 through 10) of companies whose securities are listed on
the First Section of the Tokyo Stock Exchange ("TSE").

While the Portfolio will invest primarily in the stocks of small companies
which are listed on the TSE, it may acquire the stocks of Japanese small
companies which are traded in other Japanese securities markets as well. It
is the intention of Japanese Small Company Portfolio to acquire a portion of
the stock of each of these companies on a market capitalization weighted
basis. The Portfolio also may invest up to 5% of its assets in convertible
debentures issued by Japanese small companies. (See "PORTFOLIO
CHARACTERISTICS AND POLICIES - SMALL COMPANY PORTFOLIOS - Portfolio
Structure".)

UNITED KINGDOM SMALL COMPANY PORTFOLIO

United Kingdom Small Company Portfolio will seek to achieve its investment
objective by investing its assets in a broad and diverse group of readily
marketable stocks of United Kingdom small companies which are traded
principally on the International Stock Exchange of the United Kingdom and the
Republic of Ireland ("ISE"). Any reference in this prospectus to a "United
Kingdom small company" means a company organized in the United Kingdom, with
shares listed on the ISE whose market capitalization is not larger than the
largest of those in the smaller one-half (deciles 6 through 10) of companies
included in the Financial Times-Actuaries All Share Index ("FTA").

The FTA is an index of stocks traded on the ISE, which is similar to the
S&P 500 Index, and is used by investment professionals in the United Kingdom
for the same purposes as investment professionals in the U.S. use the S&P 500
Index. While the FTA will be used by the Portfolio to determine the maximum
market capitalization of any company whose stock the Portfolio will purchase,
Portfolio acquisitions will not be limited to stocks which are included in
the FTA. United Kingdom Small Company Portfolio will not, however, purchase
shares of any investment trust or of any company whose market capitalization
is less than $5,000,000.

It is the intention of United Kingdom Small Company Portfolio to acquire a
portion of the stock of each eligible company on a market capitalization
basis. The Portfolio also may invest up to 5% of its assets in convertible
debentures issued by United Kingdom small companies. (See "PORTFOLIO
CHARACTERISTICS AND POLICIES - SMALL COMPANY PORTFOLIOS - Portfolio
Structure".)

<PAGE>

CONTINENTAL SMALL COMPANY PORTFOLIO

Continental Small Company Portfolio is authorized to invest in readily
marketable stocks of a broad and diverse group of small companies organized
under the laws of certain European countries; specifically, France, Germany,
Italy, Switzerland, the Netherlands, Sweden, Belgium, Norway, Spain, Austria,
Finland and Denmark, whose shares are traded principally in securities
markets located in those countries. Company size will be determined by the
Advisor in a manner that will compare the market capitalizations of companies
in all countries in which the Portfolio invests (i.e. on a European basis).
The Advisor will use the appropriate country indices of the Financial
Times-Actuaries World Index ("FTW") converted to a common currency, the
United States dollar, and aggregated to define "small companies". The FTW
consists of a series of country indices which contain generally the largest
companies in the major industry sectors in proportion to their market
capitalization whose shares are available for purchase by non-resident
investors. Its constituents represent about 70% of the total market
capitalization of the respective markets. Companies with publicly traded
stock whose market capitalizations are not greater than the largest of those
in the smallest 20% (9th and 10th deciles) of companies listed in the FTW as
combined for the countries in which the Portfolio invests will be considered
to be "small companies" and will be eligible for purchase by the Portfolio.

While the Advisor will use the aggregated FTW indices to determine the
maximum size of eligible portfolio companies, portfolio acquisitions will not
be limited to stocks listed on the FTW for any country. The Portfolio does
not intend, however, to purchase shares of any company whose market
capitalization is less than the equivalent of $5,000,000. The Portfolio
intends to acquire a portion of the stock of each eligible company on a
market capitalization basis. The Portfolio also may invest up to 5% of its
assets in convertible debentures issued by European small companies. The
Portfolio has acquired the stocks of small companies located in France,
Germany, Italy, Switzerland, the Netherlands, Belgium, Sweden and Spain.
When the Advisor determines that the investments of the Portfolio in the
stocks of small companies in those countries are sufficiently diverse, the
stocks of small companies located in other European countries may be acquired
on a country-by-country basis. In addition, the Advisor may in its
discretion either limit further investments in a particular country or divest
the Portfolio of holdings in a particular country. (See "PORTFOLIO
CHARACTERISTICS AND POLICIES - SMALL COMPANY PORTFOLIOS - Portfolio
Structure".)

PACIFIC RIM SMALL COMPANY PORTFOLIO

Pacific Rim Small Company Portfolio is authorized to invest in stocks of a
broad and diverse group of small companies located in Australia, New Zealand
and Asian countries whose shares are traded principally on the securities
markets located in those countries. The Portfolio presently invests in small
companies located in Singapore, Hong Kong, Australia, Malaysia and Korea. In
the future, the Advisor may add small companies located in New Zealand and
other Asian countries as securities markets in these countries become
accessible. In addition, the Advisor may in its discretion either limit
further investments in a particular country or divest the Portfolio of
holdings in a particular country.

Company size will be determined by the Advisor in a manner that will
compare the market capitalizations of the companies in all countries in which
the Portfolio invests (i.e. on a Pacific Rim basis). The Advisor will use
the appropriate country indices of the FTW converted to a common currency and
aggregated to define "small companies". Companies with publicly traded stock
whose market capitalizations are not greater than the largest of those in the
smallest 30% of companies (8th, 9th and 10th deciles) listed in the FTW as
combined for the countries in which the Portfolio invests will be considered
to be "small companies" and will be eligible for purchase by the Portfolio.

10
<PAGE>

PORTFOLIO STRUCTURE

Each of the Small Company Portfolios, including U.S. 6-10 Small Company
Portfolio indirectly through its investment in the 6-10 Series, is structured
by generally basing the amount of each security purchased on the issuer's
relative market capitalization with a view to creating in each Portfolio a
reasonable reflection of the relative market capitalizations of its portfolio
companies. The following discussion applies to the investment policies of
the 6-10 Series and the Small Company Portfolios with the exception of U.S.
6-10 Small Company Portfolio.

The decision to include or exclude the shares of an issuer will be made on
the basis of such issuer's relative market capitalization determined by
reference to other companies located in the same country, except with respect
to Continental and Pacific Rim Small Company Portfolios, such determination
shall be made by reference to other companies located in all countries in
which the Portfolios invest. Company size is measured in terms of local
currencies in order to eliminate the effect of variations in currency
exchange rates, except that Continental and Pacific Rim Small Company
Portfolios each will measure company size in terms of a common currency.
Even though a company's stock may meet the applicable market capitalization
criterion, it may not be purchased if, (i) in the Advisor's judgment, the
issuer is in extreme financial difficulty, (ii) the issuer is involved in a
merger or consolidation or is the subject of an acquisition or (iii) a
significant portion of the issuer's securities are closely held. Further,
securities of real estate investment trusts will not be acquired (except as a
part of a merger, consolidation or acquisition of assets). In addition, the
Advisor may exclude the stock of a company that otherwise meets applicable
market capitalization criterion if the Advisor determines in its best
judgment that other conditions exist that make the purchase of such stock
inappropriate.

Deviation from strict market capitalization weighting will also occur
because the Advisor intends to purchase round lots only. In order to retain
sufficient liquidity, the relative amount of any security held may be reduced
from time to time from the level which strict adherence to market
capitalization weighting would otherwise require. A portion, but generally
not in excess of 20%, of assets may be invested in interest-bearing
obligations, such as money-market instruments for this purpose, thereby
causing further deviation from strict market capitalization weighting.

Block purchases of eligible securities may be made at opportune prices
even though such purchases exceed the number of shares which, at the time of
purchase, strict adherence to the policy of market capitalization weighting
would otherwise require. In addition, eligible securities may be acquired in
exchange for the issuance of shares. (See "In Kind Purchases".) While such
purchases and acquisitions might cause a temporary deviation from market
capitalization weighting, they would ordinarily be made in anticipation of
further growth of assets.

If securities must be sold in order to obtain funds to make redemption
payments, they may be repurchased as additional cash becomes available. In
most instances, however, management would anticipate selling securities which
had appreciated sufficiently to be eligible for sale and, therefore, would
not need to repurchase such securities. (See "PORTFOLIO CHARACTERISTICS AND
POLICIES - SMALL COMPANY PORTFOLIOS - Portfolio Transactions".)

Changes in the composition and relative ranking (in terms of market
capitalization) of the stocks which are eligible for purchase take place with
every trade when the securities markets are open for trading due, primarily,
to price fluctuations of such securities. On a not less than semi-annual
basis, the Advisor will determine the market capitalization of the largest
small company eligible for investment. Common stocks whose market
capitalizations are not greater than such company will be purchased.
Additional investments generally will not be made in securities which have
appreciated in value sufficiently to be excluded from the Advisor's then
current market capitalization limit for eligible portfolio securities. This
may result in further deviation from strict market capitalization weighting
and such deviation could be substantial if a significant amount of holdings
increase in value sufficiently to be excluded from the limit for eligible
securities, but not by a sufficient amount to warrant their sale. (See
"PORTFOLIO CHARACTERISTICS AND POLICIES - SMALL COMPANY PORTFOLIOS -Portfolio
Transactions".) A further deviation from market capitalization weighting may
occur if a Portfolio invests a portion of its assets in convertible
debentures.

11
<PAGE>

It is management's belief that the stocks of small companies offer, over a
long term, a prudent opportunity for capital appreciation, but, at the same
time, selecting a limited number of such issues for investment involves
greater risk than investing in a large number of them. The Portfolios intend
to invest at least 80% of their assets in equity securities of U.S.,
Japanese, United Kingdom, European and Pacific Rim small companies.

Generally, current income is not sought as an investment objective and
investments will not be based upon an issuer's dividend payment policy or
record. However, many of the companies whose securities will be selected for
investment do pay dividends. It is anticipated, therefore, that dividend
income will be received.

PORTFOLIO TRANSACTIONS

As described under "U.S. 6-10 Small Company Portfolio," that Portfolio
invests in the shares of the 6-10 Series. Therefore, references to
"Portfolios" under "Portfolio Transactions" do not include U.S. 6-10 Small
Company Portfolio.

On a periodic basis, the Advisor will review each Portfolio's holdings and
determine which, at the time of such review, are no longer considered small
U.S., Japanese, United Kingdom, European or Pacific Rim companies. The
Advisor will make a similar review and determination with respect to the 6-10
Series. The present policy of the Advisor (except with respect to the 6-10
Series) is to consider portfolio securities for sale when they have
appreciated sufficiently to rank, on a market capitalization basis, more than
one full decile higher than the company with the largest market
capitalization that is eligible for purchase by the particular Portfolio as
determined periodically by the Advisor. The Advisor may, from time to time,
revise that policy if, in the opinion of the Advisor, such revision is
necessary to maintain appropriate market capitalization weighting.

Securities which have depreciated in value since their acquisition will
not be sold solely because prospects for the issuer are not considered
attractive, or due to an expected or realized decline in securities prices in
general. Securities may be disposed of, however, at any time when, in the
Advisor's judgment, circumstances, such as (but not limited to) tender
offers, mergers and similar transactions, or bids made for block purchases at
opportune prices, warrant their sale. Generally, securities will not be sold
to realize short-term profits, but when circumstances warrant, they may be
sold without regard to the length of time held. Generally, securities will
be purchased with the expectation that they will be held for longer than one
year and will be held until such time as they are no longer considered an
appropriate holding in light of the policy of maintaining portfolios of
companies with small market capitalizations.

U.S. LARGE COMPANY PORTFOLIO

INVESTMENT OBJECTIVE AND POLICIES

U.S. Large Company Portfolio seeks, as its investment objective, to
approximate the investment performance of the S&P 500 Index, both in terms of
the price of the Portfolio's shares and its total investment return. The
Portfolio pursues its investment objective by investing all of its assets in
U.S. Large Company Series of the Trust (the "U.S. Large Company Series"),
which has the same investment objective and policies as the Portfolio. U.S.
Large Company Series intends to invest in all of the stocks that comprise the
S&P 500 Index in approximately the same proportions as they are represented
in the Index. The amount of each stock purchased for the U.S. Large Company
Series, therefore, will be based on its respective market capitalization.
The S&P 500 Index is comprised of a broad and diverse group of stocks most of
which are traded on the NYSE. Generally, these are the U.S. stocks with the
largest market capitalizations and, as a group, they represent approximately
70% of the total market capitalization of all publicly traded U.S. stocks.

Under normal market conditions, at least 95% of the U.S. Large Company
Series' assets will be invested in the stocks that comprise the S&P 500
Index. A portion, however, generally not more than 5% of net assets, may be
invested in the same types of short-term fixed income obligations as may be
acquired by the DFA One-Year Fixed Income Portfolio, in order to maintain
liquidity or to invest temporarily uncommitted cash balances. (See "THE
FIXED INCOME PORTFOLIOS -Description of Securities and Obligations").

<PAGE>

U.S. Large Company Series may also acquire index futures contracts and
options thereon in order to commit funds awaiting investment in stocks or
maintain cash liquidity. However, the Series will not purchase index futures
contracts or options if as a result more than 5% of its total assets would
then consist of initial and variation margin deposits on such contracts or
options. Such investments entail certain risks. (See "RISK FACTORS - ALL
PORTFOLIOS".)

Ordinarily, portfolio securities will not be sold except to reflect
additions or deletions of the stocks that comprise the S&P 500 Index,
including mergers, reorganizations and similar transactions and, to the
extent necessary, to provide cash to pay redemptions of the U.S. Large
Company Series' shares. U.S. Large Company Series may lend securities to
qualified brokers, dealers, banks and other financial institutions for the
purpose of earning additional income.

Neither the U.S. Large Company Series nor the Portfolio is sponsored,
endorsed, sold or promoted by Standard & Poor's Corporation ("S&P"). S&P
makes no representation or warranty, express or implied, to the owners of the
Portfolio or the Series or any member of the public regarding the
advisability of investing in securities generally or in the Portfolio or the
Series particularly or the ability of the S&P 500 Index to track general
stock market performance. S&P's only relationship to the Portfolio or the
Series is the licensing of certain trademarks and trade names of S&P and of
the S&P 500 Index which is determined, composed and calculated by S&P without
regard to the Portfolio or the Series. S&P has no obligation to take the
needs of the Portfolio, the Series or their respective owners into
consideration in determining, composing or calculating the S&P 500 Index.
S&P is not responsible for and has not participated in the determination of
the timing of, prices at, or quantities of the Portfolio or the Series to be
issued or in the determination or calculation of the equation by which the
Portfolio or the Series is to be converted into cash. S&P has no obligation
or liability in connection with the administration, marketing or trading of
the Portfolio or the Series.

S&P DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE S&P 500
INDEX OR ANY DATA INCLUDED THEREIN. S&P MAKES NO WARRANTY, EXPRESS OR
IMPLIED, AS TO RESULTS TO BE OBTAINED BY LICENSEE, OWNERS OF THE PRODUCT, OR
ANY OTHER PERSON OR ENTITY FROM THE USE OF THE S&P 500 INDEX OR ANY DATA
INCLUDED THEREIN IN CONNECTION WITH THE RIGHTS LICENSED HEREUNDER OR FOR ANY
OTHER USE. S&P MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND HEREBY EXPRESSLY
DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE OR USE WITH RESPECT TO THE S&P 500 INDEX OR ANY DATA INCLUDED
THEREIN. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL S&P HAVE
ANY LIABILITY FOR ANY SPECIAL, PUNITIVE, INDIRECT, OR CONSEQUENTIAL DAMAGES
(INCLUDING LOST PROFITS), EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES.

LARGE CAP INTERNATIONAL PORTFOLIO

INVESTMENT OBJECTIVE AND POLICIES

The investment objective of Large Cap International Portfolio is to
achieve long-term capital appreciation by investing in the stocks of non-U.S.
large companies. The investment objective of the Portfolio may not be
changed without the approval of the holders of a majority of its outstanding
shares. The Portfolio intends to invest in the stocks of large companies in
Europe, Australia and the Far East. Initially, the Portfolio will invest in
the stocks of large companies in Japan, the United Kingdom, Germany, France,
Switzerland, Italy, Sweden, Hong Kong and Australia. As the Portfolio's
asset growth permits, it may invest in the stocks of large companies in
Spain, Singapore/Malaysia, the Netherlands, Belgium, Austria, Denmark,
Finland, Ireland, Norway and New Zealand.

Under normal market conditions, at least 65% of the Portfolio's assets
will be invested in companies organized or having a majority of their assets
in or deriving a majority of their operating income in at least three
non-U.S. countries. The Portfolio reserves the right to invest in index
futures contracts to commit funds awaiting investment or to maintain
liquidity. The Portfolio will not purchase futures contracts if as a result
more than 5%

13
<PAGE>

of its total assets would then consist of initial and variation margin
deposits on such contracts. Such investments entail certain risks. (See
"RISK FACTORS - ALL PORTFOLIOS".) The Portfolio also may invest up to 5% of
its assets in convertible debentures issued by large non-U.S. companies.

The Portfolio will be approximately market capitalization weighted. In
determining market capitalization weights, the Advisor, using its best
judgment, will seek to eliminate the effect of cross holdings on the
individual country weights. As a result, the weighting of certain countries
in the Portfolio may vary from their weighting in international indices such
as those published by The Financial Times, Morgan Stanley Capital
International or Salomon/Russell. The Advisor, however, will not attempt to
account for cross holdings within the same country. Generally, the companies
whose stocks will be selected by the Advisor for the Portfolio will be in the
largest 50% in terms of market capitalization for each country. The Advisor,
however, may exclude the stock of such a company if the Advisor determines in
its best judgment that other conditions exist that make the purchase of such
stock for a Portfolio inappropriate.

Deviation from market capitalization weighting will occur because the
Portfolio intends to purchase round lots only. In order to retain sufficient
liquidity, the relative amount of any security held by the Portfolio may be
reduced from time to time from the level which adherence to market
capitalization weighting would otherwise require. A portion, but generally
not in excess of 20%, of the Portfolio's assets may be invested in
interest-bearing obligations, such as money-market instruments, thereby
causing further deviation from market capitalization weighting. A further
deviation from market capitalization weighting may occur if the Portfolio
invests a portion of its assets in convertible debentures.

The Portfolio may make block purchases of eligible securities at opportune
prices even though such purchases exceed the number of shares which, at the
time of purchase, adherence to the policy of market capitalization weighting
would otherwise require. In addition, the Portfolio may acquire eligible
securities in exchange for the issuance of its shares. (See "In Kind
Purchases".) While such transactions might cause a temporary deviation from
market capitalization weighting, they would ordinarily be made in
anticipation of further growth of the assets of the Portfolio.

Changes in the composition and relative ranking (in terms of market
capitalization) of the stocks which are eligible for purchase by the
Portfolio take place with every trade when the securities markets are open
for trading due, primarily, to price fluctuations of such securities. On a
periodic basis, the Advisor will prepare lists of eligible large companies
that will be revised not less than semi-annually. Only common stocks whose
market capitalizations are not less than such minimum will be purchased by
the Portfolio. Additional investments will not be made in securities which
have depreciated in value to such an extent that they are not then considered
by the Advisor to be large companies. This may result in further deviation
from market capitalization weighting and such deviation could be substantial
if a significant amount of the Portfolio's holdings decrease in value
sufficiently to be excluded from the then current market capitalization
requirement for eligible securities, but not by a sufficient amount to
warrant their sale.

It is management's belief that the stocks of large companies offer, over a
long term, a prudent opportunity for capital appreciation, but, at the same
time, selecting a limited number of such issues for inclusion in the
Portfolio involves greater risk than including a large number of them. The
Advisor does not anticipate that a significant number of securities which
meet the market capitalization criteria will be selectively excluded from the
Portfolio.

The Portfolio does not seek current income as an investment objective and
investments will not be based upon an issuer's dividend payment policy or
record. However, many of the companies whose securities will be included in
the Portfolio do pay dividends. It is anticipated, therefore, that the
Portfolio will receive dividend income.

Securities which have depreciated in value since their acquisition will
not be sold by the Portfolio solely because prospects for the issuer are not
considered attractive, or due to an expected or realized decline in
securities prices in general. Securities may be disposed of, however, at any
time when, in the Advisor's judgment, circumstances warrant their sale, such
as tender offers, mergers and similar transactions, or bids made for block
purchases at opportune prices. Generally, securities will not be sold to
realize short-term profits, but when circumstances warrant, they may be sold
without regard to the length of time held. Generally, securities will be

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<PAGE>

purchased with the expectation that they will be held for longer than one
year, and will be held until such time as they are no longer considered an
appropriate holding in light of the policy of maintaining a portfolio of
companies with large market capitalizations.

DFA/AEW REAL ESTATE SECURITIES PORTFOLIO

PORTFOLIO CHARACTERISTICS AND POLICIES

The investment objective of DFA/AEW Real Estate Securities Portfolio is to
achieve long-term capital appreciation. The investment objective of the
Portfolio may not be changed without the affirmative vote of a majority of
the outstanding securities of the Portfolio. The Portfolio will concentrate
investments in readily marketable equity securities of companies whose
principal activities include development, ownership, construction,
management, or sale of residential, commercial or industrial real estate.
Initially, investments will include, principally, equity securities of
companies in the following sectors of the real estate industry: certain real
estate investment trusts and companies engaged in residential construction
and firms, except partnerships, whose principal business is to develop
commercial property. In the future, the Advisor may determine to include
companies in other sectors of the real estate industry in the Portfolio.

The Portfolio will invest in shares of real estate investment trusts
("REITS"). REITS pool investors' funds for investment primarily in income
producing real estate or real estate related loans or interests. A REIT is
not taxed on income distributed to shareholders if it complies with several
requirements relating to its organization, ownership, assets, and income and
a requirement that it distribute to its shareholders at least 95% of its
taxable income (other than net capital gains) for each taxable year. REITS
can generally be classified as Equity REITS, Mortgage REITS and Hybrid REITS.
Equity REITS invest the majority of their assets directly in real property
and derive their income primarily from rents. Equity REITS can also realize
capital gains by selling properties that have appreciated in value. Mortgage
REITS invest the majority of their assets in real estate mortgages and
derive their income primarily from interest payments. Hybrid REITS combine
the characteristics of both Equity REITS and Mortgage REITS. At the present
time, the Portfolio intends to invest only in Hybrid REITS and Equity REITS.

It is anticipated that, ordinarily, at least 80% of the net value of the
Portfolio will be invested in securities of companies in the U.S. real estate
industry. The Portfolio may invest a portion of its assets, ordinarily not
more than 20%, in high quality, highly liquid, fixed income securities such
as money market instruments, including short-term repurchase agreements. The
Portfolio will make equity investments only in securities traded in the U.S.
securities markets, principally on the NYSE, AMEX and OTC. In addition, the
Portfolio is authorized to lend its portfolio securities (see "SECURITIES
LOANS"), and to purchase and sell financial futures contracts and options
thereon. The Portfolio will not purchase future contracts or options, if as
a result an amount in excess of 5% of the net assets of the Portfolio would
be deposited as initial or variation margin for such contracts.

PORTFOLIO STRUCTURE

The Portfolio will operate as a "diversified" investment company. The
Advisor has prepared and will maintain a schedule of eligible investments
consisting of equity securities of all companies in the sectors of the real
estate industry described above as being presently eligible for investment.
It is the intention of the Portfolio to purchase a portion of the equity
securities of all of these companies on a market capitalization weighted
basis.

The Portfolio will be structured by generally basing the amount of each
security purchased on the issuer's relative market capitalization in relation
to other eligible issuers in the real estate industry. However, even though
a company's stock may meet the applicable criteria described above, it will
not be purchased by the Portfolio if, at the time of purchase, in the
judgment of the Advisor or sub-advisor, the issuer is in extreme financial
difficulty or is involved in a merger or consolidation or is the subject of
an acquisition which could result in the company no longer being considered
principally engaged in the real estate business. In addition, the Advisor
may exclude the securities of a company that otherwise meets the applicable
criteria described above if the Advisor determines in its best judgment that
other conditions exist that make the inclusion of such security inappropriate.

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<PAGE>

Deviation from strict market capitalization weighting will also occur in
the Portfolio because it intends to purchase round lots only. In order to
retain sufficient liquidity, the relative amount of any security held by the
Portfolio may be reduced from time to time from the level which strict
adherence to market capitalization weighting would otherwise require. A
portion, but generally not in excess of 20%, of the Portfolio's assets may be
invested in interest-bearing obligations, as described above, thereby causing
further deviation from strict market capitalization weighting.

The Portfolio may make block purchases of eligible securities at opportune
prices even though such purchases exceed the number of shares which, at the
time of purchase, strict adherence to the policy of market capitalization
weighting would otherwise require. In addition, the Portfolio may acquire
eligible securities in exchange for the issuance of its shares. (See "In
Kind Purchases".) While such purchases and acquisitions might cause a
temporary deviation from market capitalization weighting, they would
ordinarily be made in anticipation of further growth of the assets of the
Portfolio. If securities must be sold in order to obtain funds to make
redemption payments, such securities may be repurchased by the Portfolio as
additional cash becomes available to it. However, the Portfolio has retained
the right to borrow to make redemption payments and is also authorized to
redeem its shares in kind. (See "REDEMPTION OF SHARES".) Further, because
the securities of certain companies whose shares are eligible for purchase
are thinly traded, the Portfolio might not be able to purchase the number of
shares that strict adherence to market capitalization weighting might
require. On not less than a semi-annual basis, the Advisor will prepare a
schedule of eligible portfolio companies. Only equity securities appearing
on the then current schedule will be purchased for the Portfolio.

Investments will not be based upon an issuer's dividend payment policy or
record. However, many of the companies whose securities will be included in
the Portfolio do pay dividends. It is anticipated, therefore, that the
Portfolio will receive dividend income. Periodically, the Advisor may expand
the Portfolio's schedule of eligible investments to include equity securities
of companies in sectors of the real estate industry in addition to those
described above as eligible for investment as of the date of this prospectus.

PORTFOLIO TRANSACTIONS

The Portfolio does not intend to purchase or sell securities based on the
prospects for the economy, the securities markets or, generally, the
individual issuers whose shares are eligible for purchase. As described
under "Portfolio Structure", investments will be made in virtually all
eligible securities on a market capitalization weighted basis. This is a
passive approach to investment management that does not entail taking steps
to reduce the risk of loss by replacing portfolio equity securities with
other securities that appear to have the potential to provide better
investment performance.

Generally, securities will be purchased with the expectation that they
will be held for longer than one year. However, securities may be sold at
any time when, in the Advisor's judgment, circumstances warrant their sale.
Generally, securities will not be sold to realize short-term profits, but
when circumstances warrant, they may be sold without regard to the length of
time held.

VALUE PORTFOLIOS

PORTFOLIO CHARACTERISTICS AND POLICIES

The investment objective of each of these Portfolios is to achieve
long-term capital appreciation. U.S. Large Cap Value Portfolio and U.S.
Small Cap Value Portfolio will pursue their investment objectives by
investing all of their assets in U.S. Large Cap Value Series (the "Large Cap
Value Series") and U.S. Small Cap Value Series (the "Small Cap Value Series")
of the Trust, respectively. Each Value Series has the same investment
objective and policies as the corresponding Value Portfolio. Each of the
Series will invest in common stocks of U.S. companies with shares that have a
high book value in relation to their market value (a "book to market ratio").
A company's shares will be considered to have a high book to market ratio if
the ratio equals or exceeds the ratios of any of the 30% of companies with
the highest positive book to market ratios whose shares are listed on the
NYSE and, except as described under "Portfolio Structure", will be considered
eligible for investment. Large Cap Value Series will purchase common stocks
of companies whose market capitalizations equal or exceed that of the company
having the median market capitalization of companies whose shares are

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<PAGE>

listed on the NYSE, and the Small Cap Value Series will purchase common
stocks of companies whose market capitalizations are smaller than such
company.

PORTFOLIO STRUCTURE

Each Series will operate as a "diversified" investment company. Further,
neither Series will invest more than 25% of its total assets in securities of
companies in a single industry. Ordinarily, at least 80% of the assets of
each Series will be invested in a broad and diverse group of readily
marketable common stocks of U.S. companies with high book to market ratios,
as described above. The Series may invest a portion of their assets,
ordinarily not more than 20%, in high quality, highly liquid fixed income
securities such as money market instruments, including short-term repurchase
agreements. The Series will purchase securities that are listed on the
principal U.S. national securities exchanges and traded OTC.

Each of the Value Series will be structured on a market capitalization
basis, by generally basing the amount of each security purchased on the
issuer's relative market capitalization, with a view to creating in each
Series a reasonable reflection of the relative market capitalizations of its
portfolio companies. However, the Advisor may exclude the securities of a
company that otherwise meets the applicable criteria described above if the
Advisor determines in its best judgment that other conditions exist that make
the inclusion of such security inappropriate.

Deviation from strict market capitalization weighting will also occur in
the Series because they intend to purchase round lots only. In order to
retain sufficient liquidity, the relative amount of any security held by a
Series may be reduced, from time to time, from the level which strict
adherence to market capitalization weighting would otherwise require. A
portion, but generally not in excess of 20%, of a Series' assets may be
invested in interest-bearing obligations, as described above, thereby causing
further deviation from strict market capitalization weighting. The Series
may make block purchases of eligible securities at opportune prices even
though such purchases exceed the number of shares which, at the time of
purchase, strict adherence to the policy of market capitalization weighting
would otherwise require. In addition, the Series and the Portfolios may
acquire eligible securities in exchange for the issuance of their shares.
(See "In Kind Purchases".) While such purchases and acquisitions might cause
a temporary deviation from market capitalization weighting, they would
ordinarily be made in anticipation of further growth of the assets of a
Series.

On not less than a semi-annual basis, for each Series the Advisor will
calculate the book to market ratio necessary to determine those companies
whose stocks are eligible for investment.

PORTFOLIO TRANSACTIONS

The Series do not intend to purchase or sell securities based on the
prospects for the economy, the securities markets or the individual issuers
whose shares are eligible for purchase. As described under "Portfolio
Structure", investments will be made in virtually all eligible securities on
a market capitalization weighted basis. This is a passive approach to
investment management that does not entail taking steps to reduce risk by
replacing portfolio equity securities with other securities that appear to
have the potential to provide better investment performance.

Generally, securities will be purchased with the expectation that they
will be held for longer than one year. Large Cap Value Series may sell
portfolio securities when the issuer's market capitalization falls
substantially below that of the issuer with the minimum market capitalization
which is then eligible for purchase by the Series, and Small Cap Value
Series may sell portfolio securities when the issuer's market capitalization
increases to a level that substantially exceeds that of the issuer with the
largest market capitalization which is then eligible for investment by the
Series. However, securities may be sold at any time when, in the Advisor's
judgment, circumstances warrant their sale.

In addition, Large Cap Value Series may sell portfolio securities when
their book to market ratio falls substantially below that of the security
with the lowest such ratio that is then eligible for purchase by the Series.
Small Cap Value Series may also sell portfolio securities in the same
circumstances, however, that Series anticipates generally to retain
securities of issuers with relatively smaller market capitalizations for
longer periods, despite any decrease in the issuer's book to market ratio.

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<PAGE>

DFA INTERNATIONAL HIGH BOOK TO MARKET PORTFOLIO

INVESTMENT OBJECTIVE AND POLICIES

The investment objective of DFA International High Book to Market
Portfolio is to achieve long-term capital appreciation. The Portfolio
pursues its objective by investing all of its assets in The DFA International
Value Series of the Trust (the "International Value Series"), which has the
same investment objective and policies as the Portfolio. The International
Value Series operates as a diversified investment company and seeks to
achieve its objective by investing in the stocks of large non-U.S. companies
that have a high book value in relation to their market value (a "book to
market ratio"). The shares of a company in any given country will be
considered to have a high book to market ratio if the ratio equals or exceeds
the ratios of any of the 30% of companies in that country with the highest
positive book to market ratios whose shares are listed on a major exchange,
and, except as described below, will be considered eligible for investment.
The International Value Series intends to invest in the stocks of large
companies in countries with developed markets. Initially, the International
Value Series will invest in the stocks of large companies in Japan, the
United Kingdom, Germany, France, Switzerland, Italy, Belgium, Spain, the
Netherlands, Sweden, Hong Kong, Singapore and Australia. As the Series'
asset growth permits, it may invest in the stocks of large companies in other
developed markets.

Under normal market conditions, at least 65% of the International Value
Series' assets will be invested in companies organized or having a majority
of their assets in or deriving a majority of their operating income in at
least three non-U.S. countries and no more than 40% of the Series' assets
will be invested in such companies in any one country. The International
Value Series reserves the right to invest in index futures contracts to
commit funds awaiting investment or to maintain liquidity. The International
Value Series will not purchase futures contracts if as a result more than 5%
of its total assets would then consist of initial and variation margin
deposits on such contracts. Such investments entail certain risks. (See
"RISK FACTORS - ALL PORTFOLIOS".) The International Value Series also may
invest up to 5% of its assets in convertible debentures issued by large
non-U.S. companies.

The International Value Series intends to invest in companies having at
least $500 million of market capitalization and the Series will be
approximately market capitalization weighted. In determining market
capitalization weights, the Advisor, using its best judgment, will seek to
eliminate the effect of cross holdings on the individual country weights. As
a result, the weighting of certain countries in the International Value
Series may vary from their weighting in international indices such as those
published by The Financial Times, Morgan Stanley Capital International or
Salomon/Russell. The Advisor, however, will not attempt to account for cross
holding within the same country. The Advisor may exclude the stock of a
company that otherwise meets the applicable criteria if the Advisor
determines in its best judgment that other conditions exist that make the
purchase of such stock for the International Value Series inappropriate.

Deviation from market capitalization weighting will occur because the
International Value Series intends to purchase round lots only. In order to
retain sufficient liquidity, the relative amount of any security held by the
International Value Series may be reduced from time to time from the level
which adherence to market capitalization weighting would otherwise require.
A portion, but generally not in excess of 20%, of the International Value
Series' assets may be invested in interest-bearing obligations, such as
money-market instruments, thereby causing further deviation from market
capitalization weighting. Such investments would be made on a temporary
basis pending investment in equity securities pursuant to the International
Value Series investment objective. A further deviation from market
capitalization weighting may occur if the International Value Series invests
a portion of its assets in convertible debentures.

The International Value Series may make block purchases of eligible
securities at opportune prices even though such purchases exceed the number
of shares which, at the time of purchase, adherence to the policy of market
capitalization weighting would otherwise require. In addition, the
International Value Series may acquire eligible securities in exchange for
the issuance of its shares. (See "In Kind Purchases".) While such
transactions might cause a temporary deviation from market capitalization
weighting, they would ordinarily be made in anticipation of further growth of
the assets of the International Value Series.

Changes in the composition and relative ranking (in terms of market
capitalization and book to market ratio) of the stocks which are eligible for
purchase by the International Value Series take place with every trade when

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<PAGE>

the securities markets are open for trading due, primarily, to price
fluctuations of such securities. On a periodic basis, the Advisor will
prepare lists of eligible large companies with high book to market ratios
whose stock are eligible for investment; such list will be revised not less
than semi-annually. Only common stocks whose market capitalizations are not
less than the minimum on such list will be purchased by the International
Value Series. Additional investments will not be made in securities which
have depreciated in value to such an extent that they are not then considered
by the Advisor to be large companies. This may result in further deviation
from market capitalization weighting and such deviation could be substantial
if a significant amount of the International Value Series' holdings decrease
in value sufficiently to be excluded from the then current market
capitalization requirement for eligible securities, but not by a sufficient
amount to warrant their sale.

It is management's belief that the stocks of large companies with high
book to market ratios offer, over a long term, a prudent opportunity for
capital appreciation, but, at the same time, selecting a limited number of
such issues for inclusion in the International Value Series involves greater
risk than including a large number of them. The Advisor does not anticipate
that a significant number of securities which meet the market capitalization
criteria will be selectively excluded from the International Value Series.

The International Value Series does not seek current income as an
investment objective and investments will not be based upon an issuer's
dividend payment policy or record. However, many of the companies whose
securities will be included in the International Value Series do pay
dividends. It is anticipated, therefore, that the International Value Series
will receive dividend income.

Securities which have depreciated in value since their acquisition will
not be sold by the International Value Series solely because prospects for
the issuer are not considered attractive, or due to an expected or realized
decline in securities prices in general. Securities may be disposed of,
however, at any time when, in the Advisor's judgment, circumstances warrant
their sale, such as tender offers, mergers and similar transactions, or bids
made for block purchases at opportune prices. Generally, securities will not
be sold to realize short-term profits, but when circumstances warrant, they
may be sold without regard to the length of time held. Generally, securities
will be purchased with the expectation that they will be held for longer than
one year, and will be held until such time as they are no longer considered
an appropriate holding in light of the policy of maintaining a portfolio of
companies with large market capitalizations and high book to market ratios.

DFA INTERNATIONAL SMALL CAP VALUE PORTFOLIO

INVESTMENT OBJECTIVE AND POLICIES

The investment objective of the DFA International Small Cap Value
Portfolio is to achieve long-term capital appreciation. The Portfolio
pursues its objective by investing in the stocks of small non-U.S. companies
that have a high book to market ratio. The Investment Committee of the
Advisor will initially set the standards for determining whether the shares
of a company in any given country will be considered to have a high book to
market ratio. Such shares will be considered eligible for investment. The
Investment Committee will periodically review its standards for determining
high book to market value and will adjust the standards accordingly. The
Portfolio intends to invest in the stocks of small companies in countries
with developed markets. Initially, the Portfolio will invest in the stocks
of small companies in Japan, the United Kingdom, Germany, France,
Switzerland, Italy, Belgium, Spain, the Netherlands, Sweden, Hong Kong,
Singapore and Australia. As the Portfolio's asset growth permits, it may
invest in the stocks of small companies in other developed markets.

Under normal market conditions, at least 65% of the Portfolio's assets
will be invested in companies organized or having a majority of their assets
in or deriving a majority of their operating income in at least three
non-U.S. countries and no more than 40% of the Portfolio's assets will be
invested in such companies in any one country. The Portfolio reserves the
right to invest in index futures contracts to commit funds awaiting
investment or to maintain liquidity. The Portfolio will not purchase futures
contracts if as a result more than 5% of its total assets would then consist
of initial and variation margin deposits on such contracts. The Portfolio
also may invest up to 5% of its assets in convertible debentures issued by
small non-U.S. companies.

The Portfolio intends to invest in companies having no more than $500
million of market capitalization. The Advisor believes that such maximum
amount accounts for variations in company size among countries and

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<PAGE>

provides a sufficient universe of eligible companies. The Portfolio will be
approximately market capitalization weighted. In determining market
capitalization weights, the Advisor, using its best judgment, will seek to
eliminate the effect of cross holdings on the individual country weights. As
a result, the weighting of certain countries in the Portfolio may vary from
their weighting in international indices such as those published by The
Financial Times, Morgan Stanley Capital International or Salomon/Russell.
The Advisor, however, will not attempt to account for cross holding within
the same country. The Advisor may exclude the stock of a company that
otherwise meets the applicable criteria if the Advisor determines in its best
judgment that other conditions exist that make the purchase of such stock for
the Portfolio inappropriate.

Deviation from market capitalization weighting will occur because the
Portfolio intends to purchase round lots only. In order to retain sufficient
liquidity, the relative amount of any security held by the Portfolio may be
reduced from time to time from the level which adherence to market
capitalization weighting would otherwise require. A portion, but generally
not in excess of 20%, of the Portfolio's assets may be invested in
interest-bearing obligations, such as money-market instruments, thereby
causing further deviation from market capitalization weighting. Such
investments would be made on a temporary basis pending investment in equity
securities pursuant to the Portfolio's investment objective. A further
deviation from market capitalization weighting may occur if the Portfolio
invests a portion of its assets in convertible debentures.

Changes in the composition and relative ranking (in terms of market
capitalization and book to market ratio) of the stocks which are eligible for
purchase by the Portfolio take place with every trade when the securities
markets are open for trading due, primarily, to price fluctuations of such
securities. On a periodic basis, the Advisor will prepare a list of eligible
small companies with high book to market ratios whose stock are eligible for
investment; such list will be revised not less than semi-annually. Only
commons stocks whose market capitalizations are not greater than the maximum
on such list will be purchased by the Portfolio. Additional investments will
not be made in securities which have appreciated in value to such an extent
that they are not then considered by the Advisor to be small companies. This
may result in further deviation from market capitalization weighting and such
deviation could be substantial if a significant amount of the Portfolio's
holdings increase in value sufficiently to be excluded from the then current
market capitalization requirement for eligible securities, but not by a
sufficient amount to warrant their sale.

It is management's belief that the stocks of small companies with high
book to market ratios offer, over a long term, a prudent opportunity for
capital appreciation, but, at the same time, selecting a limited number of
such issues for inclusion in the Portfolio involves greater risk than
including a large number of them. The Advisor does not anticipate that a
significant number of securities which meet the market capitalization
criteria will be selectively excluded from the Portfolio.

The Portfolio does not intend to purchase or sell securities based on the
prospects for the economy, the securities market or the individual issues
whose shares are eligible for purchase. Securities may be disposed of,
however, at any time when, in the Advisor's judgment, circumstances warrant
their sale, such as tender offers, mergers and similar transactions, or bids
made for block purchases at opportune prices. Generally, securities will not
be sold to realize short-term profits, but when circumstances warrant, they
may be sold without regard to the length of time held. Generally, securities
will be purchased with the expectation that they will be held for longer than
one year, and will be held until such time as they are no longer considered
an appropriate holding in light of the policy of maintaining a portfolio of
companies with small market capitalizations and high book to market ratios.
The annual portfolio turnover rate of the Portfolio is not expected to exceed
20%.

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<PAGE>

EMERGING MARKETS PORTFOLIO

INVESTMENT OBJECTIVE AND POLICIES

The investment objective of the Emerging Markets Portfolio is to achieve
long-term capital appreciation. The Portfolio pursues its objective by
investing all of its assets in the Emerging Markets Series of the Trust (the
"Emerging Markets Series"), which has the same investment objective and
policies as the Portfolio. The Emerging Markets Series operates as a
diversified investment company and seeks to achieve its investment objective
by investing in emerging markets designated by the Trust's Board of Trustees
in consultation with the Advisor ("Approved Markets"). The Emerging Markets
Series invests its assets primarily in Approved Market equity securities
listed on bona fide securities exchanges or actively traded on OTC markets.
These exchanges or OTC markets may be either within or outside the issuer's
domicile country, and the securities may be listed or traded in the form of
International Depository Receipts ("IDRs") or American Depository Receipts
("ADRs").

Under normal market conditions, the Emerging Markets Series will invest at
least 65% of its assets in Approved Market securities. Approved Market
securities are defined to be (a) securities of companies organized in a
country in an Approved Market or for which the principal trading market is in
an Approved Market, (b) securities issued or guaranteed by the government of
an Approved Market country, its agencies or instrumentalities, or the central
bank of such country, (c) securities denominated in an Approved Market
currency issued by companies to finance operations in Approved Markets, (d)
securities of companies that derive at least 50% of their revenues primarily
from either goods or services produced in Approved Markets or sales made in
Approved Markets and (e) Approved Markets equity securities in the form of
depositary shares. Securities of Approved Markets may include securities of
companies that have characteristics and business relationships common to
companies in other countries. As a result, the value of the securities of
such companies may reflect economic and market forces in such other countries
as well as in the Approved Markets. The Advisor, however, will select only
those companies which, in its view, have sufficiently strong exposure to
economic and market forces in Approved Markets such that their value will
tend to reflect developments in Approved Markets to a greater extent than
developments in other regions. For example, the Advisor may invest in
companies organized and located in the United States or other countries
outside of Approved Markets, including companies having their entire
production facilities outside of Approved Markets, when such companies meet
the definition of Approved Markets securities so long as the Advisor believes
at the time of investment that the value of the company's securities will
reflect principally conditions in Approved Markets.

The Advisor defines the term "emerging market" to mean a country which is
considered to be an emerging market by the International Finance Corporation.
Approved emerging markets may not include all such emerging markets. In
determining whether to approve markets for investment, the Board of Trustees
will take into account, among other things, market liquidity, investor
information, government regulation, including fiscal and foreign exchange
repatriation rules and the availability of other access to these markets by
the investors of the Emerging Markets Series.

The following countries are currently designated as Approved Markets:
Argentina, Brazil, Chile, Indonesia, Malaysia, Mexico, Portugal, Thailand,
and Turkey. Countries that may be approved in the future include but are not
limited to Republic of China (Taiwan), which is effectively closed to foreign
investors at present, and Colombia, Greece, India, Jordan, Nigeria, Pakistan,
Philippines, Venezuela and Zimbabwe.

The Emerging Markets Series may invest up to 35% of its assets in
securities of issuers that are not Approved Markets securities, but whose
issuers the Advisor believes derive a substantial proportion, but less than
50%, of their total revenues from either goods and services produced in, or
sales made in, Approved Markets.

Pending the investment of new capital in Approved Market equity
securities, the Emerging Markets Series will typically invest in money market
instruments or other highly liquid debt instruments denominated in U.S.
dollars (including, without limitation, repurchase agreements). In addition,
the Emerging Markets Series may, for liquidity, or for temporary defensive
purposes during periods in which market or economic or political conditions
warrant, purchase highly liquid debt instruments or hold freely convertible
currencies, although the Series does not expect the aggregate of all such
amounts to exceed 10% of its net assets under normal circumstances.

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The Emerging Markets Series also may invest in shares of other investment
companies that invest in one or more Approved Markets, although it intends to
do so only where access to those markets is otherwise significantly limited.
The Emerging Markets Series may also invest in money market mutual funds for
temporary cash management purposes. The Investment Company Act of 1940
limits investment by the Series in shares of other investment companies to no
more than 10% of the value of the Series' total assets. If The Emerging
Markets Series invests in another investment company, the Series'
shareholders will bear not only their proportionate share of expenses of the
Series (including operating expenses and the fees of the Advisor), but also
will bear indirectly similar expenses of the underlying investment company.
In some Approved Markets it will be necessary or advisable for the Emerging
Markets Series to establish a wholly-owned subsidiary or a trust for the
purpose of investing in the local markets. The Emerging Markets Series also
may invest up to 5% of its assets in convertible debentures issued by
companies organized in Approved Markets.

PORTFOLIO STRUCTURE

The Emerging Market Series will seek a broad market coverage of larger
companies within each Approved Market. The Series will attempt to own shares
of companies whose aggregate overall share of the Approved Market's total
public market capitalization is at least the upper 40% of such
capitalization, and can be as large as 75%. The Series may not invest in all
such companies or achieve approximate market weights, due to constraints
imposed within Approved Markets (E.G., restrictions on purchases by
foreigners), or by the Series' policy not to invest more than 25% of its
assets in any one industry. The Series may also further limit the market
coverage in the smaller emerging markets in order to limit purchases of small
market capitalization companies.

The policy of seeking broad market diversification means that the Advisor
will not utilize "fundamental" securities research techniques in identifying
securities selections. The decision to include or exclude the shares of an
issuer will be made primarily on the basis of such issuer's relative market
capitalization determined by reference to other companies located in the same
country. Company size is measured in terms of reference to other companies
located in the same country and in terms of local currencies in order to
eliminate the effect of variations in currency exchange rates. Even though a
company's stock may meet the applicable market capitalization criterion, it
may not be included in the Series for one or more of a number of reasons.
For example, in the Advisor's judgment, the issuer may be considered in
extreme financial difficulty, a material portion of its securities may be
closely held and not likely available to support market liquidity, or the
issuer may be a "passive foreign investment company" (as defined in the
Internal Revenue Code of 1986, as amended). To this extent, there will be
the exercise of discretion and consideration by the Advisor which would not
be present in the management of a portfolio seeking to represent an
established index of broadly traded domestic securities (such as the S&P 500
Index). The Advisor will also exercise discretion in determining the
allocation of capital as between Approved Markets.

It is management's belief that equity investments offer, over a long term,
a prudent opportunity for capital appreciation, but, at the same time,
selecting a limited number of such issues for inclusion in the Series
involves greater risk than including a large number of them.

The Series does not seek current income as an investment objective and
investments will not be based upon an issuer's dividend payment policy or
record. However, many of the companies whose securities will be included in
the Series do pay dividends. It is anticipated, therefore, that the Series
will receive dividend income.

Generally, securities will be purchased with the expectation that they
will be held for longer than one year. However, securities may be disposed of
at any time when, in the Advisor's judgment, circumstances warrant their sale.

For the purpose of converting U.S. dollars to another currency, or vice
versa, or converting one foreign currency to another foreign currency, the
Emerging Markets Series may enter into forward foreign exchange contracts.
In addition, to hedge against changes in the relative value of foreign
currencies, the Series may purchase foreign currency futures contracts. The
Series will only enter into such a futures contract if it is expected that
the Series will be able readily to close out such contract. There can,
however, be no assurance that it will be able in any particular case to do
so, in which case the Series may suffer a loss.

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SECURITIES LOANS

All of the Portfolios and the corresponding Series of the Trust are
authorized to lend securities to qualified brokers, dealers, banks and other
financial institutions for the purpose of earning additional income, although
inasmuch as the Feeder Portfolios will only hold shares of a corresponding
Series, these Portfolios do not intend to lend those shares. While a
Portfolio or Series may earn additional income from lending securities, such
activity is incidental to the investment objective of a Portfolio or Series.
The value of securities loaned may not exceed 33 1/3% of the value of a
Portfolio's or Series' total assets. In connection with such loans, a
Portfolio or Series will receive collateral consisting of cash or U.S.
Government securities, which will be maintained at all times in an amount
equal to at least 100% of the current market value of the loaned securities.
In addition, the Portfolios and Series will be able to terminate the loan at
any time, will receive reasonable interest on the loan, as well as amounts
equal to any dividends, interest or other distributions on the loaned
securities. In the event of the bankruptcy of the borrower, the Fund or the
Trust could experience delay in recovering the loaned securities. Management
believes that this risk can be controlled through careful monitoring
procedures.

INVESTMENT OBJECTIVES AND POLICIES - FIXED INCOME PORTFOLIOS

DFA ONE-YEAR FIXED INCOME PORTFOLIO

The investment objective of DFA One-Year Fixed Income Portfolio is to
achieve a stable real value (i.e. a return in excess of the rate of
inflation) of invested capital with a minimum of risk. This objective will
be pursued by investing the assets of the Portfolio in DFA One-Year Fixed
Income Series of the Trust (the "One-Year Fixed Income Series"), which has
the same investment objective and policies as the Portfolio. The One-Year
Fixed Income Series will invest in U.S. government obligations, U.S.
government agency obligations, dollar denominated obligations of foreign
issuers issued in the U.S., bank obligations, including U.S. subsidiaries and
branches of foreign banks, corporate obligations, commercial paper,
repurchase agreements and obligations of supranational organizations.
Generally, the Series will acquire obligations which mature within one year
from the date of settlement, but substantial investments may be made in
obligations maturing within two years from the date of settlement when
greater returns are available. It is the Series' policy that the weighted
average length of maturity of investments will not exceed one year. The
Series principally invests in certificates of deposit, commercial paper,
bankers' acceptances, notes and bonds. The Series will invest more than 25%
of its total assets in obligations of U.S. and/or foreign banks and bank
holding companies when the yield to maturity on these instruments exceeds the
yield to maturity on all other eligible portfolio investments of similar
quality for a period of five consecutive days when the NYSE is open for
trading. (See "Investments in the Banking Industry".)

DFA GLOBAL FIXED INCOME PORTFOLIO

The investment objective of DFA Global Fixed Income Portfolio is to
provide a market rate of return for a fixed income portfolio with low
relative volatility of returns. The Portfolio will invest primarily in
obligations issued or guaranteed by the U.S. and foreign governments, their
agencies and instrumentalities, obligations of other foreign issuers rated AA
or better and supranational organizations, such as the World Bank, the
European Investment Bank, European Economic Community, and European Coal and
Steel Community. At the present time, the Advisor expects that most
investments will be made in the obligations of issuers which are developed
countries, such as those countries which are members of the Organization of
Economic Cooperation and Development (OECD). However, in the future, the
Advisor anticipates investing in issuers located in other countries as well.
Under normal market conditions, the Portfolio will invest at least 65% of the
value of its assets in issuers organized or having a majority of their assets
in, or deriving a majority of their operating income in, at least three
different countries, one of which may be the United States. The Portfolio
will acquire obligations which mature within ten years from the date of
settlement. Because many of the Portfolio's investments will be denominated
in foreign currencies, the Portfolio will also enter into forward foreign
currency contracts solely for the purpose of hedging against fluctuations in
currency exchange rates.

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DFA FIVE-YEAR GOVERNMENT PORTFOLIO

The investment objective of DFA Five-Year Government Portfolio is to
maximize total returns available from the universe of debt obligations of the
U.S. government and U.S. government agencies. Generally, the Portfolio will
acquire U.S. government obligations and U.S. government agency obligations
that mature within five years from the date of settlement. The Portfolio
will also acquire repurchase agreements.

DFA INTERMEDIATE GOVERNMENT FIXED INCOME PORTFOLIO

The investment objective of DFA Intermediate Government Fixed Income
Portfolio is to earn current income consistent with preservation of capital.
The Portfolio will invest in non-callable obligations issued or guaranteed by
the U.S. government and U.S. government agencies, AAA-rated dollar
denominated obligations of foreign governments, obligations of supranational
organizations, and futures contracts on U.S. Treasury securities. Since
government guaranteed mortgage-backed securities are considered callable,
such securities will not be included in the Portfolio.

Generally, the Portfolio will hold securities with maturities of between
five and fifteen years. The Portfolio will not shift the maturity of its
investments in anticipation of interest rate movements and ordinarily will
have an average weighted maturity of between seven to ten years. One of the
benefits of the Portfolio is expected to be that in a period of steeply
falling interest rates, the Portfolio should perform well because of its
average weighted maturity and the high quality and non-callable nature of its
investments. The Portfolio is expected to match or exceed the returns of the
Lehman Brothers Treasury Index, without exceeding the volatility of that
Index.

The Portfolio may invest more than 5% of its assets in the obligations of
foreign governments. Those obligations at the time of purchase must be
either rated in the highest rating category of a nationally recognized
statistical rating organization or, in the case of any obligation that is
unrated, of comparable quality. The Portfolio also may invest in futures
contracts on U.S. Treasury securities or options on such contracts for the
purposes of remaining fully invested and maintaining liquidity to pay
redemptions. However, the Portfolio will not purchase futures contracts or
options thereon if as a result more than 5% of its total assets would then
consist of initial and variation margin deposits on such contracts or
options. Such investments entail certain risks. (See "RISK FACTORS - ALL
PORTFOLIOS".)

DESCRIPTION OF INVESTMENTS

The following is a description of the categories of investments which may
be acquired by the Fixed Income Portfolios and the One-Year Fixed Income
Series. While DFA One-Year Fixed Income Portfolio will only invest in the
shares of the One-Year Fixed Income Series, the One-Year Fixed Income Series
may invest in all of the securities and obligations listed in categories 1-6
and 8, DFA Intermediate Government Fixed Income Portfolio may invest only in
the securities and obligations listed in categories 1, 2, 6, 7 and 8, and DFA
Five-Year Government Portfolio may invest only in the securities and
obligations listed in categories 1, 2 and 6. DFA Global Fixed Income
Portfolio may invest only in the securities and obligations listed in
categories 1, 2, 6, 7, 8 and 9.

1. U.S. GOVERNMENT OBLIGATIONS - Debt securities issued by the U.S.
Treasury which are direct obligations of the U.S. government, including
bills, notes and bonds.

2. U.S. GOVERNMENT AGENCY OBLIGATIONS - Issued or guaranteed by U.S.
government-sponsored instrumentalities and federal agencies, including the
Federal National Mortgage Association, Federal Home Loan Bank and the Federal
Housing Administration.

3. CORPORATE DEBT OBLIGATIONS - Non-convertible corporate debt
securities (e.g., bonds and debentures) which are issued by companies whose
commercial paper is rated Prime-1 by Moody's Investors Services, Inc.
("Moody's") or A-1 by S&P and dollar-denominated obligations of foreign
issuers issued in the U.S. If the issuer's commercial paper is unrated, then
the debt security would have to be rated at least AA by S&P or Aa2 by
Moody's. If there is neither a commercial paper rating nor a rating of the
debt security, then the Advisor must determine that the debt security is of
comparable quality to equivalent issues of the same issuer rated at least AA
or Aa2.

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4. BANK OBLIGATIONS - Obligations of U.S. banks and savings and loan
associations and dollar-denominated obligations of U.S. subsidiaries and
branches of foreign banks, such as certificates of deposit (including
marketable variable rate certificates of deposit) and bankers' acceptances.
Bank certificates of deposit will only be acquired if the bank has assets in
excess of $1,000,000,000.

5. COMMERCIAL PAPER - Rated, at the time of purchase, A-1 or better by
S&P or Prime-1 by Moody's, or, if not rated, issued by a corporation having
an outstanding unsecured debt issue rated Aaa by Moody's or AAA by S&P, and
having a maximum maturity of nine months.

6. REPURCHASE AGREEMENTS - Instruments through which the Portfolios
purchase securities ("underlying securities") from a bank, or a registered
U.S. government securities dealer, with an agreement by the seller to
repurchase the security at an agreed price, plus interest at a specified
rate. The underlying securities will be limited to U.S. government and
agency obligations described in (1) and (2) above. The Portfolios will not
enter into a repurchase agreement with a duration of more than seven days if,
as a result, more than 10% of the value of the Portfolio's total assets would
be so invested. The Portfolios will also only invest in repurchase
agreements with a bank if the bank has at least $1,000,000,000 in assets and
has a credit rating of not less than A as determined by Moody's or S&P. The
Advisor will monitor the market value of the securities plus any accrued
interest thereon so that they will at least equal the repurchase price.

7. FOREIGN GOVERNMENT AND AGENCY OBLIGATIONS - Bills, notes, bonds and
other debt securities issued or guaranteed by foreign governments, or their
agencies and instrumentalities.

8. SUPRANATIONAL ORGANIZATION OBLIGATIONS - Debt securities of
supranational organizations such as the European Coal and Steel Community,
the European Economic Community and the World Bank, which are chartered to
promote economic development.

9. FOREIGN ISSUER OBLIGATIONS - Debt securities of non U.S. issuers
rated AA or better by S&P and Aa2 or better by Moody's.

INVESTMENTS IN THE BANKING INDUSTRY

The One-Year Fixed Income Series will invest more than 25% of its total
assets in obligations of U.S. and/or foreign banks and bank holding companies
when the yield to maturity on these investments exceeds the yield to maturity
on all other eligible portfolio investments for a period of five consecutive
days when the NYSE is open for trading. For the purpose of this policy,
which is a fundamental policy of the Series, which can only be changed by a
vote of shareholders of the Series, banks and bank holding companies are
considered to constitute a single industry, the banking industry. The DFA
One-Year Fixed Income Portfolio has the same fundamental policy, which can
only be changed by a vote of the Portfolio's shareholders, except that the
Portfolio's policy does not apply to the extent that all or substantially all
of its assets are invested in the Series. When investment in such
obligations exceeds 25% of the total net assets of the Series, the Series
will be considered to be concentrating its investments in the banking
industry. As of the date of this prospectus, the Series is concentrating its
investment in this industry.

The types of bank and bank holding company obligations in which the
One-Year iFxed Income Series may invest include: dollar-denominated
certificates of deposit, bankers' acceptances, commercial paper and other
debt obligations issued in the United States and which mature within two
years of the date of settlement, provided such obligations meet the Series'
established credit rating criteria as stated under "Description of Securities
and Obligations". In addition, the Series is authorized to invest more than
25% of its total assets in Treasury bonds, bills and notes and obligations of
federal agencies and instrumentalities.

PORTFOLIO STRATEGY

The One-Year Fixed Income Series will be managed with a view to capturing
credit risk premiums and term or maturity premiums. As used herein, the term
"credit risk premium" means the anticipated incremental return on investment
for holding obligations considered to have greater credit risk than direct
obligations of the U.S. Treasury, and "maturity risk premium" means the
anticipated incremental return for holding securities having maturities of
longer than one month compared to securities having a maturity of one month.
The Advisor

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believes that credit risk premiums are available largely through investment
in high grade commercial paper, certificates of deposit and corporate
obligations. The holding period for assets of the Series will be chosen with
a view to maximizing anticipated monthly returns, net of trading costs.

The One-Year Fixed Income Series and DFA Five-Year Government Portfolio
are expected to have high portfolio turnover rates due to the relatively
short maturities of the securities to be acquired. The rate of portfolio
turnover will depend upon market and other conditions; it will not be a
limiting factor when management believes that portfolio changes are
appropriate. It is anticipated that the annual turnover rate of the One-Year
Fixed Income Series could be 0% to 200%, DFA Five-Year Government Portfolio
could be 100% to 500%, and DFA Intermediate Government Fixed Income Portfolio
will be no more than 25%. While the Fixed Income Portfolios and the One-Year
Fixed Income Series acquire securities in principal transactions and,
therefore, do not pay brokerage commissions, the spread between the bid and
asked prices of a security may be considered to be a "cost" of trading. Such
costs ordinarily increase with trading activity. However, as stated above,
securities ordinarily will be sold when, in the Advisor's judgment, the
monthly return of a Portfolio or the One-Year Fixed Income Series will be
increased as a result of portfolio transactions after taking into account the
cost of trading. It is anticipated that securities will be acquired in the
secondary markets for short term instruments. However, as the size of each
Portfolio or the One-Year Fixed Income Series increases, it is possible that
transactions also may be effected directly with the issuers of securities
acquired for the Portfolios or Series.

The DFA Global Fixed Income Portfolio will be managed with a view to
capturing maturity risk premiums. Ordinarily the Portfolio will invest
primarily in obligations issued or guaranteed by foreign governments and
their agencies and instrumentalities, obligations of other foreign issuers
rated AA or better and supranational organizations. Supranational issuers
include the European Economic Community, the European Coal and Steel
Community, the Nordic Investment Bank, the World Bank and the Japanese
Development Bank. The Portfolio will own obligations issued or guaranteed by
the U.S. government and its agencies and instrumentalities also. At times
when, in the Advisor's judgement, eligible foreign securities do not offer
maturity risk premiums that compare favorably with those offered by eligible
U.S. securities, the Portfolio will be invested primarily in the latter
securities.

The DFA Global Fixed Income Portfolio is "non-diversified", as defined in
the Investment Company Act of 1940, which means that, as to 75% of its total
assets, more than 5% may be invested in the securities of a single issuer.
However, for purposes of the Internal Revenue Code, the Portfolio is
"diversified" because as to 50% of its total assets, no more than 5% may be
invested in the securities of a single issuer. The Portfolio will not invest
more than 25% of its assets in securities of companies in any one industry.
Management does not consider securities which are issued by the U.S.
government or its agencies or instrumentalities to be investments in an
"industry". However, management currently considers securities issued by a
foreign government to be subject to the 25% limitation, with the effect that
not more than 25% of the Portfolio's total assets will be invested in
securities issued by any one foreign government. The Portfolio will not
invest more than 25% of its total assets in obligations of supranational
organizations. Finally, the Portfolio might invest in certain securities
issued by companies, such as Caisse Nationale des Telecommunication, a
communications company, whose obligations are guaranteed by a foreign
government. Management considers such a company to be within a particular
industry (in this case, the communications industry) and, therefore, the
Portfolio will invest in the securities of such a company only if it can do
so under the Portfolio's policy of not being concentrated in any single
industry.

RISK FACTORS - ALL PORTFOLIOS

Typically, securities of small companies are less liquid than securities
of large companies. Recognizing this factor, the Small Company Portfolios,
the 6-10 Series and the Small Cap Value Series will endeavor to effect
securities transactions in a manner to avoid causing significant price
fluctuations in the market for these securities.

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The International Equity Portfolios, the International Value Series, DFA
Global Fixed Income Portfolio and DFA One-Year Fixed Income Series invest in
foreign issuers. Such investments involve risks that are not associated with
investments in U.S. public companies. Such risks may include legal,
political and or diplomatic actions of foreign governments, such as
imposition of withholding taxes on interest and dividend income payable on
the securities held, possible seizure or nationalization of foreign deposits,
establishment of exchange controls or the adoption of other foreign
governmental restrictions which might adversely affect the value of the
assets held by the Portfolios and the Series. Further, foreign issuers are
not generally subject to uniform accounting, auditing and financial reporting
standards comparable to those of U.S. public companies and there may be less
publicly available information about such companies than comparable U.S.
companies. The One-Year Fixed Income Series and the Intermediate Government
Fixed Income and Global Fixed Income Portfolios may invest in obligations of
supranational organizations. The value of the obligations of these
organizations may be adversely affected if one or more of their supporting
governments discontinue their support. Also, there can be no assurance that
any of the Portfolios will achieve its investment objective.

The investments of the Emerging Markets Series involve risks in addition
to the usual risks of investing in developed foreign markets. A number of
emerging securities markets restrict, to varying degrees, foreign investment
in stocks. Repatriation of investment income, capital and the proceeds of
sales by foreign investors may require governmental registration and/or
approval in some emerging countries. In some jurisdictions, such
restrictions and the imposition of taxes are intended to discourage shorter
rather than longer-term holdings. While the Emerging Markets Series will
invest only in markets where these restrictions are considered acceptable to
the Advisor, new or additional repatriation restrictions might be imposed
subsequent to the Series' investment. If such restrictions were imposed
subsequent to investment in the securities of a particular country, the
Series might, among other things, discontinue the purchasing of securities in
that country. Such restrictions will be considered in relation to the
Series' liquidity needs and other factors and may make it particularly
difficult to establish the fair market value of particular securities from
time to time. The valuation of securities held by the Emerging Markets
Series is the responsibility of the Trust's Board of Trustees, acting in good
faith and with advice from the Advisor. (See "VALUATION OF SHARES.")
Further, some attractive equity securities may not be available to the Series
because foreign shareholders hold the maximum amount permissible under
current laws.

Relative to the U.S. and to larger non-U.S. markets, many of the emerging
securities markets in which the Emerging Markets Series may invest are
relatively small, have low trading volumes, suffer periods of illiquidity and
are characterized by significant price volatility. Such factors may be even
more pronounced in jurisdictions where securities ownership is divided into
separate classes for domestic and non-domestic owners.

In addition, many emerging markets, including most Latin American
countries, 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 very negative effects on
the economies and securities markets of certain countries. In an attempt to
control inflation, wage and price controls have been imposed at times in
certain countries. Certain emerging markets have recently transitioned, or
are in the process of transitioning, from centrally controlled economies.
There can be no assurance that such transitions will be successful.

Brokerage commissions, custodial services and other costs relating to
investment in foreign markets generally are more expensive than in the United
States; this is particularly true with respect to emerging markets. Such
markets have different settlement and clearance procedures. In certain
markets there have been times when settlements have been unable to keep pace
with the volume of securities transactions, making it difficult to conduct
such transactions. The inability of the Emerging Markets Series to make
intended securities purchases due to settlement problems could cause the
Series to miss investment opportunities. Inability to dispose of a portfolio
security caused by settlement problems could result either in losses to the
Series due to subsequent declines in value of the portfolio security or, if
the Series has entered into a contract to sell the security, could result in
possible liability to the purchaser.

The risk also exists that an emergency situation may arise in one or more
emerging markets as a result of which trading of securities may cease or may
be substantially curtailed and prices for the Emerging Markets Series'
portfolio securities in such markets may not be readily available. The
Series' portfolio securities in the affected markets will be valued at fair
value determined in good faith by or under the direction of the Board of
Trustees.

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Government involvement in the private sector varies in degrees among the
emerging securities markets contemplated for investment by the Emerging
Markets Series. Such involvement may, in some cases, include government
ownership of companies in certain commercial business sectors, wage and price
controls or imposition of trade barriers and other protectionist measures.
With respect to any developing country, there is no guarantee that some
future economic or political crisis will not lead to price controls, forced
mergers of companies, expropriation, the creation of government monopolies,
or other measures which could be detrimental to the investments of the
Emerging Markets Series.

Taxation of dividends and capital gains received by non-residents varies
among countries with emerging markets and, in some cases, is high in relation
to comparable U.S. rates. Particular tax structures may have the intended or
incidental effect of encouraging long holding periods for particular
securities and/or the reinvestment of earnings and sales proceeds in the same
jurisdiction. In addition, emerging market jurisdictions typically have less
well-defined tax laws and procedures than is the case in the United States,
and such laws may permit retroactive taxation so that the Emerging Markets
Series could in the future become subject to local tax liability that it had
not reasonably anticipated in conducting its investment activities or valuing
its assets.

Investments of the International Equity Portfolios, the International
Value Series and DFA Global Fixed Income Portfolio will be denominated in
foreign currencies. Changes in the relative values of foreign currencies and
the U.S. dollar, therefore, will affect the value of investments of these
Portfolios and Series. These Portfolios and Series may purchase foreign
currency futures contracts and options in order to hedge against changes in
the level of foreign currency exchange rates, provided not more than 5% of
each Portfolio's or Series' assets are then invested as initial or variation
margin deposits on such contracts or options. Such contracts involve an
agreement to purchase or sell a specific currency at a future date at a price
set in the contract and enable the Portfolios and Series to protect against
losses resulting from adverse changes in the relationship between the U.S.
dollar and foreign currencies occurring between the trade and settlement
dates of Portfolio and Series securities transactions, but they also tend to
limit the potential gains that might result from a positive change in such
currency relationships.

Each Portfolio and each corresponding Series of the Trust, except U.S.
9-10 and Japanese Small Company Portfolios, DFA One-Year Fixed Income
Portfolio, DFA Five-Year Government Portfolio and DFA Intermediate Government
Fixed Income Portfolio, have reserved the right to borrow amounts not
exceeding 33% of its net assets for the purposes of making redemption
payments. When advantageous opportunities to do so exist, each Portfolio and
each Series may also purchase securities when borrowings exceed 5% of the
value of its net assets. Such purchases can be considered to be "leveraging"
and, in such circumstances, the net asset value of the Portfolio or Series
may increase or decrease at a greater rate than would be the case if the
Portfolio or Series had not leveraged. The interest payable on the amount
borrowed would increase the Portfolio's or Series' expenses and, if the
appreciation and income produced by the investments purchased when the
Portfolio or Series has borrowed are less than the cost of borrowing, the
investment performance of the Portfolio will be reduced as a result of
leveraging.

The method employed by the Advisor to manage the Domestic and
International Equity Portfolios (except U.S. Large Company Portfolio) and, in
respect of those that are Feeder Portfolios, the corresponding Series of the
Trust will differ from the process employed by many other investment advisors
in that the Advisor will rely on fundamental analysis of the investment
merits of securities to a limited extent to eliminate potential portfolio
acquisitions rather than rely on this technique to select securities.
Further, because securities generally will be held long-term and will not be
eliminated based on short-term price fluctuations, the Advisor generally will
not act upon general market movements or short-term price fluctuations of
securities to as great an extent as many other investment advisors. U.S.
Large Company Series will operate as an index fund and, therefore, represents
a passive method of investing in all stocks that comprise the S&P 500 Index
which does not entail selection of securities based on the individual
investment merits of their issuers. The investment performance of the U.S.
Large Company Series and the corresponding Portfolio is expected to
approximate the investment performance of the S&P 500 Index, which tends to
be cyclical in nature, reflecting periods when stock prices generally rise or
fall.

U.S. Large Company Series, Large Cap International Portfolio, the Value
Series, DFA/AEW Real Estate Securities Portfolio, the International Value
Series, the Emerging Markets Series and the DFA International Small Cap Value
Portfolio may invest in index futures contracts and index options. These
investments entail the risk that an imperfect correlation may exist between
changes in the market value of the stocks owned by the

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Portfolio or Series and the prices of such futures contracts and options and,
at times, the market for such contracts and options might lack liquidity,
thereby inhibiting a Portfolio's or Series' ability to close a position in
such investments.

Concentrating in obligations of the banking industry may involve
additional risk by foregoing the safety of investing in a variety of
industries. Changes in the market's perception of the riskiness of banks
relative to non-banks could cause more fluctuations in the net asset value of
the One-Year Fixed Income Series (and, thus, DFA One-Year Fixed Income
Portfolio) than might occur in less concentrated portfolios.

The DFA/AEW Real Estate Securities Portfolio intends to concentrate its
investments in the real estate industry. Concentrating investments in the
real estate industry involves the risk of foregoing the safety of investing
in a variety of industries. Further, while the Portfolio will not invest in
real estate directly, but only in securities issued by real estate companies,
the Portfolio may be subject to certain risks that are similar to those
associated with the direct ownership of real estate in addition to securities
markets risks. These include declines in the value of real estate, risks
related to general and local economic conditions, heavy cash flow dependency,
possible lack of availability of mortgage funds, overbuilding, extended
periods of high vacancy rates, increases in property taxes and operating
expenses, changes in zoning laws, losses due to costs resulting from the
clean-up of environmental hazards, liability to third parties for damages
resulting from environmental hazards, casualty or condemnation losses,
limitations on rents, and changes in neighborhood values, interest rates and
the credit quality of tenants. Also, in deciding whether to purchase
securities of a particular real estate company, including REITS, the Advisor
does not consider the geographic location within the United States of the
underlying assets of such company. Therefore, to the extent that the
Portfolio may become substantially invested in real estate companies,
including REITS, whose underlying assets are located in one particular region
of the United States and subsequently a decline in real estate values occurs
in that region, the value of such real estate companies may be adversely
affected and the Portfolio's net asset value may in turn be similarly
affected.

In addition, all of the Portfolios and the Series of the Trust may invest
in repurchase agreements. In the event of the bankruptcy of the other party
to a repurchase agreement, the Fund or the Trust could experience delay in
recovering the securities underlying such agreements. Management believes
that this risk can be controlled through stringent security selection
criteria and careful monitoring procedures.

MANAGEMENT OF THE FUND

Dimensional Fund Advisors Inc. (the "Advisor") serves as investment
advisor to each of the Portfolios, except the Feeder Portfolios, and each
Series of the Trust. As such, the Advisor is responsible for the management
of their respective assets. Investment decisions for all Portfolios of the
Fund and all Series of the Trust are made by the Investment Committee of the
Advisor which meets on a regular basis and also as needed to consider
investment issues. The Investment Committee is composed of certain officers
and directors of the Advisor who are elected annually. The Advisor provides
the Portfolios (except the Feeder Portfolios) and the Series with a trading
department and selects brokers and dealers to effect securities transactions.
Portfolio securities transactions are placed with a view to obtaining best
price and execution and, subject to this goal, may be placed with brokers
which have assisted in the sale of the Portfolios' shares.

For the fiscal year ended November 30, 1994, (i) the Advisor received a
fee for its services which, on an annual basis, equaled the following
percentage of the average net assets of each Portfolio or, in the case of a
Feeder Portfolio, the average net assets of its corresponding Trust Series
and (ii) the total expenses of each Portfolio were the following percentages
of respective average net assets:

<TABLE>
<CAPTION>
PORTFOLIO MANAGEMENT FEE TOTAL EXPENSES
--------- -------------- --------------
<S> <C> <C>
U.S. 9-10 Small Company 0.50% 0.65%

U.S. 6-10 Small Company 0.03% 0.53%

29
<PAGE>

U.S. Large Company 0.025% 0.24%

U.S. Small Cap Value 0.20% 0.66%

U.S. Large Cap Value 0.10% 0.44%

DFA/AEW Real Estate Securities 0.50% 0.90%

Japanese Small Company 0.50% 0.76%

Pacific Rim Small Company 0.50% 0.95%

United Kingdom Small Company 0.50% 0.74%

Continental Small Company 0.50% 0.77%

Large Cap International 0.25% 0.66%

DFA International High Book to Market 0.17% 0.69%

DFA One-Year Fixed Income 0.05% 0.21%

DFA Five-Year Government 0.20% 0.31%

DFA Global Fixed Income 0.25% 0.49%

DFA Intermediate Government Fixed Income 0.15% 0.29%

</TABLE>

The investment advisory fees applicable to the Emerging Markets Portfolio,
which commenced operations in April, 1994, and the DFA International Small
Cap Value Portfolio, which commenced operations after November 30, 1994, are
equal to .10% and .65%, respectively, of the average net assets of each
Portfolio on an annual basis.

In February, 1994, the DFA International High Book to Market Portfolio
invested its assets in the corresponding Series of the Trust and the existing
investment advisory agreement with respect to that Portfolio was terminated.
At that time, an administration agreement with respect to the DFA
International High Book to Market Portfolio took effect. (See
"Administrative Services - All Portfolios".)

Beginning with the effective date of the Investment Management Agreement
with respect to the DFA International Value Series, the Advisor has agreed to
waive its fee under that Agreement to the extent necessary to keep the
cumulative annual expenses of the Series to not more than .45% of average net
assets of the Series on an annualized basis. (See "Client Service Agent -
DFA International High Book to Market Portfolio.") Through February 15,
1994, the Advisor waived its fee under the Investment Management Agreement
with respect to the DFA International High Book to Market Portfolio to the
extent necessary to keep the cumulative annual expenses of the Portfolio to
not more than 0.65% of average net assets of the Portfolio on an annualized
basis. Absent the waivers, the annualized ratio of expenses to average net
assets for the DFA International High Book to Market Portfolio for the fiscal
year ended November 30, 1994 would have been 0.73%.

The Advisor has agreed to bear all of the ordinary operating expenses of
U.S. Large Company Portfolio and its corresponding Series, except the
investment advisory fee of the Series and the administration fee of the
Portfolio. Absent this arrangement, the annualized ratio of expenses to
average net assets for U.S. Large Company Portfolio for the fiscal year ended
November 30, 1994 would have been .66%.

The Fund and the Trust each bears all of its own costs and expenses,
including: services of its independent accountants, legal counsel, brokerage
fees, commissions and transfer taxes in connection with the acquisition and
disposition of portfolio securities, taxes, insurance premiums, costs
incidental to meetings of its shareholders

30
<PAGE>

and directors or trustees, the cost of filing its registration statements
under federal and state securities laws, reports to shareholders, and
transfer and dividend disbursing agency, administrative services and
custodian fees, except the Advisor will pay the ordinary operating expenses
(other than the advisory fee) of U.S. Large Company Series. Expenses of U.S.
Large Company Series, which are determined by the Board of Trustees to be
extraordinary, would be borne by that Series. Expenses allocable to a
particular Portfolio or Series are so allocated and expenses which are not
allocable to a particular Portfolio or Series are borne by each Portfolio or
Series on the basis of the fees paid by the Fund or Trust to PFPC.

The Advisor was organized in May 1981 and is engaged in the business of
providing investment management services to institutional investors. Assets
under management total approximately $10.4 billion. David G. Booth and Rex
A. Sinquefield, directors and officers of both the Fund and the Advisor and
trustees and officers of the Trust, together own approximately 55% of the
Advisor's outstanding stock and may be deemed controlling persons of the
Advisor. The Advisor owns 100% of the outstanding shares of Dimensional Fund
Advisors Ltd. ("DFAL") (see "Investment Services - United Kingdom and
Continental Small Company Portfolios") and DFA Australia Pty Limited ("DFA
Australia") (see "Investment Services - Japanese and Pacific Rim Small
Company Portfolios").

INVESTMENT SERVICES - UNITED KINGDOM AND CONTINENTAL SMALL COMPANY PORTFOLIOS

Pursuant to Sub-Advisory Agreements with the Advisor, DFAL, 14 Berkeley
Street, London, W1X 5AD, England, a company that is organized under the laws
of England, has the authority and responsibility to select brokers or dealers
to execute securities transactions for United Kingdom and Continental Small
Company Portfolios. DFAL's duties include the maintenance of a trading desk
for the Portfolios and the determination of the best and most efficient means
of executing securities transactions. On at least a semi-annual basis the
Advisor reviews the holdings of United Kingdom and Continental Small Company
Portfolios and reviews the trading process and the execution of securities
transactions. The Advisor is responsible to determine those securities which
are eligible for purchase and sale by these Portfolios and may delegate this
task, subject to its own review, to DFAL. DFAL maintains and furnishes to
the Advisor information and reports on United Kingdom and European small
companies, including its recommendations of securities to be added to the
securities that are eligible for purchase by the Portfolios. The Advisor
pays DFAL quarterly fees of 12,500 pounds sterling for services to each
Portfolio. DFAL is a member of the Investment Management Regulatory
Organization Limited ("IMRO"), a self regulatory organization for investment
managers operating under the laws of England. If a shareholder of United
Kingdom Small Company Portfolio or Continental Small Company Portfolio wishes
to register a complaint against DFAL, that shareholder may either make the
complaint in writing to the Compliance Officer of DFAL or may complain
directly to IMRO.

INVESTMENT SERVICES - JAPANESE AND PACIFIC RIM SMALL COMPANY PORTFOLIOS

Pursuant to Sub-Advisory Agreements with the Advisor, DFA Australia, Suite
4403 Gateway, 1 MacQuarie Place, Sydney, New South Wales 2000, Australia, the
successor to Dimensional Fund Advisors Asia Inc., has the authority and
responsibility to select brokers and dealers to execute securities
transactions for Japanese and Pacific Rim Small Company Portfolios. DFA
Australia's duties include the maintenance of a trading desk for each
Portfolio and the determination of the best and most efficient means of
executing securities transactions. On at least a semi-annual basis, the
Advisor reviews the holdings of Japanese and Pacific Rim Small Company
Portfolios and reviews the trading process and the execution of securities
transactions. The Advisor is responsible to determine those securities which
are eligible for purchase and sale by these Portfolios and may delegate this
task, subject to its own review, to DFA Australia. DFA Australia maintains
and furnishes to the Advisor information and reports on Japanese and Pacific
Rim small companies, including its recommendations of securities to be added
to the securities that are eligible for purchase by each Portfolio. The
Advisor pays DFA Australia quarterly fees of 25,000 Hong Kong dollars for
services to each Portfolio.

INVESTMENT SERVICES - DFA/AEW REAL ESTATE SECURITIES PORTFOLIO

Pursuant to a Sub-Advisory Agreement with the Fund, Aldrich, Eastman &
Waltch L.P., Boston, MA ("AEW"), provides the Advisor with real estate
expertise and advice regarding investments of the Portfolio. For its
services the Portfolio pays AEW a fee which, on an annual basis, equals .175%
of the average net assets of the Portfolio. AEW is a Massachusetts limited
partnership founded in 1981 that currently manages approximately $4.1 billion
for its institutional clients. The general partner of AEW is AEW Holdings,
L.P.,

31
<PAGE>

whose general partner is Aldrich, Eastman & Waltch, Inc. ("AEW, Inc."), a
registered investment advisor. Peter C. Aldrich and Thomas G. Eastman each
own 28.7% of the voting securities of AEW, Inc. While AEW has not previously
served as an investment advisor to a registered investment company, the firm
has substantial experience in providing institutional investors with advice
regarding investment in real estate.

ADMINISTRATIVE SERVICES - THE FEEDER PORTFOLIOS

The Fund has entered into an administration agreement with the Advisor, on
behalf of each Feeder Portfolio. Pursuant to each administration agreement,
the Advisor performs various services, including: supervision of the services
provided by the Portfolio's custodian and transfer and dividend disbursing
agent and others who provide services to the Fund for the benefit of the
Portfolio; providing shareholders with information about the Portfolio and
their investments as they or the Fund may request; assisting the Portfolio in
conducting meetings of shareholders; furnishing information as the Board of
Directors may require regarding the corresponding Series; and any other
administrative services for the benefit of the Portfolio as the Board of
Directors may reasonably request. For its administrative services, the
Feeder Portfolios pay the Advisor a monthly fee equal to one-twelfth of the
percentages listed below:

<TABLE>
<S> <C>
U.S. 6-10 Small Company .32%

U.S. Large Company .215%

U.S. Small Cap Value .10%

U.S. Large Cap Value .20%

DFA International High Book to Market .20%*

Emerging Markets .40%

DFA One-Year Fixed Income .10%
<FN>
__________________________
*The administration fee of .20% will be applied to the first $40 million of
average net assets of the Portfolio, but not to amounts in excess of $40
million.
</TABLE>

CLIENT SERVICE AGENT - DFA INTERNATIONAL HIGH BOOK TO MARKET PORTFOLIO

Pursuant to a Client Service Agent Agreement, Reinhardt Werba Bowen
Advisory Services, San Jose, CA ("RWBAS"), performs various services for the
DFA International High Book to Market Portfolio, including: establishment of
a toll-free telephone number for shareholders of the Portfolio to use to
obtain or receive up-to-date account information; providing to shareholders
quarterly reports with respect to the performance of the Portfolio; and
providing shareholders with such information regarding the operation and
affairs of the Portfolio, and their investment in its shares, as the
shareholders or the Board of Directors may reasonably request. For its
services, the Portfolio pays RWBAS a monthly fee which, on an annual basis,
equals .20% of the average daily net assets of the Portfolio in excess of $40
million. RWBAS has agreed to waive its fee under certain circumstances.
(See "MANAGEMENT OF THE FUND".)

DIRECTORS AND OFFICERS

The Board of Directors is responsible for establishing Fund policies and
for overseeing the management of the Fund. Each of the Directors and
officers of the Fund is also a Trustee and officer of the Trust. The
Directors of the Fund, including all of the disinterested directors, have
adopted written procedures to monitor potential conflicts of interest that
might develop between the Feeder Portfolios and the Trust. Information as to
the Directors and Officers of the Fund and the Trust is set forth in the
Statement of Additional Information under "Directors and Officers."

32
<PAGE>

DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAXES

Each Portfolio of the Fund intends to qualify each year as a regulated
investment company under the Internal Revenue Code of 1986, as amended (the
"Code") so that it will not be liable for federal income taxes to the extent
that its net investment income and net realized capital gains are
distributed. The policy of the Domestic and International Equity Portfolios,
except U.S. Large Company Portfolio and the U.S. Large Cap Value Portfolio,
is to distribute substantially all of their net investment income together
with any net realized capital gains in November and December of each year.
Dividends from net investment income of U.S. Large Company Portfolio and the
U.S. Large Cap Value Portfolio are distributed quarterly and any net realized
capital gains are distributed annually after November 30. Net investment
income, which is accrued daily, will be distributed monthly (except for
January) by DFA One-Year Fixed Income Portfolio, quarterly by DFA
Intermediate Government Fixed Income, DFA Global Fixed Income and DFA Global
Bond Portfolios, and semi-annually by DFA Five-Year Government Portfolio.
Any net realized capital gains of Fixed Income Portfolios will be distributed
annually after the end of the fiscal year. Each Portfolio of the Fund is
treated as a separate corporation for Federal tax purposes.

Shareholders of the Portfolios will automatically receive all income
dividends and capital gains distributions in additional shares of the
Portfolio whose shares they hold at net asset value (as of the business date
following the dividend record date), unless as to U.S. 9-10 Small Company
Portfolio, U.S. 6-10 Small Company Portfolio, the Fixed Income Portfolios,
DFA/AEW Real Estate Securities Portfolio, U.S. Large Company Portfolio and
the Value Portfolios upon written notice to the Transfer Agent, the
shareholder selects one of the following options:

Income Option - to receive income dividends in cash and capital gains
distributions in additional shares at net asset value.

Capital Gains Option - to receive capital gains distributions in cash and
income dividends in additional shares at net asset
value.

Cash Option - to receive both income dividends and capital gains
distributions in cash.

As noted above, U.S. 6-10 Small Company, U.S. Large Company, DFA One-Year
Fixed Income, U.S. Small Cap Value, U.S. Large Cap Value, DFA International
High Book to Market Portfolios (collectively the "Corporate Feeder
Portfolios") seek to achieve their investment objectives by investing all of
their investable assets in a corresponding series of shares of the Trust
(collectively the "Corporate Series"). The Corporate Series intend to qualify
each year as regulated investment companies under the Code.

A Corporate Feeder Portfolio receives income in the form of income
dividends paid by the corresponding Corporate Series. This income, less the
expenses incurred in operations, is a Corporate Feeder Portfolio's net
investment income from which income dividends are distributed as described
above. A Corporate Feeder Portfolio also may receive capital gains
distributions from the corresponding Corporate Series and may realize capital
gains upon the redemption of the shares of the corresponding Corporate
Series. Any net realized capital gains of a Corporate Feeder Portfolio will
be distributed as described above.

Emerging Markets Portfolio seeks its investment objective by investing all
of its investable assets in Emerging Markets Series of the Trust. Emerging
Markets Series has obtained a ruling from the Internal Revenue Service
("IRS") holding, in part, that Emerging Markets Series is taxable as a
partnership and that the Emerging Markets Portfolio is deemed to own a
proportionate share of the assets of the Emerging Markets Series for purposes
of satisfying the requirements of Section 853 of the Code, which permits flow
through treatment for foreign tax credits. (As described below, certain
dividends from investments made by Emerging Markets Series in foreign
countries may be subject to withholding taxes. Foreign tax credits for such
taxes may be available to shareholders of the Emerging Markets Portfolio.)
If the requirements of Section 853 of the Code are satisfied, the Emerging
Markets Portfolio will be eligible to pass through the foreign tax credits of
Emerging Markets Series to the Emerging Markets Portfolio's shareholders.

If a Portfolio, except for the Feeder Portfolios, purchases shares in
certain foreign investment entities, called "passive foreign investment
companies" ("PFIC"), such Portfolio may be subject to U.S. federal income tax
and a related interest charge on a portion of any "excess distribution" or
gain from the disposition of such shares

33
<PAGE>

even if such income is distributed as a taxable dividend by the Portfolio to
its shareholders. In the case of a Feeder Portfolio, except for the Emerging
Markets Portfolio, if the corresponding Series purchases shares in PFICs,
such Series may be subject to U.S. federal income tax and a related interest
charge on a portion of any "excess distribution" or gain from the disposition
of such shares even if such income is distributed as a taxable dividend by
the Series to the Feeder Portfolio. In the case of the Emerging Markets
Portfolio, if Emerging Markets Series purchases shares in PFICs, the Emerging
Markets Portfolio may be subject to U.S. federal income tax and a related
interest charge on a portion of any "excess distribution" or gain from the
disposition of such shares.

Dividends received on investments made by the Portfolios (or in the case
of a Feeder Portfolio, the corresponding Series) may be subject to foreign
withholding taxes on income from certain of their foreign securities.

Since virtually all the net investment income from the Fixed Income
Portfolios is expected to arise from earned interest, it is not expected that
any of those Portfolios' distributions will be eligible for the dividends
received deduction for corporations.

Whether paid in cash or additional shares and regardless of the length of
time a Portfolio's shares have been owned by shareholders who are subject to
federal income taxes, distributions from long-term capital gains are taxable
as such. Dividends from net investment income or net short-term capital gains
will be taxable as ordinary income, whether received in cash or in additional
shares. For those investors subject to tax, if purchases of shares of a
Portfolio are made shortly before the record date for a dividend or capital
gains distribution, a portion of the investment will be returned as a taxable
distribution. Shareholders are notified annually by the Fund as to the
federal tax status of dividends and distributions paid by the Portfolio whose
shares they own.

Dividends which are declared in October, November or December to
shareholders of record in such a month but which, for operational reasons,
may not be paid to the shareholder until the following January, will be
treated for tax purposes as if paid by the Portfolio and received by the
shareholder on December 31 of the calendar year in which they are declared.

The sale of shares of a Portfolio is a taxable event and may result in a
capital gain or loss to shareholders subject to tax. Capital gain or loss
may be realized from an ordinary redemption of shares or an exchange of
shares between two Portfolios of the Fund. Any loss incurred on sale or
exchange of a Portfolio's shares, held for six months or less, will be
treated as a long-term capital loss to the extent of capital gain dividends
received with respect to such shares.

In addition to federal taxes, shareholders may be subject to state and
local taxes on distributions. Distributions of interest income and capital
gains realized from certain types of U.S. government securities may be exempt
from state personal income taxes.

The tax discussion set forth above is included for general information
only. Prospective investors should consult their own tax advisers concerning
the federal, state, local or foreign tax consequences of an investment in a
Portfolio.

PURCHASE OF SHARES

Investors may purchase shares of any Portfolio by first contacting the
Advisor at (310) 395-8005 to notify the Advisor of the proposed investment.
All investments are subject to approval of the Advisor and all investors must
complete and submit the necessary account registration forms. The Fund
reserves the right to reject any initial or additional investment and to
suspend the offering of shares of any Portfolio.

34
<PAGE>

Only clients of RWBAS are eligible to purchase shares of the DFA
International High Book to Market Portfolio, and any such person should first
contact RWBAS at (800) 366-7266, ext. 124, to notify RWBAS of the proposed
investment.

Investors having an account with a bank that is a member or a
correspondent of a member of the Federal Reserve System may purchase shares
by first calling the Advisor at (310) 395-8005 to notify the Advisor of the
proposed investment, then requesting the bank to transmit immediately
available funds (Federal Funds) by wire to the appropriate Custodian, for the
Account of DFA Investment Dimensions Group Inc. (specify Portfolio).
Additional investments also may be made through the wire procedure by first
notifying the Advisor. Investors who wish to purchase shares of any
Portfolio by check should send their check to DFA Investment Dimensions Group
Inc., c/o PFPC Inc., 400 Bellevue Parkway, Wilmington, Delaware 19809. Chase
Manhattan Bank, N.A. serves as custodian for Emerging Markets Portfolio.
Boston Safe Deposit and Trust Company serves as custodian for the
International Equity Portfolios, except for Emerging Markets Portfolio, and
DFA Global Fixed Income Portfolio. PNC Bank, N.A. serves as custodian for
all other Portfolios.

Shares may also be purchased and sold by individuals through securities
firms which may charge a service fee or commission for such transactions. No
such fee or commission is charged on shares which are purchased or redeemed
directly from the Fund. Investors who are clients of investment advisory
organizations may also be subject to investment advisory fees under their own
arrangements with such organizations.

IN KIND PURCHASES

If accepted by the Fund, shares of the Portfolios may be purchased in
exchange for securities which are eligible for acquisition by the Portfolios
(or their corresponding Series) as described in this prospectus or in
exchange for local currencies in which eligible securities of the
International Equity Portfolios, the International Value Series and DFA
Global Fixed Income Portfolio are denominated. Purchases in exchange for
securities will not be subject to a reimbursement fee. Securities and local
currencies to be exchanged which are accepted by the Fund and Fund shares to
be issued therefore will be valued as set forth under "VALUATION OF SHARES"
at the time of the next determination of net asset value after such
acceptance. All dividends, interest, subscription, or other rights
pertaining to such securities shall become the property of the Portfolio
whose shares are being acquired and must be delivered to the Fund by the
investor upon receipt from the issuer. Investors who desire to purchase
shares of the International Equity Portfolios or DFA Global Fixed Income
Portfolio with local currencies should first contact the Advisor for wire
instructions.

The Fund will not accept securities in exchange for shares of a Portfolio
unless: (1) such securities are, at the time of the exchange, eligible to be
included in the Portfolio whose shares are to be issued (or in its
corresponding Series) and current market quotations are readily available for
such securities; (2) the investor represents and agrees that all securities
offered to be exchanged are not subject to any restrictions upon their sale
by the Portfolio under the Securities Act of 1933 or under the laws of the
country in which the principal market for such securities exists, or
otherwise; and (3) at the discretion of the Fund, the value of any such
security (except U.S. Government Securities) being exchanged together with
other securities of the same issuer owned by the Portfolio or Series may not
exceed 5% of the net assets of the Portfolio or Series immediately after the
transaction, however, this last limitation does not apply to DFA Global Fixed
Income Portfolio. The Fund will accept such securities for investment and
not for resale.

A gain or loss for federal income tax purposes will be realized by
investors who are subject to federal taxation upon the exchange depending
upon the cost of the securities or local currency exchanged. Investors
interested in such exchanges should contact the Advisor. Purchases of
shares will be made in full and fractional shares calculated to three decimal
places. In the interest of economy and convenience, certificates for shares
will not be issued except at the written request of the stockholder.
Certificates for fractional shares, however, will not be issued.

35
<PAGE>

VALUATION OF SHARES

The net asset value per share of each Portfolio and corresponding Series
is calculated as of the close of the NYSE by dividing the total market value
of the Portfolio's investments and other assets, less any liabilities, by the
total outstanding shares of the stock of the Portfolio or Series. The value
of the shares of each Portfolio will fluctuate in relation to its own
investment experience. Securities held by the Portfolios and corresponding
Series which are listed on the securities exchange and for which market
quotations are available are valued at the last quoted sale price of the day
or, if there is no such reported sale, U.S. 9-10 Small Company Portfolio, the
6-10 Series, the U.S. Large Company Series, DFA/AEW Real Estate Securities
Portfolio, the Value Series and Emerging Markets Series value such securities
at the mean between the most recent quoted bid and asked prices. Price
information on listed securities is taken from the exchange where the
security is primarily traded. Unlisted securities for which market
quotations are readily available are valued at the mean between the most
recent bid and asked prices. The value of other assets and securities for
which no quotations are readily available (including restricted securities)
are determined in good faith at fair value in accordance with procedures
adopted by the Board of Directors. The net asset values per share of the
International Equity Portfolios, the International Value Series and DFA
Global Fixed Income Portfolio are expressed in U.S. dollars by translating
the net assets of each Portfolio or Series using the bid price for the dollar
as quoted by generally recognized reliable sources.

Provided that the Transfer Agent has received the investor's Account
Registration Form in good order and the Custodian has received the investor's
payment, shares of the Portfolio selected will be priced at the public
offering price calculated next after receipt of the investor's funds by the
Custodian. The Transfer Agent or the Fund may from time to time appoint a
sub-transfer agent for the receipt of purchase orders and funds from certain
investors. With respect to such investors, the shares of the Portfolio
selected will be priced at the public offering price calculated after receipt
of the purchase order by the sub-transfer agent. The only difference between
a normal purchase and a purchase through a sub-transfer agent is that if the
investor buys shares through a sub-transfer agent, the purchase price will be
the public offering price next calculated after the sub-transfer agent
receives the order, rather than on the day the Custodian receives the
investor's payment (provided that the Transfer Agent has received the
investor's purchase order in good order). "Good order" with respect to the
purchase of shares means that (1) a fully completed and properly signed
Account Registration Form and any additional supporting legal documentation
required by the Advisor has been received in legible form and (2) the Advisor
has been notified of the purchase by telephone and, if the Advisor so
requests, also in writing, no later than the close of regular trading on the
NYSE (ordinarily 1:00 p.m. PST) on the day of the purchase. If an order to
purchase shares must be canceled due to non-payment, the purchaser will be
responsible for any loss incurred by the Fund arising out of such
cancellation. To recover any such loss, the Fund reserves the right to
redeem shares owned by any purchaser whose order is canceled, and such
purchaser may be prohibited or restricted in the manner of placing further
orders.

The value of the shares of The Fixed Income Portfolios and the One-Year
Fixed Income Series will tend to fluctuate with interest rates because,
unlike money market funds, these Portfolios and the Series do not seek to
stabilize the value of their respective shares by use of the "amortized cost"
method of asset valuation. Net asset value includes interest on fixed income
securities which is accrued daily. Securities which are traded OTC and on a
stock exchange will be valued according to the broadest and most
representative market, and it is expected that for bonds and other
fixed-income securities this ordinarily will be the OTC market. Securities
held by The Fixed Income Portfolios and the One-Year Fixed Income Series may
be valued on the basis of prices provided by a pricing service when such
prices are believed to reflect the current market value of such securities.
Other assets and securities for which quotations are not readily available
will be valued in good faith at fair value using methods determined by the
Board of Directors.

Generally, trading in foreign securities markets is completed each day at
various times prior to the close of the NYSE. The values of foreign
securities held by the International Equity Portfolios, the International
Value Series and DFA Global Fixed Income Portfolio are determined as of such
times for the purpose of computing the net asset values of these Portfolios
or Series. If events which materially affect the value of the investments of
a Portfolio or Series occur subsequent to the close of the securities market
on which such securities are primarily traded, the investments affected
thereby will be valued at "fair value" as described above.

Certain of the securities holdings of the Emerging Markets Series in
Approved Markets may be subject to tax, investment and currency repatriation
regulations of the Approved Markets that could have a material effect

36
<PAGE>

on the valuation of the securities. For example, the Series might be subject
to different levels of taxation on current income and realized gains
depending upon the holding period of the securities. In general, a longer
holding period (e.g., 5 years) may result in the imposition of lower tax
rates than a shorter holding period (e.g., 1 year). The Series may also be
subject to certain contractual arrangements with investment authorities in an
Approved Market which require the Series to maintain minimum holding periods
or to limit the extent of repatriation of income and realized gains. As a
result, the valuation of particular securities at any one time may depend
materially upon the assumptions that the Series makes at that time concerning
the anticipated holding period for the securities. Absent special
circumstances as determined by the Board of Trustees of the Trust, it is
presently intended that the valuation of such securities will be based upon
the assumption that they will be held for at least the amount of time
necessary to avoid higher tax rates or penalties and currency repatriation
restrictions. However, the use of such valuation standards will not prevent
the Series from selling such securities in a shorter period of time if the
Advisor considers the earlier sale to be a more prudent course of action.
Revision in valuation of those securities will be made at the time of the
transaction to reflect the actual sales proceeds inuring to the Series.

PUBLIC OFFERING PRICE

It is management's belief that payment of a reimbursement fee by each
investor, which is used to defray significant costs associated with investing
proceeds of the sale of their shares to such investors, will eliminate a
dilutive effect such costs would otherwise have on the net asset value of
shares held by previous investors. Therefore, the shares of the Emerging
Markets Series and the International Equity Portfolios, with the exception of
United Kingdom Small Company Portfolio, Large Cap International Portfolio and
DFA International High Book to Market Portfolio, are sold at an offering
price which is equal to the current net asset value of such shares plus a
reimbursement fee. The amount of the reimbursement fee represents
management's estimate of the costs reasonably anticipated to be associated
with the purchase of securities by those Portfolios and the Emerging Markets
Series and is paid to the Portfolios and Series and used by them to defray
such costs. Such costs include brokerage commissions on listed securities,
imputed commissions on OTC securities and a .5% Stamp Duty imposed on the
purchase of stocks on the ISE. The reimbursement fees for the International
Equity Portfolios, expressed as a percentage of the net asset value of the
shares of each Portfolio, are: Continental and Pacific Rim Small Company
Portfolios-1%; Japanese Small Company Portfolio and the Emerging Markets
Portfolio-0.50%; and DFA International Small Cap Value Portfolio-0.70%.
Reinvestments of dividends and capital gains distributions paid by the
Portfolios and in-kind investments are not subject to a reimbursement fee.
(See "In-Kind Purchases" and "DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND
TAXES".)

The public offering price of shares of the Domestic Equity Portfolios,
United Kingdom Small Company Portfolio, Large Cap International Portfolio,
DFA International High Book to Market Portfolio and the Fixed Income
Portfolios is the net asset value thereof next determined after the receipt
of the investor's funds by the Custodian, provided that an Account
Registration Form in good order has been received by the Transfer Agent; no
sales charge or reimbursement fee is imposed.

DISTRIBUTION

The Fund acts as distributor of each series of its own shares of stock.
It has, however, entered into an agreement with DFA Securities Inc., a wholly
owned subsidiary of the Advisor, pursuant to which DFA Securities Inc. is
responsible for supervising the sale of each series of shares. No
compensation is paid by the Fund to DFA Securities Inc. under this agreement.

37
<PAGE>

EXCHANGE OF SHARES

Investors may exchange shares of one Portfolio for those of another
Portfolio by first contacting the Advisor at (310) 395-8005 to notify the
Advisor of the proposed exchange and then completing an Exchange Form and
mailing it to:

DFA Investment Dimensions Group Inc.
Attn: Client Operations
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401

The minimum amount for an exchange is $100,000. Exchanges are not
accepted into or from the International Equity Portfolios, except Large Cap
International Portfolio.

Investors in any Portfolio eligible for the exchange privilege also may
exchange all or part of their Portfolio shares into a portfolio of
Dimensional Investment Group Inc., an open-end, management investment
company, subject to the minimum purchase requirement set forth in that fund's
prospectus. Investors may contact the Advisor at the above-listed phone
number for more information on such exchanges and to request a copy of the
prospectus of Dimensional Investment Group Inc.

The exchange privilege is not intended to afford shareholders a way to
speculate on short-term movements in the markets. Accordingly, in order to
prevent excessive use of the exchange privilege that may potentially disrupt
the management of the Portfolios or otherwise adversely affect the Fund, any
proposed exchange will be subject to the approval of the Advisor. Such
approval will depend on: (i) the size of the proposed exchange; (ii) the
prior number of exchanges by that shareholder; (iii) the nature of the
underlying securities and the cash position of the Portfolios involved in the
proposed exchange; (iv) the transaction costs involved in processing the
exchange; and (v) the total number of redemptions by exchange already made
out of a Portfolio.

The redemption and purchase prices of shares redeemed and purchased by
exchange, respectively, are the net asset values next determined after the
Advisor has received an Exchange Form in good order. "Good order" means a
completed Exchange Form specifying the dollar amount to be exchanged, signed
by all registered owners of the shares; and if the Fund does not have on file
the authorized signatures for the account, a guarantee of the signature of
each registered owner by an "eligible guarantor institution." Such
institutions generally include national or state banks, savings associations,
savings and loan associations, trust companies, savings banks, credit unions
and members of a recognized stock exchange. Exchanges will be accepted only
if the registrations of the two accounts are identical, stock certificates
have not been issued and the shares of the Portfolio being acquired are
registered in the investor's state of residence.

There is no fee imposed on an exchange. However, the Fund reserves the
right to impose an administrative fee in order to cover the costs incurred in
processing an exchange. Any such fee will be disclosed in the prospectus.
An exchange is treated as a redemption and a purchase. Therefore, an
investor could realize a taxable gain or a loss on the transaction. The Fund
reserves the right to revise or terminate the exchange privilege, waive the
minimum amount requirement, limit the amount of or reject any exchange, as
deemed necessary, at any time.

REDEMPTION OF SHARES

Investors who desire to redeem shares of a Portfolio must first contact
the Advisor at the telephone number shown under "PURCHASE OF SHARES." Each
Portfolio will redeem shares at the net asset value of such shares next
determined, either: (1) where stock certificates have not been issued, after
receipt of a written request for redemption in good order, by the Fund's
Transfer Agent or (2) if stock certificates have been issued, after receipt
of the stock certificates in good order at the office of the Transfer Agent.
"Good order" means that the request to redeem shares must include all
necessary documentation, to be received in writing by the Advisor no later
than the close of regular trading on the NYSE (ordinarily 1:00 p.m. PST),
including: the stock certificate(s), if issued; a letter of instruction or a
stock assignment specifying the number of shares or dollar amount to be
redeemed, signed by all registered owners (or authorized representatives
thereof) of the shares;

38
<PAGE>

and, if the Fund does not have on file the authorized signatures for the
account, a guarantee of the signature of each registered owner by an eligible
guarantor institution; and any other required supporting legal documents.

Shareholders redeeming shares for which certificates have not been issued,
who have authorized redemption payment by wire on an authorization form filed
with the Fund, may request that redemption proceeds be paid in federal funds
wired to the bank they have designated on the authorization form. If the
proceeds are wired to the shareholder's account at a bank which is not a
member of the Federal Reserve System, there could be a delay in crediting the
funds to the shareholder's bank account. The Fund reserves the right at any
time to suspend or terminate the redemption by wire procedure after prior
notification to shareholders. No charge is made by the Fund for redemptions.
The redemption of all shares in an account will result in the account being
closed. A new Account Registration Form will be required for future
investments. (See "PURCHASE OF SHARES".)

Although the redemption payments will ordinarily be made within seven days
after receipt, payment to investors redeeming shares which were purchased by
check will not be made until the Fund can verify that the payments for the
purchase have been, or will be, collected, which may take up to fifteen days
or more. Investors may avoid this delay by submitting a certified check
along with the purchase order.

GENERAL INFORMATION

The Fund was incorporated under Maryland law on June 15, 1981. Until June
1983, the Fund was named DFA Small Company Fund Inc. The shares of each
Portfolio, when issued and paid for in accordance with the Fund's prospectus,
will be fully paid and non-assessable shares, with equal, non-cumulative
voting rights and no preferences as to conversion, exchange, dividends,
redemption or any other feature.

The DFA Investment Trust Company was organized as a Delaware business
trust on October 27, 1992. The Trust offers shares of its Series only to
institutional investors in private offerings. The Fund may withdraw the
investment of a Feeder Portfolio in a Series of the Trust at any time, if the
Board of Directors of the Fund determines that it is in the best interests of
the Portfolio to do so. Upon any such withdrawal, the Board of Directors of
the Fund would consider what action might be taken, including the investment
of all of the assets of the Portfolio in another pooled investment entity
having the same investment objective as the Portfolio or the hiring of an
investment advisor to manage the Portfolio's assets in accordance with the
investment policies described above.

Whenever a Feeder Portfolio, as an investor in its corresponding Trust
Series, is asked to vote on a proposal, the Fund will hold a special meeting
of the Feeder Portfolio's shareholders to solicit their votes with respect to
the proposal. The Directors of the Fund will then vote the Feeder
Portfolio's shares in the Series in accordance with the voting instructions
received from the Feeder Portfolio's shareholders. The Directors of the Fund
will vote shares of the Feeder Portfolio for which they receive no voting
instructions in the same proportion as the shares for which they receive
voting instructions. If a shareholder of Emerging Markets Series redeems its
entire interest in the Series, a majority in interest of the remaining
shareholders in the Series must vote to approve the continuing existence of
the Series or the Series will be liquidated. That issue will be voted upon
only by the direct holders of Series shares and will not be voted upon by the
shareholders of the Emerging Markets Portfolio.

The Portfolios and the Series may disseminate reports of their investment
performance from time to time. Investment performance is calculated on a
total return basis; that is by including all net investment income and any
realized and unrealized net capital gains or losses during the period for
which investment performance is reported. If dividends or capital gains
distributions have been paid during the relevant period the calculation of
investment performance will include such dividends and capital gains
distributions as though reinvested in shares of the Portfolio or Series.
Standard quotations of total return, which include deductions of any
applicable reimbursement fees, are computed in accordance with SEC Guidelines
and are presented whenever any non-standard quotations are disseminated to
provide comparability to other investment companies. Non-standardized total
return quotations may differ from the SEC Guideline computations by covering
different time periods, excluding deduction of reimbursement fees charged to
investors and paid to the Portfolios which

39
<PAGE>

would otherwise reduce returns quotations, and linking actual Portfolio
return with simulated data for periods prior to a Portfolio's inception. In
all cases, disclosures are made when performance quotations differ from the
SEC Guidelines which were established effective May 1, 1988. Performance
data is based on historical earnings and is not intended to indicate future
performance. Rates of return expressed on an annual basis will usually not
equal the sum of returns expressed for consecutive interim periods due to the
compounding of the interim yields. The Fund's annual report to shareholders
for the fiscal year ended November 30, 1994 contains additional performance
information. A copy of the annual report is available upon request and
without charge.

With respect to the International Equity Portfolios and DFA Global Fixed
Income Portfolio, rates of return expressed as a percentage of U.S. dollars
will reflect applicable currency exchange rates at the beginning and ending
dates of the investment periods presented. The return expressed in terms of
U.S. dollars is the return one would achieve by investing dollars in the
Portfolio at the beginning of the period and liquidating the investment in
dollars at the end of the period. Hence, the return expressed as a
percentage of U.S. dollars combines the investment performance of the
Portfolio as well as the performance of the local currency or currencies of
the Portfolio. Inasmuch as DFA Global Fixed Income Portfolio intends to
continually hedge against the risk of variations in currency exchange rates,
the Advisor believes that the variation of the Portfolio's investment
performance in relation to fluctuations in currency exchange rates will be
minimized.

As of January 31, 1995, the following persons beneficially own more than
25% of the voting securities of the following Portfolios:

U.S. 6-10 SMALL COMPANY PORTFOLIO
Washington University 35.18%
Endowment Fund
P. O. Box 1047
St. Louis, Missouri 63139

U.S. LARGE COMPANY PORTFOLIO

Charles Schwab & Company, Inc. - REIN* 56.49%
101 Montgomery Street
San Francisco, CA 94104

U.S. SMALL CAP VALUE PORTFOLIO

Charles Schwab & Company, Inc. - REIN* 28.74%
101 Montgomery Street
San Francisco, CA 94104

U.S. LARGE CAP VALUE PORTFOLIO

Charles Schwab & Company, Inc. - REIN* 60.77%
101 Montgomery Street
San Francisco, CA 94104

DFA/AEW REAL ESTATE SECURITIES PORTFOLIO
Owens-Illinois 46.64%
Master Retirement Trust
34 Exchange Place
Jersey City, NJ 07302

Charles Schwab & Company, Inc. - REIN* 40.05%
101 Montgomery Street
San Francisco, CA 94104

40
<PAGE>

JAPANESE SMALL COMPANY PORTFOLIO

BellSouth Corporation Master Pension Trust 34.24%
1155 Peachtree Street, N.E.
Atlanta, GA 30367

PACIFIC RIM SMALL COMPANY PORTFOLIO

BellSouth Corporation Master Pension Trust 66.57%
1155 Peachtree Street, N.E.
Atlanta, GA 30367

UNITED KINGDOM SMALL COMPANY PORTFOLIO

BellSouth Corporation Master Pension Trust 52.09%
1155 Peachtree Street, N.E.
Atlanta, GA 30367
EMERGING MARKETS PORTFOLIO

Charles Schwab & Company, Inc. - REIN* 68.06%
101 Montgomery Street
San Francisco, CA 94104

CONTINENTAL SMALL COMPANY PORTFOLIO

BellSouth Corporation Master Pension Trust 33.75%
1155 Peachtree Street, N.E.
Atlanta, GA 30367-6000

LARGE CAP INTERNATIONAL PORTFOLIO

Charles Schwab & Company, Inc. - REIN* 88.78%
101 Montgomery Street
San Francisco, CA 94104

DFA INTERNATIONAL HIGH BOOK TO MARKET PORTFOLIO

Charles Schwab & Company, Inc. - REIN* 96.73%
101 Montgomery Street
San Francisco, CA 94104

DFA INTERNATIONAL SMALL CAP VALUE PORTFOLIO

Charles Schwab & Company, Inc. - REIN* 96.15%
101 Montgomery Street
San Francisco, CA 94104

DFA FIVE-YEAR GOVERNMENT PORTFOLIO

Charles Schwab & Company, Inc. - REIN* 73.76%
101 Montgomery Street
San Francisco, CA 94104

__________________________
* Owner of record only.

41
<PAGE>

DFA GLOBAL FIXED INCOME PORTFOLIO

Charles Schwab & Company, Inc. - REIN* 72.09%
101 Montgomery Street
San Francisco, CA 94104

DFA INTERMEDIATE GOVERNMENT FIXED INCOME PORTFOLIO

Charles Schwab & Company, Inc. - CAP* 58.88%
101 Montgomery Street
San Francisco, CA 94104

Charles Schwab & Company, Inc. - REIN* 31.02%
101 Montgomery Street
San Francisco, CA 94104

Shareholder inquiries may be made by writing or calling the Fund at the
address or telephone number appearing on the cover of this prospectus. Only
those individuals whose signatures are on file for the account in question
may receive specific account information or make changes in the account
registration.

__________________________
* Owner of record only.

42
<PAGE>

[THIS PAGE INTENTIONALLY LEFT BLANK]

<PAGE>

[THIS PAGE INTENTIONALLY LEFT BLANK]

<PAGE>

DFA INVESTMENT DIMENSIONS GROUP INC.
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
Tel. No. (310) 395-8005

Investment Advisor
- ------------------
DIMENSIONAL FUND ADVISORS INC.
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
Tel. No. (310) 395-8005

Sub-Advisors
- ------------
DIMENSIONAL FUND ADVISORS LTD.
14 Berkeley Street
London W1X 5AD
England
Tel. No. (071) 495-2343

DFA AUSTRALIA PTY LIMITED
Suite 4403 Gateway
1 MacQuarie Place
Sydney, New South Wales 2000
Australia

ALDRICH, EASTMAN & WALTCH L.P.
225 Franklin Street, 25th Floor
Boston, MA 02110
Tel. No. (617) 261-9506

Custodians - International
- --------------------------
BOSTON SAFE DEPOSIT AND TRUST COMPANY
Princess House
1 Suffolk Lane
London EC4R 0AN
England

CHASE MANHATTAN BANK, N.A.
4 Chase Metrotech Center
Brooklyn, NY 11245

Custodian - Domestic
- --------------------
PNC BANK, N.A.
200 Stevens Drive, Airport Business Center
Lester, PA 19113

Transfer and Dividend Disbursing Agent
- --------------------------------------
PFPC Inc.
400 Bellevue Parkway
Wilmington, DE 19809

Legal Counsel
- -------------
STRADLEY, RONON, STEVENS & YOUNG
2600 One Commerce Square
Philadelphia, PA 19103-7098

Independent Accountants
- -----------------------
COOPERS & LYBRAND L.L.P.
2400 Eleven Penn Center
Philadelphia, PA 19103

<PAGE>

DFA INVESTMENT DIMENSIONS GROUP INC.

1299 OCEAN AVENUE, 11TH FLOOR, SANTA MONICA, CALIFORNIA 90401
TELEPHONE: (310) 395-8005

STATEMENT OF ADDITIONAL INFORMATION

June 30, 1995

DFA Investment Dimensions Group Inc. (the "Fund") offers twenty series
of shares. This statement of additional information relates to eighteen of
those series: U.S. 9-10 SMALL COMPANY PORTFOLIO, U.S. 6-10 SMALL COMPANY
PORTFOLIO, U.S. LARGE COMPANY PORTFOLIO, U.S. SMALL CAP VALUE PORTFOLIO, U.S.
LARGE CAP VALUE PORTFOLIO, DFA/AEW REAL ESTATE SECURITIES PORTFOLIO, JAPANESE
SMALL COMPANY PORTFOLIO, PACIFIC RIM SMALL COMPANY PORTFOLIO, UNITED KINGDOM
SMALL COMPANY PORTFOLIO, EMERGING MARKETS PORTFOLIO, CONTINENTAL SMALL COMPANY
PORTFOLIO, LARGE CAP INTERNATIONAL PORTFOLIO, DFA INTERNATIONAL HIGH BOOK TO
MARKET PORTFOLIO, DFA INTERNATIONAL SMALL CAP VALUE PORTFOLIO, DFA ONE-YEAR
FIXED INCOME PORTFOLIO, DFA FIVE-YEAR GOVERNMENT PORTFOLIO, DFA GLOBAL FIXED
INCOME PORTFOLIO AND DFA INTERMEDIATE GOVERNMENT FIXED INCOME PORTFOLIO
(collectively, the "Portfolios"). This statement of additional information is
not a prospectus but should be read in conjunction with the Portfolios'
prospectus dated June 30, 1995, which can be obtained from the Fund by writing
to the Fund at the above address or by calling the above telephone number.

TABLE OF CONTENTS
Page
----
PORTFOLIO CHARACTERISTICS AND POLICIES. . . . . . . . . . . . . . . . . . . . .1

BROKERAGE COMMISSIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2

INVESTMENT LIMITATIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . .4

FUTURES CONTRACTS.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7

FEDERAL TAX TREATMENT OF FUTURES CONTRACTS. . . . . . . . . . . . . . . . . . .7

MANAGEMENT OF THE FUND. . . . . . . . . . . . . . . . . . . . . . . . . . . . .8

DIRECTORS AND OFFICERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . .8

ADMINISTRATIVE SERVICES . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

OTHER INFORMATION.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

PRINCIPAL HOLDERS OF SECURITIES.. . . . . . . . . . . . . . . . . . . . . . . 13

PURCHASE OF SHARES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

REDEMPTION AND TRANSFER OF SHARES.. . . . . . . . . . . . . . . . . . . . . . 19

CALCULATION OF PERFORMANCE DATA.. . . . . . . . . . . . . . . . . . . . . . . 20

FINANCIAL STATEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

<PAGE>

PORTFOLIO CHARACTERISTICS AND POLICIES

The following information supplements the information set forth in the
prospectus under the captions "PORTFOLIO CHARACTERISTICS AND POLICIES - SMALL
COMPANY PORTFOLIOS", "U.S. LARGE COMPANY PORTFOLIO - Investment Objective and
Policies", "LARGE CAP INTERNATIONAL PORTFOLIO - Investment Objective and
Policies", "INVESTMENT OBJECTIVES AND POLICIES - FIXED INCOME PORTFOLIOS",
"DFA/AEW REAL ESTATE SECURITIES PORTFOLIO", "VALUE PORTFOLIOS - Portfolio
Characteristics and Policies", "DFA INTERNATIONAL HIGH BOOK TO MARKET
PORTFOLIO - Investment Objective and Policies", "EMERGING MARKETS PORTFOLIO -
Investment Objective and Policies" and "DFA INTERNATIONAL SMALL CAP VALUE
PORTFOLIO - Investment Objective and Policies". The following information
applies to all the Portfolios, except the Feeder Portfolios, and also to the
Trust Series.

Because the structure of the Domestic and International Equity
Portfolios is based on the relative market capitalizations of eligible
holdings, it is possible that the Portfolios might include at least 5% of the
outstanding voting securities of one or more issuers. In such circumstances,
the Fund and the issuer would be deemed "affiliated persons" under the
Investment Company Act of 1940 and certain requirements of the Act regulating
dealings between affiliates might become applicable. However, based on the
present capitalizations of the groups of companies eligible for inclusion in
the Portfolios and the anticipated amount of a Portfolio's assets intended to
be invested in such securities, management does not anticipate that a
Portfolio will include as much as 5% of the voting securities of any issuer.

Each of the International Equity Portfolios may invest up to 5% of its
assets in convertible debentures issued by non-U.S. companies. Convertible
debentures include corporate bonds and notes that may be converted into or
exchanged for common stock. These securities are generally convertible either
at a stated price or a stated rate (that is, for a specific number of shares
of common stock or other security). As with other fixed income securities,
the price of a convertible debenture to some extent varies inversely with
interest rates. While providing a fixed-income stream (generally higher in
yield than the income derived from a common stock but lower than that afforded
by a non-convertible debenture), a convertible debenture also affords the
investor an opportunity, through its conversion feature, to participate in the
capital appreciation of the common stock into which it is convertible. As the
market price of the underlying common stock declines, convertible debentures
tend to trade increasingly on a yield basis and so may not experience market
value declines to the same extent as the underlying common stock. When the
market price of the underlying common stock increases, the price of a
convertible debenture tends to rise as a reflection of the value of the
underlying common stock. To obtain such a higher yield, a Portfolio may be
required to pay for a convertible debenture an amount in excess of the value
of the underlying common stock. Common stock acquired by a Portfolio upon
conversion of a convertible debenture will generally be held for so long as
the Adviser anticipates such stock will provide the Portfolio with
opportunities which are consistent with the Portfolio's investment objective
and policies.

Because the relative market capitalizations of small companies compared
with larger companies generally do not change substantially over short periods
of time, the portfolio turnover rates of the Small Company Portfolios
ordinarily are anticipated to be low and are not expected to exceed 25% per
year. Generally, securities will be purchased with the expectation that they
will be held for longer than one year. Generally, securities will be held
until such time as, in the Advisor's judgment, they are no longer considered
an appropriate holding in light of the policy of maintaining portfolios of
companies with small market capitalization. Because The DFA/AEW Real Estate
Securities Portfolio generally will hold securities for the long term, its
turnover rate ordinarily is anticipated to be low and is not expected to
exceed 10% per year. Generally, securities will be purchased with the
expectation that they will be held for longer than one year.

1
<PAGE>

BROKERAGE COMMISSIONS

The following table depicts brokerage commissions paid by the Fund
Portfolios. For Feeder Portfolios, the amounts include commissions paid by
the corresponding Series.

BROKERAGE COMMISSIONS
FISCAL YEARS ENDED NOVEMBER 30, 1994, 1993 and 1992

<TABLE>
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
U.S. 9-10 Small Company $1,431,640 $ 732,528 $ 602,144
U.S. 6-10 Small Company 398,610 301,156 148,550
U.S. Large Company 10,643 58,218 12,234
Japanese Small Company 807,580 724,038 295,692
United Kingdom Small Company 138,025 97,468 89,254
Continental Small Company 343,484 343,850 216,531
Large Cap International 153,475 110,610 ---
U.S. Small Cap Value 1,860,712 328,869 ---
U.S. Large Cap Value 367,810 134,312 ---
DFA/AEW Real Estate Securities 83,979 63,997 ---
Pacific Rim Small Company 529,025 871,257 ---
DFA International High Book to Market 623,031 233,355 ---
Emerging Markets 79,105 --- ---
---------- ----------
TOTAL $6,827,119 $3,999,658 $1,364,405
</TABLE>

The substantial increases or decreases in the amount of brokerage
commissions paid by certain Portfolios from year to year indicated in the
foregoing table resulted from increases or decreases in the amount of
securities that were bought and sold by those Portfolios. During the fiscal
year 1993, The U.S. 6-10 Small Company Portfolio and Series and The U.S. 9-10
Small Company Portfolio paid total commissions of $29,934 to Kemper Capital
Markets, Inc., a securities firm which has been succeeded by Kemper
Securities, Inc., an affiliate of Kemper Financial Services, Inc., which owns
approximately 15.6% of the Advisor's outstanding stock. Such commissions
represented .652% of the total commissions paid by the Fund for such year and
the total value of transactions as to which such commissions relate were
$4,551,431 or .482% of the Fund's total value of transactions involving
payment of commissions during fiscal year ended November 30, 1993. No
commissions were paid to affiliates or affiliates of affiliates during fiscal
year 1994.

Please note that while the following discussion relates to the policies
of certain Portfolios with respect to brokerage commissions, it should be
understood that with respect to a Feeder Portfolio, the discussion applies to
the Series of the Trust in which the Feeder Portfolio invests all of its
assets.

The Fixed Income Portfolios acquire and sell securities on a net basis
with dealers which are major market markers in such securities. The
Investment Committee of the Advisor selects dealers on the basis of their
size, market making and credit analysis ability. When executing portfolio
transactions, the Advisor seeks to obtain the most favorable price for the
securities being traded among the dealers with whom the Fixed Income
Portfolios effect transactions.

2
<PAGE>

Portfolio transactions will be placed with a view to receiving the best
price and execution. The Portfolios will seek to acquire and dispose of
securities in a manner which would cause as little fluctuation in the market
prices of stocks being purchased or sold as possible in light of the size of
the transactions being effected, and brokers will be selected with this goal
in view. The Advisor monitors the performance of brokers which effect
transactions for the Portfolios to determine the effect that their trading has
on the market prices of the securities in which they invest. The Advisor also
checks the rate of commission being paid by the Portfolios to their brokers to
ascertain that they are competitive with those charged by other brokers for
similar services. Dimensional Fund Advisors Ltd. performs these services for
The United Kingdom and Continental Small Company Portfolios and DFA Australia
Pty Ltd. performs these services for The Japanese and Pacific Rim Small
Company Portfolios. Transactions also may be placed with brokers who provide
the Advisor or the sub-advisors with investment research, such as reports
concerning individual issuers, industries and general economic and financial
trends and other research services. Brokerage transactions may be placed with
securities firms that are affiliated with an affiliate of the Advisor.
Commission paid on such transactions would be commensurate with the rate of
commissions paid on similar transactions to brokers that are not so
affiliated.

The OTC companies eligible for purchase by The U.S. 9-10 Small Company
Portfolio, The U.S. 6-10 Small Company Portfolio, The U.S. Small Cap Value
Portfolio, and The DFA/AEW Real Estate Securities Portfolio are thinly traded
securities. Therefore, the Advisor believes it needs maximum flexibility to
effect OTC trades on a best execution basis. To that end, the Advisor places
buy and sell orders with market makers, third market brokers, Instinet and
with brokers on an agency basis when the Advisor determines that the
securities may not be available from other sources at a more favorable price.
Third market brokers enable the Advisor to trade with other institutional
holders directly on a net basis. This allows the Advisor to sometimes trade
larger blocks than would be possible by going through a single market maker.

Instinet is an electronic information and communication network whose
subscribers include most market makers as well as many institutions. Instinet
charges a commission for each trade executed on its system. On any given
trade, The U.S. 9-10 Small Company Portfolio, The U.S. 6-10 Small Company
Portfolio, the Value Portfolios and The DFA/AEW Real Estate Securities
Portfolio, by trading through Instinet, would pay a spread to a dealer on the
other side of the trade plus a commission to Instinet. However, placing a buy
(or sell) order on Instinet communicates to many (potentially all) market
makers and institutions at once. This can create a more complete picture of
the market and thus increase the likelihood that the Portfolios can effect
transactions at the best available prices.

During the fiscal year 1994, the Portfolios paid commissions for
securities transactions to brokers which provided market price monitoring
services, market studies and research services to the Portfolios as follows:

<TABLE>
<CAPTION>
VALUE OF BROKERAGE
SECURITIES TRANSACTIONS COMMISSIONS
----------------------- -----------
<S> <C> <C>
U.S. 9-10 Small Company $ 17,936,416 $ 67,904
U.S. 6-10 Small Company 20,974,849 125,985
U.S. Small Cap Value 129,688,743 732,945
U.S. Large Cap Value 113,847,315 177,095
DFA/AEW Real Estate Securities 641,539 1,626
U.S. Large Company 18,339,260 9,999
DFA International High Book to Market 106,853,325 256,448
------------ -----------
TOTAL: $408,281,447 $1,372,002
------------ -----------
------------ -----------
</TABLE>

3
<PAGE>

The investment advisory agreements permit the Advisor knowingly to pay
commissions on these transactions which are greater than another broker might
charge if the Advisor, in good faith, determines that the commissions paid are
reasonable in relation to the research or brokerage services provided by the
broker or dealer when viewed in terms of either a particular transaction or
the Advisor's overall responsibilities to the Fund. Research services
furnished by brokers through whom securities transactions are effected may be
used by the Advisor in servicing all of its accounts and not all such services
may be used by the Advisor with respect to the Fund.

Brokerage commissions for transactions in securities listed on the TSE
and other Japanese securities exchanges are fixed. Under the current
regulations of the TSE and the Japanese Ministry of Finance, member and non-
member firms of Japanese exchanges are required to charge full commissions to
all customers other than banks and certain financial institutions, but members
and licensed non-member firms may confirm transactions to banks and financial
institution affiliates located outside Japan with institutional discounts on
brokerage commissions. The Japanese Small Company Portfolio has been able to
avail itself of institutional discounts. The Portfolio's ability to effect
transactions at a discount from fixed commission rates depends on a number of
factors, including the size of the transaction, the relation between the cost
to the member or the licensed non-member firm of effecting such transaction
and the commission receivable, and the law, regulation and practice discussed
above. There can be no assurance that the Portfolio will continue to be able
to realize the benefit of discounts from fixed commissions.

A Feeder Portfolio will not incur any brokerage or other costs in
connection with its purchase or redemption of shares of the corresponding
Series of the Trust.

INVESTMENT LIMITATIONS

Each of the Portfolios has adopted certain limitations which may not be
changed with respect to any Portfolio without the approval of a majority of
the outstanding voting securities of the Portfolio. A "majority" is defined
as the lesser of: (1) at least 67% of the voting securities of the Portfolio
(to be affected by the proposed change) present at a meeting if the holders of
more than 50% of the outstanding voting securities of the Portfolio are
present or represented by proxy, or (2) more than 50% of the outstanding
voting securities of such Portfolio.

The Portfolios will not:

(1) invest in commodities or real estate, including limited partnership
interests therein, except The DFA/AEW Real Estate Securities Portfolio,
although they may purchase and sell securities of companies which deal in real
estate and securities which are secured by interests in real estate, and all
Portfolios except The U.S. 9-10 and 6-10 Small Company Portfolios, The DFA
One-Year Fixed Income Portfolio and The DFA Five-Year Government Portfolio may
purchase or sell financial futures contracts and options thereon;

(2) make loans of cash, except through the acquisition of repurchase
agreements and obligations customarily purchased by institutional investors;

(3) as to 75% of the total assets of a Portfolio, invest in the securities of
any issuer (except obligations of the U.S. Government and its
instrumentalities) if, as a result, more than 5% of the Portfolio's total
assets, at market, would be invested in the securities of such issuer,
provided that this limitation applies to 100% of the total assets of The U.S.
9-10 Small Company Portfolio and The DFA Global Fixed Income Portfolio is not
subject to this limitation;

4
<PAGE>

(4) purchase or retain securities of an issuer if those officers and directors
of the Fund or the Advisor owning more than 1/2 of 1% of such securities
together own more than 5% of such securities;

(5) borrow, except from banks and as a temporary measure for extraordinary or
emergency purposes and then, in no event, in excess of 5% of a Portfolio's
gross assets valued at the lower of market or cost; provided that The United
Kingdom, Pacific Rim and Continental Small Company Portfolios, The Large Cap
International Portfolio, The DFA Global Fixed Income Portfolio, The U.S. Large
Company Portfolio, The DFA/AEW Real Estate Securities Portfolio, the Value
Portfolios, the DFA International High Book to Market Portfolio, The U.S. 6-10
Small Company Portfolio, the Emerging Markets Portfolio and the DFA
International Small Cap Value Portfolio may borrow amounts not exceeding 33%
of their net assets from banks and pledge not more than 33% of such assets to
secure such loans;

(6) pledge, mortgage, or hypothecate any of its assets to an extent greater
than 10% of its total assets at fair market value, except as described in (5)
above;

(7) invest more than 10% of the value of the Portfolio's total assets in
illiquid securities which include certain restricted securities, repurchase
agreements with maturities of greater than seven days, and other illiquid
investments provided that The DFA/AEW Real Estate Securities Portfolio, the
Value Portfolios, the DFA International High Book to Market Portfolio, The
U.S. 6-10 Small Company Portfolio, the Emerging Markets Portfolio and the DFA
International Small Cap Value Portfolio may invest not more than 15% of their
total assets in illiquid securities;

(8) engage in the business of underwriting securities issued by others;

(9) invest for the purpose of exercising control over management of any
company;

(10) invest its assets in securities of any investment company, except in
connection with a merger, acquisition of assets, consolidation or
reorganization, provided that The DFA/AEW Real Estate Securities Portfolio may
invest in a REIT that is registered as an investment company;

(11) invest more than 5% of its total assets in securities of companies which
have (with predecessors) a record of less than three years' continuous
operation, except this limitation does not apply to The DFA/AEW Real Estate
Securities Portfolio;

(12) acquire any securities of companies within one industry if, as a result
of such acquisition, more than 25% of the value of the Portfolio's total
assets would be invested in securities of companies within such industry;
except The DFA One-Year Fixed Income Portfolio shall invest more than 25% of
its total assets in obligations of banks and bank holding companies in the
circumstances described in the prospectus under "Investments in the Banking
Industry" and as otherwise described under "Portfolio Strategy"; and except
The DFA/AEW Real Estate Securities Portfolio shall invest more than 25% of its
total assets in securities of companies in the real estate industry;

(13) write or acquire options (except as described in (1) above) or interests
in oil, gas or other mineral exploration, leases or development programs;

(14) purchase warrants, however, the Domestic and International Equity
Portfolios may acquire warrants as a result of corporate actions involving
their holdings of other equity securities;

(15) purchase securities on margin or sell short; or

5
<PAGE>

(16) acquire more than 10% of the voting securities of any issuer and The U.S.
9-10 Small Company Portfolio will not acquire more than 10% of any class of
securities of any issuer, and provided that this limitation applies only to
75% of the assets of The DFA/AEW Real Estate Securities Portfolio, the Value
Portfolios, the Emerging Markets Portfolio and the DFA International Small Cap
Value Portfolio.

The investment limitations described in (3), (7), (9), (10), (11), (12)
and (16) above do not prohibit each Feeder Portfolio from investing all or
substantially all of its assets in the shares of another registered open-end
investment company, such as a Series of the Trust. The investment limitations
of each Series are the same as those of the corresponding Feeder Portfolio.

For purposes of (1) above, each Portfolio that may purchase or sell
financial futures contracts and options thereon may not deposit as initial or
variation margin deposits more than 5% of its net assets.

For purposes of (5) above, the Emerging Markets Portfolio (indirectly
through its investment in the Emerging Markets Series) may borrow in
connection with a foreign currency transaction or the settlement of a
portfolio trade. The only type of borrowing contemplated thereby is the use
of a letter of credit issued on the Emerging Markets Series' behalf in lieu of
depositing initial margin in connection with currency futures contracts, and
the Series has no present intent to engage in any other types of borrowing
transactions under this authority.

Although (2) above prohibits cash loans, the Portfolios are authorized
to lend portfolio securities. Inasmuch as the Feeder Portfolios will only
hold shares of a corresponding Series, these Portfolios do not intend to lend
those shares.

For the purposes of (7) above, The DFA One-Year Fixed Income Portfolio
(indirectly through the One-Year Fixed Income Series) may invest in commercial
paper that is exempt from the registration requirements of the Securities Act
of 1933 (the "1933 Act") subject to the requirements regarding credit ratings
stated in the prospectus under "Description of Investments". Further,
pursuant to Rule 144A under the 1933 Act, the Portfolios may purchase certain
unregistered (i.e. restricted) securities upon a determination that a liquid
institutional market exists for the securities. If it is decided that a
liquid market does exist, the securities will not be subject to the 10% or 15%
limitation on holdings of illiquid securities stated in (7) above. While
maintaining oversight, the Board of Directors has delegated the day-to-day
function of making liquidity determinations to the Advisor. For 144A
securities to be considered liquid, there must be at least two dealers making
a market in such securities. After purchase, the Board of Directors and the
Advisor will continue to monitor the liquidity of Rule 144A securities.

For the purposes of (12) above, utility companies will be divided
according to their services; e.g., gas, gas transmission, electric and gas,
electric, water and telephone will each be considered a separate industry.

Although not a fundamental policy subject to shareholder approval, The
Large Cap International and the Small Company Portfolios, including The U.S.
6-10 Small Company Portfolio indirectly through its investment in the 6-10
Series, do not intend to purchase interests in any real estate investment
trust.

The International Equity Portfolios (including the DFA International
High Book to Market Portfolio indirectly through its investment in the
corresponding Series) and The DFA Global Fixed Income Portfolio may acquire
and sell forward foreign currency exchange contracts in order to hedge against
changes in the level of future currency rates. Such contracts involve an
obligation to purchase or sell a specific currency at a future date at a price
set in the contract. While each Value Portfolio and the DFA

6
<PAGE>

International High Book to Market Portfolio (indirectly through their
investment in the corresponding Series), as well as The DFA/AEW Real Estate
Securities Portfolio, have retained authority to buy and sell financial
futures contracts and options thereon, they have no present intention to do
so.

Notwithstanding any of the above investment restrictions, the Emerging
Markets Series may establish subsidiaries or other similar vehicles for the
purpose of conducting its investment operations in Approved Markets, if such
subsidiaries or vehicles are required by local laws or regulations governing
foreign investors such as the Series or whose use is otherwise considered by
the Series to be advisable. The Emerging Markets Series would "look through"
any such vehicle to determine compliance with its investment restrictions.

FUTURES CONTRACTS

Please note that while the following discussion relates to the policies
of certain Portfolios with respect to futures contracts, it should be
understood that with respect to a Feeder Portfolio, the discussion applies to
the Series of the Trust in which the Feeder Portfolio invests all of its
assets.

All Portfolios, except The U.S. 9-10 and 6-10 Small Company Portfolios,
The DFA One-Year Fixed Income Portfolio and The DFA Five-Year Government
Portfolio, may enter into futures contracts and options on futures contracts
for the purpose of remaining fully invested and to maintain liquidity to pay
redemptions. Futures contracts provide for the future sale by one party and
purchase by another party of a specified amount of defined securities at a
specified future time and at a specified price. Futures contracts which are
standardized as to maturity date and underlying financial instrument are
traded on national futures exchanges. The Portfolios or Series will be
required to make a margin deposit in cash or government securities with a
broker or custodian to initiate and maintain positions in futures contracts.
Minimal initial margin requirements are established by the futures exchange
and brokers may establish margin requirements which are higher than the
exchange requirements. After a futures contract position is opened, the value
of the contract is marked to market daily. If the futures contract price
changes to the extent that the margin on deposit does not satisfy margin
requirements, payment of additional "variation" margin will be required.
Conversely, reduction in the contract value may reduce the required margin
resulting in a repayment of excess margin to the Portfolio or Series.
Variation margin payments are made to and from the futures broker for as long
as the contract remains open. The Portfolios or Series expect to earn income
on their margin deposits. A Portfolio or Series will not enter into futures
contract transactions if, immediately thereafter, the sum of its initial and
variation margin deposits on open contracts exceeds 5% of the market value of
its total assets.

Positions in futures contracts may be closed out only on an exchange
which provides a secondary market. However, there can be no assurance that a
liquid secondary market will exist for any particular futures contract at any
specific time. Therefore, it might not be possible to close a futures
position and, in the event of adverse price movements, the Portfolio or Series
would continue to be required to continue to make variation margin deposits.
In such circumstances, if the Portfolio or Series has insufficient cash, it
might have to sell portfolio securities to meet daily margin requirements at a
time when it might be disadvantageous to do so. Management intends to
minimize the possibility that it will be unable to close out a futures
contract by only entering into futures which are traded on national futures
exchanges and for which there appears to be a liquid secondary market.

FEDERAL TAX TREATMENT OF FUTURES CONTRACTS

Except for transactions a Portfolio has identified as hedging
transactions, the Portfolio is required for federal income tax purposes to
recognize as income for each taxable year its net unrealized gains and losses
on certain futures contracts as of the end of the year as well as those
actually realized during the

7
<PAGE>

year. In most cases, any gain or loss recognized with respect to a futures
contract is considered to be 60% long-term gain or loss and 40% short-term
capital gain or loss, without regard to the holding period of the contract.
Furthermore, sales of futures contracts which are intended to hedge against a
change in the value of securities held by the Portfolio may affect the
holding period of such securities and, consequently, the nature of the gain
or loss on such securities upon disposition.

In order for a Portfolio to continue to qualify for federal income tax
treatment as a regulated investment company, at least 90% of its gross income
for a taxable year must be derived from qualifying income; i.e., dividends,
interest, income derived from loans of securities, gains from the sale of
securities and other income derived with respect to the Portfolio's business
of investing in securities. In addition, gains realized on the sale or other
disposition of securities held for less than three months must be limited to
less than 30% of the Portfolio's annual gross income. It is anticipated that
any net gain realized from closing futures contracts will be considered gain
from the sale of securities and, therefore, constitute qualifying income for
purposes of the 90% requirement. In order to avoid realizing excessive gains
on securities held less than three months, the Portfolio may be required to
defer the closing out of futures contracts beyond the time when it would
otherwise be advantageous to do so. It is anticipated that unrealized gains
on futures contracts which have been open for less than three months as of the
end of the Portfolio's fiscal year and which are recognized for tax purposes,
will not be considered gains on sales of securities held less than three
months for the purpose of the 30% test. The Portfolios will distribute to
shareholders annually any net capital gains which have been recognized for
federal income tax purposes (including unrealized gains at the end of each
Portfolio's fiscal year) on futures transactions. Such distributions will be
combined with distributions of capital gains realized on each Portfolio's
other investments.

MANAGEMENT OF THE FUND

The Advisor has undertaken to reimburse each Portfolio to the extent
necessary to satisfy the most restrictive expense ratio required by any state
in which the particular Portfolio's shares are qualified for sale. Presently,
the most restrictive expense limitation is 2.5% on the first $30,000,000 of
average annual net assets of the Portfolio, 2.0% of the next $70,000,000 of
such assets, and 1.5% of any excess.

DIRECTORS AND OFFICERS

The names and addresses of the directors and officers of the Fund and a
brief statement of their present positions and principal occupations during
the past five years is set forth below.

DIRECTORS

David G. Booth*, 48, Director, President and Chairman-Chief Executive
Officer, Santa Monica, CA. President, Chairman-Chief Executive Officer and
Director, Dimensional Fund Advisors Inc., DFA Securities Inc., DFA Australia
Pty Limited, Dimensional Investment Group Inc. (registered investment company)
and Dimensional Emerging Markets Fund Inc. (registered investment company).
Trustee, President and Chairman-Chief Executive Officer of The DFA Investment
Trust Company. Chairman and Director, Dimensional Fund Advisors Ltd.

George M. Constantinides, 47, Director, Chicago, IL. Leon Carroll
Marshall Professor of Finance, Graduate School of Business, University of
Chicago. Trustee, The DFA Investment Trust Company. Director, Dimensional
Investment Group Inc. and Dimensional Emerging Markets Fund Inc. Academic
Advisory Council Member, Merrill Lynch & Co.

8
<PAGE>

John P. Gould, 56, Director, Chicago, IL. Distinguished Service
Professor of Economics, Graduate School of Business, University of Chicago.
Trustee, The DFA Investment Trust Company and First Prairie Funds (registered
investment company). Director, Dimensional Investment Group Inc., Dimensional
Emerging Markets Fund Inc. and Harbor Investment Advisors.

Roger G. Ibbotson, 52, Director, New Haven, CT. Professor in Practice
of Finance, Yale School of Management. Trustee, The DFA Investment Trust
Company. Director, Dimensional Investment Group Inc., Dimensional Emerging
Markets Fund Inc., Hospital Fund, Inc. (investment management services) and
BIRR Portfolio Analysis, Inc. (software products). Chairman, Institute Study
of Security Markets. Chairman and President, Ibbotson Associates, Inc.,
Chicago, IL (software, data, publishing and consulting).

Merton H. Miller, 72, Director, Chicago, IL. Robert R. McCormick
Distinguished Service Professor Emeritus, Graduate School of Business,
University of Chicago. Trustee, The DFA Investment Trust Company. Director,
Dimensional Investment Group Inc. and Dimensional Emerging Markets Fund Inc.

Myron S. Scholes, 54, Director, Greenwich, CT. Frank E. Buck Professor
of Finance, Graduate School of Business and Professor of Law, Law School,
Senior Research Fellow, Hoover Institution, (all) Stanford University.
Trustee, The DFA Investment Trust Company. Director, Dimensional Investment
Group Inc., Dimensional Emerging Markets Fund Inc., Benham Capital Management
Group of Investment Companies and Smith Breedon Group of Investment Companies.
Limited Partner, Long-Term Capital Management L.P. (money manager).

Rex A. Sinquefield*, 50, Director, Chairman and Chief Investment
Officer, Santa Monica, CA. Chairman-Chief Investment Officer and Director,
Dimensional Fund Advisors Inc., DFA Securities Inc., DFA Australia Pty
Limited, Dimensional Investment Group Inc. and Dimensional Emerging Markets
Fund Inc. Trustee, Chairman-Chief Investment Officer of The DFA Investment
Trust Company. Chairman, Chief Executive Officer and Director, Dimensional
Fund Advisors Ltd.

* Interested Director of the Fund.

OFFICERS

Each of the officers listed below hold the same office in the following
entities: Dimensional Fund Advisors Inc., DFA Securities Inc., DFA Australia
Pty Limited, Dimensional Investment Group Inc., The DFA Investment Trust
Company, Dimensional Fund Advisors Ltd., and Dimensional Emerging Markets Fund
Inc.

Arthur Barlow, 39, Vice President, Santa Monica, CA.

Maureen Connors, 58, Vice President, Santa Monica, CA.

Irene R. Diamant, 45, Vice President and Secretary, Santa Monica, CA.
Associate attorney, Cahill Gordon & Reindel, from 1987 to 1991.

Eugene Fama, Jr., 34, Vice President, Santa Monica, CA.

David Plecha, 33, Vice President, Santa Monica, CA.

George Sands, 39, Vice President, Santa Monica, CA. Managing Director,
Asset Strategy Consulting, Los Angeles, CA from 1991 to 1992 and previously
Vice President of Wilshire Associates, Santa Monica, CA.

9
<PAGE>

Michael T. Scardina, 39, Vice President, Chief Financial Officer,
Controller and Treasurer, Santa Monica, CA.

Cem Severoglu, 31, Vice President, Santa Monica, CA.

Jeanne C. Sinquefield, Ph.D., 48, Executive Vice President, Santa
Monica, CA.

Rex A. Sinquefield and Jeanne C. Sinquefield are husband and wife.
Directors and officers as a group own less than 1% of the Fund's outstanding
stock.

Set forth below is a table listing, for each director entitled to
receive compensation, the compensation received from the Fund during the
fiscal year ended November 30, 1994 and the total compensation received from
all four registered investment companies for which the Advisor serves as
investment advisor during that same fiscal year.

<TABLE>
<CAPTION>
AGGREGATE TOTAL COMPENSATION FROM
COMPENSATION FUND
DIRECTOR FROM FUND* AND FUND COMPLEX
- -------- ------------ -----------------------
<S> <C> <C>
George M. Constantinides $ 15,375 $ 30,750
John P. Gould $ 15,375 $ 30,750
Roger G. Ibbotson $ 15,375 $ 30,750
Merton H. Miller $ 15,000 $ 30,000
Myron S. Scholes $ 12,000 $ 24,000

<FN>
* With respect to the Feeder Portfolios, the amount represents the
compensation paid to the directors for their service to the Fund and the Trust.
</TABLE>

ADMINISTRATIVE SERVICES

PFPC Inc. ("PFPC") serves as the accounting services, dividend
disbursing and transfer agent for all Fund Portfolios and Series of the Trust.
The services provided by PFPC are subject to supervision by the executive
officers and the Board of Directors of the Fund, and include day-to-day
keeping and maintenance of certain records, calculation of the offering price
of the shares, preparation of reports, liaison with its custodians, and
transfer and dividend disbursing agency services. For its services, each
Portfolio pays PFPC annual fees which are set forth in the following table:

U.S. 9-10 SMALL COMPANY PORTFOLIO
.1025% of the first $300 million of net assets
.0769% of the next $300 million of net assets
.0513% of the next $250 million of net assets
.0205% of the net assets over $850 million
PFPC has agreed that it may from time to time limit the fee rates for this
Portfolio.

DFA/AEW REAL ESTATE SECURITIES PORTFOLIO
.10% of the first $200 million of net assets
.075% of the next $200 million of net assets
.05% of the next $200 million of net assets
.03% of the next $200 million of net assets
.02% of net assets over $800 million
The DFA/AEW Real Estate Securities Portfolio is subject to a $4,900 per month
minimum fee.

10
<PAGE>

JAPANESE SMALL COMPANY PORTFOLIO
PACIFIC RIM SMALL COMPANY PORTFOLIO
UNITED KINGDOM SMALL COMPANY PORTFOLIO
CONTINENTAL SMALL COMPANY PORTFOLIO
LARGE CAP INTERNATIONAL PORTFOLIO
DFA INTERNATIONAL SMALL CAP VALUE PORTFOLIO
Charges for each Portfolio:
.1230% of the first $300 million of net assets
.0615% of the next $300 million of net assets
.0410% of the next $250 million of net assets
.0205% of the net assets over $850 million
The Pacific Rim Small Company Portfolio is subject to a minimum fee of
$100,000. The Large Cap International Portfolio and the DFA International
Small Cap Value Portfolio are each subject to $75,000 per year minimum fees.

DFA FIVE-YEAR GOVERNMENT PORTFOLIO
DFA INTERMEDIATE GOVERNMENT FIXED INCOME PORTFOLIO
Charges for each Portfolio:
.0513% of the first $100 million of net assets
.0308% of the next $100 million of net assets
.0205% of net assets over $200 million

DFA GLOBAL FIXED INCOME PORTFOLIO
.1230% of the first $150 million of net assets
.0820% of the next $150 million of net assets
.0615% of the next $300 million of net assets
.0410% of the next $250 million of net assets
.0205% of net assets over $850 million
The DFA Global Fixed Income Portfolio is subject to a $75,000 per year minimum
fee.

PFPC also charges each Feeder Portfolio a monthly fee of $1,000, except for
the Emerging Markets Portfolio which pays $2,600 monthly.

11
<PAGE>

OTHER INFORMATION

For the services it provides as investment advisor to each Portfolio of
the Fund (or, with respect to each Feeder Portfolio, the corresponding Series
of the Trust), the Advisor is paid a monthly fee calculated as a percentage of
average net assets of the Portfolio (or, with respect to each Feeder
Portfolio, the corresponding Series of the Trust). For the fiscal years
ending November 30, 1992, 1993 and 1994, the Portfolios only paid advisory
fees as set forth in the following table:

<TABLE>
<CAPTION>
1992 1993 1994
(000) (000) (000)
<S> <C> <C> <C>
U.S. 9-10 Small Company Portfolio $3,550 $3,149 $3,337

U.S. 6-10 Small Company Portfolio $ 87 n/a
March 20
to
November
30, 1992
--------
$ 191
U.S. Large Company Portfolio $ 31 $ 19 n/a
($36 waived)

DFA/AEW Real Estate Securities Portfolios n/a $ 75 $ 138

Japanese Small Company Portfolio $ 712 $1,127 $1,500

Pacific Rim Small Company Portfolio n/a $ 425 $ 962

United Kingdom Small Company Portfolio $ 728 $ 826 $1,044

Continental Small Company Portfolio $1,109 $1,149 $1,627

Large Cap International Portfolio waived $ 132 $ 148
($ 35)

DFA International High Book to Market
Portfolio n/a $ 105 $ 156

DFA One-Year Fixed Income Portfolio $ 757 $ 147 n/a

DFA Five-Year Government Portfolio $ 129 $ 256 $ 427

DFA Global Fixed Income Portfolio $ 107 $ 192 $ 311

DFA Intermediate Government Fixed Income
Portfolio $ 53 $ 72 $ 88
</TABLE>

The Fund commenced offering shares of The U.S. 6-10 Small Company
Portfolio in March 1992; The DFA/AEW Real Estate Securities, The U.S. Large
Cap Value and The U.S. Small Cap Value Portfolios in September 1992; the DFA
International High Book to Market Portfolio in May 1993; the Emerging Markets
Portfolio in April 1994; the DFA Global Bond and DFA Global Value Portfolios
in August 1994; and the DFA International Small Cap Value Portfolio in
December 1994. Until March 1992, The DFA Intermediate Fixed Income Portfolio
and The DFA Global Fixed Income Portfolio were named

12
<PAGE>

The DFA Intermediate Government Bond Portfolio and The DFA Global Bond
Portfolio, respectively. Until February 1993, The Pacific Rim Small Company
Portfolio was named The Asia-Australia Small Company Portfolio. Until May
1993, The DFA/AEW Real Estate Securities Portfolio, The U.S. Large Cap Value
Portfolio and The U.S. Small Cap Value Portfolio were named The DFA Real
Estate Securities Portfolio, The U.S. Large Cap High Book to Market Portfolio
and The U.S. Small Cap High Book to Market Portfolio, respectively. The
Fund's Amended and Restated Articles of Incorporation continue to designate
the shares of (i) The DFA Intermediate Government Fixed Income Portfolio as
"The DFA Intermediate Government Bond Portfolio Shares", (ii) The DFA Global
Fixed Income Portfolio as "The DFA Global Bond Portfolio Shares", (iii) The
Pacific Rim Small Company Portfolio as "The Asia-Australia Small Company
Portfolio Shares", (iv) The DFA/AEW Real Estate Securities Portfolio as "The
DFA Real Estate Securities Portfolio Shares", (v) The U.S. Large Cap Value
Portfolio as "The U.S. Large Cap High Book to Market Portfolio Shares" and
(vi) The U.S. Small Cap Value Portfolio as "The U.S. Small Cap High Book to
Market Portfolio Shares".

With respect to matters which require shareholder approval, shareholders
are entitled to vote only with respect to matters which affect the interest of
the class of shares (Portfolio) which they hold, except as otherwise required
by applicable law. If liquidation of the Fund should occur, shareholders
would be entitled to receive on a per class basis the assets of the particular
Portfolio whose shares they own, as well as a proportionate share of Fund
assets not attributable to any particular class. Ordinarily, the Fund does
not intend to hold annual meetings of shareholders, except as required by the
Investment Company Act of 1940 or other applicable law. The Fund's bylaws
provide that special meetings of shareholders shall be called at the written
request of at least 10% of the votes entitled to be cast at such meeting.
Such meeting may be called to consider any matter, including the removal of
one or more directors. Shareholders will receive shareholder communications
with respect to such matters as required by the Investment Company Act of
1940, including semi-annual and annual financial statements of the Fund, the
latter being audited at least once each year.

PRINCIPAL HOLDERS OF SECURITIES

As of January 31, 1995, the following stockholders own beneficially at
least 5% of the outstanding stock of the Portfolios, as set forth below.

THE U.S. 9-10 SMALL COMPANY PORTFOLIO

Charles Schwab & Company, Inc. - REIN* 14.11%
101 Montgomery Street
San Francisco, CA 94104

Pepsico Inc. Master Trust 12.02%
The Northern Trust Company Trustee
P.O. Box 92956
801 South Canal
Chicago, IL 60675

State Farm Insurance Companies 11.56%
One State Farm Plaza
Bloomington, IL 61710

13
<PAGE>

Amoco Corporation Master Trust 10.16%
Employee Pension Plan P94304
P.O. Box 87703
Chicago, IL 60680

Owens-Illinois 6.94%
Master Retirement Trust
34 Exchange Place
Jersey City, NJ 07302

Board of Trustees, NEBF 5.65%
Pension Benefit Trust Fund
1125 15th Street, N.W.
Washington, D.C. 20005

THE U.S. 6-10 SMALL COMPANY PORTFOLIO

Washington University 35.18%
Endowment Fund
P. O. Box 1047
St. Louis, Missouri 63139

The Charles A. Dana Foundation 24.42%
150 East 52nd Street, 23rd Floor
New York, NY 10022

Salvation Army - ETHQ 14.76%
440 W. Nyack Road
West Nyack, NY 10994

Claude Worthington Benedum Foundation 7.01%
1400 Benedum-Trees Building
Pittsburgh, PA 15222

John B. Stetson University 5.93%
Campus Box 8318
De Land, FL 32720

Charles Schwab & Company, Inc. - REIN* 5.64%
101 Montgomery Street
San Francisco, CA 94104

THE JAPANESE SMALL COMPANY PORTFOLIO

BellSouth Corporation Master Pension Trust 34.24%
1155 Peachtree Street, N.E.
Atlanta, GA 30367

Charles Schwab & Company, Inc. - REIN* 22.69%
101 Montgomery Street
San Francisco, CA 94104

_____________________________________
* Owner of record only.

14
<PAGE>

Bost & Co.* 12.79%
1 Cabot Road, AIM 028-0038
Medford, MA 02155

San Diego County Employees 6.43%
1600 Pacific Highway
San Diego, CA 92101

THE UNITED KINGDOM SMALL COMPANY PORTFOLIO

BellSouth Corporation Master Pension Trust 52.09%
1155 Peachtree Street, N.E.
Atlanta, GA 30367

Charles Schwab & Company, Inc.-REIN* 19.32%
101 Montgomery Street
San Francisco, CA 94104

Bost & Co.* 9.33%
1 Cabot Road, AIM 028-0038
Medford, MA 02155

THE CONTINENTAL SMALL COMPANY PORTFOLIO

BellSouth Corporation Master Pension Trust 35.75%
1155 Peachtree Street, N.E.
Atlanta, GA 30367-6000

Charles Schwab & Company, Inc. - REIN* 21.44%
101 Montgomery Street
San Francisco, CA 94104

Bost & Co.* 13.00%
1 Cabot Road, AIM 028-0038
Medford, MA 02155

Pacific Telesis 6.63%
130 Kearny Street
San Francisco, CA 94188

San Diego County Employees 6.04%
1600 Pacific Highway
San Diego, CA 92101

THE LARGE CAP INTERNATIONAL PORTFOLIO

Charles Schwab & Company, Inc. - REIN* 88.78%
101 Montgomery Street
San Francisco, CA 94104

_____________________________________
* Owner of record only.

15
<PAGE>

THE U.S. LARGE COMPANY PORTFOLIO

Charles Schwab & Company, Inc. - REIN* 56.49%
101 Montgomery Street
San Francisco, CA 94104

Flensing & Co.* 13.17%
c/o State Street Bank & Trust Co.
Master Trust Services/Public Funds
P.O. Box 1992
Boston, MA 02105

Donaldson Lufkin & Jenrette Securities Corp.* 6.66%
P.O. Box 2052
Jersey City, NJ 07303

Charles Schwab & Company, Inc. - CASH* 5.36%
101 Montgomery Street
San Francisco, CA 94104

THE DFA ONE-YEAR FIXED INCOME PORTFOLIO

Charles Schwab & Company, Inc. - REIN* 19.47%
101 Montgomery Street
San Francisco, CA 94104

Charles Schwab & Company, Inc. - CASH* 17.94%
101 Montgomery Street
San Francisco, CA 94104

Peoples Energy Corporation Pension Trust 9.41%
122 South Michigan Avenue
Chicago, IL 60603

Buoy & Co.* 5.30%
c/o Fleet Services
One East Avenue
Rochester, NY 14638

THE DFA FIVE-YEAR GOVERNMENT PORTFOLIO

Charles Schwab & Company, Inc. - REIN* 73.36%
101 Montgomery Street
San Francisco, CA 94104

Charles Schwab & Company, Inc. - CASH* 6.22%
101 Montgomery Street
San Francisco, CA 94104

_____________________________________
* Owner of record only.

16
<PAGE>

THE DFA GLOBAL FIXED INCOME PORTFOLIO

Charles Schwab & Company, Inc. - REIN* 72.09%
101 Montgomery Street
San Francisco, CA 94104

Charles Schwab & Company, Inc. - CAP* 15.02%
101 Montgomery Street
San Francisco, CA 94104

THE DFA INTERMEDIATE GOVERNMENT FIXED INCOME PORTFOLIO

Charles Schwab & Company, Inc. - CAP* 58.88%
101 Montgomery Street
San Francisco, CA 94104

Charles Schwab & Company, Inc. - REIN* 31.02%
101 Montgomery Street
San Francisco, CA 94104

PACIFIC RIM SMALL COMPANY PORTFOLIO

BellSouth Corporation Master Pension Trust 66.57%
1155 Peachtree Street, N.E.
Atlanta, GA 30367

Charles Schwab & Company, Inc. - REIN* 11.93%
101 Montgomery Street
San Francisco, CA 94104

Bost & Co.* 9.03%
1 Cabot Road, AIM 028-0038
Medford, MA 02155

U.S. LARGE CAP VALUE PORTFOLIO

Charles Schwab & Company, Inc. - REIN* 60.77%
101 Montgomery Street
San Francisco, CA 94104

Mac & Co. #504-378* 7.70%
P.O. Box 320
Pittsburgh, PA 15230

Mac & Co. #863-228* 6.83%
P.O. Box 320
Pittsburgh, PA 15230

Charles Schwab & Company, Inc. - CAP* 6.01%
101 Montgomery Street
San Francisco, CA 94104

_____________________________________
* Owner of record only.

17
<PAGE>

DFA/AEW REAL ESTATE SECURITIES PORTFOLIO

Owens-Illinois 46.64%
Master Retirement Trust
34 Exchange Place
Jersey City, NJ 07302

Charles Schwab & Company, Inc. - REIN* 40.05%
101 Montgomery Street
San Francisco, CA 94104

Charles Schwab & Company, Inc. - CASH* 5.40%
101 Montgomery Street
San Francisco, CA 94104

U.S. SMALL CAP VALUE PORTFOLIO

Charles Schwab & Company, Inc. - REIN* 28.74%
101 Montgomery Street
San Francisco, CA 94104

Mac & Co. #853-271* 24.77%
P.O. Box 320
Pittsburgh, PA 15230

Leland Stanford Junior University 7.77%
Stanford Management Company
2770 Sand Hill Road
Menlo Park, CA 94025

Premark RSP 5.47%
c/o Bankers Trust Co.
34 Exchange Place
Jersey City, NJ 07302

California Institute of Technology 5.21%
Mail Code 212-31
Pasadena, CA 91125

DFA INTERNATIONAL HIGH BOOK TO MARKET PORTFOLIO

Charles Schwab & Company, Inc. - REIN* 96.73%
101 Montgomery Street
San Francisco, CA 94104

EMERGING MARKETS PORTFOLIO

Charles Schwab & Company, Inc. - REIN* 68.06%
101 Montgomery Street
San Francisco, CA 94104

_____________________________________
* Owner of record only.

18
<PAGE>

U.S. Trust Co. of California* 5.65%
555 S. Flower Street
Los Angeles, CA 90071

DFA INTERNATIONAL SMALL CAP VALUE PORTFOLIO

Charles Schwab & Company, Inc. - REIN* 96.15%
101 Montgomery Street
San Francisco, CA 94104

PURCHASE OF SHARES

The following information supplements the information set forth in the
prospectus under the caption "PURCHASE OF SHARES".

The Fund will accept purchase and redemption orders on each day that the
New York Stock Exchange ("NYSE") is open for business, regardless of whether
the Federal Reserve System is closed. However, no purchases by wire may be
made on any day that the Federal Reserve System is closed. The Fund will
generally be closed on days that the NYSE is closed. The New York Stock
Exchange is scheduled to be open Monday through Friday throughout the year
except for days closed to recognize New Year's Day, Presidents' Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving and Christmas
Day. The Federal Reserve System is closed on the same days as the NYSE,
except that is open on Good Friday and closed on Martin Luther King, Jr. Day,
Columbus Day and Veterans' Day. Orders for redemptions and purchases will not
be processed if the Fund is closed. The TSE is closed on the following days
in 1995: January 2-3 and 16, February 11, March 21, April 29, May 3-5,
September 15, September 23, October 10, November 3, November 23 and
December 23 and 29. Orders for the purchase and redemption of shares of The
Japanese Small Company Portfolio received on those days will be priced as of
the close of the NYSE on the next day that the TSE is open for trading.

The Fund reserves the right, in its sole discretion, to suspend the
offering of shares of any or all Portfolios or reject purchase orders when, in
the judgement of management, such suspension or rejection is in the best
interest of the Fund or a Portfolio. Securities accepted in exchange for
shares of a Portfolio will be acquired for investment purposes and will be
considered for sale under the same circumstances as other securities in the
Portfolio.

Based on the experience of The U.S. 9-10 Small Company Portfolio,
management believes that any dilutive effect of the cost of investing the
proceeds of the sale of the shares of that Portfolio is minimal and,
therefore, the shares of that Portfolio are currently sold at net asset value,
without imposition of a reimbursement fee. Reimbursement fees may be charged
prospectively from time to time based upon the future experience of The U.S.
9-10 Small Company Portfolio and other Portfolios. Any such charges will be
described in the prospectus.

REDEMPTION AND TRANSFER OF SHARES

The following information supplements the information set forth in the
prospectus under the caption "REDEMPTION OF SHARES".

_____________________________________
* Owner of record only.

19
<PAGE>

The Fund may suspend redemption privileges or postpone the date of
payment: (1) during any period when the NYSE is closed, or trading on the
Exchange is restricted as determined by the Securities and Exchange Commission
(the "Commission"), (2) during any period when an emergency exists as defined
by the rules of the Commission as a result of which it is not reasonably
practicable for the Fund to dispose of securities owned by it, or fairly to
determine the value of its assets and (3) for such other periods as the
Commission may permit.

If the Board of Directors determines that it would be detrimental to the
best interests of the remaining shareholders of any Portfolio to make payment
wholly or partly in cash, any Portfolio (except for a Feeder Portfolio) may
pay the redemption price in whole or in part by a distribution of portfolio
securities from the Portfolio of the shares being redeemed in lieu of cash.
Upon such a determination by both the Board of Directors of the Fund and the
Board of Trustees of the Trust, a Feeder Portfolio may pay the redemption
price, in lieu of cash, by a distribution of portfolio securities that the
Portfolio receives from the Series to satisfy the Portfolio's redemption
request. Any such redemption by the Series and/or the Portfolio would be in
accordance with Rule 18f-1 under the Investment Company Act of 1940.
Investors may incur brokerage charges and other transaction costs selling
securities that were received in payment of redemptions. The International
Equity Portfolios and The DFA Global Fixed Income Portfolio reserve the right
to redeem their shares in the currencies in which their investments are
denominated. Investors may incur charges in converting such securities to
dollars and the value of the securities may be affected by currency exchange
fluctuations.

Shareholders may transfer shares of any Portfolio to another person by
making a written request therefore to the Advisor who will transmit the
request to the Fund's Transfer Agent. The request should clearly identify the
account and number of shares to be transferred, and include the signature of
all registered owners and all stock certificates, if any, which are subject to
the transfer. The signature on the letter of request, the stock certificate
or any stock power must be guaranteed in the same manner as described in the
prospectus under "REDEMPTION OF SHARES". As with redemptions, the written
request must be received in good order before any transfer can be made.

CALCULATION OF PERFORMANCE DATA

Following are quotations of the annualized percentage total returns for
the one-, five-, and ten-year periods ended November 30, 1994 (as applicable)
using the standardized method of calculation required by the Securities and
Exchange Commission ("SEC") which is net of the cost of any current
reimbursement fees charged to investors and paid to the Portfolios.
Reimbursement fees of 1%, 1.5% and 1.5% have been in effect since the
inception of the Japanese, United Kingdom and Continental Small Company
Portfolios, respectively, until June 30, 1995. A reimbursement fee of 1% has
been in effect since the inception of DFA International Small Cap Value
Portfolio until June 30, 1995. Effective June 30, 1995, the amount of the
reimbursement fee is reduced with respect to Continental Small Company,
Pacific Rim Small Company, Japanese Small Company, Emerging Markets and DFA
International Small Cap Value Portfolios, and eliminated with respect to the
United Kingdom Small Company Portfolio. The reimbursement fee for each
Portfolio, expressed as a percentage of the net asset value of the shares of
the Portfolios, is as follows: Continental Small Company and Pacific Rim
Small Company Portfolios - 1.00%; Japanese Small Company and Emerging Markets
Portfolios - .50%; and DFA International Small Cap Value Portfolio - .70%.

A reimbursement fee of 1% was charged to investors in The U.S. 9-10
Small Company Portfolio from December 9, 1986 through June 17, 1988. A
reimbursement fee of 0.75% was charged to investors in The Large Cap
International Portfolio from the date of its inception until March 5, 1992.
In addition, for those Portfolios in effect for less than one, five, or ten
years, the time periods during which the Portfolios have been active have been
substituted for the periods stated (which in no case extends prior to the
effective dates of the Portfolios' registration statements).

20
<PAGE>

<TABLE>
<CAPTION>
ONE YEAR FIVE YEARS TEN YEARS
-------- ---------- ---------
<S> <C> <C> <C>
U.S. 9-10 Small Company Portfolio 5.08 11.48 11.12

U.S. 6-10 Small Company Portfolio .22 33 MONTHS n/a
---------
6.53

U.S. Large Company Portfolio 1.05 47 MONTHS n/a
---------
11.42

U.S. Small Cap Value Portfolio 2.17 21 MONTHS n/a
---------
7.67

U.S. Large Cap Value Portfolio -3.27 22 MONTHS n/a
---------
2.21

DFA/AEW Real Estate Securities Portfolio -11.75 23 MONTHS n/a
---------
-1.03

Japanese Small Company Portfolio 28.29 -4.87 106 MONTHS
----------
15.60

Pacific Rim Small Company Portfolio 2.71 23 MONTHS n/a
---------
31.97

United Kingdom Small Company Portfolio 10.17 5.51 105 MONTHS
----------
9.89

Emerging Markets Portfolio 7 MONTHS n/a n/a
--------
20.16

Continental Small Company Portfolio 16.42 1.69 79 MONTHS
---------
9.00

Large Cap International Portfolio 10.75 40 MONTHS n/a
---------
6.66

DFA One-Year Fixed Income Portfolio 2.49 6.02 7.31

DFA Five-Year Government Portfolio -3.12 7.47 90 MONTHS
---------
7.61

DFA Global Fixed Income Portfolio -2.91 48 MONTHS n/a
---------
6.72

DFA Intermediate Government Fixed Income Portfolio -4.71 49 MONTHS n/a
---------
8.43

DFA International Small Cap Value Portfolio 5 MONTHS n/a n/a
--------
1.65
</TABLE>

21
<PAGE>

As the following formula indicates, the average annual total return is
determined by finding the average annual compounded rates of return over the
stated time period that would equate a hypothetical initial purchase order of
$1,000 to its redeemable value (including capital appreciation/depreciation and
dividends and distributions paid and reinvested less any fees charged to a
shareholder account) at the end of the stated time period. The calculation
assumes that all dividends and distributions are reinvested at the public
offering price on the reinvestment dates during the period. The quotation
assumes the account was completely redeemed at the end of each period and the
deduction of all applicable charges and fees. According to the SEC formula:

P(1 + T)(n) = ERV

where:

P = a hypothetical initial payment of $1,000

T = average annual total return

n = number of years

ERV = ending redeemable value of a hypothetical $1,000 payment made at
the beginning of the one-, five-, and ten-year periods at the end of the
one-, five-, and ten-year periods (or fractional portion thereof).

Following are quotations of the annualized total returns for the one-,
five-, and ten-year periods ended November 30, 1994 using a non-standardized
method of calculation which is used in communicating performance data in
addition to the standardized method required by the SEC. The
non-standardized quotations differ from the standardized in that they are
calculated without deduction of any reimbursement fees charged to investors
and paid to the Portfolios which would otherwise reduce return quotations for
the Portfolios with such fees. Additionally, the non-standardized quotations
are presented over time periods which extend prior to the initial investment
in the Portfolios (except for The Continental Small Company and Large Cap
International Portfolios) by using simulated data for the investment
strategies of the Portfolios for that portion of the period prior to the
initial investment dates. The simulated data excludes the deduction of
Portfolio expenses which would otherwise reduce the returns quotations.
Non-standardized quotations are also presented for the United Kingdom and
Japanese Small Company Portfolios calculated assuming the local currencies of
the Portfolios are invested and redeemed at the beginning and ending dates of
the period. The local currency calculations ignore the effect of foreign
exchange rates on the investment and only express the returns of the
underlying securities of the Portfolios.

<TABLE>
<CAPTION>
ONE YEAR FIVE YEARS TEN YEARS
-------- ---------- ---------
<S> <C> <C> <C>
U.S. 9-10 Small Company Portfolio 5.08 11.48 11.23
(effective and initial investment
on December 22, 1981)

U.S. 6-10 Small Company Portfolio .22 9.25 10.99
(effective March 6, 1992 and
initial investment on March 20, 1992)

22
<PAGE>

U.S. Large Company Portfolio (effective 1.05 8.65 14.40
February 26, 1990 and initial investment on
December 31, 1990)

U.S. Small Cap Value Portfolio (effective 2.17 12.69 15.43
September 18, 1992 and initial investment
on March 1, 1993)

U.S. Large Cap Value Portfolio (effective -3.27 9.54 14.91
September 18, 1992 and initial investment
on February 18, 1993)

DFA/AEW Real Estate Securities Portfolio -11.75 4.35 5.79
(effective September 18, 1992 and initial
investment on January 5, 1993)

Japanese Small Company Portfolio
(effective January 14, 1986, and initial
investment on January 31, 1986)
Dollar return 29.59 -4.68 20.87
Local currency return 17.62 -11.43 10.34

Pacific Rim Small Company Portfolio 4.27 23 MONTHS n/a
(effective April 2, 1991 and initial ---------
investment on January 4, 1993) 33.02

United Kingdom Small Company Portfolio
(effective January 14, 1986, and initial
investment on March 4, 1986)
Dollar return 11.85 5.83 15.48
Local currency return 6.03 5.84 12.42

Emerging Markets Portfolio (effective April 1, 7 MONTHS n/a n/a
1994 and initial investment on April 22, --------
1994) 23.31

Continental Small Company Portfolio 18.19 2.00 79.5
(effective and initial investment on April 15, MONTHS
1988) ------
Dollar return 9.19

Large Cap International Portfolio(effective 10.75 40 MONTHS n/a
April 2, 1991 and initial investment on July 18, ---------
1991) 6.66

DFA One-Year Fixed Income Portfolio 2.49 6.02 7.31
(effective June 5, 1983, and initial investment
on July 27, 1983)

23
<PAGE>

DFA Five-Year Government Portfolio -3.12 7.47 9.66
(effective and initial investment on May 13,
1987)

DFA Global Fixed Income Portfolio -2.91 48 MONTHS n/a
(effective September 24, 1990 and initial ---------
investment on November 6, 1990) 6.72

DFA Intermediate Government Fixed -4.71 49 MONTHS n/a
Income Portfolio (effective September 24, ---------
1990 and initial investment on October 22, 8.43
1990)

DFA International Small Cap Value Portfolio 5 Months n/a n/a
(effective December 20, 1994 and initial --------
investment on December 30, 1995) 4.13

</TABLE>

FINANCIAL STATEMENTS

The audited financial statements and financial highlights of the Fund
for its fiscal year ended November 30, 1994, as set forth in the Fund's
annual report to stockholders, and the report thereon of Coopers & Lybrand
L.L.P., independent accountants, also appearing therein, are incorporated
herein by reference. The audited annual report does not contain any data
regarding the DFA International Small Cap Value Portfolio because that
Portfolio had not commenced operations as of November 30, 1994.

With respect to DFA International Small Cap Value Portfolio, the
unaudited financial statements contained in the report to shareholders of the
Portfolio, dated May 31, 1995, are incorporated herein by reference. A
shareholder of DFA International Small Cap Value Portfolio may obtain a copy
of the report, upon request and without charge, by contacting the Fund at the
address or telephone number appearing on the cover of the Statement of
Additional Information.