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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
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Pre-Effective Amendment No.
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Post-Effective Amendment No. 44 File No. 2-73948 X
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REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
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Amendment No. 45 File No. 811-3258 X
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DFA INVESTMENT DIMENSIONS GROUP INC.
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(Exact Name of Registrant as Specified in Charter)
1299 Ocean Avenue, 11th Floor, Santa Monica CA 90401
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(Address of Principal Executive Office) (Zip Code)
Registrant's Telephone Number, including Area Code (310) 395-8005
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Irene R. Diamant, Vice President and Secretary, DFA Investment Dimensions
Group Inc.,
1299 Ocean Avenue, 11th Floor, Santa Monica, California 90401
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(Name and Address of Agent for Service)
Copies of communications to Stephen W. Kline, Esquire, Stradley, Ronon, Stevens
& Young, LLP, Great Valley Corporate Center, 30 Valley Stream Parkway, Malvern,
PA 19355, (610) 640-5801.
It is proposed that this filing will become effective
(check appropriate box):
/ / Immediately upon filing pursuant to paragraph (b)
/X / On December 20, 1996 pursuant to paragraph (b)
/ / 60 days after filing pursuant to paragraph (a)(1)
/ / On (date) pursuant to paragraph (a)(1)
/ / 75 days after filing pursuant to paragraph (a)(2)
/ / On (date) pursuant to paragraph (a)(2) of Rule 485.
If appropriate, check the following box:
/ / This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
This Registrant has registered an indefinite number of shares of common stock
under the Securities Act of 1933 pursuant to Rule 24f-2 under the Investment
Company Act of 1940. On or about January 29, 1997, Registrant will file a Rule
24f-2 Notice for Registrant's most recent fiscal year which ended November 30,
1996.
The Trustees and principal officers of The DFA Investment Trust Company also
have executed this registration statement.
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FORM N-1A
CROSS REFERENCE SHEET
(as required by Rule 404)
FORM N-1A PART A ITEM NO. PROSPECTUS LOCATION
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Item 1. Cover Page. . . . . . . . . . . . . . Cover Page
Item 2. Synopsis. . . . . . . . . . . . . . . Highlights
Item 3. Condensed Financial Information.. . . Condensed Financial
Information
Item 4. General Description of Registrant . . Cover Page; Highlights;
General Information
Item 5. Management of the Fund. . . . . . . . Highlights; Management of
the Fund
Item 6. Capital Stock and Other Securities. . Highlights; Dividends,
Capital Gains
Distributions and Taxes;
General Information
Item 7. Purchase of Securities Being
Offered . . . . . . . . . . . . . . . Purchase and Redemption
of Shares
Item 8. Redemption or Repurchase. . . . . . . Purchase and Redemption
of Shares
Item 9. Pending Legal Proceedings . . . . . . Not Applicable
FORM N-1A PART B ITEM NO. LOCATION IN
- ------------------------- STATEMENT OF
ADDITIONAL
INFORMATION
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Item 10. Cover Page. . . . . . . . . . . . . . Cover Page
Item 11. Table of Contents . . . . . . . . . . Table of Contents
Item 12. General Information and History . . . Other Information
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Item 13. Investment Objectives and Policies. . Portfolio Characteristics
and Policies; Investment
Limitations; Futures
Contracts
Item 14. Management of the Fund. . . . . . . . Directors and Officers
Item 15. Control Persons and Principal
Holders of Securities . . . . . . . . Principal Holders of
Securities
Item 16. Investment Advisory and Other
Services. . . . . . . . . . . . . . . Directors and Officers;
Administrative Services;
Other Information
Item 17. Brokerage Allocation and Other
Practices . . . . . . . . . . . . . . Brokerage Transactions
Item 18. Capital Stock and Other Securities. . Other Information
Item 19. Purchase, Redemption and Pricing
of Securities Being Offered . . . . . Purchase and Redemption
of Shares
Item 20. Tax Status. . . . . . . . . . . . . . Federal Tax Treatment of
Futures Contracts
Item 21. Underwriters. . . . . . . . . . . . . Not Applicable
Item 22. Calculation of Performance Data . . . Calculation of
Performance Data
Item 23. Financial Statements. . . . . . . . . Financial Statements
FORM N-1A PART C ITEM NO. LOCATION IN PART C
- ------------------------- ------------------
Item 24. Financial Statements and Exhibits . . Exhibits
Item 25. Persons Controlled by or Under
Common Control with Registrant. . . . Persons Controlled by or
Under Common Control with
Registrant
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Item 26. Number of Holders of Securities . . . Number of Holders of
Securities
Item 27. Indemnification . . . . . . . . . . . Indemnification
Item 28. Business and Other Connections of
Investment Advisor. . . . . . . . . . Business and Connections
of Investment Advisor and
Subadvisors
Item 29. Principal Underwriters. . . . . . . . Principal Underwriters
Item 30. Location of Accounts and Records. . . Location of Accounts and
Records
Item 31. Management Services . . . . . . . . . Management Services
Item 32. Undertakings. . . . . . . . . . . . . Undertakings
<PAGE>
PROSPECTUS
DECEMBER 20, 1996
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.
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 REAL ESTATE SECURITIES PORTFOLIO
ENHANCED U.S. LARGE COMPANY PORTFOLIO
INTERNATIONAL EQUITY PORTFOLIOS
<TABLE>
<S> <C>
JAPANESE SMALL COMPANY PORTFOLIO CONTINENTAL SMALL COMPANY PORTFOLIO
PACIFIC RIM SMALL COMPANY PORTFOLIO LARGE CAP INTERNATIONAL PORTFOLIO
UNITED KINGDOM SMALL COMPANY PORTFOLIO RWB/DFA INTERNATIONAL HIGH BOOK TO MARKET PORTFOLIO
EMERGING MARKETS PORTFOLIO DFA INTERNATIONAL SMALL CAP VALUE PORTFOLIO
EMERGING MARKETS SMALL CAP PORTFOLIO INTERNATIONAL SMALL COMPANY PORTFOLIO
</TABLE>
FIXED INCOME PORTFOLIOS
<TABLE>
<S> <C>
DFA ONE-YEAR FIXED INCOME PORTFOLIO DFA TWO-YEAR GOVERNMENT PORTFOLIO
DFA TWO-YEAR CORPORATE FIXED INCOME PORTFOLIO DFA FIVE-YEAR GOVERNMENT PORTFOLIO
DFA TWO-YEAR GLOBAL FIXED INCOME PORTFOLIO DFA INTERMEDIATE GOVERNMENT FIXED INCOME PORTFOLIO
DFA GLOBAL FIXED INCOME PORTFOLIO
</TABLE>
EACH OF THE U.S. 6-10 SMALL COMPANY, U.S. LARGE COMPANY, ENHANCED U.S.
LARGE COMPANY, JAPANESE SMALL COMPANY, PACIFIC RIM SMALL COMPANY, UNITED KINGDOM
SMALL COMPANY AND CONTINENTAL SMALL COMPANY, DFA ONE-YEAR FIXED INCOME, DFA
TWO-YEAR CORPORATE FIXED INCOME, DFA TWO-YEAR GLOBAL FIXED INCOME, DFA TWO-YEAR
GOVERNMENT, U.S. SMALL CAP VALUE, U.S. LARGE CAP VALUE, RWB/DFA INTERNATIONAL
HIGH BOOK TO MARKET, EMERGING MARKETS AND EMERGING MARKETS SMALL CAP PORTFOLIO
(COLLECTIVELY, THE "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 SHARES OF THE DFA INVESTMENT TRUST COMPANY (THE
"TRUST"), AN OPEN-END, MANAGEMENT INVESTMENT COMPANY THAT ISSUES SERIES
(INDIVIDUALLY AND COLLECTIVELY, THE "SERIES") HAVING THE SAME INVESTMENT
OBJECTIVE, POLICIES AND LIMITATIONS AS EACH OF THE FEEDER 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." THE INTERNATIONAL SMALL COMPANY PORTFOLIO SEEKS TO ACHIEVE ITS
INVESTMENT OBJECTIVE BY INVESTING IN FOUR SERIES OF THE TRUST.
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 December 20, 1996, as amended from time to time, 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. . . . . . . . . . . . . . . . . . . . . 9
THE FEEDER PORTFOLIOS. . . . . . . . . . . . . . . . . . . . . . . . . . 24
SMALL COMPANY PORTFOLIOS . . . . . . . . . . . . . . . . . . . . . . . . 25
Investment Objective and Policies. . . . . . . . . . . . . . . . . . 25
PORTFOLIO CHARACTERISTICS AND POLICIES -
SMALL COMPANY PORTFOLIOS . . . . . . . . . . . . . . . . . . . . . . . . 25
U.S. 6-10 Small Company Portfolio . . . . . . . . . . . . . . . . . 25
U.S. 9-10 Small Company Portfolio. . . . . . . . . . . . . . . . . . 26
Japanese Small Company Portfolio . . . . . . . . . . . . . . . . . . 26
United Kingdom Small Company Portfolio . . . . . . . . . . . . . . . 26
Continental Small Company Portfolio. . . . . . . . . . . . . . . . . 27
Pacific Rim Small Company Portfolio. . . . . . . . . . . . . . . . . 27
International Small Company Portfolio. . . . . . . . . . . . . . . . 28
Portfolio Structure. . . . . . . . . . . . . . . . . . . . . . . . . 28
Portfolio Transactions . . . . . . . . . . . . . . . . . . . . . . . 30
U.S. LARGE COMPANY PORTFOLIO . . . . . . . . . . . . . . . . . . . . . . 30
Investment Objective and Policies. . . . . . . . . . . . . . . . . . 30
ENHANCED U.S. LARGE COMPANY PORTFOLIO. . . . . . . . . . . . . . . . . . 31
Investment Objective and Policies. . . . . . . . . . . . . . . . . . 31
STANDARD & POOR'S - INFORMATION AND DISCLAIMERS. . . . . . . . . . . . . 32
LARGE CAP INTERNATIONAL PORTFOLIO. . . . . . . . . . . . . . . . . . . . 32
Investment Objective and Policies. . . . . . . . . . . . . . . . . . 32
DFA REAL ESTATE SECURITIES PORTFOLIO . . . . . . . . . . . . . . . . . . 34
Portfolio Characteristics and Policies . . . . . . . . . . . . . . . 34
Portfolio Structure. . . . . . . . . . . . . . . . . . . . . . . . . 34
Portfolio Transactions . . . . . . . . . . . . . . . . . . . . . . . 35
VALUE PORTFOLIOS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Portfolio Characteristics and Policies . . . . . . . . . . . . . . . 35
Portfolio Structure. . . . . . . . . . . . . . . . . . . . . . . . . 36
Portfolio Transactions . . . . . . . . . . . . . . . . . . . . . . . 36
RWB/DFA INTERNATIONAL HIGH BOOK TO MARKET PORTFOLIO. . . . . . . . . . . 37
Investment Objective and Policies. . . . . . . . . . . . . . . . . . 37
DFA INTERNATIONAL SMALL CAP VALUE PORTFOLIO. . . . . . . . . . . . . . . 38
Investment Objective and Policies. . . . . . . . . . . . . . . . . . 38
EMERGING MARKETS PORTFOLIO AND EMERGING MARKETS SMALL CAP PORTFOLIO. . . 40
Investment Objective and Policies. . . . . . . . . . . . . . . . . . 40
Series' Characteristics and Policies . . . . . . . . . . . . . . . . 40
Portfolio Structure. . . . . . . . . . . . . . . . . . . . . . . . . 41
SECURITIES LOANS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES -
FIXED INCOME PORTFOLIOS. . . . . . . . . . . . . . . . . . . . . . . . . 42
DFA One-Year Fixed Income Portfolio. . . . . . . . . . . . . . . . . 42
DFA Two-Year Corporate Fixed Income Portfolio. . . . . . . . . . . . 43
DFA Two-Year Global Fixed Income Portfolio . . . . . . . . . . . . . 43
DFA Global Fixed Income Portfolio. . . . . . . . . . . . . . . . . . 43
DFA Two-Year Government Portfolio. . . . . . . . . . . . . . . . . . 44
DFA Five-Year Government Portfolio . . . . . . . . . . . . . . . . . 44
DFA Intermediate Government Fixed Income Portfolio . . . . . . . . . 44
Description of Investments . . . . . . . . . . . . . . . . . . . . . 45
Investments in the Banking Industry. . . . . . . . . . . . . . . . . 46
Portfolio Strategy . . . . . . . . . . . . . . . . . . . . . . . . . 46
RISK FACTORS - ALL PORTFOLIOS. . . . . . . . . . . . . . . . . . . . . . 47
Small Company Securities . . . . . . . . . . . . . . . . . . . . . . 47
Foreign Securities . . . . . . . . . . . . . . . . . . . . . . . . . 47
Investing in Emerging Markets. . . . . . . . . . . . . . . . . . . . 48
Foreign Currencies and Related Transactions. . . . . . . . . . . . . 49
Borrowing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Portfolio Strategies . . . . . . . . . . . . . . . . . . . . . . . . 49
Futures Contracts and Options on Futures . . . . . . . . . . . . . . 50
Options on Stock Indices . . . . . . . . . . . . . . . . . . . . . . 50
Swaps. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Banking Industry and Real Estate Concentrations. . . . . . . . . . . 51
Repurchase Agreements. . . . . . . . . . . . . . . . . . . . . . . . 52
MANAGEMENT OF THE FUND . . . . . . . . . . . . . . . . . . . . . . . . . 52
Investment Services - United Kingdom and Continental
Small Company Series . . . . . . . . . . . . . . . . . . . . . . . 54
Investment Services - Japanese and Pacific Rim Small
Company Series . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Administrative Services - The Feeder Portfolios and
International Small Company Portfolio. . . . . . . . . . . . . . . 55
Client Service Agent - RWB/DFA International High Book to
Market Portfolio . . . . . . . . . . . . . . . . . . . . . . . . . 56
Directors and Officers . . . . . . . . . . . . . . . . . . . . . . . 56
DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAXES . . . . . . . . . . . . 56
PURCHASE OF SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
In Kind Purchases . . . . . . . . . . . . . . . . . . . . . . . . . 59
VALUATION OF SHARES. . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Public Offering Price. . . . . . . . . . . . . . . . . . . . . . . . 61
DISTRIBUTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
EXCHANGE OF SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
REDEMPTION OF SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . 63
GENERAL INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . 63
<PAGE>
HIGHLIGHTS
PAGE
THE FUND
This prospectus relates to twenty-four separate Portfolios of the Fund.
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 25
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, Pacific Rim Small Company Portfolio and International 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
Portfolio, except the U.S. 9-10 Small Company and International Small Company
Portfolios, invests all of its assets in a corresponding Series of the Trust.
The International Small Company Portfolio invests all of its assets in four
Series of the Trust: Japanese Small Company, Pacific Rim Small Company, United
Kingdom Small Company and Continental Small Company Series (collectively, the
"Underlying Series"). Each corresponding Series of the Trust and U.S. 9-10
Small Company Portfolio 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 30
The investment objective of U.S. Large Company Portfolio is to approximate
the investment performance of 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 OBJECTIVES - ENHANCED U.S. LARGE COMPANY PORTFOLIO 31
The investment objective of the Enhanced U.S. Large Company Portfolio is to
achieve a total return which exceeds the total return performance of the S&P 500
Index. The Portfolio will invest all of its assets in the Enhanced U.S. Large
Company Series of the Trust. The Series may invest in all of the stocks
represented in the S&P 500 Index, options on stock indices, stock index futures
and options thereon, swap agreements on stock indices, shares of investment
companies that invest in stock indices and short-term fixed income obligations.
INVESTMENT OBJECTIVE - LARGE CAP INTERNATIONAL PORTFOLIO 32
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 REAL ESTATE SECURITIES PORTFOLIO 34
The investment objective of DFA 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.
<PAGE>
INVESTMENT OBJECTIVES - VALUE PORTFOLIOS 35
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.
INVESTMENT OBJECTIVE - RWB/DFA INTERNATIONAL HIGH BOOK
TO MARKET PORTFOLIO 37
The investment objective of the RWB/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 38
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 OBJECTIVES - EMERGING MARKETS PORTFOLIO AND EMERGING MARKETS
SMALL CAP PORTFOLIO 40
The investment objective of both the Emerging Markets Portfolio and the
Emerging Markets Small Cap Portfolio is to achieve long-term capital
appreciation. The Emerging Markets Portfolio will invest all of its assets in
the Emerging Market Series of the Trust, which in turn invests in the equity
securities of larger companies in emerging markets. The Emerging Markets Small
Cap Portfolio will invest all of its assets in the Emerging Markets Small Cap
Series of the Trust, which in turn invests in the equity securities of smaller
companies in emerging markets.
INVESTMENT OBJECTIVES - FIXED INCOME PORTFOLIOS 42
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 Two-Year Corporate Fixed Income Portfolio
is to maximize total returns consistent with the preservation of capital. The
Portfolio will invest all of its assets in DFA Two-Year Corporate Fixed Income
Series of the Trust. Generally, the Series will acquire high quality
obligations which mature within two years from the date of settlement. 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 Two-Year Global Fixed Income Portfolio is
to maximize total returns consistent with preservation of capital. The
Portfolio will invest all of its assets in DFA Two-Year Global Fixed Income
Series of the Trust. The Series will invest in obligations issued or guaranteed
by the U.S. and foreign governments, their agencies and instrumentalities,
corporate debt obligations, bank obligations, commercial paper, and obligations
of other foreign issuers and supranational organizations which mature within two
years from the date of settlement. 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.")
2
<PAGE>
The investment objective of DFA Two-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 and consistent with preservation of
capital. The Portfolio will invest all of its assets in DFA Two-Year Government
Series of the Trust. Generally, the Series will acquire U.S. Government
obligations and U.S. Government agency obligations that mature within two years
from the date of settlement and repurchase agreements.
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.
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 invests in the obligations issued or
guaranteed by the U.S. and foreign governments and their agencies, obligations
of other foreign issuers rated AA or better, corporate debt obligations, bank
obligations, commercial paper and supranational organizations.
RISK FACTORS 47
Japanese Small Company Portfolio, United Kingdom Small Company Portfolio,
Continental Small Company Portfolio, Pacific Rim Small Company Portfolio,
International Small Company Portfolio, Large Cap International Portfolio, DFA
International Small Cap Value Portfolio, RWB/DFA International High Book to
Market Portfolio, Emerging Markets Portfolio and Emerging Markets Small Cap
Portfolio (collectively, the "International Equity Portfolios"), DFA Two-Year
Global Fixed Income Portfolio, Enhanced U.S. Large Company Portfolio and DFA
Global Fixed Income Portfolio (directly or indirectly through their investment
in the Trust Series) invest in foreign securities which are traded abroad.
DFA One-Year Fixed Income Series, DFA Two-Year Corporate Fixed Income
Series and DFA Two-Year Global Fixed Income Series and Enhanced U.S. Large
Company Series of the Trust, in which the corresponding Feeder Portfolios
invest, are 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. The DFA One-Year Fixed Income Series, DFA
Two-Year Corporate Fixed Income Series and DFA Two-Year Global Fixed Income
Series also are authorized to concentrate investments in the banking industry in
certain circumstances. DFA 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 RWB/DFA International High Book to Market Portfolio and DFA Real
Estate Securities Portfolio may invest in stock index futures contracts and
options thereon and the U.S. Large Company, the Value and Enhanced U.S. Large
Company Series of the Trust, in which the corresponding Portfolios invest, also
may purchase and sell index futures and options thereon. The Enhanced U.S.
Large Company Series and its corresponding Feeder Portfolio also may invest in
options on stock indices and swap agreements on stock indices.
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.")
3
<PAGE>
MANAGEMENT AND ADMINISTRATIVE SERVICES 52
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 Series of the Trust. DFA Australia Pty
Limited serves as sub-advisor of Japanese and Pacific Rim Small Company Series
of the Trust. The Advisor provides each Feeder Portfolio and International
Small Company Portfolio with certain administrative services. Reinhardt Werba
Bowen Advisory Services serves as client service agent to the RWB/DFA
International High Book to Market Portfolio. (See "MANAGEMENT OF THE FUND.")
DIVIDEND POLICY 56
The Domestic and International Equity Portfolios, except for U.S. Large
Company, Enhanced U.S. Large Company and U.S. Large Cap Value Portfolios, each
distribute substantially all of their own net investment income in December of
each year. U.S. Large Company, Enhanced U.S. Large Company, U.S. Large Cap
Value, DFA Two-Year Corporate Fixed Income, DFA Two-Year Government, DFA
Intermediate Government Fixed Income, DFA Two-Year Global Fixed Income and DFA
Global Fixed Income Portfolios 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 58
Shares of the International Equity Portfolios, except United Kingdom Small
Company, Large Cap International and RWB/DFA International High Book to Market
Portfolios, 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 and
the Emerging Markets Small Cap Portfolio; 0.50% of the net asset value of the
shares of Japanese Small Company Portfolio and Emerging Markets Portfolio; 0.70%
of the net asset value of the shares of DFA International Small Cap Value
Portfolio; and 0.675% of the net asset value of the shares of International
Small Company 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. No reimbursement fee is assessed in
connection with any purchase of shares by exchange between International Small
Company Portfolio and any of the Feeder Portfolios which invest in the
Underlying Series. 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 each Feeder Portfolio and International
Small Company Portfolio will fluctuate in relation to the investment experience
of the Series of the Trust in which such Portfolios invest. The value of the
shares issued by all other Portfolios will fluctuate in relation to their own
investment experience. Unlike shares of 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.")
4
<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%
Emerging Markets Small Cap Portfolio 1.00%
DFA International Small Cap Value Portfolio 0.70%
International Small Company Portfolio 0.675%
_____________________________________
(1) Reimbursement fees are charged to purchasers of shares and paid to these
Portfolios, except in the case of certain purchases permitted to be made by
exchange (see "EXCHANGE OF SHARES"). 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.) The Japanese Small Company, Continental
Small Company, Pacific Rim Small Company, Emerging Markets and Emerging Markets
Small Cap Series of the Trust charge a reimbursement fee to purchasers of
shares, including International Small Company Portfolio, equal to the
reimbursement fee charged by its corresponding Feeder Portfolio as set forth
above.
Except as indicated below, the expenses in the following table are based on
those incurred by the Portfolios and Series for the fiscal year ended
November 30, 1995.
<TABLE>
<CAPTION>
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% -- 0.12% 0.62%
U.S. 6-10 Small Company(1) 0.03% 0.32% 0.14% 0.49%
U.S. Large Company(1)(3)
(after waivers and assumptions) 0.025% 0.125% -- 0.15%
Enhanced U.S. Large Company(1)(2) 0.05% 0.15% 0.52% 0.72%
U.S. Small Cap Value(1) 0.20% 0.30% 0.14% 0.64%
U.S. Large Cap Value(1) 0.10% 0.15% 0.17% 0.42%
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
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>
DFA Real Estate Securities (5) 0.30% 0.32% 0.62%
Japanese Small Company(1)(4) 0.10% 0.40% 0.26% 0.76%
Pacific Rim Small Company(1)(4) 0.10% 0.40% 0.36% 0.86%
United Kingdom Small Company(1)(4) 0.10% 0.40% 0.26% 0.76%
Emerging Markets(1) 0.10% 0.40% 1.08% 1.58%
Emerging Markets Small Cap(1) 0.20% 0.45% 0.95% 1.60%
Continental Small Company(1)(4) 0.10% 0.40% 0.26% 0.76%
International Small Company(2) 0.10% 0.40% 0.33% 0.83%
Large Cap International 0.25% 0.32% 0.57%
RWB/DFA International High Book to 0.20% 0.20% 0.28% 0.68%
Market(1)
DFA International Small Cap Value(6) 0.65% 0.58% 1.23%
DFA One-Year Fixed Income(1) 0.05% 0.10% 0.05% 0.20%
DFA Two-Year Corporate Fixed 0.15% 0.05% 0.35% 0.55%
Income(1)(2)
DFA Two-Year Global Fixed Income(1)(2) 0.05% 0.10% 0.30% 0.45%
DFA Global Fixed Income 0.25% 0.21% 0.46%
DFA Two-Year Government(1)(2) 0.15% 0.05% 0.39% 0.59%
DFA Five-Year Government 0.20% 0.08% 0.28%
DFA Intermediate Government Fixed 0.15% 0.12% 0.27%
Income
</TABLE>
- ----------------------------------
(1) Feeder Portfolio
(2) "Other Expenses" are annualized estimates based on anticipated fees and
expenses through the fiscal year ending November 30, 1996. With respect to
International Small Company Portfolio, the amount set forth under
"Management Fee" reflects the indirect payment of a portion of the
management fee of each Underlying Series, which is equal to 0.10% of the
average net assets of such Series on an annual basis; the amounts set forth
under "Other Expenses" and "Total Operating Expenses" also reflect the
indirect payment of a portion of the expenses of the Underlying Series.
(4) Prior to August 9, 1996, the Feeder Portfolio invested its assets directly
in the stocks of small companies. The above figures have been restated to
reflect estimated aggregate annualized operating expenses of the Feeder
Portfolio and its corresponding Series as though the Feeder Portfolio's
assets had been invested in the Series during the fiscal year ended
November 30, 1995.
(5) Effective December 20, 1996, the investment advisory fee payable by the
Fund on behalf of the DFA Real Estate Securities Portfolio to the Adviser
was reduced from .325% of the Portfolio's average net assets on an annual
basis to .30% of the Portfolio's average net assets on an annual basis.
Effective December 19, 1996, the sub-advisory agreement between the Fund,
on behalf of the Portfolio, and Aldrich, Eastman and Waltch L.P. ("AEW")
terminated; pursuant to the terms of the sub-advisory agreement previously
in effect, the Portfolio paid AEW a fee equal to .175% of its average net
assets on an annual basis. The above figures have been restated to reflect
the reduction in the advisory fee and termination of the sub-advisory
agreement as though they were both in effect during the fiscal year ended
November 30, 1995. See "Management of the Fund."
(6) Annualized, based on fees and expenses incurred from December 30, 1994
(commencement of operations) to November 30, 1995.
6
<PAGE>
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 6 20 35 77
U.S. 6-10 Small Company 5 16 27 62
U.S. Large Company 2 5 8 19
Enhanced U.S. Large Company 7 23 n/a n/a
U.S. Small Cap Value 7 20 36 80
U.S. Large Cap Value 4 13 24 53
DFA Real Estate Securities 6 20 35 77
Japanese Small Company 13 29 47 99
Pacific Rim Small Company 19 37 57 115
United Kingdom Small Company 8 24 42 94
Emerging Markets 21 55 91 192
Emerging Markets Small Cap 26 60 n/a n/a
Continental Small Company 18 34 52 103
International Small Company 15 33 n/a n/a
Large Cap International 6 18 32 71
RWB/DFA International High Book to Market 7 22 38 85
DFA International Small Cap Value 19 46 74 155
DFA One-Year Fixed Income 2 6 11 26
DFA Two-Year Corporate Fixed Income 6 18 n/a n/a
DFA Two-Year Global Fixed Income 5 14 n/a n/a
DFA Global Fixed Income 5 15 26 58
DFA Two-Year Government 6 19 n/a n/a
DFA Five-Year Government 3 9 16 36
DFA Intermediate Government Fixed Income 3 9 15 34
</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. THE EXAMPLE SHOULD NOT BE
CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE
GREATER OR LESSER THAN THOSE SHOWN.
7
<PAGE>
With respect to the Feeder Portfolios and International Small Company
Portfolio, the table summarizes the aggregate annual operating expenses of both
the Portfolios and the Series of the Trust in which the Portfolios invest. (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 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. By investing in shares of the Underlying Series,
International Small Company Portfolio will indirectly bear its pro rata share of
the operating expenses, management expenses and brokerage costs of such Series,
as well as the expense of operating the Portfolio.
The Enhanced U.S. Large Company, DFA Two-Year Corporate Fixed Income, DFA
Two-Year Global Fixed Income, DFA Two-Year Government, Emerging Markets Small
Cap (and their corresponding Trust Series) and International Small Company
Portfolios are new and, therefore, 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.
During the fiscal year ended November 30, 1995, the Advisor 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. Such expenses were 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, 1995 would have been 0.46%. As
of December 1, 1995, pursuant to the terms of the current administration
agreement with respect to the U.S. Large Company Portfolio, the Advisor agreed
to waive its fees and/or assume the expenses of the Portfolio to the extent (1)
necessary to pay the ordinary operating expenses of the Portfolio (except the
administration fee); and (2) that the indirect expenses the Portfolio bears as a
shareholder of the Series, on an annual basis, exceed 0.025% of the Portfolio's
average net assets. Beginning August 9, 1996, in addition to the
waiver/assumption effective on December 1, 1995, the Adviser has agreed to
assume expenses or waive the fee payable by the U.S. Large Company Portfolio
under the administration agreement by an additional .09% of average assets on an
annual basis.
From December 1, 1993 through August 8, 1996, the Advisor agreed to waive
its fee under the Investment Management Agreement with respect to 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. For the fiscal year ended November 30, 1995, the
Advisor was not required to waive any portion of its fee pursuant to such
agreement.
Effective August 9, 1996, the Advisor has agreed to waive its
administrative fee and assume the direct expenses of the Japanese Small Company,
United Kingdom Small Company, Continental Small Company and Pacific Rim Small
Company Portfolios to the extent necessary to keep the direct annual expenses of
each Portfolio to not more than 0.47% of average net assets of the Portfolio on
an annualized basis; this arrangement does not extend to the fees and expenses
of the Trust Series.
The Advisor has agreed to waive its administration fee and assume the
direct expenses of the International Small Company Portfolio to the extent
necessary to keep the administration fee and direct annual expenses of the
Portfolio to not more than 0.45% of average net assets of the Portfolio on an
annualized basis; this arrangement does not extend to the fees and expenses of
the Underlying Series.
For purposes of waivers and/or expense assumptions, the annual expenses are
those expenses incurred in any period consisting of twelve consecutive months.
The Advisor retains the right in its sole discretion to modify or eliminate the
waiver of a portion of its fees or assumption of expenses in the future.
8
<PAGE>
For the fiscal year ended November 30, 1995, the following international
equity Portfolios or Series set forth below received the following net revenue
from a securities lending program which constituted a percentage of the average
daily net assets of the Portfolio or Series:
PORTFOLIO/SERIES NET REVENUE PERCENTAGE OF ASSETS
---------------- ----------- --------------------
Japanese Small Company $742,590 0.22%
Pacific Rim Small Company 52,899 0.03%
Continental Small Company 116,607 0.03%
Large Cap International 19,452 0.03%
International Value 239,860 0.05%
Domestic equity Portfolios implemented lending programs late in the year. The
income generated in these Portfolios for the fiscal year ended November 30, 1995
is not representative of the income that would be earned over a full year.
CONDENSED FINANCIAL INFORMATION
The following financial highlights are part of the financial statements of
each Portfolio of the Fund. The information for each of the past fiscal years
has been audited by independent auditors. The information for the six-month
period ended May 31, 1996, and the information for the Enhanced U.S. Large
Company Portfolio for the period from July 3, 1996 (date of commencement of
operations) to October 31, 1996, has not been audited by independent auditors.
The financial statements, related notes, and the report of the independent
auditors covering such financial information and financial highlights for the
Fund's most recent fiscal year ended November 30, 1995, are incorporated by
reference into the Statement of Additional Information from the Fund's Annual
Report to shareholders for the year ended November 30, 1995. The financial
statements, related notes and financial highlights for the six-month period
ended May 31, 1996, are incorporated by reference into the Statement of
Additional Information from the Fund's Semi-Annual Report to shareholders for
the six months ended May 31, 1996. The financial statements, related notes and
financial highlights of the Enhanced U.S. Large Company Portfolio for the period
from July 3, 1996 to October 31, 1996, are included in the Statement of
Additional Information. Further information about each Portfolio's performance
(except for the Enhanced U.S. Large Company Portfolio) is contained in the
Fund's Annual Report to shareholders for the year ended November 30, 1995 and
the Fund's Semi-Annual Report to shareholders for the six months ended May 31,
1996. A copy of each of the Annual Report (including the report of the
independent auditors) and the Semi-Annual Report may be obtained from the Fund
upon request at no charge.
9
<PAGE>
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
THE U.S. 9-10 SMALL COMPANY PORTFOLIO
-------------------------------------------------------------------------
Period Year Year Year Year Year
Ended Ended Ended Ended Ended Ended
May 31 Nov. 30 Nov. 30 Nov. 30 Nov. 30 Nov. 30
1996 1995 1994 1993 1992 1991
(unaudited)
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $11.03 $8.49 $ 8.69 $7.75 $6.33 $5.34
----- ---- ----- ---- ---- ----
Income From
- -----------
Investment
- ----------
Operations
- ----------
Net Investment 0.01 0.05 0.01 0.03 0.04 0.04
Income
Net Gains (Losses) on
Securities (Realized
and Unrealized) 2.79 2.61 0.40 1.67 1.53 1.64
---- ---- ---- ---- ---- ----
Total From
Investment
Operations 2.80 2.66 0.41 1.70 1.57 1.68
- -------------------------------------------------------------------------------------------------
Less Distributions
- ------------------
Net Investment
Income (0.01) (0.04) (0.03) (0.05) (0.05) (0.07)
Net Realized Gains (0.76) (0.08) (0.58) (0.71) (0.10) (0.62)
---- ---- ---- ---- ---- ----
Total Distributions (0.77) (0.12) (0.61) (0.76) (0.15) (0.69)
- --------------------------------------------------------------------------------------------------
Net Asset Value, End
of Period $13.06 $11.03 $8.49 $8.69 $7.75 $6.33
- --------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------
Total Return 26.99%# 31.37% 5.06% 23.91% 25.24% 39.08%
- --------------------------------------------------------------------------------------------------
Ratios/Supplemental
- -------------------
Data
- ----
Net Assets, End of
Period (thousands) $1,259,837 $925,474 $659,221 $630,918 $651,313 $722,289
Ratio of Expenses to
Average Net Assets 0.61%* 0.62% 0.65% 0.70% 0.68% 0.64%
Ratio of Net
Investment
Income to Average
Net Assets 0.21%* 0.45% 0.16% 0.26% 0.53% 0.75%
Portfolio Turnover
Rate 22.46%* 24.65% 16.56% 9.87% 9.72% 10.13%
Average Commission
Rate(1) $0.0582 N/A N/A N/A N/A N/A
- --------------------------------------------------------------------------------------------------
<CAPTION>
THE U.S. 9-10 SMALL COMPANY PORTFOLIO
-----------------------------------------------------------
Year Year Year Year Year
Ended Ended Ended Ended Ended
Nov. 30 Nov. 30 Nov. 30 Nov. 30 Nov. 30
1990 1989 1988 1987 1986
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $7.74 $7.66 $7.50 $8.94 $8.88
---- ---- ---- ---- ----
Income From
- -----------
Investment
- ----------
Operations 0.07 0.07 0.10 0.09 0.12
- ----------
Net Investment
Income
Net Gains (Losses) on
Securities (Realized
and Unrealized) (1.77) 0.98 1.48 (1.53) 1.15
---- ---- ---- ---- ----
Total From
Investment (1.70) 1.05 1.58 (1.44) 1.27
Operations
- -------------------------------------------------------------------------------------
Less Distributions
- ------------------
Net Investment (0.08) (0.09) (0.11) - (0.23)
Income
Net Realized Gains (0.62) (0.88) (1 .31) - (0.98)
---- ---- ---- ---- ----
Total Distributions (0.70) (0.97) (1.42) - (1 .21)
- -------------------------------------------------------------------------------------
Net Asset Value, End
of Period $5.34 $7.74 $7.66 $7.50 $8.94
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
Total Return (24.09)% 16.09% 24.36% (16 .04)% 14.88%
- -------------------------------------------------------------------------------------
Ratios/Supplemental
- -------------------
Data
- ----
Net Assets, End of
Period (thousands) $561,102 $949,291 $912,518 $788,821 $952,580
Ratio of Expenses to
Average Net Assets 0.62% 0.62% 0.62% 0.61% 0.62%
Ratio of Net
Investment
Income to Average 0.99% 0.86% 1.19% 0.92% 1.14%
Net Assets
Portfolio Turnover 3.79% 7.86% 25 .98% 23.05% 14.19%
Rate
Average Commission
Rate(1) N/A N/A N/A N/A N/A
- -------------------------------------------------------------------------------------
</TABLE>
(Adjusted to reflect a 1,900% Stock Dividend as of November 28, 1986)
* Annualized
# Non-annualized
(1) Computed by dividing the total amount of brokerage commissions paid by the
total shares of investment securities purchased and sold during the period
for which commissions were charged, as required by the SEC for fiscal years
beginning after September 1, 1995.
10
<PAGE>
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
THE U.S. 6-10 SMALL COMPANY PORTFOLIO
-------------------------------------
Period Year Year Year March 20
Ended Ended Ended Ended to
May 31 Nov. 30 Nov. 30 Nov. 30 Nov. 30
1996 1995 1994 1993 1992
(unaudited)
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $12.64 $11.08 $11.43 $10.35 $10.00
----- ----- ----- ----- -----
Income from
- -----------
Investment Operations
- ---------------------
Net Investment Income - 0.09 0.09 0 .08 0.04
Net Gains (Losses) on
Securities (Realized
and Unrealized) 2.65 2.81 (0.07) 1.43 0.31
---- ---- ------ ---- ----
Total From Investment
Operations 2.65 2.90 0.02 1.51 0.35
- ------------------------------------------------------------------------------------
Less Distributions
- ------------------
Net Investment
Income (0.02) (0.14) (0.09) (0.11) -
Net Realized Gains (0.40) (1.20) (0.28) (0.32) -
---- ---- ---- ---- ---
Total Distributions (0.42) (1.34) (0.37) (0.43) -
- ------------------------------------------------------------------------------------
Net Asset Value, End
of Period $14.87 $12.64 $11.08 $11.43 $10.35
- ------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------
Total Return 21.51%# 28.75% 0.22% 14.72% 6.70%#
- ------------------------------------------------------------------------------------
Ratios/Supplemental
- -------------------
Data
- ----
Net Assets, End of
Period (thousands) $260,023 $186,644 $112,137 $136,863 $134,418
Ratio of Expenses to
Average Net Assets** 0.48%* 0.49% 0.53% 0.58% 0.48%*
Ratio of Net
Investment
Income to Average (0.11)%* 0.83% 0.72% 0.70% 0.96%*
Net Assets
Portfolio Turnover Rate N/A*** N/A*** N/A*** 1.81%*(b) 3.41%*
Average Commission
Rate N/A*** N/A*** N/A*** N/A N/A
- ------------------------------------------------------------------------------------
<CAPTION>
THE U.S. LARGE COMPANY PORTFOLIO
---------------------------------
Period Year Year Year Year Dec. 31
Ended Ended Ended Ended Ended 1990 to
May 31 Nov. 30 Nov. 30 Nov. 30 Nov. 30 Nov. 30
1996 1995 1994 1993 1992 1991
(unaudited)
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $18.12 $13.58 $13.91 $13.12 $11.44 $10.00
----- ----- ----- ----- ----- -----
Income from
- -----------
Investment Operations
- ---------------------
Net Investment Income 0.21 0.35 0.37 0.36 0.36 0.34
Net Gains (Losses) on
Securities (Realized
and Unrealized) 1.88 4.57 (0.22) 0.87 1.69 1.34
---- ---- ---- ---- ---- ----
Total From Investment
Operations 2.09 4.92 0.15 1.23 2.05 1.68
- ----------------------------------------------------------------------------------------------------
Less Distributions
- ------------------
Net Investment
Income (0.14) (0.36) (0.37) (0.44) (0.37) (0.24)
Net Realized Gains (0.01) (0.02) (0.11) - - -
----- ---- ---- --- --- ---
Total Distributions (0.15) (0 .38) (0.48) (0.44) (0.37) (0.24)
- ----------------------------------------------------------------------------------------------------
Net Asset Value, End
of Period $20.06 $18.12 $13.58 $13.91 $13.12 $11.44
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
Total Return 11.59%# 36.54% 1.04% 9.48% 18.23% 16.80%#
- ----------------------------------------------------------------------------------------------------
Ratios/Supplemental
- -------------------
Data
- ----
Net Assets, End of
Period (thousands) $130,752 $97,111 $48,638 $37,830 $34,908 $22,279
Ratio of Expenses to
Average Net 0.24%*(a) 0.24%(a) 0.24%(a) 0.24%(a) 0.11%(a) 0.00%*(a)
Assets**
Ratio of Net
Investment
Income to Average 2.22%*(a) 2.29%(a) 2.75%(a) 2.48%(a) 2.86%(a) 3.42%*(a)
Net Assets
Portfolio Turnover
Rate N/A*** N/A*** N/A*** 27.67%*(b) 3.56% 0.97%*
Average Commission
Rate N/A*** N/A*** N/A*** N/A N/A N/A
- ---------------------------------------------------------------------------------------------------
</TABLE>
* Annualized
** Represents the combined ratio for the respective portfolio and its
respective pro-rata share of its Master Fund Series for the year ended
November 30, 1993 and subsequent periods.
*** Refer to the respective Master Fund Series.
# Non-Annualized
(a) Had certain waivers and reimbursements not been in effect, the ratios of
expenses to average net assets for the periods ended May 31, 1996, November
30, 1995, 1994, 1993, 1992 and 1991 would have been 0.50%, 0.46%, 0.66%,
0.79%, 0.53% and 0.52%, respectively, and the ratios of net investment
income to average net assets for the periods ended May 31, 1996, November
30, 1995, 1994, 1993, 1992, and 1991 would have been 1.96%, 2.23%, 2.64%,
2.28%, 2.44% and 2.90%, respectively.
(b) Portfolio turnover calculated for the periods December 1, 1992 to February
2, 1993 and December 1, 1992 to February 7, 1993, respectively (through
date of Exchange transaction, see respective Master Fund Series for rate
subsequent to Exchange transaction).
11
<PAGE>
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
THE U.S. SMALL CAP VALUE PORTFOLIO
----------------------------------
Period Year Year March 2
Ended Ended Ended to
May 31 Nov. 30 Nov. 30 Nov. 30
1996 1995 1994 1993
(unaudited)
- --------------------------------------------------------------------------------
Net Asset Value,
Beginning of Period $14.03 $11.13 $11.04 $10.00
----- ----- ----- -----
Income from Investment
- ----------------------
Operations
- ----------
Net Investment Income - 0.10 0 .14 0.11
Net Gains (Losses) on
Securities (Realized
and Unrealized) 2.29 3.06 0.10 1.03
---- ---- ---- ----
Total From Investment
Operations 2.29 3.16 0.24 1.14
- --------------------------------------------------------------------------------
Less Distributions
- ------------------
Net Investment Income (0.02) (0.10) (0.15) (0.10)
Net Realized Gains (0.05) (0.16) - -
---- ---- --- ---
Total Distributions (0.07) (0.26) (0.15) (0.10)
- --------------------------------------------------------------------------------
Net Asset Value, End of
Period $16.25 $14.03 $11.13 $11.04
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Total Return 16.33%# 28.41% 2.19% 11.39%#
- --------------------------------------------------------------------------------
Ratios/Supplemental
-------------------
Data
----
Net Assets, End of
Period (thousands) $1,021,021 $609,950 $344,148 $95,682
Ratio of Expenses to
Average Net Assets** 0.61%* 0.64% 0.66% 0.70%*
Ratio of Net Investment
Income to Average
Net Assets (0.08)%* 0.85% 1.69% 1.97%*
Portfolio Turnover Rate N/A*** N/A*** N/A*** N/A***
Average Commission Rate N/A*** N/A*** N/A*** N/A***
- --------------------------------------------------------------------------------
THE U.S. LARGE CAP VALUE PORTFOLIO
----------------------------------
Period Year Year Feb. 19
Ended Ended Ended to
May 31 Nov. 30 Nov. 30 Nov. 30
1996 1995 1994 1993
(unaudited)
- --------------------------------------------------------------------------------
Net Asset Value,
Beginning of Period $13.29 $9.91 $10.60 $10.00
----- ---- ----- -----
Income from Investment
- ----------------------
Operations
- ----------
Net Investment Income 0.08 0.29 0.32 0.18
Net Gains (Losses) on
Securities (Realized
and Unrealized) 1.54 3.55 (0.68) 0.59
---- ---- ---- ----
Total From Investment
Operations 1.62 3.84 (0.36) 0.77
- --------------------------------------------------------------------------------
Less Distributions
- ------------------
Net Investment Income (0.08) (0.29) (0.33) (0.17)
Net Realized Gains - (0.17) - -
--- ---- --- ---
Total Distributions (0.08) (0.46) (0.33) (0.17)
- --------------------------------------------------------------------------------
Net Asset Value, End
of Period $14.83 $13.29 $9.91 $10.60
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Total Return 12.29%# 39.13% (3.27)% 7.59%#
- --------------------------------------------------------------------------------
Ratios/Supplemental Data
------------------------
Net Assets, End of
Period (thousands) $398,218 $280,915 $197,566 $90,288
Ratio of Expenses to
Average Net Assets** 0.37%* 0.42% 0.44% 0.47%*
Ratio of Net Investment
Income to Average
Net Assets 1.07%* 2.49% 3.50% 3.38%*
Portfolio Turnover Rate N/A*** N/A*** N/A*** N/A***
Average Commission Rate N/A*** N/A*** N/A*** N/A***
- --------------------------------------------------------------------------------
* Annualized
** Represents the respective combined ratio for The U.S. Small Cap Value
Portfolio and The U.S. Large Cap Value Portfolio and their pro-rata shares
of their respective Master Fund Series.
*** Refer to the respective Master Fund Series.
# Non-annualized
12
<PAGE>
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
THE DFA REAL ESTATE SECURITIES THE ENHANCED U.S. LARGE
PORTFOLIO COMPANY PORTFOLIO
Period Year Year Jan 5 Period from
Ended Ended Ended to July 3, 1996
May 31 Nov. 30 Nov. 30 Nov. 30 (commencement of operations)
1996 1995 1994 1993 to October 31, 1996
(unaudited) (unaudited)
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $10.00 $9.28 $10.92 $10.00 $10.00
------ ----- ------ ------ ------
Income from Investment
Operations
Net Investment Income 0.35 0.61 0.37 0.20 (0.01)
Net Gains (Losses) on
Securities (Realized
and Unrealized) 0.71 0.68 (1.65) 0.91 1.01
---- ---- ------ ---- ----
Total From Investment
Operations 1.06 1.29 (1.28) 1.11 1.00
- ----------------------------------------------------------------------------------------------------
Less Distributions
- ------------------
Net Investment Income (0.14) (0.46) (0.28) (0.19) -
Net Realized Gains - - - - -
Tax Return of Capital - (0.11) (0.08) - -
------ ------ ------ ------ ----
Total Distributions (0.14) (0.57) (0.36) (0.19) -
- ----------------------------------------------------------------------------------------------------
Net Asset Value, End of
Period $10.92 $10.00 $9.28 $10.92 $11.00
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
Total Return 10.70%# 14.00% (11.76)% 11.08%# 10.00%#
- ----------------------------------------------------------------------------------------------------
Ratios/Supplemental
Data
Net Assets, End of
Period (thousands) $47,367 $43,435 $30,456 $22,106 $26,251
Ratio of Expenses to
Average Net Assets 0.73%* 0.82% 0.90% 0.88%* 0.68%*(2)
Ratio of Net Investment
Income to Average
Net Assets 6.62%* 6.76% 3.90% 2.63%* (0.39%)*(2)
Portfolio Turnover Rate 24.08%* 0.66% 28.87% 0.55%* N/A
Average Commission
Rate(1) $0.0456 N/A N/A N/A --
- ----------------------------------------------------------------------------------------------------
</TABLE>
* Annualized
# Non-annualized
(1) Computed by dividing the total amount of brokerage commissions paid by the
total shares of investment securities purchased and sold during the period
for which commissions were charged, as required by the SEC for fiscal years
beginning after September 1, 1995.
(2) Because of commencement of operations and related preliminary transaction
costs, these ratios are not necessarily indicative of future ratios.
N/A Refer to the respective Master Fund Series.
13
<PAGE>
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
THE PACIFIC RIM SMALL COMPANY PORTFOLIO
---------------------------------------
Period Year Year Jan. 5
Ended Ended Ended to
May 31 Nov. 30 Nov. 30 Nov. 30
1996 1995 1994 1993
(unaudited)
- --------------------------------------------------------------------------------
Net Asset Value,
Beginning of Period $14.38 $15.98 $16.45 $10.00
----- ----- ------ -----
Income from
- -----------
Investment Operations
- ---------------------
Net Investment Income 0 .12 0.34 0.23 0.11
Net Gains (Losses) on
Securities (Realized
and Unrealized) 2.18 (1.33) 0.47 6.46
---- ---- ---- ----
Total From Investment
Operations 2.30 (0.99) 0.70 6.57
- --------------------------------------------------------------------------------
Less Distributions
- ------------------
Net Investment
Income (0.02) (0 .34) (0.23) (0.09)
Net Realized Gains (0.40) (0.27) (0.94) (0 .03)
Tax Return of Capital - - - -
--- --- --- ---
Total Distributions (0.42) (0.61) (1.17) (0.12)
- --------------------------------------------------------------------------------
Net Asset Value, End of
Period $16.26 $14.38 $15.98 $16.45
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
14
<PAGE>
THE PACIFIC RIM SMALL COMPANY PORTFOLIO
---------------------------------------
Period Year Year Jan. 5
Ended Ended Ended to
May 31 Nov. 30 Nov. 30 Nov. 30
1996 1995 1994 1993
(unaudited)
- --------------------------------------------------------------------------------
Total Return 16.41%# (6.27)% 4.26% 65.71%#
- --------------------------------------------------------------------------------
Ratios/Supplemental
-------------------
Data
- ----
Net Assets, End of
Period (thousands) $209,217 $193,137 $212,953 $164,623
Ratio of Expenses to
Average Net Assets 0.81%* 0.83% 0.95% 1.16%*
Ratio of Net
Investment
Income to Average 1.52%* 2.22% 1.47% 1.27%*
Net Assets
Portfolio Turnover
Rate 9.40%* 5.95% 26.05% 2.77%*
Average Commission
Rate(1) $0.0114 N/A N/A N/A
- --------------------------------------------------------------------------------
* Annualized
# Non-annualized
(1) Computed by dividing the total amount of brokerage commissions paid by the
total shares of investment securities purchased and sold during the period
for which commissions were charged, as required by the SEC for fiscal years
beginning after September 1, 1995.
15
<PAGE>
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
THE JAPANESE SMALL COMPANY PORTFOLIO
--------------------------------------------------------------------------
Period Year Year Year Year Year
Ended Ended Ended Ended Ended Ended
May 31 Nov. 30 Nov. 30 Nov. 30 Nov. 30 Nov. 30
1996 1995 1994 1993 1992 1991
(unaudited)
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $22.78 $25.06 $19.96 $18.92 $25.05 $26.27
------ ------ ------ ------ ----- -----
Income from
- -----------
Investment
- ----------
Operations
- ----------
Net Investment 0.05 0.06 0.05 0.04 0.04 (0.01)
Income
(Loss)
Net Gains (Losses) on
Securities (Realized
and Unrealized) 3.78 (1.65) 5.76 1.75 (5.69) 0.51
---- ---- ---- ---- ---- ----
Total From
Investment
Operations 3.83 (1.59) 5.81 1.79 (5.65) 0.50
- ----------------------------------------------------------------------------------------------------
Less Distributions
- ------------------
Net Investment
Income (0.01) (0.06) (0.04) (0.05) - -
Net Realized Gains (0.36) (0.63) (0.67) (0.70) (0.48) (1.72)
---- ---- ---- ---- ---- ----
Total Distributions (0.37) (0.69) (0.71) (0.75) (0.48) (1.72)
- ----------------------------------------------------------------------------------------------------
Net Asset Value, End
of $26.24 $22.78 $25.06 $19.96 $18.92 $25.05
Period
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
Total Return 16.94%# (6.54)% 29.59% 9.52% (23.01)% 1.68%
- ----------------------------------------------------------------------------------------------------
Ratios/Supplemental
- -------------------
Data
- ----
Net Assets, End of
Period (thousands) $409,125 $371,113 $330,674 $209,244 $139,892 $159,475
Ratio of Expenses to
Average Net Assets 0.71%* 0.74% 0.76% 0.82% 0.78% 0.78%
Ratio of Net Investment
Income to Average
Net Assets 0.35%* 0.25% 0.10% 0.06% 0.10% (0.11)%
Portfolio Turnover
Rate 6.13%* 7.79% 10.51% 9.36% 5.00% 2.71%
Average Commission
Rate(1) $0.0443 N/A N/A N/A N/A N/A
- ----------------------------------------------------------------------------------------------------
<CAPTION>
Year Year Year Year Jan. 31
Ended Ended Ended Ended to
Nov. 30 Nov. 30 Nov. 30 Nov. 30 Nov. 30
1990 1989 1988 1987 1986
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $38.33 $31.03 $24.87 $14.39 $10.35
----- ----- ----- ----- -----
Income from
- -----------
Investment
- ----------
Operations
- ----------
Net Investment (0.03) (0.09) (0.05) (0.01) 0.01
Income
(Loss)
Net Gains (Losses) on
Securities (Realized
and Unrealized) (10.74) 9.09 10.42 10.53 4.03
----- ---- ----- ----- ----
Total From
Investment (10.77) 9.00 10.37 10.52 4.04
Operations
- --------------------------------------------------------------------------------------
Less Distributions
- ------------------
Net Investment - - - - -
Income
Net Realized Gains (1.29) (1.70) (4.21) (0.04) -
Total Distributions (1.29) (1 .70) (4.21) (0.04) -
- --------------------------------------------------------------------------------------
Net Asset Value, End
of
Period $26.27 $38.33 $31.03 $24.87 $14.39
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
Total Return (29.12)% 30.63% 47.62% 73 .09% 38.37%#
- --------------------------------------------------------------------------------------
Ratios/Supplemental
- -------------------
Data
- ----
Net Assets, End of $149,100 $168,820 $107,863 $60,450 $45,683
Period (thousands)
Ratio of Expenses to
Average Net Assets 0.83% 0.76% 0.76% 0.78% 0.79%*
Ratio of Net
Investment
Income to Average (0.22)% (0.34)% (0.23)% (0.08)% 0.07%*
Net Assets
Portfolio Turnover Rate 10.26% 5.76% 9.14% 0.07% 0.00%*
Average Commission
Rate(1) N/A N/A N/A N/A N/A
- --------------------------------------------------------------------------------------
</TABLE>
* Annualized
# Non-annualized
(1) Computed by dividing the total amount of brokerage commissions paid by the
total shares of investment securities purchased and sold during the period
for which commissions were charged, as required by the SEC for fiscal years
beginning after September 1, 1995.
16
<PAGE>
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
THE UNITED KINGDOM SMALL COMPANY PORTFOLIO
-----------------------------------------------------------------------
Period Year Year Year Year Year
Ended Ended Ended Ended Ended Ended
May 31 Nov. 30 Nov. 30 Nov. 30 Nov. 30 Nov. 30
1996 1995 1994 1993 1992 1991
(unaudited)
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $24.09 $23.20 $21.22 $16.38 $21.37 $20.41
----- ----- ----- ----- ----- -----
Income from
- -----------
Investment Operations
- ---------------------
Net Investment Income 0.29 0.84 0.48 0.45 0 .64 0.69
Net Gains (Losses) on
Securities (Realized
and Unrealized) 3.74 1.12 2.03 5.34 (4.98) 1.71
---- ---- ---- ---- ---- ----
Total From Investment
Operations 4.03 1.96 2.51 5.79 (4.34) 2.40
- --------------------------------------------------------------------------------------------------
Less Distributions
- ------------------
Net Investment
Income (0.06) (0.76) (0.53) (0.95) (0.65) (0 .90)
Net Realized Gains (1.59) (0.31) - - - (0.54)
---- ---- --- --- --- ----
Total Distributions (1.65) (1 .07) (0.53) (0.95) (0.65) (1.44)
- --------------------------------------------------------------------------------------------------
Net Asset Value, End
of Period $26.47 $24.09 $23.20 $21.22 $16.38 $21.37
- --------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------
Total Return 17.85%# 8.39% 11.85% 36.42% (20.93)% 12.55%
- --------------------------------------------------------------------------------------------------
Ratios/Supplemental
- -------------------
Data
- ----
Net Assets, End of
Period (thousands) $184,414 $167,730 $214,113 $181,789 $121,086 $146,873
Ratio of Expenses to
Average Net Assets 0.72%* 0.72% 0.74% 0.78% 0.76% 0.84%
Ratio of Net
Investment
Income to Average
Net Assets 2.41%* 2.51% 1.95% 2.22% 3.19% 3.44%
Portfolio Turnover Rate 4.98%* 7.82% 10.75% 8.21% 4.41% 4.50%
Average Commission
Rate(1) $0.0107 N/A N/A N/A N/A N/A
- --------------------------------------------------------------------------------------------------
<CAPTION>
Year Year Year Year Jan. 31
Ended Ended Ended Ended to
Nov. 30 Nov. 30 Nov. 30 Nov. 30 Nov. 30
1990 1989 1988 1987 1986
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $22.55 $28.29 $23.41 $16.29 $14.03
----- ----- ----- ----- -----
Income from
- -----------
Investment Operations
- ---------------------
Net Investment Income 0.92 0.52 0.61 0.17 0.46
Net Gains (Losses) on
Securities (Realized
and Unrealized) (1.34) (4.75) 5.18 7.35 1.80
---- ---- ---- ---- ----
Total From Investment
Operations (0.42) (4.23) 5.79 7.52 2.26
- --------------------------------------------------------------------------------------
Less Distributions
- ------------------
Net Investment (0.75) (0.54) (0.28) (0 .36) -
Income
Net Realized Gains (0.97) (0.97) (0.63) (0.04) -
---- ---- ---- ---- ---
Total Distributions (1.72) (1.51) (0.91) (0.40) -
- --------------------------------------------------------------------------------------
Net Asset Value, End
of Period $20.41 $22.55 $28.29 $23.41 $16.29
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
Total Return (2.22)% (15.40)% 23.66% 47.44% 13.19%#
- --------------------------------------------------------------------------------------
Ratios/Supplemental
- -------------------
Data
- ----
Net Assets, End of
Period (thousands) $127,137 $119,385 $121,337 $82,197 $29,275
Ratio of Expenses to
Average Net Assets 0.83% 0.70% 0.71% 0.85% 0.76%*
Ratio of Net
Investment
Income to Average 4.34% 2.24% 2.58% 1.92% 3.99%*
Net Assets
Portfolio Turnover 10.86% 11.38% 12 .55% 9.50% 11.81%*
Rate
Average Commission
Rate(1) N/A N/A N/A N/A N/A
- --------------------------------------------------------------------------------------
</TABLE>
* Annualized
# Non-annualized
(1) Computed by dividing the total amount of brokerage commissions paid by the
total shares of investment securities purchased and sold during the period
for which commissions were charged, as required by the SEC for fiscal years
beginning after September 1, 1995.
17
<PAGE>
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
THE CONTINENTAL SMALL COMPANY PORTFOLIO
------------------------------------------------------------
Period Year Year Year Year
Ended Ended Ended Ended Ended
May 31 Nov. 30 Nov. 30 Nov. 30 Nov. 30
1996 1995 1994 1993 1992
(unaudited)
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $14.13 $14.63 $12.62 $11.39 $14.18
----- ----- ----- ----- -----
Income from Investment
- ----------------------
Operations
- ----------
Net Investment Income 0.10 0.29 0.18 0.23 0.28
Net Gains (Losses) on
Securities (Realized
and Unrealized) 1.58 (0.48) 2.10 1.46 (2.11)
---- ---- ---- ---- ----
Total From Investment
Operations 1.68 (0.19) 2.28 1.69 (1.83)
- --------------------------------------------------------------------------------------
Less Distributions
- ------------------
Net Investment Income (0.02) (0.29) (0.19) (0.44) (0.26)
Net Realized Gains (0.73) (0.02) (0.07) (0.02) (0.70)
Tax Return of Capital - - (0.01) - -
--- --- ---- --- ---
Total Distributions (0.75) (0.31) (0.27) (0.46) (0.96)
- --------------------------------------------------------------------------------------
Net Asset Value, End of
Period $15.06 $14.13 $14.63 $12.62 $11.39
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
Total Return 12.47%# (1.33)% 18.19% 15.27% (13.85)%
- --------------------------------------------------------------------------------------
Ratios/Supplemental Data
------------------------
Net Assets, End of
Period (thousands) $351,204 $314,116 $340,992 $266,175 $196,845
Ratio of Expenses to
Average Net Assets 0.72%* 0.74% 0.77% 0.83% 0.90%
Ratio of Net Investment
Income to Average
Net Assets 1.43%* 1.69% 1.21% 1.61% 2.11%
Portfolio Turnover Rate 5.19%* 9.79% 10.22% 8.99% 6.35%
Average Commission
Rate(1) $0.1612 N/A N/A N/A N/A
- --------------------------------------------------------------------------------------
</TABLE>
THE CONTINENTAL SMALL COMPANY PORTFOLIO
------------------------------------------------
Year Year Year April 15
Ended Ended Ended to
Nov. 30 Nov. 30 Nov. 30 Nov. 30
1991 1990 1989 1988
- --------------------------------------------------------------------------
Net Asset Value,
Beginning of Period $16.24 $16.15 $12.02 $10.00
----- ----- ----- -----
Income from Investment
- ----------------------
Operations
- ----------
Net Investment Income 0.27 0.25 0.12 0.17
Net Gains (Losses) on
Securities (Realized
and Unrealized) (1.66) 0.31 4.10 1.85
---- ---- ---- ----
Total From Investment
Operations (1.39) 0.56 4.22 2.02
- --------------------------------------------------------------------------
Less Distributions
- ------------------
Net Investment Income (0.29) (0.20) (0.09) -
Net Realized Gains (0.38) (0.27) - -
Tax Return of Capital - - - -
---- ---- --- ---
Total Distributions (0.67) (0.47) (0.09) -
- --------------------------------------------------------------------------
Net Asset Value, End of
Period $14.18 $16.24 $16.15 $12.02
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
Total Return (9.11)% 3.50% 35.62% 20.01%#
- --------------------------------------------------------------------------
Ratios/Supplemental Data
------------------------
Net Assets, End of
Period (thousands) $214,054 $245,465 $199,065 $78,689
Ratio of Expenses to
Average Net Assets 0.86% 0.89% 0.82% 1.05%*
Ratio of Net Investment
Income to Average
Net Assets 1.68% 1.63% 1.41% 3.27%*
Portfolio Turnover Rate 7.69% 6.24% 5.70% 0.26%*
Average Commission
Rate(1) N/A N/A N/A N/A
- -------------------------------------------------------------------------
* Annualized
# Non-annualized
(1) Computed by dividing the total amount of brokerage commissions paid by the
total shares of investment securities purchased and sold during the period
for which commissions were charged, as required by the SEC for fiscal years
beginning after September 1, 1995.
18
<PAGE>
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
THE LARGE CAP INTERNATIONAL PORTFOLIO
-------------------------------------
Period Year Year Year Year July 15
Ended Ended Ended Ended Ended 1991 to
May 31 Nov. 30 Nov. 30 Nov. 30 Nov. 30 Nov. 30
1996 1995 1994 1993 1992 1991
(unaudited)
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $12.60 $11.91 $11.26 $9.63 $10.64 $10.00
----- ----- ----- ---- ----- -----
Income from Investment
- ----------------------
Operations
- ----------
Net Investment Income 0.11 0.15 0.09 0.15 0 .11 0 .06
Net Gains (Losses) on
Securities (Realized
and Unrealized) 0.84 0.95 1.11 1.72 (1.04) 0.58
---- ---- ---- ---- ---- ----
Total From Investment
Operations 0.95 1.10 1.20 1.87 (0.93) 0.64
- ----------------------------------------------------------------------------------------------------
Less Distributions
Net Investment Income (0.02) (0.18) (0.09) (0.24) (0.07) -
Net Realized Gains - (0.23) (0.46) - (0.01) -
--- ---- ---- --- ---- ---
Total Distributions (0.02) (0.41) (0.55) (0 .24) (0.08) -
- ----------------------------------------------------------------------------------------------------
Net Asset Value, End of
Period $13.53 $12.60 $11.91 $11.26 $9.63 $10.64
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
Total Return 7.52%# 9.37% 10.74% 19.55% (9.00)% 2.88%#
- ----------------------------------------------------------------------------------------------------
Ratios/Supplemental
-------------------
Data
- ----
Net Assets, End of
Period (thousands) $70,550 $67,940 $55,635 $78,472 $26,041 $4,360
Ratio of Expenses to
Average Net Assets 0.58%* 0.57% 0.66% 0.55%(a) 0.50%(a) 0.50%*(a)
Ratio of Net Investment
Income to Average
Net Assets 1.65%* 1.84% 1.18% 1.94%(a) 1.75%(a) 1.96%*(a)
Portfolio Turnover Rate 28.04%* 24.44% 33.15% 0.28% 0.20% 2.38%*
Average Commission
Rate(1) $0.0167 N/A N/A N/A N/A N/A
- ----------------------------------------------------------------------------------------------------
</TABLE>
THE RWB/DFA INTERNATIONAL
HIGH BOOK TO MARKET PORTFOLIO
-----------------------------
Period Year Year June 10
Ended Ended Ended to
May 31 Nov. 30 Nov. 30 Nov. 30
1996 1995 1994 1993
(unaudited)
- ----------------------------------------------------------------------------
Net Asset Value,
Beginning of Period $12.02 $11.44 $9.92 $10.00
----- ----- ---- -----
Income from Investment
- ----------------------
Operations
- ----------
Net Investment Income 0.02 0.19 0.14 0.06
Net Gains (Losses) on
Securities (Realized
and Unrealized) 1.31 0.60 1.52 (0.11)
---- ---- ---- ----
Total From Investment
Operations 1.33 0.79 1.66 (0.05)
- ----------------------------------------------------------------------------
Less Distributions
Net Investment Income (0.01) (0.19) (0.14) (0.03)
Net Realized Gains - (0.02) - -
--- ---- --- ---
Total Distributions (0.01) (0.21) (0.14) (0.03)
- ----------------------------------------------------------------------------
Net Asset Value, End of
Period $13.34 $12.02 $11.44 $9.92
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
Total Return 11.11%# 6.95% 16.71% (0 .50)%#
- ----------------------------------------------------------------------------
Ratios/Supplemental
-------------------
Data
- ----
Net Assets, End of
Period (thousands) $232,037 $172,017 $112,952 $63,235
Ratio of Expenses to
Average Net Assets** 0.58%* 0.68% 0.69%(b) 0.65%*(b)
Ratio of Net Investment
Income to Average
Net Assets 0.29%* 1.85% 1.39%(b) 1.40%*(b)
Portfolio Turnover Rate N/A*** N/A*** 0.15%*(c) 0.41%*
Average Commission
Rate(1) N/A*** N/A*** N/A N/A
- ----------------------------------------------------------------------------
* Annualized
** Represents the combined ratio for The RWB/DFA International High Book to
Market Portfolio and its pro-rata share of its Master Fund Series for the
year ended November 30, 1994 and subsequent periods.
*** Refer to the respective Master Fund Series.
# Non-annualized
(a) Had certain fees and expenses not been waived or reimbursed, the ratios of
expenses to average net assets for the periods ended November 30, 1993,
1992 and 1991 would have been 0.66%, 1.35% and 2.31%, respectively, and the
ratios of net investment income to average net assets for the periods ended
November 30, 1993, 1992 and 1991 would have been 1.83%, 0.90% and 0.15%,
respectively.
(b) Had certain waivers not been in effect, the ratios of expenses to average
net assets for the periods ended November 30, 1994 and 1993 would have been
0.73% and 0.82%, respectively, and the ratios of net investment income to
average net assets for the periods ended November 30, 1994 and 1993 would
have been 1.38% and 1.23%, respectively.
(c) Portfolio turnover calculated for the period December 1, 1993 to February
15, 1994 (through date of Exchange transaction, see respective Master Fund
Series for rate subsequent to Exchange transaction).
(1) Computed by dividing the total amount of brokerage commissions paid by the
total shares of investment securities purchased and sold during the period
for which commissions were charged, as required by the SEC for fiscal years
beginning after September 1, 1995.
19
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
THE DFA
INTERNATIONAL SMALL CAP
THE EMERGING MARKETS PORTFOLIO VALUE PORTFOLIO
------------------------------ ---------------
Period Year April 25 Period Dec. 30
Ended Ended to Ended 1994 to
May 31 Nov. 30 Nov. 30 May 31 Nov. 30
1996 1995 1994 1996 1995
(unaudited) (unaudited)
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $10.35 $11.30 $10.00 $9.68 $10.00
------ ------ ------ ----- ------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income
(Loss) 0.11 0.06 (0.02) 0.05 0.05
Net Gains (Lossezs) on
Securities (Realized
and Unrealized) 1.50 (0.96) 1.32 1.39 (0.32)
Total From Investment
Operations 1.61 (0.90) 1.30 1.44 (0.27)
- ------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Net Investment Income - (0.05) - - (0.04)
Net Realized Gains - - - - (0.01)
Total Distributions - (0.05) - - (0.05)
Net Asset Value, End of
Period $11.96 $10.35 $11.30 $11.12 $9.68
- ------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------
Total Return 15.60%# (7.96)% 13.00%# 14.93%# (2.73)%#
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of
Period (thousands) $120,995 $49,337 $15,731 $318,151 $147,125
Ratio of Expenses to
Average Net Assets 1.20%*(a) 1.58%(a) 2.43%*(a) 1.03%* 1.23%*(b)
Ratio of Net Investment
Income to Average
Net Assets 2.66%* 0.98% (0.44)%* 1.21%* 1.43%*(b)
Portfolio Turnover Rate N/A*** N/A*** N/A*** 14.94%* 1.62%*
Average Commission
Rate(1) N/A*** N/A*** N/A*** $0.0071 N/A
- ------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized
*** Refer to the respective Master Fund Series.
# Non-annualized
(a) Reflects the Portfolio's proportionate share of expenses from its
respective Master Fund Series.
(b) Because of commencement of operations and related preliminary transaction
costs, these ratios are not necessarily indicative
of future ratios.
(1) Computed by dividing the total amount of brokerage commissions paid by
the total shares of investment securities purchased and sold during the
period for which commissions were charged, as required by the SEC for
fiscal years beginning after September 1, 1995.
20
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
THE DFA ONE-YEAR FIXED INCOME PORTFOLIO
- ----------------------------------------------------------------------------------------------------
Period Year Year Year Year Year
Ended May Ended Ended Ended Ended Ended
31 Nov. 30 Nov. 30 Nov. 30 Nov. 30 Nov. 30
1996 1995 1994 1993 1992 1991
(Unaudited)
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $10.21 $10.05 $10.28 $10.35 $10.33 $10.19
INCOME FROM
INVESTMENT
OPERATIONS
Net Investment
Income 0.27 0.60 0.46 0.35 0.43 0.68
Net Gains (Losses) on
Securities (Realized
and Unrealized) (0.03) 0.17 (0.21) 0.11 0.06 0.16
----- ---- ----- ---- ---- ----
- ----------------------------------------------------------------------------------------------------
Total From
Investment
Operations 0.24 0.77 0.25 0.46 0.49 0.84
- ----------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Net Investment
Income (0.27) (0.60) (0.46) (0.38) (0.44) (0 .70)
- ----------------------------------------------------------------------------------------------------
Net Realized Gains - (0.01) (0.02) (0.15) (0.03) -
----- ---- ----- ---- ---- -----
Total Distributions (0.27) (0.61) (0.48) (0 .53) (0.47) (0.70)
- ----------------------------------------------------------------------------------------------------
Net Asset Value, End
of $10.18 $10.21 $10.05 $10.28 $10.35 $10.33
Period
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
Total Return 2.44%# 7.80% 2.48% 4.62% 5.64% 8.61%
- ----------------------------------------------------------------------------------------------------
RATIO/SUPPLEMENTAL
DATA
Net Assets, End of $824,604 $704,950 $592,226 $608,400 $561,879 $469,276
Period (thousands)
Ratio of Expenses to
Average Net Assets** 0.21%* 0.20% 0.21% 0.21% 0.21% 0.21%
Ratio of Net
Investment
Income to Average 5.27%* 5.86% 4.47% 3.38% 4.81% 6.75%
Net Assets
Portfolio Turnover N/A*** N/A*** N/A*** 61.95%(a) 125.56% 82.26%
Rate
<PAGE>
- ----------------------------------------------------------------------------------------------------
Year Year Year Year Year
Ended Ended Ended Ended Ended
Nov. 30 Nov. 30 Nov. 30 Nov. 30 Nov. 30
1990 1989 1988 1987 1986
- -------------------------------------------------------------------------------------
Net Asset Value,
Beginning of Period $10.16 $10.12 $10.12 $10.27 $10.18
------ ------ ------ ------ ------
INCOME FROM
INVESTMENT
OPERATIONS
Net Investment 0.83 0.82 0.78 0.69 0.76
Income
Net Gains (Losses) on
Securities (Realized
and Unrealized) 0.04 0.03 (0.04) (0.08) 0.15
---- ---- ---- ---- ----
Total From
Investment 0.87 0.85 0.74 0.61 0.91
Operations
- -------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Net Investment (0.84) (0.81) (0.74) (0.68) (0.78)
Income
Net Realized Gains - - - (0.08) (0.04)
---- ---- ---- ---- ----
Total Distributions (0.84) (0.81) (0.74) (0.76) (0.82)
- -------------------------------------------------------------------------------------
Net Asset Value, End
of $10.19 $10.16 $10.12 $10.12 $10.27
Period
Total Return 8.88% 9.53% 7.61% 6.14% 9.45%
RATIO/SUPPLEMENTAL
DATA
Net Assets, End of $412,907 $360,146 $341,551 $342,436 $332,018
Period (thousands)
Ratio of Expenses to
Average Net Assets** 0.21% 0.22% 0.22% 0.22% 0.23%
Ratio of Net
Investment
Income to Average 8.27% 8.77% 7.70% 6.82% 7.42%
Net Assets
Portfolio Turnover 96.30% 0 .00% 80 .74% 162.18% 138.50%
Rate
- ---------------------------------------------------------------------------------------------------------
</TABLE>
(Adjusted to reflect a 900% stock dividend as of January 2, 1996)
* Annualized
** Represents the combined ratio for the portfolio and its pro-rata share of
its Master Fund Series for the period ended November 30, 1993 and
subsequent periods.
*** Refer to the respective Master Fund Series.
# Non-annualized
(a) Portfolio turnover calculated for period December 1, 1992 to
February 7, 1993 (through date of Exchange transaction, see
respective Master Fund Series for rate subsequent to Exchange transaction).
21
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
THE DFA FIVE-YEAR GOVERNMENT PORTFOLIO
- -------------------------------------------------------------------------------------------------
Period Year Year Year Year
Ended Ended Ended Ended Ended
May 31 Nov. 30 Nov. 30 Nov. 30 Nov. 30
1996 1995 1994 1993 1992
(Unaudited)
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $10.05 $9.75 $10.55 $10.88 $11.25
------ ----- ------ ------ ------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income 0.29 0.59 0.48 0.47 0 .57
Net Gains (Losses) on
Securities (Realized
and Unrealized) (0.07) 0.30 (0.80) 0.49 0.31
Total From Investment
Operations 0.22 0.89 (0.32) 0.96 0.88
- -------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Net Investment Income (0.06) (0.59) (0.48) (0.73) (0.76)
Net Realized Gains - - - (0.56) (0 .49)
Total Distributions (0.06) (0.59) (0 .48) (1.29) (1.25)
- -------------------------------------------------------------------------------------------------
Net Asset Value, End of
Period $10.21 $10.05 $9.75 $10.55 $10.88
Total Return 2.16%# 9.35% (3.13)% 9.46% 8.59%
- -------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL
DATA
Net Assets, End of
Period (thousands) $208,574 $300,921 $235,554 $164,504 $83,543
Ratio of Expenses to
Average Net Assets 0.28%* 0.28% 0.31% 0.31% 0.31%
Ratio of Net Investment
Income to Average
Net Assets 5.35%* 6.14% 5.08% 4.75% 5.82%
Portfolio Turnover Rate 474.38%* 398.09% 52.39% 152.10% 218.60%
- -------------------------------------------------------------------------------------------------
Year Year Year Year May 31
Ended Ended Ended Ended to
Nov. 30 Nov. 30 Nov. 30 Nov. 30 Nov. 30
1991 1990 1989 1988 1987
- ------------------------------------------------------------------------------------------
Net Asset Value,
Beginning of Period $10.64 $10.46 $10.42 $10.33 $10.00
------ ------ ------ ------ ------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income 0.81 0.76 0.85 0.62 0.38
Net Gains (Losses) on
Securities (Realized
and Unrealized) 0.54 0.20 0.05 0.09 (0.05)
---- ---- ---- ---- ----
Total From Investment
Operations 1.35 0.96 0.90 0.71 0.33
- ------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Net Investment Income (0 .74) (0.78) (0.86) (0.58) -
Net Realized Gains - - - (0.04) -
---- ---- ---- ---- -----
Total Distributions (0.74) (0.78) (0.86) (0.62) -
- ------------------------------------------------------------------------------------------
Net Asset Value, End of
Period $11.25 $10.64 $10.46 $10.42 $10.33
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
Total Return 13.44% 9.72% 9.33% 7.13% 3.26%#
- ------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL
DATA
Net Assets, End of
Period (thousands) $56,971 $52,260 $53,039 $4,863 $4,258
Ratio of Expenses to
Average Net Assets 0.30% 0.30% 0.30% 0.28% 0.27%*
Ratio of Net Investment
Income to Average
Net Assets 7.16% 7.91% 8.49% 7.97% 7.50%*
Portfolio Turnover Rate 223.18% 165.50% 312 .59% 253.31% 100.85%*
- ------------------------------------------------------------------------------------------
</TABLE>
(Adjusted to reflect a 900% stock dividend as of January 2, 1996)
* Annualized
# Non-annualized
22
<PAGE>
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
THE DFA
TWO-YEAR
GLOBAL FIXED
INCOME
THE DFA INTERMEDIATE GOVERNMENT FIXED INCOME PORTFOLIO(a) PORTFOLIO
---------------------------------------------------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Period Year Year Year Year Year Oct. 22 Feb. 9
Ended Ended Ended Ended Ended Ended to 1996 to
May 31 Nov. 30 Nov. 30 Nov. 30 Nov. 30 Nov. 30 Nov. 30 May 31
1996 1995 1994 1993 1992 1991 1990 1996
(unaudited) (unaudited)
- -------------------------------------------------------------------------------------------------------------------------
Net Asset Value,
Beginning of Period $11.24 $10.22 $11.59 $11.20 $11.02 $10.27 $10.00 $10.00
----- ----- ----- ----- ----- ----- ----- -----
INCOME FROM
INVESTMENT OPERATIONS
Net Investment Income 0.33 0.70 0.69 0.55 0 .76 0.84 0.09 0.01
Net Gains (Losses) on
Securities (Realized
and Unrealized) (0.58) 1.11 (1.22) 0.66 0.26 0.63 0.18 0.14
---- ---- ---- ---- ---- ---- ---- ----
Total From Investment
Operations (0.25) 1.81 (0.53) 1.21 1.02 1.47 0.27 0.15
- -------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Net Investment
Income (0.18) (0.70) (0.68) (0.73) (0.78) (0 .72) - (0.02)
Net Realized Gains (0.04) (0.09) (0.16) (0.09) (0.06) - - -
---- ---- ---- ---- ---- ---- ---- ----
Total Distributions (0.22) (0.79) (0.84) (0.82) (0.84) (0.72) - (0.02)
- -------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End
of $10.77 $11.24 $10.22 $11.59 $11.20 $11.02 $10.27 $10.13
Period
- -------------------------------------------------------------------------------------------------------------------------
Total Return (2.23)%# 18.04% (4.72)% 12.84% 9.70% 14.94% 2.63%# 1.46%#
- -------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL
DATA
Net Assets, End of
Period (thousands) $81,607 $78,087 $60,827 $53,051 $40,160 $29,393 $25,567 $262,909
Ratio of Expenses to
Average Net Assets** 0.25%* 0.27% 0.29% 0.32% 0.29% 0.28% 0.23%* 0.33%*(b)
Ratio of Net
Investment
Income to Average 6.11%* 6.44% 6.45% 6.41% 7.05% 7.86% 8.73%* 0.45%*(b)
Net Assets
Portfolio Turnover 15.62%* 40.79% 27.15% 16.91% 17.91% 19.72% 0.00%* N/A***
Rate
</TABLE>
* Annualized
** Represents the combined ratio for The DFA Two-Year Global Fixed Income
Portfolio and its pro-rata share of its Master Fund Series.
*** Refer to the respective Master Fund Series.
# Non-annualized
(a) Adjusted to reflect a 900% stock dividend as of January 2, 1996
(b) Because of commencement of operations and related preliminary transaction
costs, these ratios are not necessarily indicative of future ratios.
23
<PAGE>
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
THE DFA GLOBAL FIXED INCOME PORTFOLIO(a)
Period Year Year Year Year Year Nov. 6
Ended Ended Ended Ended Ended Ended to
May 31 Nov. 30 Nov. 30 Nov. 30 Nov. 30 Nov. 30 Nov. 30
1996 1995 1994 1993 1992 1991 1990
(unaudited)
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $10.51 $9.81 $10.56 $10.36 $10.47 $10.02 $10.00
------ ----- ------ ------ ------ ------ ------
INCOME FROM INVESTMENT
OPERATIONS
- ---------------------------------------------------------------------------------------------------------
Net Investment Income
(Loss) 0.22 0.39 0.35 0.40 0.54 0.66 0.04
Net Gains (Losses) on
Securities (Realized
and Unrealized) 0.05 1.08 (0.65) 0.73 0.26 0.26 (0.02)
---- ---- ---- ---- ---- ---- ----
Total From Investment
Operations 0.27 1.47 (0.30) 1.13 0.80 0.92 0.02
- ---------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Net Investment Income (0.35) (0.77) (0.44) (0.45) (0.64) (0 .47) -
Net Realized Gains - - (0.01) (0.48) (0.27) - -
Total Distributions (0.35) (0.77) (0.45) (0.93) (0.91) (0.47) -
- ---------------------------------------------------------------------------------------------------------
Net Asset Value, End of
Period $10.43 $10.51 $9.81 $10.56 $10.36 $10.47 $10.02
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
Total Return 2.65%# 15.23% (2.91)% 11.42% 8.00% 11.00% 0.22%#
- ---------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL
DATA
Net Assets, End of
Period (thousands) $127,527 $208,166 $135,529 $101,528 $54,607 $31,647 $8,474
Ratio of Expenses to
Average Net Assets 0.46%* 0.46% 0.49% 0.52% 0.58% 0.67% 0.51%*
Ratio of Net Investment
Income to Average
Net Assets 4.93%* 5.80% 5.75% 5.09% 5.52% 6.74% 6.92%*
Portfolio Turnover Rate 143.73%* 130.41% 113.55% 139.57% 210.39% 194.25% 0 .00%*
- ---------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized
# Non-annualized
(a) Adjusted to reflect a 900% stock dividend as of January 2, 1996
24
<PAGE>
THE FEEDER PORTFOLIOS
Each of the sixteen 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 - SMALL COMPANY PORTFOLIOS - 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"; "ENHANCED U.S. LARGE COMPANY PORTFOLIO - Investment
Objective and Policies"; "U.S. LARGE COMPANY PORTFOLIO - Investment Objective
and Policies"; "THE VALUE PORTFOLIOS - Portfolio Characteristics and Policies";
"INVESTMENT OBJECTIVES AND POLICIES - FIXED INCOME PORTFOLIOS - DFA One-Year
Fixed Income Portfolio; DFA Two-Year Corporate Fixed Income Portfolio; DFA
Two-Year Global Fixed Income Portfolio; and DFA Two-Year Government Portfolio";
"RWB/DFA INTERNATIONAL HIGH BOOK TO MARKET PORTFOLIO - Investment Objective and
Policies"; and "EMERGING MARKETS PORTFOLIO AND EMERGING MARKETS SMALL CAP
PORTFOLIO - Investment Objectives 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, 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 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. Moreover, a distribution in kind by the Series
corresponding to the U.S. 6-10 Small Company, U.S. Large Company, Enhanced U.S.
Large Company, DFA One-Year Fixed Income, DFA Two-Year Corporate Fixed Income,
DFA Two-Year Global Fixed Income, U.S. Small Cap Value, U.S. Large Cap Value,
and RWB/DFA International High Book to Market Portfolios may constitute a
taxable exchange for federal income tax purposes resulting in gain or loss to
such Portfolios. Any net capital gains so realized will be distributed to such
a Portfolio's shareholders as described in "DIVIDENDS, CAPITAL GAINS
DISTRIBUTIONS AND TAXES" below.
25
<PAGE>
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 the U.S. 6-10 Small Company, Japanese
Small Company, Pacific Rim Small Company, United Kingdom Small Company and
Continental Small Company Series of the Trust (the "Small Company 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 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.
The U.S. 9-10 Small Company Portfolio and the Small Company 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.
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 U.S.
9-10 Small Company Portfolio or Small Company Series, may participate 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 U.S. 6-10 Small Company Series of the Trust
(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-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
26
<PAGE>
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 or AMEX or 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 pursues its investment objective by
investing all of its assets in the Japanese Small Company Series of the Trust
(the "Japanese Series"), which has the same investment objective and policies as
the Portfolio. The Japanese Series 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 Japanese Series 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 the Japanese Series to acquire a portion of the stock of
each of these companies on a market capitalization weighted basis. The Japanese
Series 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 pursues its investment objective by
investing all of its assets in the United Kingdom Small Company Series of the
Trust (the "United Kingdom Series"), which has the same investment objective and
policies as the Portfolio. The United Kingdom Series will invest 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"). 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 United Kingdom Series to determine the maximum
market capitalization of any company whose stock the Series will purchase,
acquisitions by the United Kingdom Series will not be limited to stocks which
are included in the FTA. The United Kingdom Series 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 Series to acquire a portion of the
stock of each eligible company on a market capitalization basis. The United
Kingdom Series 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.")
CONTINENTAL SMALL COMPANY PORTFOLIO
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Continental Small Company Portfolio pursues its investment objective by
investing all of its assets in the Continental Small Company Series of the Trust
(the "Continental Series"), which has the same investment objective and policies
as the Portfolio. The Continental Series 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 Continental Series 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
Continental Series invests will be considered to be "small companies" and will
be eligible for purchase by the Continental Series.
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 Continental Series
does not intend, however, to purchase shares of any company whose market
capitalization is less than the equivalent of $5,000,000. The Continental
Series intends to acquire a portion of the stock of each eligible company on a
market capitalization basis. The Continental Series also may invest up to 5% of
its assets in convertible debentures issued by European small companies. The
Continental Series 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 Continental Series 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
Continental Series 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 pursues its investment objective by
investing all of its assets in the Pacific Rim Small Company Series of the Trust
(the "Pacific Rim Series"), which has the same investment objective and policies
as the Portfolio. The Pacific Rim Series 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 Pacific Rim Series 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.
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 Pacific Rim Series 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 Pacific Rim Series invests will be
considered to be "small companies" and will be eligible for purchase by the
Pacific Rim Series. The Advisor may use a standard different from the FTW to
determine "small companies" if it deems such change appropriate.
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 Pacific Rim Series
does not intend to purchase shares of any company whose market capitalization is
less than $5,000,000. The Pacific Rim Series intends to acquire a portion of
the stock of each eligible company on a market capitalization basis. The
Pacific Rim Series also may invest up to 5% of its assets in convertible
debentures issued by small
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companies located in the Pacific Rim. (See "PORTFOLIO CHARACTERISTICS AND
POLICIES - SMALL COMPANY PORTFOLIOS - Portfolio Structure.")
INTERNATIONAL SMALL COMPANY PORTFOLIO
The International Small Company Portfolio seeks to achieve its investment
objective by investing virtually all of its assets in all four Underlying Series
in such relative portions as determined by the Advisor from time to time. A
small portion of the assets of International Small Company Portfolio may be
invested in short-term, high-quality, fixed-income obligations pending
investment in shares of the Underlying Series and/or pending payment of
redemptions of its own shares for cash. For a complete description of the
investment objectives and policies, portfolio structure and transactions for
each Underlying Series, see "PORTFOLIO CHARACTERISTICS AND POLICIES - SMALL
COMPANY PORTFOLIOS." The International Small Company Portfolio is designed for
investors who wish to achieve their investment objective of capital appreciation
by participating in the investment performance of a broad range of equity
securities of Japanese, United Kingdom, European and Pacific Rim small
companies.
It is the current policy of International Small Company Portfolio to invest
in the shares of the Underlying Series within the following percentage ranges:
Underlying Series Investment Range
----------------- ----------------
Japanese Small Company 27.5 - 42.5%
United Kingdom Small Company 7.5 - 22.5%
Continental Small Company 27.5 - 42.5%
Pacific Rim Small Company 7.5 - 22.5%
The allocation of the assets of International Small Company Portfolio to be
invested in the Underlying Series will be determined by the Advisor on a
semi-annual basis. In setting the target allocation, the Advisor will first
consider the market capitalizations of all eligible companies in each of the
Underlying Series. The Advisor will calculate the market capitalizations for
each Underlying Series in the manner described under "PORTFOLIO CHARACTERISTICS
AND POLICIES - SMALL COMPANY PORTFOLIOS." In determining the target
allocations, the Advisor, using its best judgment, will seek to eliminate the
effect of cross holdings between companies on a Series by Series basis and may
take into account the existence of substantial private or government ownership
of the shares of a company. The Advisor may also consider such other factors as
it deems appropriate with respect to determining the target allocations. Target
allocations will remain in effect until the next semi-annual re-calculation.
The Advisor expects to change the relative weights ascribed to each Underlying
Series, based on its semi-annual market capitalization calculations, when it
determines that fundamental changes in the relative values ascribed by market
forces to each relevant geographic area have occurred. To maintain target
weights during the period, adjustments may be made by applying future purchases
by International Small Company Portfolio in proportion necessary to rebalance
the investment portfolio of the Portfolio. Initially, the target allocations
for investment by the Portfolio in the Underlying Series will be: Japanese Small
Company Series - 35%; United Kingdom Small Company Series - 15%; Continental
Small Company Series - 35%; and Pacific Rim Small Company Series - 15%.
PORTFOLIO STRUCTURE
The U.S. 9-10 Small Company Portfolio and each Small Company 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 the Portfolio
and each Series a reasonable reflection of the relative market capitalizations
of its portfolio companies. The following discussion applies to the investment
policies of the U.S. 9-10 Small Company Portfolio and the Small Company Series.
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 that with
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respect to Continental and Pacific Rim Series, such determination shall be made
by reference to other companies located in all countries in which the Series
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 Series 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. Furthermore, 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, the U.S. 9-10 Small Company Portfolio and
each Small Company Series may, in exchange for the issuance of shares, acquire
securities eligible for purchase or otherwise represented in their portfolios at
the time of the exchange. (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.
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 U.S. 9-10 Small Company
Portfolio and each Small Company Series intend to invest at least 80% of their
assets in equity securities of U.S., Japanese, United Kingdom, European and
Pacific Rim small companies, respectively.
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.
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PORTFOLIO TRANSACTIONS
On a periodic basis, the Advisor will review the holdings of each of the
U.S. 9-10 Small Company Portfolio and Small Company Series 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 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 U.S. 9-10
Small Company Portfolio or particular Small Company Series 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 the issuer's 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").
U.S. Large Company Series may also acquire stock index futures contracts
and options thereon in order to commit funds awaiting investment in stocks or
maintain cash liquidity. To the extent that the Series invests in stock index
futures contracts and options thereon for other than bona fide hedging purposes,
the Series will not purchase such futures contracts or options if as a result
more than 5% of its total assets would then consist of initial margin deposits
and premiums required to establish such contracts or options. Such investments
entail certain risks. (See "RISK FACTORS - ALL PORTFOLIOS.")
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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. For information concerning Standard & Poor's Corporation ("S&P") and
disclaimers of S&P with respect to the U.S. Large Company Portfolio and the U.S.
Large Company Series, see "STANDARD & POOR'S -INFORMATION AND DISCLAIMERS."
ENHANCED U.S. LARGE COMPANY PORTFOLIO
INVESTMENT OBJECTIVE AND POLICIES
Enhanced U.S. Large Company Portfolio seeks, as its investment objective,
to achieve a total return which exceeds the total return performance of the S&P
500 Index. The Portfolio pursues its investment objective by investing all of
its assets in Enhanced U.S. Large Company Series of the Trust (the "Enhanced
U.S. Large Company Series"). The Enhanced U.S. Large Company Series will have
the same investment objective and policies as the Portfolio. Enhanced U.S.
Large Company Series may invest in all of the stocks represented in the S&P 500
Index, options on stock indices, stock index futures, options on stock index
futures, swap agreements on stock indices and, to the extent permissible
pursuant to the Investment Company Act of 1940, shares of investment companies
that invest in stock indices. 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.
The Enhanced U.S. Large Company Series may, from time to time, also invest
in options on stock indices, stock index futures, options on stock index futures
and swap agreements based on indices other than, but similar to, the S&P 500
Index (such instruments whether or not based on the S&P 500 Index hereinafter
collectively referred to as "Index Derivatives"). The Enhanced U.S. Large
Company Series may invest all of its assets in Index Derivatives. Certain of
these Index Derivatives are speculative and may subject the Portfolio to
additional risks (See "RISK FACTORS - ALL PORTFOLIOS"). Assets of the Enhanced
U.S. Large Company Series not invested in S&P 500 stocks or Index Derivatives
may be invested in the same types of short-term fixed income obligations as may
be acquired by DFA Two-Year Global Fixed Income Series and, to the extent
allowed by the Investment Company Act of 1940, shares of money market mutual
funds (collectively, "Fixed Income Investments") (See "INVESTMENT OBJECTIVES
AND POLICIES - FIXED INCOME PORTFOLIOS - Description of Investments"). The
Series' investments in the securities of other investment companies may involve
duplication of certain fees and expenses.
The percentage of assets of the Enhanced U.S. Large Company Series that
will be invested at any one time in S&P 500 Index stocks, Index Derivatives and
Fixed Income Investments may vary from time to time, within the discretion of
the Advisor and according to restraints imposed by the Investment Company Act of
1940. The Enhanced U.S. Large Company Series will maintain a segregated account
consisting of liquid assets (or, as permitted by applicable regulation, enter
into offsetting positions) to cover its open positions in Index Derivatives to
avoid leveraging of the Series.
The Enhanced U.S. Large Company Series will enter into positions in futures
and options on futures only to the extent such positions are permissible with
respect to applicable rules of the Commodity Futures Trading Commission without
registering the Series or the Trust as a commodities pool operator. In
addition, the Enhanced U.S. Large Company Series may not be able to utilize
Index Derivatives to the extent otherwise permissible or desirable because of
constraints imposed by the Internal Revenue Code or by unanticipated illiquidity
in the marketplace for such instruments. For more information about Index
Derivatives, see "RISK FACTORS - ALL PORTFOLIOS."
It is the position of the Securities and Exchange Commission that over-the-
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counter options are illiquid. Accordingly, the Enhanced U.S. Large Company
Series will invest in such options only to the extent consistent with its 15%
limit on investment in illiquid securities.
STANDARD & POOR'S - INFORMATION AND DISCLAIMERS
Neither the U.S. Large Company Portfolio or the Enhanced U.S. Large Company
Portfolio (the "Large Company Portfolios"), nor the U.S. Large Company Series or
the Enhanced U.S. Large Company Series (the "Large Company Series") are
sponsored, endorsed, sold or promoted by S&P. S&P makes no representation or
warranty, express or implied, to the owners of the Large Company Portfolios or
the Large Company Series or any member of the public regarding the advisability
of investing in securities generally or in the Large Company Portfolios or the
Large Company Series particularly or the ability of the S&P 500 Index to track
general stock market performance. S&P's only relationship to the Large Company
Portfolios or the Large Company 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 Large Company Portfolios or the
Large Company Series. S&P has no obligation to take the needs of the Large
Company Portfolios, the Large Company 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
prices and amount of the Large Company Portfolios or the Large Company Series or
the issuance or sale of the Large Company Portfolios or the Large Company Series
or in the determination or calculation of the equation by which the Large
Company Portfolios or the Large Company Series is to be converted into cash.
S&P has no obligation or liability in connection with the administration,
marketing or trading of the Large Company Portfolios or the Large Company
Series.
S&P DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE S&P 500
INDEX OR ANY DATA INCLUDED THEREIN AND S&P SHALL HAVE NO LIABILITY FOR ANY
ERRORS, OMISSIONS, OR INTERRUPTIONS 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. S&P MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND 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 invested 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. To the
extent that the Portfolio invests in index futures contracts for other than bona
fide hedging purposes, the Portfolio will not purchase futures contracts if as a
result more than 5% of its total assets would then consist of initial 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.
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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. Furthermore, 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 securities eligible
for purchase at the time of the exchange or otherwise represented in the
portfolio 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 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.
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DFA REAL ESTATE SECURITIES PORTFOLIO
PORTFOLIO CHARACTERISTICS AND POLICIES
The investment objective of DFA 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. 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. To the
extent that the Portfolio invests in futures contracts or options for other than
bona fide hedging purposes, 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 margin deposits and premiums required to
establish such contracts or options.
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, 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.
Deviation from strict market capitalization weighting will also occur in
the Portfolio because it intends to purchase round lots only. Furthermore, 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.
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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 securities
eligible for purchase or otherwise represented in the portfolio at the time of
the exchange 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 listed on the NYSE, and the Small
Cap Value Series will purchase common stocks of companies whose market
capitalizations are smaller than such company.
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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 securities eligible for purchase at the
time of the exchange or otherwise represented in their portfolios 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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RWB/DFA INTERNATIONAL HIGH BOOK TO MARKET PORTFOLIO
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of RWB/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. To the extent that the International Value
Series invests in futures contracts for other than bona fide hedging purposes,
the Series will not purchase futures contracts if as a result more than 5% of
its total assets would then consist of initial 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. Furthermore, 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 securities eligible for purchase at the
time of the exchange or otherwise represented in its portfolio 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.
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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 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. To the extent that the Portfolio invests in futures contracts for
other than bona fide hedging transactions, the Portfolio will not purchase
futures contracts if as a result more than 5% of its total assets would then
consist of initial 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.
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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 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. Furthermore, 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.
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 securities eligible
for purchase at the time of the exchange or otherwise represented in the
portfolio 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 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 common
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 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.
The Portfolio does not intend to purchase or sell securities based on the
prospects for the economy, the securities market or the individual issuers 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.
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EMERGING MARKETS PORTFOLIO AND
EMERGING MARKETS SMALL CAP PORTFOLIO
INVESTMENT OBJECTIVES AND POLICIES
The investment objective of both the Emerging Markets Portfolio and the
Emerging Markets Small Cap Portfolio is to achieve long-term capital
appreciation. The Emerging Markets 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 Small Cap Portfolio pursues its objective by
investing all of its assets in the Emerging Markets Small Cap Series of the
Trust (the "Emerging Markets Small Cap Series"), which has the same investment
objective and policies as the Portfolio. Each 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"). Each 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").
SERIES' CHARACTERISTICS AND POLICIES
The Emerging Markets Series will seek a broad market coverage of larger
companies within each Approved Market. This Series will attempt to own shares
of companies whose aggregate overall share of the Approved Market's total public
market capitalization is at least in the upper 40% of such capitalization, and
can be as large as 75%. The Emerging Markets Series may limit the market
coverage in the smaller emerging markets in order to limit purchases of small
market capitalization companies.
The Emerging Markets Small Cap Series will seek a broad market coverage
of smaller companies within each Approved Market. This Series will attempt
to own shares of companies whose total market capitalization is less than
$ 1,5 billion. On a periodic basis, the Advisor will review the holdings
of the Emerging Markets Small Cap Series and determine which, at the time
of such review, are no longer considered small emerging market companies.
The present policy is to consider portfolio securities for sale when they
have appreciated sufficiently to rank, on a market capitalization basis,
100% larger than the largest market capitalization that is eligible for
purchase as set by the Advisor for that Approved Market.
Each Series may not invest in all such companies or Approved Markets
described above or achieve approximate market weights, for reasons which include
constraints imposed within Approved Markets (E.G., restrictions on purchases by
foreigners), and each Series' policy not to invest more than 25% of its assets
in any one industry.
Under normal market conditions, the Emerging Markets Series will invest at
least 65% of its assets in Approved Market securities, and the Emerging Markets
Small Cap Series will invest at least 65% of its assets in small company (as
defined above) 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
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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 each of the Emerging Markets Series and the Emerging Markets Small
Cap Series.
The following countries are currently designated as Approved Markets:
Argentina, Brazil, Chile, Indonesia, Malaysia, Mexico, Philippines, Portugal,
South Korea, Thailand, Turkey, and Israel. 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, Venezuela and Zimbabwe.
Each 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,
each 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, each 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 neither Series
expects the aggregate of all such amounts to exceed 10% of its net assets under
normal circumstances.
Both Series also may invest in shares of other investment companies that
invest in one or more Approved Markets, although they intend to do so only where
access to those markets is otherwise significantly limited. The Series may also
invest in money market mutual funds for temporary cash management purposes. The
Investment Company Act of 1940 limits investment by a Series in shares of other
investment companies to no more than 10% of the value of a Series' total assets.
If a 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 a Series to establish a
wholly-owned subsidiary or a trust for the purpose of investing in the local
markets. Each Series also may invest up to 5% of its assets in convertible
debentures issued by companies organized in Approved Markets.
PORTFOLIO STRUCTURE
Each Series' 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 a 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 a Series involves greater risk
than including a large number of them.
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Neither Series seeks 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 a
Series do pay dividends. It is anticipated, therefore, that both 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.
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. The portfolio turnover rate of the Emerging Markets Small Cap Series
ordinarily is anticipated to be low, and is not expected to exceed 20% per year.
For the purpose of converting U.S. dollars to another currency, or vice
versa, or converting one foreign currency to another foreign currency, each
Series may enter into forward foreign exchange contracts. In addition, to hedge
against changes in the relative value of foreign currencies, each Series may
purchase foreign currency futures contracts. A 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.
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 and 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.")
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DFA TWO-YEAR CORPORATE FIXED INCOME PORTFOLIO
The investment objective of DFA Two-Year Corporate Fixed Income Portfolio
is to maximize total returns consistent with the preservation of capital. This
objective will be pursued by investing the assets of the Portfolio in DFA
Two-Year Corporate Fixed Income Series of the Trust (the "Two-Year Corporate
Fixed Income Series"). The Two-Year Corporate Fixed Income Series will have the
same investment objective and policies as the Portfolio. The Two-Year Corporate
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. It is the Series' policy to acquire
obligations which mature within two years from the date of settlement. 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 TWO-YEAR GLOBAL FIXED INCOME PORTFOLIO
The investment objective of DFA Two-Year Global Fixed Income Portfolio is
to maximize total returns consistent with preservation of capital. This
objective will be pursued by investing the assets of the Portfolio in DFA
Two-Year Global Fixed Income Series of the Trust (the "Two-Year Global Fixed
Income Series"). The Two-Year Global Fixed Income Series will have the same
investment objective and policies as the Portfolio. The Two-Year Global Fixed
Income Series will invest in obligations issued or guaranteed by the U.S. and
foreign governments, their agencies and instrumentalities, corporate debt
obligations, bank obligations, commercial paper, repurchase agreements,
obligations of other domestic and foreign issuers having quality ratings meeting
the minimum standards described in "Description of Investments," securities of
domestic or foreign issuers denominated in U.S. dollars but not trading in the
United States, and obligations of 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 in developed
countries, such as those countries which are members of the Organization of
Economic Cooperations and Development ("OECD"). However, in the future, the
Advisor anticipates investing in issuers located in other countries as well.
Under normal market conditions, the Series 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 Series will acquire obligations which mature within two years from the
date of settlement. Because many of the Series' investments will be denominated
in foreign currencies, the Series will also enter into forward foreign currency
contracts solely for the purpose of hedging against fluctuations in currency
exchange rates. 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 "Investment 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,
corporate debt obligations, bank obligations, commercial paper rated as set
forth in "Description of Investments" 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
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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.
DFA TWO-YEAR GOVERNMENT PORTFOLIO
The investment objective of DFA Two-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 and consistent with the
preservation of capital. This objective will be pursued by investing the assets
of the Portfolio in the DFA Two-Year Government Series of the Trust (the
"Two-Year Government Series"). The Two-Year Government Series will have the
same investment objective and policies as the Portfolio. Generally, the
Two-Year Government Series will acquire U.S. government obligations and U.S.
government agency obligations that mature within two years from the date of
settlement. The Series will also acquire repurchase agreements.
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.")
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DESCRIPTION OF INVESTMENTS
The following is a description of the categories of investments which may
be acquired by the Fixed Income Portfolios, the One-Year Fixed Income, Two-Year
Corporate Fixed Income, Two-Year Government and Two-Year Global Fixed Income
Series.
Permissible
Categories:
-----------
DFA One-Year Fixed Income Series 1-6, 8
DFA Two-Year Corporate Fixed Income Series 1-6, 8
DFA Two-Year Government Series 1, 2, 6
DFA Five-Year Government Portfolio 1, 2, 6
DFA Two-Year Global Fixed Income Series 1-10
DFA Global Fixed Income Portfolio 1-10
DFA Intermediate Government Fixed Income Portfolio 1, 2, 6, 7, 8
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.
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 from banks having 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 is approved by the Investment Committee of the
Advisor. 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.
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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.
10. EURODOLLAR OBLIGATIONS - Debt securities of domestic or foreign
issuers denominated in U.S. dollars but not trading in the United States.
Investors should be aware that the net asset values of the Fixed Income
Portfolios may change as general levels of interest rates fluctuate. When
interest rates increase, the value of a portfolio of fixed-income securities can
be expected to decline. Conversely, when interest rates decline, the value of a
portfolio of fixed-income securities can be expected to increase.
INVESTMENTS IN THE BANKING INDUSTRY
The One-Year Fixed Income Series, Two-Year Corporate Fixed Income Series
and Two-Year Global Fixed Income Series will invest more than 25% of their total
respective 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 each Series and can only be changed by
a vote of the shareholders of each Series, banks and bank holding companies are
considered to constitute a single industry, the banking industry. The DFA
One-Year Fixed Income Portfolio, DFA Two-Year Corporate Fixed Income Portfolio
and DFA Two-Year Global Fixed Income Portfolio each have the same fundamental
policy, which can only be changed by a vote of each Portfolio's shareholders,
except that the policy of each Portfolio does not apply to the extent that all
or substantially all of its assets are invested in its respective Series. When
investment in such obligations exceeds 25% of the total net assets of any of
these Series, such Series will be considered to be concentrating its investments
in the banking industry. As of the date of this prospectus, the One-Year Fixed
Income Series is not concentrating its investment in this industry.
The types of bank and bank holding company obligations in which the
One-Year Fixed Income Series, Two-Year Corporate Fixed Income Series and DFA
Two-Year Global Fixed 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 each Series' established
credit rating criteria as stated under "Description of Investments." In
addition, all three Series are authorized to invest more than 25% of their total
assets in Treasury bonds, bills and notes and obligations of federal agencies
and instrumentalities.
PORTFOLIO STRATEGY
The One-Year Fixed Income Series, Two-Year Corporate Fixed Income Series
and Two-Year Global 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 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, Two-Year Corporate Fixed Income Series,
Two-Year Government Series, Two-Year Global 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
Two-Year Corporate Fixed Income Series and Two-Year Global Fixed Income Series,
respectively, could be 0% to 200% and Two-Year
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Government Series could be 100% to 500%. While the Fixed Income Portfolios, the
One-Year Fixed Income Series, Two-Year Corporate Fixed Income Series, Two-Year
Global Fixed Income Series and Two-Year Government 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, the One-Year Fixed Income
Series, Two-Year Corporate Fixed Income Series, Two-Year Government Series or
the Two-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.
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
SMALL COMPANY SECURITIES
Typically, securities of small companies are less liquid than securities of
large companies. Recognizing this factor, management will endeavor to effect
securities transactions in a manner to avoid causing significant price
fluctuations in the market for these securities.
FOREIGN SECURITIES
The International Equity Portfolios, International Value Series, DFA Global
Fixed Income Portfolio, One-Year Fixed Income Series, Two-Year Corporate Fixed
Income Series, Two-Year Global Fixed Income Series and Enhanced U.S. Large
Company Series (directly or indirectly through their investment in the Trust
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
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comparable U.S. companies. The One-Year Fixed Income Series, Two-Year Corporate
Fixed Income Series, Two-Year Global Fixed Income Series, Enhanced U.S. Large
Company 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.
INVESTING IN EMERGING MARKETS
The investments of the Emerging Markets Series and the Emerging Markets
Small Cap 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 and the Emerging Markets Small Cap 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 a Series' investment. If such restrictions were imposed
subsequent to investment in the securities of a particular country, a 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 a 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 and the Emerging
Markets Small Cap 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. [THESE RISKS ARE HEIGHTENED FOR INVESTMENTS IN SMALL
COMPANY EMERGING MARKETS SECURITIES.]
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 to
market-based 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 do not keep pace with the
volume of securities transactions, making it difficult to conduct such
transactions. The inability of a 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 a 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 a 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.
Government involvement in the private sector varies in degrees among the
emerging securities markets contemplated for investment by each 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
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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 a 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 and the Emerging
Markets Small Cap 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.
FOREIGN CURRENCIES AND RELATED TRANSACTIONS
Investments of the International Equity Portfolios (directly or indirectly
through their investment in the Trust Series) and DFA Global Fixed Income
Portfolio, many of the investments of the Two-Year Global Fixed Income Series
and, to a lesser extent, the investment in the Enhanced U.S. Large Company
Series, 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 thereon in
order to hedge against changes in the level of foreign currency exchange rates.
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. Gains and losses on investments in futures and
options thereon depend on the direction of securities prices, interest rates and
other economic factors.
BORROWING
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
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.
PORTFOLIO STRATEGIES
The method employed by the Advisor to manage the Domestic and International
Equity Portfolios (except U.S. Large Company Portfolio and Enhanced U.S. Large
Company Portfolio and their corresponding Series) 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
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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.
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FUTURES CONTRACTS AND OPTIONS ON FUTURES
U.S. Large Company Series, Enhanced U.S. Large Company Series, Large Cap
International Portfolio, the Value Series, DFA Real Estate Securities
Portfolio, the International Value Series, the Emerging Markets Series, the
Emerging Markets Small Cap Series and the DFA International Small Cap Value
Portfolio may invest in index futures contracts and options on index futures.
To the extent that such Series or Portfolios invest in futures contracts and
options thereon for other than bona fide hedging purposes, no Series or
Portfolio will enter into such transactions if, immediately thereafter, the
sum of the amount of initial margin deposits and premiums paid for open
futures options would exceed 5% of the Series' or Portfolio's total assets,
after taking into account unrealized profits and unrealized losses on such
contracts it has entered into; provided, however, that, in the case of an
option that is in-the-money at the time of purchase, the in-the-money amount
may be excluded in calculating the 5%. Certain index futures contracts and
options on index futures may be considered to be derivative securities.
These investments entail the risk that an imperfect correlation may exist
between changes in the market value of the stocks owned by the 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. Gains or losses on investments in options and futures depend on
the direction of securities prices, interest rates and other economic
factors, and the loss from investing in futures transactions is potentially
unlimited. Certain restrictions imposed by the Internal Revenue Code may
limit the ability of a Portfolio or Series to invest in futures contracts and
options on futures contracts.
OPTIONS ON STOCK INDICES
The Enhanced U.S. Large Company Series may purchase put and call options
and write put and call options on stock indices and stock index futures
listed on national securities exchanges or traded in the over-the-counter
market. The Enhanced U.S. Large Company Series may use these techniques to
hedge against changes in securities prices or as part of its overall
investment strategy. An option on an index is a contract that gives the
holder of the option, in return for a premium, the right to buy from (in the
case of a call) or sell to (in the case of a put) the writer of the option
the cash value of the index at a specified exercise price at any time during
the term of the option. Upon exercise, the writer of an option on an index
is obligated to pay the difference between the cash value of the index and
the exercise price multiplied by the specified multiplier for the index
option. (An index is designed to reflect specified facets of a particular
financial or securities market, a specific group of financial instruments or
securities, or certain economic indicators.) A stock index fluctuates with
changes in the market values of the stocks included in the index. Certain
put and call options on stock indices and stock index futures may be
considered to be derivative securities.
With respect to the writing of options, the writer has no control over the
time when it may be required to fulfill its obligation. Prior to exercise or
expiration, an option may be closed out by an offsetting purchase or sale of
an option on the same series. There can be no assurance, however, that a
closing purchase or sale transaction can be effected when the Enhanced U.S.
Large Company Series desires.
The Enhanced U.S. Large Company Series may write covered straddles
consisting of a combination of a call and a put written on the same index. A
straddle will be covered when sufficient assets are deposited to meet the
Enhanced U.S. Large Company Series' immediate obligations. The Series may
use the same liquid assets to cover both the call and put options where the
exercise price of the call and the put are the same or the exercise price of
the call is higher than that of the put. In such cases, the Series will also
segregate liquid assets equivalent to the amount, if any, by which the put is
"in the money."
The effectiveness of purchasing stock index options will depend upon the
extent to which price movements in the Enhanced U.S. Large Company Series'
portfolio correlate with price movements of the stock index selected. Because
the value of an index option depends upon movements in the level of the index
rather than the price of a particular stock, whether the Series will realize a
gain or loss from the purchase of options on an index depends upon movements in
the level of stock prices in the stock market generally or, in the case of
certain indices, in an industry or market segment, rather than movements in the
price of a particular stock. If the Enhanced U.S. Large
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Company Series takes positions in options instruments contrary to prevailing
market trends, the Series could be exposed to the risk of a loss. Certain
restrictions imposed on the Enhanced U.S. Large Company Series by the Internal
Revenue Code may limit the ability of such Series to invest in options.
SWAPS
The Enhanced U.S. Large Company Series may enter into equity index swap
agreements for purposes of attempting to obtain a particular desired return at a
lower cost to the Series than if the Series had invested directly in an
instrument that yielded that desired return. Swap agreements are two-party
contracts entered into primarily by institutional investors for periods ranging
from a few weeks to more than one year. In a standard "swap" transaction, two
parties agree to exchange the returns (or differentials in rates of return)
earned or realized on particular predetermined investments or instruments. The
gross returns to be exchanged or "swapped" between the parties are generally
calculated with respect to a "notional amount," i.e., the return on or increase
in value of a particular dollar amount invested a group of securities
representing a particular index. Swap agreements are considered to be
derivative securities.
The "notional amount" of the swap agreement is only a fictive basis on
which to calculate the obligations which the parties to a swap agreement have
agreed to exchange. Most swap agreements entered into by the Enhanced U.S.
Large Company Series would calculate the obligations of the parties to the
agreement on a "net basis." Consequently, the Series' current obligations (or
rights) under a swap agreement will generally be equal only to the net amount to
be paid or received under the agreement based on the relative values of the
positions held by each party to the agreement (the "net amount"). The Enhanced
U.S. Large Company Series' current obligations under a swap agreement will be
accrued daily (offset against amounts owed to the Series) and any accrued but
unpaid net amounts owed to a swap counterparty will be covered by the
maintenance of a segregated account consisting of liquid assets to avoid any
potential leveraging of the Series' portfolio. The Enhanced U.S. Large Company
Series will not enter into a swap agreement with any single party if the net
amount owed or to be received under existing contracts with that party would
exceed 5% of the Series' assets.
Because they are two-party contracts and because they may have terms of
greater than seven days, swap agreements may be considered to be illiquid and,
therefore, swap agreements entered into by the Enhanced U.S. Large Company
Series and other illiquid securities will be limited to 15% of the net assets of
the Series. Moreover, the Enhanced U.S. Large Company Series bears the risk of
loss of the amount expected to be received under a swap agreement in the event
of the default or bankruptcy of a swap agreement counterparty. The Advisor will
cause the Enhanced U.S. Large Company Series to enter into swap agreements only
with counterparties that the Investment Committee of the Advisor has approved.
Certain restrictions imposed on the Enhanced U.S. Large Company Series by the
Internal Revenue Code may limit the Series' ability to use swap agreements. The
swap market is a relatively new market and is largely unregulated. It is
possible that developments in the swaps market, including potential government
regulation, could adversely affect the Enhanced U.S. Large Company Series'
ability to terminate existing swap agreements or to realize amounts to be
received under such agreements.
BANKING INDUSTRY AND REAL ESTATE CONCENTRATIONS
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, Two-Year Corporate Fixed Income Series and Two-Year Global Fixed Income
Series (and, thus, DFA One-Year Fixed Income Portfolio, DFA Two-Year Corporate
Fixed Income Portfolio and DFA Two-Year Global Fixed Income Portfolio) than
might occur in less concentrated portfolios.
The DFA 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
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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.
REPURCHASE AGREEMENTS
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 International Small Company
Portfolio) 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, 1995, (i) the Advisor (including a
sub-advisor in respect of DFA Real Estate Securities Portfolio) received a fee
for its services from the Fund or the Trust 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:
PORTFOLIO MANAGEMENT FEE TOTAL EXPENSES
--------- -------------- --------------
U.S. 9-10 Small Company 0.50% 0.62%
U.S. 6-10 Small Company 0.03% 0.49%
U.S. Large Company 0.025% 0.24%
U.S. Small Cap Value 0.20% 0.64%
U.S. Large Cap Value 0.10% 0.42%
DFA Real Estate Securities(1) 0.50% 0.82%
Japanese Small Company(2) 0.50% 0.74%
Pacific Rim Small Company(2) 0.50% 0.83%
United Kingdom Small Company(2) 0.50% 0.72%
Emerging Markets 0.10% 1.58%
Continental Small Company(2) 0.50% 0.74%
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Large Cap International 0.25% 0.57%
RWB/DFA International High Book to Market 0.20% 0.68%
DFA International Small Cap Value(3) 0.65% 1.23%
DFA One-Year Fixed Income 0.05% 0.20%
DFA Five-Year Government 0.20% 0.28%
DFA Global Fixed Income 0.25% 0.46%
DFA Intermediate Government Fixed Income 0.15% 0.27%
- ------------------------
(1) Effective December 20, 1996, the investment advisory fee payable by the
Fund on behalf of the DFA Real Estate Securities Portfolio to the Advisor
was reduced from .325% to .30% of the average net assets of the Portfolio
on an annual basis. Effective December 19, 1996, the sub-advisory agreement
between the Fund, on behalf of the Portfolio, and AEW terminated; pursuant
to the terms of the sub-advisory agreement, the Portfolio paid AEW a fee
equal to .175% of its average net assets on an annual basis.
(2) Prior to August 9, 1996, the Fund, on behalf of the Portfolio, had an
investment management agreement with the Advisor; the dollar amount
represents the total dollar amount of management fees paid by the Portfolio
to the Advisor for the fiscal year ended November 30, 1995.
(3) Annualized, based on fees and expenses incurred from December 30, 1994
(commencement of operations) to November 30, 1995.
For the new Trust Series, the investment management fees, calculated as a
percentage of the average net assets of the Series on an annual basis, are:
Enhanced U.S. Large Company Series - .05%; Two-Year Global Fixed Income Series -
.05%; Two-Year Corporate Fixed Income Series - .15%; Two-Year Government Series
- - .15%; and Emerging Markets Small Cap Series - .20%.
The Advisor provides asset allocation advice with respect to the Underlying
Series to the International Small Company Portfolio without charge pursuant
to a written agreement. The investment management fees applicable to each
Underlying Series are equal to 0.10% of the average net assets of the Series
on an annual basis. The International Small Company Portfolio, as a
shareholder of each Underlying Series, benefits from the investment
management services provided by the Advisor to each of the Underlying Series,
and indirectly bears its proportionate share of the investment management
fees paid by such Series.
For the fiscal year ended November 30, 1995, the Advisor 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. Such expenses were 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, 1995 would have been .46%.
Pursuant to the terms of the current administration agreement between U.S.
Large Company Portfolio and the Advisor, the Advisor has agreed to waive a
portion of its administration fee and/or assume the expenses of the Portfolio
to the extent (1) necessary to pay the ordinary operating expenses of the
Portfolio (except the administration fee); and (2) that the indirect expenses
the Portfolio bears as a shareholder of the Series, on an annual basis,
exceed 0.025% of the Portfolio's average net assets. Beginning August 9,
1996, in addition to the waiver/assumption effective on December 1, 1995, the
Advisor has agreed to assume expenses or waive the fee payable by the U.S.
Large Company Portfolio under the administration agreement by an additional
.09% of average assets on an annual basis.
From December 1, 1993 through August 8, 1996, the Advisor agreed to waive
its fee under the Investment Management Agreement with respect to 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. For the fiscal year ended November 30,
1995, the Advisor was not required to waive any portion of its fee pursuant
to such agreement.
Effective August 9, 1996, the Advisor has agreed to waive its
administration fee and assume the direct expenses of the Japanese Small
Company, United Kingdom Small Company, Continental Small Company and Pacific
Rim Small Company Portfolios to the extent necessary to keep the direct
annual expenses of each Portfolio to not more
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than 0.47% of average net assets of the Portfolio on an annualized basis; this
arrangement does not extend to the fees and expenses of the Trust Series.
The Advisor has agreed to waive its administration fee and assume the
direct expenses of the International Small Company Portfolio to the extent
necessary to keep the administration fee and direct annual expenses of the
Portfolio to not more than 0.45% of average net assets of the Portfolio on an
annualized basis; this arrangement does not extend to the fees and expenses of
the Underlying Series.
For purposes of waivers and/or expense assumptions, the annual expenses are
those expenses incurred in any period consisting of twelve consecutive months.
The Advisor retains the right in its sole discretion to modify or eliminate the
waiver of a portion of its fees or assumption of expenses in the future.
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 and directors or trustees, the cost of filing
its registration statements under the federal securities laws and the cost of
any filings required under the state securities laws, reports to shareholders,
and transfer and dividend disbursing agency, administrative services and
custodian fees, except as described above with respect to the U.S. Large Company
Portfolio. 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 Inc., the accounting services, dividend disbursing and
transfer agent for all Fund Portfolios and the Series of the Trust.
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 $18.9 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, and shareholders of the Advisor's
outstanding stock, 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 Series") and DFA Australia Pty Limited ("DFA Australia") (see
"Investment Services - Japanese and Pacific Rim Small Company Series").
INVESTMENT SERVICES - UNITED KINGDOM AND CONTINENTAL SMALL COMPANY SERIES
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
Series. DFAL's duties include the maintenance of a trading desk for the Series
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 Series and reviews
the trading process and the execution of securities transactions. The Advisor
is responsible for determining those securities which are eligible for purchase
and sale by these Series 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
Series. The Advisor pays DFAL quarterly fees of 12,500 pounds sterling for
services to each Series. 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.
INVESTMENT SERVICES - JAPANESE AND PACIFIC RIM SMALL COMPANY SERIES
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 Series. DFA Australia's duties
include the maintenance of a trading desk for each Series 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 Series and reviews the
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trading process and the execution of securities transactions. The Advisor is
responsible for determining those securities which are eligible for purchase and
sale by these Series 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 Series. The Advisor pays DFA Australia quarterly fees of
25,000 Hong Kong dollars for services to each Series.
ADMINISTRATIVE SERVICES - THE FEEDER PORTFOLIOS AND INTERNATIONAL SMALL COMPANY
PORTFOLIO
The Fund has entered into an administration agreement with the Advisor, on
behalf of each Feeder Portfolio and International Small Company 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 and International Small Company
Portfolio pay the Advisor a monthly fee equal to one-twelfth of the percentages
listed below:
U.S. 6-10 Small Company .32%
U.S. Large Company .125%*
Enhanced U.S. Large Company .15%
U.S. Small Cap Value .30%
U.S. Large Cap Value .15%
RWB/DFA International High Book to Market .01%
Japanese Small Company .40%**
Pacific Rim Small Company .40%**
United Kingdom Small Company .40%**
Continental Small Company .40%**
International Small Company .40%***
Emerging Markets .40%
Emerging Markets Small Cap .45%
DFA One-Year Fixed Income .10%
DFA Two-Year Corporate Fixed Income .05%
DFA Two-Year Global Fixed Income .10%
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DFA Two-Year Government .05%
- --------------------------
* Pursuant to the terms of the administration agreement between U.S. Large
Company Portfolio and the Advisor, the Advisor has agreed to waive a
portion of its administration fee and/or assume the expenses of the
Portfolio to the extent (1) necessary to pay the ordinary operating
expenses of the Portfolio (except the administration fee); and (2) that
the direct expenses the Portfolio bears as a shareholder of the Series,
on an annual basis, exceeds 0.025% of the Portfolio's average net assets.
Beginning August 9, 1996, in addition to the waiver/assumption effective
on December 1, 1995, the Advisor has agreed to assume expenses or waive
the fee payable by the U.S. Large Company Portfolio under the
administration agreement by an additional .09% of average assets on an
annual basis. The above fees reflect that waiver.
** Effective August 9, 1996, the Advisor has agreed to waive its
administration fee and assume the direct expenses of the Japanese Small
Company, United Kingdom Small Company, Continental Small Company and
Pacific Rim Small Company Portfolios to the extent necessary to keep the
direct annual expenses of each Portfolio to not more than 0.47% of
average net assets of the Portfolio on an annualized basis; this
arrangement does not extend to the fees and expenses of the Trust Series.
*** The Advisor has agreed to waive its administration fee and assume the
direct expenses of the International Small Company Portfolio to the
extent necessary to keep the administration fee and direct annual
expenses of the Portfolio to not more than 0.45% of average net assets of
the Portfolio on an annualized basis.
CLIENT SERVICE AGENT - RWB/DFA INTERNATIONAL HIGH BOOK TO MARKET PORTFOLIO
Pursuant to a Client Service Agent Agreement, Reinhart Werba Bowen Advisory
Services, San Jose, CA ("RWBAS") performs various services for the RWB/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. Effective February 8, 1996, for its
services, the Portfolio pays RWBAS a monthly fee which, on an annual basis,
equals .13% of the average daily net assets of the Portfolio.
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."
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 U.S. 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, Enhanced U.S. Large Company Portfolio and
U.S. Large Cap Value Portfolio, is to distribute substantially all of their net
investment income together with any net realized capital gains in December of
each year. Dividends from net investment income of U.S. Large Company
Portfolio, Enhanced U.S. Large Company Portfolio and 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
Two-Year Global Fixed Income, DFA Two-Year Corporate Fixed Income, DFA Two-Year
Government and DFA Global Fixed Income 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 U.S federal tax
purposes.
Shareholders of each 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
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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
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 options listed below. While shareholders of the Enhanced U.S. Large
Company Portfolio will automatically receive all capital gains distributions in
additional shares of the Portfolio, upon written notice to the Transfer Agent,
they may receive all income dividends in cash.
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.
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U.S. 6-10 Small Company, Enhanced U.S. Large Company, DFA One-Year Fixed
Income, DFA Two-Year Corporate Fixed Income, DFA Two-Year Global Fixed Income,
U.S. Small Cap Value, U.S. Large Cap Value, RWB/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.
The U.S. Large Company, Emerging Markets, Emerging Markets Small Cap, DFA
Two-Year Government, Japanese Small Company, Pacific Rim Small Company, United
Kingdom Small Company, Continental Small Company and International Small Company
Portfolios ("Partnership Portfolios"), seek to achieve their investment
objectives by investing all of their investable assets in a corresponding Series
of shares of the Trust or, in the case of International Small Company Portfolio,
the Underlying Series (collectively, the "Partnership Series"). Each
Partnership Series is classified as a partnership for U.S. federal income tax
purposes. A Partnership Portfolio is allocated its proportionate share of the
income and realized and unrealized gains and losses of its corresponding
Partnership Series.
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 even if such income is distributed as a
taxable dividend by the Portfolio to its shareholders. In the case of a
Corporate Feeder 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 Corporate Feeder Portfolio.
In the case of a Partnership Portfolio, if the corresponding Series purchases
shares in PFICs, the Partnership 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.
The Portfolios (or, in the case of a Feeder Portfolio or International
Small Company Portfolio, the corresponding Series) may be subject to foreign
withholding taxes on income from certain of their foreign securities. If more
than 50% in value of the total assets of a Portfolio, or in the case of a
Partnership Portfolio (but not a Corporate Feeder Portfolio) its corresponding
Series, are invested in securities of foreign corporations, such Portfolio may
elect to pass-through to its shareholders their pro rata share of foreign income
taxes paid by such Portfolio. If this election is made, shareholders will be
required to include in their gross income their pro rata share of foreign taxes
paid by the Portfolio. However, shareholders will be entitled to either deduct
(as an itemized deduction in the case of individuals) their share of such
foreign taxes in computing their taxable income or to claim a credit for such
taxes against their U.S. federal income tax, subject to certain limitations
under the Code.
The Enhanced U.S. Large Company Series' investment in index derivatives are
subject to complex tax rules which may have the effect of accelerating income or
converting, in part, what otherwise would have been long-term capital gain into
short-term capital gain. These rules may effect the amount, character and
timing of income distributed to shareholders of the Enhanced U.S. Large Company
Portfolio.
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. Similarly, it is anticipated that either
none or only a small portion of the distributions made by the International
Equity Portfolios will qualify for the corporate dividends received deduction
because of
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such Portfolios' investment in foreign equity securities. In the case of the
other Portfolios, dividends from net investment income will generally qualify in
part for the corporate dividends received deduction, but the portion of
dividends so qualified depends on the aggregate qualifying dividend income
received by the Portfolio from domestic (U.S.) sources.
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
U.S. 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 U.S.
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
U.S. federal income 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.
A Portfolio is required to withhold 31% of taxable dividends, capital gains
distributions, and redemptions paid to shareholders who have not complied with
IRS taxpayer identification regulations. You may avoid this withholding
requirement by certifying on the account registration form your proper Taxpayer
Identification Number and by certifying that you are not subject to backup
withholding.
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.
Only clients of RWBAS are eligible to purchase shares of the RWB/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. The Chase Manhattan Bank serves as custodian for
each of the Emerging Markets Series and Portfolio and Emerging Markets Small Cap
Series and Portfolio. Boston Safe Deposit and Trust Company serves as custodian
for the following Portfolios and Series:
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DFA International Small Cap Value Portfolio, Large Cap International Portfolio,
DFA Global Fixed Income Portfolio, DFA International Value Series, the
Underlying Series, International Small Company Portfolio, DFA Two-Year Global
Fixed Income Series, and Enhanced U.S. Large Company Series (co-custodian with
PNC Bank, N.A.). PNC Bank, N.A. serves as custodian for all other Portfolios
and Series.
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) or otherwise represented in their portfolios as
described in this prospectus or in exchange for local currencies in which such
securities of the International Equity Portfolios, the International Value
Series, Enhanced U.S. Large Company Series, DFA Two-Year Global Fixed Income
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, DFA Two-Year Global Fixed Income Portfolio 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, or otherwise represented, 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 or the International Small Company Portfolio. The Fund will accept
such securities for investment and not for resale.
A gain or loss for federal income tax purposes will generally 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.
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. The value of the shares of the Feeder Portfolios and International
Small Company Portfolio will fluctuate in relation to the investment experience
of the Trust Series in which such Portfolios invest. Securities held by the
Portfolios and 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 Real Estate Securities
Portfolio, the Value Series, Emerging Markets Series and Emerging Markets Small
Cap 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. Securities issued by open-end
investment companies, such as the Series, are valued using their respective net
asset values for purchase orders placed at the close of the NYSE. Unlisted
securities for which market quotations are readily
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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 (in respect of
those Portfolios that are Feeder Portfolios and International Small Company
Portfolio, the Trust Series), the International Value Series, Two-Year Global
Fixed Income 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, the One-Year Fixed
Income Series, Two-Year Corporate Fixed Income Series, Two-Year Government
Series and Two-Year Global 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, the One-Year Fixed Income Series, Two-Year
Corporate Fixed Income Series, Two-Year Government Series and Two-Year Global
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 those Portfolios and Series that invest in such securities are
determined as of such times for the purpose of computing the net asset values of
the Portfolios and 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 and
Emerging Markets Small Cap Series in Approved Markets may be subject to tax,
investment and currency repatriation regulations of the Approved Markets that
could have a material effect on the valuation of the securities. For example,
such 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 a 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 a 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
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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.
Futures contracts are valued using the settlement price established each
day on the exchange on which they are traded. The value of such futures
contracts held by a Portfolio or Series are determined each day as of such
close.
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 certain Portfolios 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 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.
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 table below lists the Portfolios whose shares are sold at an offering price
which is equal to the current net asset value of such shares plus a
reimbursement fee. The reimbursement fee is expressed as a percentage of the
net asset value of the shares of each Portfolio.
PORTFOLIO REIMBURSEMENT FEE
--------- -----------------
Japanese Small Company Portfolio(1) 0.50%
Continental Small Company Portfolio(1) 1.00%
Pacific Rim Small Company Portfolio(1) 1.00%
Emerging Markets Portfolio(1) 0.50%
Emerging Markets Small Cap Portfolio(1) 1.00%
DFA International Small Cap Value Portfolio 0.70%
International Small Company Portfolio(2) 0.675%
____________________
(1) The Series in which the Portfolio invests also charges a reimbursement
fee equal to that charged by the Portfolio.
(2) The reimbursement fee is equal to a blended rate of the reimbursement
fees of the Underlying Series. The blended rate is determined on a
quarterly basis and is based upon the target allocation in effect at
the end of each quarter. The blended rate will be calculated by
multiplying the rate of reimbursement fee of each Underlying Series by
a fraction equal to the portion of the assets of the Portfolio which,
at such time, is being allocated to each Underlying Series and adding
the results thereof. If there is a change to the reimbursement fee of
an Underlying Series during a quarter, the blended rate will be
re-calculated to reflect such change in the Underlying Series'
reimbursement fee.
The public offering price of shares of the Domestic Equity Portfolios,
United Kingdom Small Company Portfolio, Large Cap International Portfolio,
RWB/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.
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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.
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 accepted
into or from the International Equity Portfolios only with respect to: (1) Large
Cap International Portfolio; (2) a Feeder Portfolio and another open-end
investment company advised or administered by the Advisor, provided that the
Feeder Portfolio and investment company both invest substantially all of their
assets in the same series of shares of the Trust; and (3) International Small
Company Portfolio and any of the Feeder Portfolios which invest in the
Underlying Series.
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. Exchanges with respect to
International Small Company Portfolio and any of the Feeder Portfolios which
invest in the Underlying Series are not subject to a reimbursement fee. "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.
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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; 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. The Fund
reserves the right to send redemption proceeds by check in its discretion; a
shareholder may request overnight delivery of such check at the shareholder's
own expense. 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.
With respect to each Portfolio, the Fund reserves the right to redeem a
shareholder's account if the value of the shares in a specific portfolio is $500
or less, whether because of redemptions, a decline in the portfolio's net asset
value per share or any other reason. Before the Fund involuntarily redeems
shares from such an account and sends the proceeds to the stockholder, the Fund
will give written notice of the redemption to the stockholder at least sixty
days in advance of the redemption date. The stockholder will then have sixty
days from the date of the notice to make an additional investment in the Fund in
order to bring the value of the shares in the account for a specific portfolio
to more than $500 and avoid such involuntary redemption. The redemption price
to be paid to a stockholder for shares redeemed by the Fund under this right
will be the aggregate net asset value of the shares in the account at the close
of business on the redemption date.
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.
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
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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.
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 shareholder proposal, the Fund will solicit voting
instructions from the Feeder Portfolio's shareholders 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
accordance with their best judgment. If a majority shareholder of a Partnership
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.
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 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, 1995, and Semi-Annual Report to shareholders for the six
months ended May 31, 1996, contain additional performance information. A copy
of each of the Annual Report and the Semi-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.
67
<PAGE>
As of November 30, 1996, the following persons beneficially owned more than
25% of the voting securities of the following Portfolios:
U.S. LARGE COMPANY PORTFOLIO
Charles Schwab & Company, Inc. - REIN* 64.82%
101 Montgomery Street, San Francisco, CA 94104
U.S. LARGE CAP VALUE PORTFOLIO
Charles Schwab & Company, Inc. - REIN* 48.76%
101 Montgomery Street, San Francisco, CA 94104
DFA REAL ESTATE SECURITIES PORTFOLIO
Charles Schwab & Company, Inc. - REIN* 41.48%
101 Montgomery Street, San Francisco, CA 94104
Owens-Illinois Master Retirement Trust 32.16%
34 Exchange Place, Jersey City, NJ 07302
JAPANESE SMALL COMPANY PORTFOLIO
Charles Schwab & Company, Inc. - REIN* 37.96%
101 Montgomery Street, San Francisco, CA 94104
BellSouth Corporation Master Pension Trust 34.84%
1155 Peachtree Street, N.E., Atlanta, GA 30367
PACIFIC RIM SMALL COMPANY PORTFOLIO
BellSouth Corporation Master Pension Trust 60.54%
1155 Peachtree Street, N.E., Atlanta, GA 30367
UNITED KINGDOM SMALL COMPANY PORTFOLIO
Charles Schwab & Company, Inc. - REIN* 41.38%
101 Montgomery Street, San Francisco, CA 94104
BellSouth Corporation Master Pension Trust 39.33%
1155 Peachtree Street, N.E., Atlanta, GA 30367
DFA ONE-YEAR FIXED INCOME PORTFOLIO
Charles Schwab & Company, Inc. - REIN* 25.20%
101 Montgomery Street, San Francisco, CA 94104
EMERGING MARKETS PORTFOLIO
- ----------
* Owner of record only.
68
<PAGE>
Charles Schwab & Company, Inc. - REIN* 61.50%
101 Montgomery Street, San Francisco, CA 94104
CONTINENTAL SMALL COMPANY PORTFOLIO
BellSouth Corporation Master Pension Trust 39.05%
1155 Peachtree Street, N.E., Atlanta, GA 30367-6000
Charles Schwab & Company, Inc. - REIN* 35.98%
101 Montgomery Street, San Francisco, CA 94104
LARGE CAP INTERNATIONAL PORTFOLIO
Charles Schwab & Company, Inc. - REIN* 77.74%
101 Montgomery Street, San Francisco, CA 94104
RWB/DFA INTERNATIONAL HIGH BOOK TO MARKET PORTFOLIO
Charles Schwab & Company, Inc. - REIN* 90.44%
101 Montgomery Street, San Francisco, CA 94104
DFA INTERNATIONAL SMALL CAP VALUE PORTFOLIO
Charles Schwab & Company, Inc. - REIN* 54.85%
101 Montgomery Street, San Francisco, CA 94104
BellSouth Corporation Master Pension Trust 30.86%
1155 Peachtree Street, N.E., Atlanta, GA 30367-6000
DFA FIVE-YEAR GOVERNMENT PORTFOLIO
Charles Schwab & Company, Inc. - REIN* 64.61%
101 Montgomery Street, San Francisco, CA 94104
DFA GLOBAL FIXED INCOME PORTFOLIO
Charles Schwab & Company, Inc. - REIN* 48.22%
101 Montgomery Street, San Francisco, CA 94104
DFA INTERMEDIATE GOVERNMENT FIXED INCOME PORTFOLIO
Charles Schwab & Company, Inc. - CAP* 71.44%
101 Montgomery Street, San Francisco, CA 94104
DFA TWO-YEAR GLOBAL FIXED INCOME PORTFOLIO
Charles Schwab & Company, Inc. - CAP* 53.50%
101 Montgomery Street, San Francisco, CA 94104
Charles Schwab & Company, Inc. - REIN* 44.16%
101 Montgomery Street, San Francisco, CA 94104
- -------------
* Owner of record only.
69
<PAGE>
ENHANCED U.S. LARGE COMPANY PORTFOLIO
Charles Schwab & Company, Inc. - CAP* 82.46%
101 Montgomery Street, San Francisco, CA 94104
- -------------
* Owner of record only.
70
<PAGE>
DFA TWO-YEAR CORPORATE FIXED INCOME PORTFOLIO
Dimensional Fund Advisors Inc. 100%
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
DFA TWO-YEAR GOVERNMENT PORTFOLIO
Dimensional Fund Advisors Inc. 100%
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
INTERNATIONAL SMALL COMPANY PORTFOLIO
San Diego County Employees Retirement Association 77.89%
1495 Pacific Highway
San Diego, CA 92101
U.S. SMALL CAP VALUE PORTFOLIO
Charles Schwab & Company, Inc. - REIN* 27.03%
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.
71
<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
CUSTODIANS - INTERNATIONAL
BOSTON SAFE DEPOSIT AND TRUST COMPANY
Princess House
1 Suffolk Lane
London EC4R 0AN
England
THE CHASE MANHATTAN BANK
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, LLP
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
December 20, 1996
DFA Investment Dimensions Group Inc. (the "Fund") offers thirty series of
shares. This statement of additional information relates to twenty-four of
those series: U.S. 9-10 Small Company Portfolio, U.S. 6-10 Small Company
Portfolio, U.S. Large Company Portfolio, Enhanced U.S. Large Company Portfolio,
U.S. Small Cap Value Portfolio, U.S. Large Cap Value Portfolio, DFA Real Estate
Securities Portfolio, Japanese Small Company Portfolio, Pacific Rim Small
Company Portfolio, United Kingdom Small Company Portfolio, Emerging Markets
Portfolio, Emerging Markets Small Cap Portfolio, Continental Small Company
Portfolio, Large Cap International Portfolio, RWB/DFA International High Book to
Market Portfolio, DFA International Small Cap Value Portfolio, International
Small Company Portfolio, DFA One-Year Fixed Income Portfolio, DFA Two-Year
Corporate Fixed Income Portfolio, DFA Two-Year Global Fixed Income Portfolio,
DFA Two-Year Government 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 December 20, 1996, as amended from time to time,
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
OPTIONS ON STOCK INDICES.. . . . . . . . . . . . . . . . . . . . . . . . . .7
FUTURES CONTRACTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
FEDERAL TAX TREATMENT OF OPTIONS, FUTURES CONTRACTS AND SIMILAR
POSITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
DIRECTORS AND OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . . . 11
ADMINISTRATIVE SERVICES. . . . . . . . . . . . . . . . . . . . . . . . . . 13
OTHER INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
PRINCIPAL HOLDERS OF SECURITIES. . . . . . . . . . . . . . . . . . . . . . 15
PURCHASE OF SHARES.. . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
REDEMPTION AND TRANSFER OF SHARES. . . . . . . . . . . . . . . . . . . . . 22
CALCULATION OF PERFORMANCE DATA. . . . . . . . . . . . . . . . . . . . . . 23
FINANCIAL STATEMENTS.. . . . . . . . . . . . . . . . . . . . . . . . . . . 26
<PAGE>
1
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," "INTERNATIONAL SMALL COMPANY PORTFOLIO - Investment
Objectives and Policies," "U.S. LARGE COMPANY PORTFOLIO - Investment Objective
and Policies," "ENHANCED 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
REAL ESTATE SECURITIES PORTFOLIO," "VALUE PORTFOLIOS - Portfolio Characteristics
and Policies," "RWB/DFA INTERNATIONAL HIGH BOOK TO MARKET PORTFOLIO -Investment
Objective and Policies," "EMERGING MARKETS PORTFOLIO AND EMERGING MARKETS SMALL
CAP PORTFOLIO - Investment Objectives and Policies" and "DFA INTERNATIONAL SMALL
CAP VALUE PORTFOLIO - Investment Objective and Policies." The following
information applies to all of 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 Advisor 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. The turnover rate for the International Small
Company Portfolio is 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 Real Estate Securities Portfolio generally will
hold securities for the long term, its turnover rate ordinarily is anticipated
to be low. Generally, securities will be purchased with the expectation that
they will be held for longer than one year.
<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, 1995, 1994 and 1993
1995 1994 1993
U.S. 9-10 Small Company $1,132,110 $1,431,640 $732,528
U.S. 6-10 Small Company 361,784 398,610 301,156
U.S. Large Company 15,289 10,643 58,218
Japanese Small Company 768,765 807,580 724,038
United Kingdom Small Company 236,754 138,025 97,468
Continental Small Company 244,705 343,484 343,850
Large Cap International 61,048 153,475 110,610
U.S. Small Cap Value 1,025,415 1,860,712 328,869
U.S. Large Cap Value 415,802 367,810 134,312
DFA Real Estate Securities 26,084 83,979 63,997
Pacific Rim Small Company 142,227 529,025 871,257
RWB/DFA International High Book to
Market 542,306 623,031 233,355
Emerging Markets 166,601 79,105 ---
DFA International Small Cap Value 745,562 --- ---
---------- ---------- ----------
TOTAL $5,884,452 $6,827,119 $3,999,658
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 owned approximately 15.6% of
the Advisor's outstanding stock during that year. 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 years 1994 or 1995.
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 and International Small
Company Portfolio, the discussion applies to the Series of the Trust in which
the Feeder Portfolio invests all of its assets and the Underlying Series,
respectively.
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
2
<PAGE>
seeks to obtain the most favorable price for the securities being traded among
the dealers with whom the Fixed Income Portfolios effect transactions.
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 Series and DFA Australia Pty Ltd. performs these
services for the Japanese and Pacific Rim Small Company Series. 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 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 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 1995, the Portfolios or, in the case of a Feeder
Portfolio, its corresponding Series, paid commissions for securities
transactions to brokers which provided market price monitoring services, market
studies and research services to the Portfolios or Series as follows:
VALUE OF BROKERAGE
SECURITIES TRANSACTIONS COMMISSIONS
U.S. 9-10 Small Company $ 73,540,398 $ 319,350
U.S. 6-10 Small Company 45,143,939 176,059
U.S. Small Cap Value 99,862,560 493,455
U.S. Large Cap Value 155,807,866 221,667
DFA Real Estate Securities 10,362,100 20,848
Pacific Rim Small Company Portfolio 2,906,311 11,774
U.S. Large Company 0 0
Emerging Markets Portfolio 107,211 804
Continental Small Company Portfolio 14,082,656 66,367
3
<PAGE>
RWB/DFA International High Book to
Market 34,304,000 85,760
DFA International Small Cap Value 1,892,230 8,399
TOTAL: $438,009,271 $1,404,483
------------ ----------
------------ ----------
4
<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 Tokyo
Stock Exchange ("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
Series 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 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; and the Enhanced U.S. Large
Company Portfolio may purchase, sell and enter into indices-related futures
contracts, options on such futures contracts, securities-related swap agreements
and other derivative instruments;
(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) 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
<PAGE>
(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, DFA Two-Year Corporate Fixed Income Portfolio, DFA Two-
Year Government Portfolio, DFA Two-Year Global Fixed Income Portfolio, DFA
Global Fixed Income Portfolio, U.S. Large Company Portfolio, Enhanced U.S. Large
Company Portfolio, The DFA Real Estate Securities Portfolio, the Value
Portfolios, RWB/DFA International High Book to Market Portfolio, The U.S. 6-10
Small Company Portfolio, Emerging Markets Portfolio, Emerging Markets Small Cap
Portfolio, International Small Company 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 Enhanced U.S. Large Company, DFA Two-Year
Corporate Fixed Income, DFA Two-Year Government, DFA Two-Year Global Fixed
Income, International Small Company and Emerging Markets Small Cap Portfolios
are not subject to this limitation and The DFA Real Estate Securities Portfolio,
the Value Portfolios, the RWB/DFA International High Book to Market Portfolio,
The U.S. 6-10 Small Company Portfolio, the Emerging Markets Portfolio, 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 Real Estate Securities Portfolio may
invest in a REIT that is registered as an investment company; and provided that
the Enhanced U.S. Large Company Portfolio may invest its assets in securities of
investment companies and units of such companies such as, but not limited to,
S&P Depositary Receipts; and provided that the Emerging Markets, Emerging
Markets Small Cap and International Small Company Portfolios are not subject to
this limitation;
(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 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 DFA
One-Year Fixed Income, DFA Two-Year Corporate Fixed Income and DFA Two-Year
Global Fixed Income Portfolios 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"; except The DFA 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, except
the Enhanced U.S. Large Company Portfolio may write or acquire options;
(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;
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(15) purchase securities on margin or sell short;
(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; provided that this limitation applies only to 75% of
the assets of The DFA Real Estate Securities Portfolio, the Value Portfolios,
the Emerging Markets Portfolio, the Emerging Markets Small Cap 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 and International Small Company
Portfolio from investing all or substantially all of its assets in the shares of
another registered, open-end investment company, such as the Series of the
Trust. The investment limitations of each Series are the same as those of the
corresponding Feeder Portfolio.
The investment limitations described in (1) and (15) above do not prohibit
each Portfolio that may purchase or sell financial futures contracts and options
thereon from making margin deposits to the extent permitted under applicable
regulations; and the investment limitations described in (1), (13) and (15)
above do not prohibit the Enhanced U.S. Large Company Portfolio from (i) making
margin deposits in connection with transactions in options; and (ii) maintaining
a short position, or purchasing, writing or selling puts, calls, straddles,
spreads or combinations thereof in connection with transactions in options,
futures, and options on futures and transactions arising under swap agreements
or other derivative instruments;
For purposes of (5) above, the Emerging Markets Portfolio and the Emerging
Markets Small Cap Portfolio (indirectly through their investment in the
corresponding Series of the Trust) 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 such
Series' behalf in lieu of depositing initial margin in connection with currency
futures contracts, and the Series have 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 and International
Small Company Portfolio will only hold shares of certain Series of the Trust,
these Portfolios do not intend to lend those shares.
For the purposes of (7) above, DFA One-Year Fixed Income Portfolio, DFA
Two-Year Corporate Fixed Income Portfolio, DFA Two-Year Global Fixed Income
Portfolio (indirectly through their investment in the corresponding Series) and
DFA Global Fixed Income Portfolio 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: (1) The
Large Cap International and Small Company Portfolios, including The U.S. 6-10
Small Company, Japanese Small Company, Pacific Rim Small Company, United Kingdom
Small Company and Continental Small Company Portfolios indirectly through their
investment in the corresponding Series of the Trust, do not intend to
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purchase interests in any real estate investment trust; and (2) the Enhanced
U.S. Large Company, DFA Two-Year Corporate Fixed Income, DFA Two-Year
Government, DFA Two-Year Global Fixed Income, International Small Company and
Emerging Markets Small Cap Portfolios (indirectly through their investment in
the Trust Series) do not intend to invest more than 15% of their total assets in
illiquid securities.
The International Equity, DFA Two-Year Global Fixed Income and DFA Global
Fixed Income Portfolios (directly or indirectly through their investment in the
Trust Series) 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, RWB/DFA
International High Book to Market Portfolio, and DFA Real Estate Securities
Portfolio (directly or indirectly through their investment in the Trust Series),
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 and the Emerging Markets Small Cap Series may establish
subsidiaries or other similar vehicles for the purpose of conducting their
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. Each
Series would "look through" any such vehicle to determine compliance with their
investment restrictions.
Unless otherwise indicated, all limitations applicable to the Portfolios'
and Series' investments apply only at the time that a transaction is undertaken.
Any subsequent change in a rating assigned by any rating service to a security
or change in the percentage of a Portfolio's or Series' assets invested in
certain securities or other instruments resulting from market fluctuations or
other changes in a Portfolio's or Series' total assets will not require a
Portfolio or Series to dispose of an investment until the Advisor determines
that it is practicable to sell or closeout the investment without undue market
or tax consequences. In the event that ratings services assign different
ratings to the same security, the Advisor will determine which rating it
believes best reflects the security's quality and risk at that time, which may
be the higher of the several assigned ratings.
OPTIONS ON STOCK INDICES
The Enhanced U.S. Large Company Series may purchase and sell options on
stock indices. With respect to the sale of call options on stock indices,
pursuant to published positions of the Securities and Exchange Commission
("SEC"), the Enhanced U.S. Large Company Series will either (1) maintain with
its custodian liquid assets equal to the contract value (less any margin
deposits); (2) hold a portfolio of stocks substantially replicating the movement
of the index underlying the call option; or (3) hold a separate call on the same
index as the call written where the exercise price of the call held is (a) equal
to or less than the exercise price of the call written, or (b) greater than the
exercise price of the call written, provided the difference is maintained by the
Series in liquid assets in a segregated account with its custodian. With
respect to the sale of put options on stock indices, pursuant to published SEC
positions, the Enhanced U.S. Large Company Series will either (1) maintain
liquid assets equal to the exercise price (less any margin deposits) in a
segregated account with its custodian; or (2) hold a put on the same index as
the put written where the exercise price of the put held is (a) equal to or
greater than the exercise price of the put written, or (b) less than the
exercise price of the put written, provided an amount equal to the difference is
maintained by the Series in liquid assets in a segregated account with its
custodian.
Prior to the earlier of exercise or expiration, an option may be closed out
by an offsetting purchase or sale of an option of the same series (type,
exchange, underlying index, exercise price, and expiration). There can be no
assurance, however, that a closing purchase or sale transaction can be effected
when the Enhanced U.S. Large Company Series desires.
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The Enhanced U.S. Large Company Series will realize a gain from a closing
purchase transaction if the cost of the closing option is less than the premium
received from writing the option, or, if it is more, the Series will realize a
loss. The principal factors affecting the market value of a put or a call
option include supply and demand, interest rates, the current market price of
the underlying index in relation to the exercise price of the option, the
volatility of the underlying index, and the time remaining until the expiration
date.
If an option written by the Enhanced U.S. Large Company Series expires, the
Series realizes a gain equal to the premium received at the time the option was
written. If an option purchased by the Enhanced U.S. Large Company Series
expires unexercised, the Series realizes a loss equal to the premium paid.
The premium paid for a put or call option purchased by the Enhanced U.S.
Large Company Series is an asset of the Series. The premium received for an
option written by the Series is recorded as a deferred credit. The value of an
option purchased or written is marked to market daily and is valued at the
closing price on the exchange on which it is traded or, if not traded on an
exchange or no closing price is available, at the mean between the last bid and
asked prices.
RISKS ASSOCIATED WITH OPTIONS ON INDICES
There are several risks associated with transactions in options on indices.
For example, there are significant differences between the securities and
options markets that could result in an imperfect correlation between these
markets, causing a given transaction not to achieve its objectives. The value
of an option position will reflect, among other things, the current market price
of the underlying index, the time remaining until expiration, the relationship
of the exercise price, the term structure of interest rates, estimated price
volatility of the underlying index and general market conditions. A decision as
to whether, when and how to use options involves the exercise of skill and
judgment, and even a well-conceived transaction may be unsuccessful to some
degree because of market behavior or unexpected events.
Options normally have expiration dates of up to 90 days. The exercise
price of the options may be below, equal to or above the current market value of
the underlying index. Purchased options that expire unexercised have no value.
Unless an option purchased by the Enhanced U.S. Large Company Series is
exercised or unless a closing transaction is effected with respect to that
position, the Enhanced U.S. Large Company Series will realize a loss in the
amount of the premium paid and any transaction costs.
A position in an exchange-listed option may be closed out only on an
exchange that provides a secondary market for identical options. Although the
Enhanced U.S. Large Company Series intends to purchase or write only those
options for which there appears to be an active secondary market, there is no
assurance that a liquid secondary market will exist for any particular option at
any specific time. Closing transactions may be effected with respect to options
traded in the over-the-counter markets only by negotiating directly with the
other party to the option contract, or in a secondary market for the option if
such a market exists. There can be no assurance that the Enhanced U.S. Large
Company Series will be able to liquidate an over-the-counter option at a
favorable price at any time prior to expiration. In the event of insolvency of
the counter-party, the Series may be unable to liquidate an over-the-counter
option. Accordingly, it may not be possible to effect closing transactions with
respect to certain options, with the result that the Enhanced U.S. Large Company
Series would have to exercise those options which they have purchased in order
to realize any profit. With respect to options written by the Enhanced U.S.
Large Company Series, the inability to enter into a closing transaction may
result in material losses to the Series.
Index prices may be distorted if trading of a substantial number of
securities included in the index is interrupted causing the trading of options
on that index to be halted. If a trading halt occurred, the Enhanced U.S. Large
Company Series would not be able to close out options which it had purchased and
may incur losses if the underlying index moved adversely before trading resumed.
If a trading halt occurred and restrictions prohibiting the exercise of options
were imposed through the close of trading on the last day before expiration,
exercises on that day would be settled on the basis of a closing index value
that may not reflect current price information for securities representing a
substantial portion of the value of the index.
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The Enhanced U.S. Large Company Series' activities in the options markets
may result in higher fund turnover rates and additional brokerage costs;
however, the Series may also save on commissions by using options as a hedge
rather than buying or selling individual securities in anticipation or as a
result of market movements.
INVESTMENT LIMITATIONS ON OPTIONS TRANSACTIONS
The ability of the Enhanced U.S. Large Company Series to engage in options
transactions is subject to certain limitations. The Enhanced U.S. Large Company
Series will only invest in over-the-counter options to the extent consistent
with the 15% limit on investments in illiquid securities.
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. Such
Portfolios (with the exception of Enhanced U.S. Large Company Portfolio and its
corresponding Series) may enter into futures contracts and options on future
contracts only for the purpose of remaining fully invested and to maintain
liquidity to pay redemptions. The Enhanced U.S. Large Company Portfolio may use
futures contracts and options thereon to hedge against securities prices or as
part of its overall investment strategy.
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. To the extent that a Series or Portfolio
invests in futures contracts and options thereon for other than bona fide
hedging purposes, no Series or Portfolio will enter into such transactions if,
immediately thereafter, the sum of the amount of initial margin deposits and
premiums paid for open futures options would exceed 5% of the Series' or
Portfolio's total assets, after taking into account unrealized profits and
unrealized losses on such contracts it has entered into; provided, however,
that, in the case of an option that is in-the-money at the time of purchase, the
in-the-money amount may be excluded in calculating the 5%. Pursuant to
published positions of the SEC, the Portfolios or Series may be required to
maintain segregated accounts consisting of liquid assets, (or, as permitted
under applicable regulation, enter into offsetting positions) in connection with
its futures contract transactions in order to cover its obligations with respect
to such contracts.
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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 OPTIONS,
FUTURES CONTRACTS AND SIMILAR POSITIONS
The investment by a Portfolio (or in the case of a Feeder Portfolio, by a
corresponding Series) in options, futures contracts and options on futures
contracts is subject to many complex and special tax rules. For example,
options on stock and on narrow-based stock indexes will generally produce
long-term or short-term capital gain or loss upon the exercise, lapse, or
closing out of the option or sale of the underlying stock or security. By
contrast, the treatment by a Portfolio or Series of certain other options,
futures and forward contracts is generally governed by Section 1256 of the Code.
These "Section 1256" positions generally include listed options on debt
securities, options on broad-based stock indexes, options on futures contracts,
regulated futures contracts and certain foreign currency contracts and options
thereon.
Absent a tax election to the contrary, each such Section 1256 position held
by a Portfolio or Series will be marked-to-market (i.e., treated as if it were
sold for fair market value) on the last business day of a Portfolio's or Series'
fiscal year, and all gain or loss associated with fiscal year transactions and
marked-to-market positions at fiscal year end (except certain currency gain or
loss covered by Section 988 of the Code) will generally be treated as 60%
long-term capital gain or loss and 40% short-term capital gain or loss. The
effect of Section 1256 marked-to-market rules may be to accelerate income or to
convert what otherwise would have been long-term capital gains into short-term
capital gains or short-term capital losses into long-term capital losses within
a Portfolio or Series. The acceleration of income on Section 1256 positions may
require a Portfolio or Series to accrue taxable income without the corresponding
receipt of cash. In order to generate cash to satisfy the distribution
requirements of the Code, a Portfolio or Series may be required to dispose of
portfolio securities that it otherwise would have continued to hold or to use
cash flows from other sources such as the sale of a Portfolio's or Series'
shares. In these ways, any or all of these rules may affect both the amount,
character and timing of income distributed to shareholders by a Portfolio.
When a Portfolio (or in the case of a Feeder Portfolio, the corresponding
Series) holds an option or contract which substantially diminishes a Portfolio's
or Series' risk of loss with respect to another position of a Portfolio or
Series (as might occur in some hedging transactions), this combination of
positions could be treated as a "straddle" for tax purposes, resulting in
possible deferral of losses, adjustments in the holding periods of a Portfolio's
or Series' securities and conversion of short-term capital losses into long-term
capital losses. Certain tax elections exist for mixed straddles (i.e.,
straddles comprised of at least one Section 1256 position and at least one
non-Section 1256 position) which may reduce or eliminate the operation of these
straddle rules.
The Portfolios and those Series taxable as regulated investment companies
are also subject to the requirement that less than 30% of their annual gross
income be derived from the sale or other disposition of securities and certain
other investments held for less than three months ("short-short income"). This
requirement may limit a Portfolio's (or in the case of a Feeder Portfolio, the
corresponding Series') ability to engage in options, straddles, hedging
transactions and forward or futures contracts because these transactions are
often consummated in less than three months, may require the sale of portfolio
securities held less than three months and may, as in the case of short sales of
portfolio securities, reduce the holding periods of certain securities within a
Portfolio or Series, resulting in additional short-short income for a Portfolio
or Series.
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A Portfolio (or in the case of a Feeder Portfolio, the corresponding
Series) will monitor its transactions in such options and contracts and may make
certain other tax elections in order to mitigate the effect of the above rules
and to prevent disqualification of a Portfolio or Series as a regulated
investment company under Subchapter M of the Code.
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*, 50, 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, 49, Director, Chicago, IL. Leo Melamed 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.
John P. Gould, 57, Director, Chicago, IL. Steven G. Rothmeier
Distinguished Service Professor of Economics, Graduate School of Business,
University of Chicago. Trustee, The DFA Investment Trust Company and First
Prairie Funds (registered investment companies). Director, Dimensional
Investment Group Inc., Dimensional Emerging Markets Fund Inc. and Harbor
Investment Advisors. Executive Vice President, Lexecon Inc. (economics, law,
strategy and finance consulting).
Roger G. Ibbotson, 53, 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 and President, Ibbotson
Associates, Inc., Chicago, IL (software, data, publishing and consulting).
Merton H. Miller, 73, 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.
Public Director, Chicago Mercantile Exchange.
Myron S. Scholes, 55, Director, Greenwich, CT. Limited Partner, Long-Term
Capital Management L.P. (money manager). Frank E. Buck Professor of Finance,
Graduate School of Business and Professor of Law, Law School, Senior Research
Fellow, Hoover Institution, (all) Stanford University (on leave).
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.
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Rex A. Sinquefield*, 52, 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, 41, Vice President, Santa Monica, CA.
Maureen Connors, 60, Vice President, Santa Monica, CA.
Truman Clark, 55, Vice President, Santa Monica, CA. Consultant until
October 1995 and Principal and Manager of Product Development, Wells Fargo Nikko
Investment Advisors, San Francisco, CA from 1990-1994.
Robert Deere, 39, Vice President, Santa Monica, CA.
Irene R. Diamant, 46, Vice President and Secretary (for all entities other
than Dimensional Fund Advisors Ltd.), Santa Monica, CA.
Margaret East, 56, Secretary, Dimensional Fund Advisors Ltd.
Eugene Fama, Jr., 35, Vice President, Santa Monica, CA.
David Plecha, 35, Vice President, Santa Monica, CA.
George Sands, 40, 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.
Michael T. Scardina, 41, Vice President, Chief Financial Officer,
Controller and Treasurer, Santa Monica, CA.
Cem Severoglu, 33, Vice President, Santa Monica, CA.
Jeanne C. Sinquefield, Ph.D., 50, 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, 1995 and the total compensation received from all four
registered investment companies for which the Advisor serves as investment
advisor during that same fiscal year.
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Aggregate Total Compensation from
Director Compensation Fund
- -------- from Fund and Fund Complex
------------ -------------------------
George M. Constantinides $ 15,000 $ 30,000
John P. Gould $ 15,000 $ 30,000
Roger G. Ibbotson $ 15,000 $ 30,000
Merton H. Miller $ 12,000 $ 24,000
Myron S. Scholes $ 15,000 $ 30,000
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 of the Portfolios listed
below 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 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 Real Estate Securities Portfolio is subject to a $4,900 per month
minimum fee. PFPC has agreed to limit the minimum fee for this Portfolio from
time to time.
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 Large Cap International Portfolio and the DFA International Small Cap Value
Portfolio are each subject to a $75,000 per year minimum fee. PFPC has agreed
to limit the minimum fee for these Portfolios from time to time.
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
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.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 has agreed to limit the minimum fee for this Portfolio from time to
time.
ONE-YEAR FIXED INCOME PORTFOLIO
U.S. 6-10 SMALL COMPANY PORTFOLIO
U.S. LARGE CAP VALUE PORTFOLIO
U.S. SMALL CAP VALUE PORTFOLIO
RWB/DFA INTERNATIONAL HIGH BOOK TO MARKET PORTFOLIO
ENHANCED U.S. LARGE COMPANY PORTFOLIO
DFA TWO-YEAR GLOBAL FIXED INCOME PORTFOLIO
DFA TWO-YEAR CORPORATE FIXED INCOME PORTFOLIO
Charges for each Portfolio:
$1,000 per month (includes custodian fees)
JAPANESE SMALL COMPANY PORTFOLIO
PACIFIC RIM SMALL COMPANY PORTFOLIO
UNITED KINGDOM SMALL COMPANY PORTFOLIO
CONTINENTAL SMALL COMPANY PORTFOLIO
EMERGING MARKETS PORTFOLIO
EMERGING MARKETS SMALL CAP PORTFOLIO
DFA TWO-YEAR GOVERNMENT PORTFOLIO
U.S. LARGE COMPANY PORTFOLIO
Charges for each Portfolio:
$2,600 per month (includes custodian fees)
INTERNATIONAL SMALL COMPANY PORTFOLIO
$2,000 per month (includes custodian fees)
15
<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,
1993, 1994 and 1995, the Portfolios (or their corresponding Series) paid
management fees as set forth in the following table:
1993 1994 1995
(000) (000) (000)
U.S. 9-10 Small Company Portfolio $ 3,149 $3,337 $4,045
U.S. 6-10 Small Company Portfolio $ 127* $ 46* $ 57*
U.S. Large Company Portfolio $ 26 $ 11 $ 19
U.S. Small Cap Value Portfolio $ 94 $ 459* $ 976*
U.S. Large Cap Value Portfolio $ 45 $ 143* $ 306*
DFA Real Estate Securities Portfolios $ 75 $ 138 $ 183
Japanese Small Company Portfolio** $1,127 $1,500 $1,704
Pacific Rim Small Company Portfolio** $ 425 $ 962 $1,020
United Kingdom Small Company Portfolio** $ 826 $1,044 $1,096
Emerging Markets Portfolio n/a $ 6* $ 30*
Continental Small Company Portfolio** $1,149 $1,627 $1,781
Large Cap International Portfolio $ 132 $ 148 $ 147
DFA International Small Cap Value Portfolio n/a n/a $ 299
RWB/DFA International High Book to Market
Portfolio $ 105 $ 536* $ 937*
DFA One-Year Fixed Income Portfolio $ 388 $ 311 $ 310*
DFA Five-Year Government Portfolio $ 256 $ 427 $ 531
DFA Global Fixed Income Portfolio $ 192 $ 311 $ 433
DFA Intermediate Government Fixed Income
Portfolio $ 72 $ 88 $ 102
- ------------------------------
* The Series has more than one Feeder Portfolio; the dollar amount
represents the total dollar amount of management fees paid by the Series to the
Advisor.
** Prior to August 9, 1996, the Fund on behalf of the Portfolio had an
investment management agreement with the Advisor; the dollar amount represents
the dollar amount of investment management fees paid by the Portfolio to the
Advisor.
16
<PAGE>
The Fund commenced offering shares of RWB/DFA International High Book to
Market Portfolio in May, 1993; Emerging Markets Portfolio in April, 1994; DFA
Global Bond and DFA Global Value Portfolios in August, 1994; DFA International
Small Cap Value Portfolio in December, 1994. The Enhanced U.S. Large Company,
DFA Two-Year Corporate Fixed Income, DFA Two-Year Government and DFA Two-Year
Global Fixed Income, International Small Company and Emerging Markets Small Cap
Portfolios had not commenced operations as of November 30, 1995.
Until March, 1992, The DFA Intermediate Fixed Income Portfolio and The DFA
Global Fixed Income Portfolio were named 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 September, 1995, The DFA Intermediate Government Fixed
Income Portfolio was named The DFA Intermediate Government Bond Portfolio. The
DFA Global Fixed Income Portfolio was named The DFA Global Bond Portfolio, The
Pacific Rim Small Company Portfolio was named The Asia-Australia Small Company
Portfolio. The U.S. Large Cap Value Portfolio was named The U.S. Large Cap High
Book to Market Portfolio, The U.S. Small Cap Value Portfolio was named The U.S.
Small Cap High Book to Market Portfolio. Until February, 1996, RWB/DFA
International High Book to Market Portfolio was named DFA International High
Book to Market Portfolio. From September, 1995 until December, 1996, The DFA
Real Estate Securities Portfolio was named DFA/AEW Real Estate Securities
Portfolio.
PRINCIPAL HOLDERS OF SECURITIES
As of November 30, 1996, the following stockholders owned 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* 23.04%
101 Montgomery Street
San Francisco, CA 94104
Pepsico Inc. Master Trust 8.34%
The Northern Trust Company Trustee
P.O. Box 92956
801 South Canal
Chicago, IL 60675
State Farm Insurance Companies 10.12%
One State Farm Plaza
Bloomington, IL 61710
Amoco Corporation Master Trust 8.90%
Employee Pension Plan P94304
P.O. Box 87703
Chicago, IL 60680
Owens-Illinois 5.22%
Master Retirement Trust
34 Exchange Place
Jersey City, NJ 07302
17
<PAGE>
THE U.S. 6-10 SMALL COMPANY PORTFOLIO
Washington University 16.91%
Endowment Fund
P. O. Box 1047
St. Louis, Missouri 63139
The Charles A. Dana Foundation 18.92%
745 5th Avenue, Suite 700
New York, NY 10151
Salvation Army - ETHQ 18.24%
440 W. Nyack Road
West Nyack, NY 10994
Charles Schwab & Company, Inc. - REIN* 13.33%
101 Montgomery Street
San Francisco, CA 94104
Mac & Co.* 6.08%
P.O. Box 3198
Pittsburgh, PA 15230
Northern Telecom Inc. 5.70%
Bankers Trust Co., Trustee
34 Exchange Place
Jersey City, NJ 07302
THE JAPANESE SMALL COMPANY PORTFOLIO
Charles Schwab & Company, Inc. - REIN* 37.96%
101 Montgomery Street
San Francisco, CA 94104
BellSouth Corporation Master Pension Trust 34.84%
1155 Peachtree Street, N.E.
Atlanta, GA 30367
THE UNITED KINGDOM SMALL COMPANY PORTFOLIO
Charles Schwab & Company, Inc.-REIN* 41.38%
101 Montgomery Street
San Francisco, CA 94104
BellSouth Corporation Master Pension Trust 39.33%
1155 Peachtree Street, N.E.
Atlanta, GA 30367
18
<PAGE>
John Deere Pension Fund 5.12%
John Deere Road
Moline, IL 61265
THE CONTINENTAL SMALL COMPANY PORTFOLIO
BellSouth Corporation Master Pension Trust 39.05%
1155 Peachtree Street, N.E.
Atlanta, GA 30367-6000
Charles Schwab & Company, Inc. - REIN* 35.98%
101 Montgomery Street
San Francisco, CA 94104
John Deere Pension Fund 5.92%
John Deere Road
Moline, IL 61265
THE LARGE CAP INTERNATIONAL PORTFOLIO
Charles Schwab & Company, Inc. - REIN* 77.74%
101 Montgomery Street
San Francisco, CA 94104
THE U.S. LARGE COMPANY PORTFOLIO
Charles Schwab & Company, Inc. - REIN* 64.82%
101 Montgomery Street
San Francisco, CA 94104
Charles Schwab & Company, Inc. - CASH* 9.17%
101 Montgomery Street
San Francisco, CA 94104
Donaldson Lufkin & Jenrette Securities Corp.* 8.03%
P.O. Box 2052
Jersey City, NJ 07303
THE DFA ONE-YEAR FIXED INCOME PORTFOLIO
Charles Schwab & Company, Inc. - REIN* 25.20%
101 Montgomery Street
San Francisco, CA 94104
Public School Retirement System 12.89%
P.O. Box 268
Jefferson City, MO 65102
Charles Schwab & Company, Inc. - CASH* 7.55%
101 Montgomery Street
19
<PAGE>
San Francisco, CA 94104
Peoples Energy Corporation Pension Trust 6.06%
130 E. Randolph Dr., 24th Floor
Chicago, IL 60601
THE DFA FIVE-YEAR GOVERNMENT PORTFOLIO
Charles Schwab & Company, Inc. - REIN* 64.61%
101 Montgomery Street
San Francisco, CA 94104
Charles Schwab & Company, Inc. - CASH* 12.21%
101 Montgomery Street
San Francisco, CA 94104
THE DFA GLOBAL FIXED INCOME PORTFOLIO
Charles Schwab & Company, Inc. - REIN* 48.22%
101 Montgomery Street
San Francisco, CA 94104
Charles Schwab & Company, Inc. - CAP* 23.91%
101 Montgomery Street
San Francisco, CA 94104
Charles Schwab & Company, Inc. - CASH* 9.56%
101 Montgomery Street
San Francisco, CA 94104
THE DFA INTERMEDIATE GOVERNMENT FIXED INCOME PORTFOLIO
Charles Schwab & Company, Inc. - CAP* 71.44%
101 Montgomery Street
San Francisco, CA 94104
Charles Schwab & Company, Inc. - REIN* 18.24%
101 Montgomery Street
San Francisco, CA 94104
Charles Schwab & Company, Inc. - CASH* 5.31%
101 Montgomery Street
San Francisco, CA 94104
PACIFIC RIM SMALL COMPANY PORTFOLIO
BellSouth Corporation Master Pension Trust 60.54%
1155 Peachtree Street, N.E.
Atlanta, GA 30367
Charles Schwab & Company, Inc. - REIN* 18.60%
101 Montgomery Street
San Francisco, CA 94104
20
<PAGE>
U.S. LARGE CAP VALUE PORTFOLIO
Charles Schwab & Company, Inc. - REIN* 48.76%
101 Montgomery Street
San Francisco, CA 94104
Charles Schwab & Company, Inc. - CAP* 8.16%
101 Montgomery Street
San Francisco, CA 94104
Charles Schwab & Company, Inc. - CASH* 8.97%
101 Montgomery Street
San Francisco, CA 94104
Donaldson Lufkin & Jenrette Securities Corp.* 5.74%
P.O. Box 2052
Jersey City, NJ 07303
DFA REAL ESTATE SECURITIES PORTFOLIO
Charles Schwab & Company, Inc. - REIN* 41.48%
101 Montgomery Street
San Francisco, CA 94104
Owens-Illinois 32.16%
Master Retirement Trust
34 Exchange Place
Jersey City, NJ 07302
Charles Schwab & Company, Inc. - CASH* 12.01%
101 Montgomery Street
San Francisco, CA 94104
U.S. SMALL CAP VALUE PORTFOLIO
Charles Schwab & Company, Inc. - REIN* 27.03%
101 Montgomery Street
San Francisco, CA 94104
Mac & Co. * 11.63%
P.O. Box 320
Pittsburgh, PA 15230
Charles Schwab & Company, Inc. - CAP* 9.66%
101 Montgomery Street
San Francisco, CA 94104
The United Church Board For Pension Assets Management 5.25%
21
<PAGE>
One Wall Street, 8th Floor
New York, NY 10286
RWB/DFA INTERNATIONAL HIGH BOOK TO MARKET PORTFOLIO
Charles Schwab & Company, Inc. - REIN* 90.44%
101 Montgomery Street
San Francisco, CA 94104
Donaldson Lufkin & Jenrette Securities Corp.* 8.51%
P.O. Box 2052
Jersey City, NJ 07303
EMERGING MARKETS PORTFOLIO
Charles Schwab & Company, Inc. - REIN* 61.50%
101 Montgomery Street
San Francisco, CA 94104
California Institute of Technology 6.99%
Mail Code 212-31
Pasadena, CA 91125
DFA INTERNATIONAL SMALL CAP VALUE PORTFOLIO
Charles Schwab & Company, Inc. - REIN* 54.85%
101 Montgomery Street
San Francisco, CA 94104
BellSouth Corporation Master Pension Trust 30.86%
1155 Peachtree Street, N.E.
Atlanta, GA 30367
DFA TWO-YEAR GLOBAL FIXED INCOME PORTFOLIO
Charles Schwab & Company, Inc. - CAP* 53.50%
101 Montgomery Street
San Francisco, CA 94104
Charles Schwab & Company, Inc. - REIN* 44.16%
101 Montgomery Street
San Francisco, CA 94104
ENHANCED U.S. LARGE COMPANY PORTFOLIO
Charles Schwab & Company, Inc. - CAP* 82.46%
101 Montgomery Street
San Francisco, CA 94104
22
<PAGE>
Charles Schwab & Company, Inc. - REIN* 8.46%
101 Montgomery Street
San Francisco, CA 94104
DFA TWO-YEAR CORPORATE FIXED INCOME PORTFOLIO
Dimensional Fund Advisors Inc. 100%
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
DFA TWO-YEAR GOVERNMENT PORTFOLIO
Dimensional Fund Advisors Inc. 100%
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
INTERNATIONAL SMALL COMPANY PORTFOLIO
San Diego County Employees Retirement Association 77.89%
1495 Pacific Highway
San Diego, CA 92101
Charles Schwab & Company, Inc. - REIN* 11.09%
101 Montgomery Street
San Francisco, CA 94104]
-----------------------
* Owner of record only.
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 1996: January
1, 2, 3 and 15, February 12, March 20, April 29, May 3, 4 and 6, September 16
and 23, October 10, November 4 and 23 and December 23 and 31. 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.
23
<PAGE>
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."
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 NYSE is
restricted as determined by the SEC, (2) during any period when an emergency
exists as defined by the rules of the SEC 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 SEC 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, DFA Two-Year
Global Fixed Income and The DFA Global Fixed Income Portfolios reserve the right
to redeem their shares in the currencies in which their investments (and, in
respect of the Feeder Portfolios and International Small Company Portfolio, the
currencies in which the corresponding Series' 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 May 31, 1996 (as applicable) using the
standardized method of calculation required by the SEC, which is net of the cost
of any current reimbursement fees charged to investors and paid to the
Portfolios. Also included is a quotation of the annualized percentage total
return for the Enhanced U.S. Large Company Portfolio for the period from July 3,
1996 (date of commencement of operations) to October 31, 1996 using the
standardized method of calculation required by the SEC. Reimbursement fees of
1%, 1.5% and 1.5% were in effect from the inception of the Japanese, United
Kingdom and Continental Small Company Portfolios, respectively, until June 30,
1995. A reimbursement fee of 1% was in effect from the inception of DFA
International Small Cap Value Portfolio until June 30, 1995. Effective June 30,
1995, the amount of the reimbursement fee was reduced with respect to
Continental Small
24
<PAGE>
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 current 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, Pacific Rim Small Company
and Emerging Markets Small Cap Portfolios -1.00%; Japanese Small Company and
Emerging Markets Portfolios -.50%; DFA International Small Cap Value Portfolio
- - .70%; and International Small Company Portfolio - .675%.
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).
<TABLE>
<CAPTION>
ONE YEAR FIVE YEARS TEN YEARS
-------- ---------- ---------
<S> <C> <C> <C>
U.S. 9-10 Small Company Portfolio 46.25 22.70 12.42
U.S. 6-10 Small Company Portfolio 38.53 51 Months n/a
19.01
U.S. Large Company Portfolio 27.99 14.25 65 months
16.88
U.S. Small Cap Value Portfolio 31.35 39 Months n/a
17.74
U.S. Large Cap Value Portfolio 29.01 40 Months n/a
15.67
Enhanced U.S. Large Company Portfolio 3 Months n/a n/a
49.38
DFA DFA/AEW Real Estate Securities Portfolio 14.68 41 Months n/a
6.44
Japanese Small Company Portfolio 18.57 1.12 11.69
Pacific Rim Small Company Portfolio 17.69 41 Months n/a
20.39
United Kingdom Small Company Portfolio 17.01 10.39 10.49
Emerging Markets Portfolio 6.97 25 Months n/a
8.45
Continental Small Company Portfolio 2.46 4.01 97.5 Months
8.66
Large Cap International Portfolio 10.59 58 Months n/a
</TABLE>
25
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
9.98
RWB/DFA International High Book to 13.65 36 Months n/a
Market Portfolio 11.34
DFA One-Year Fixed Income Portfolio 5.56 5.45 6.79
DFA Five-Year Government Portfolio 5.69 6.77 108 Months
7.62
DFA Global Fixed Income Portfolio 9.35 8.03 66 Months
8.10
DFA Intermediate Government Fixed 3.19 8.14 67 Months
Income Portfolio 8.86
DFA International Small Cap Value Portfolio 8.85 17 months n/a
7.44
DFA Two-Year Global Fixed Income Portfolio 2 months n/a n/a
6.00
</TABLE>
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 May 31, 1996 (as applicable) using a
non-standardized method of calculation which is used in communicating
performance data in addition to the standardized method required by the SEC.
Also included is a quotation of the annualized percentage total return for the
Enhanced U.S. Large Company Portfolio for the period from July 3, 1996 (date of
commencement of operations) to October 31, 1996 using a non-standardized method
of calculation. 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
26
<PAGE>
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 corresponding Series 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 Series.
<TABLE>
<CAPTION>
Effective Date/
Initial Investment One Year Five Years Ten Years
------------------ -------- ---------- ---------
<S> <C> <C> <C> <C>
U.S. 9-10 SMALL COMPANY PORTFOLIO 12/22/81 46.25 22.70 12.42
12/22/81
U.S. 6-10 SMALL COMPANY PORTFOLIO 03/06/92 38.53 17.87 10.80
03/20/92
U.S. LARGE COMPANY PORTFOLIO 02/26/90 27.99 14.25 13.76
12/31/90
U.S. SMALL CAP VALUE PORTFOLIO 09/18/92 31.35 21.14 14.11
03/01/93
U.S. LARGE CAP VALUE PORTFOLIO 09/18/92 29.01 18.20 15.28
02/18/93
ENHANCED U.S. LARGE COMPANY
PORTFOLIO 02/08/96 23.73 n/a n/a
07/03/96
DFA REAL ESTATE SECURITIES
PORTFOLIO 09/18/92 14.68 10.95 4.53
01/05/93
JAPANESE SMALL COMPANY PORTFOLIO
Dollar return
Local currency return 01/14/86 19.77 1.32 11.81
01/31/86 52.62 (3.57) 6.57
PACIFIC RIM SMALL COMPANY
PORTFOLIO 04/02/91 17.69 41 Months n/a
01/04/93 20.39
UNITED KINGDOM SMALL COMPANY
PORTFOLIO
Dollar return
Local currency return 01/14/86 18.80 10.72 10.66
03/04/86 21.93 12.83 10.12
EMERGING MARKETS PORTFOLIO 04/01/94 8.60 18.52 101 months
04/22/94 12.30
CONTINENTAL SMALL COMPANY
PORTFOLIO
Dollar return 04/15/88 4.02 4.32 97.5 Mos.
04/15/88 8.66
LARGE CAP INTERNATIONAL PORTFOLIO 04/02/91 10.59 58 Months n/a
07/18/91 9.98
DFA INTERNATIONAL HIGH BOOK
TO MARKET PORTFOLIO 05/14/93 13.65 36 Months 17.18
06/10/93 13.20
</TABLE>
27
<PAGE>
<TABLE>
<CAPTION>
EFFECTIVE DATE/
INITIAL INVESTMENT ONE YEAR FIVE YEARS TEN YEARS
------------------ -------- ---------- ---------
<S> <C> <C> <C> <C>
DFA ONE-YEAR FIXED INCOME
PORTFOLIO 06/05/83 5.56 5.45 6.79
07/27/83
DFA FIVE-YEAR GOVERNMENT
PORTFOLIO 05/13/87 5.69 6.77 7.85
05/13/87
DFA GLOBAL FIXED INCOME PORTFOLIO 09/24/90 9.35 8.03 66 Months
11/06/90 8.10
DFA INTERMEDIATE GOVERNMENT
FIXED INCOME PORTFOLIO 09/24/90 3.19 8.14 67 Months
10/22/90 8.86
DFA INTERNATIONAL SMALL CAP VALUE
PORTFOLIO 12/20/94
12/30/94 8.85 17 Months n/a
7.44
DFA TWO-YEAR GLOBAL
FIXED INCOME PORTFOLIO 02/08/96
02/09/96 2 Months n/a n/a
6.00
</TABLE>
The Portfolios may compare their investment performance to appropriate
market and mutual fund indices and investments for which reliable performance
data is available. Such indices are generally unmanaged and are prepared by
entities and organizations which track the performance of investment companies
or investment advisors. Unmanaged indices often do not reflect deductions for
administrative and management costs and expenses. The performance of the
Portfolios may also be compared in publications to averages, performance
rankings, or other information prepared by recognized mutual fund statistical
services. Any performance information, whether related to the Portfolios or to
the Advisor, should be considered in light of a Portfolio's investment
objectives and policies, characteristics and the quality of the portfolio and
market conditions during the time period indicated and should not be considered
to be representative of what may be achieved in the future.
FINANCIAL STATEMENTS
The audited financial statements and financial highlights of the Fund for
its fiscal year ended November 30, 1995, 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
Enhanced U.S. Large Company, DFA Two-Year Corporate Fixed Income, DFA Two-Year
Global Fixed Income, DFA Two-Year Government, International Small Company and
Emerging Markets Small Cap Portfolios because such Portfolios had not commenced
operations as of November 30, 1995.
The audited financial statements of 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,
RWB/DFA International High Book
28
<PAGE>
to Market and Emerging Markets Series of the Trust for the fiscal year ended
November 30, 1995, as set forth in the Trust's Annual Report to shareholders,
are incorporated herein by reference.
The unaudited financial statements and financial highlights of the Fund for
the six months ended May 31, 1996, as set forth in the Fund's Semi-Annual Report
to stockholders, are incorporated herein by reference. The unaudited financial
statements of 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 Two-Year Global
Fixed Income, DFA International Value and Emerging Markets Series of the Trust
for the six months ended May 31, 1996, as set forth in the Trust's Semi-Annual
Report to shareholders, are incorporated herein by reference. The unaudited
Semi-Annual Reports do not contain any data regarding Enhanced U.S. Large
Company, DFA Two-Year Corporate Fixed Income, DFA Two-Year Government,
International Small Company and Emerging Markets Small Cap Portfolios
and/or Series, as relevant, because such Portfolios and/or Series had not
commenced operations as of May 31, 1996.
The unaudited financial statements and financial highlights of Enhanced U.S.
Large Company Portfolio, and its corresponding Series of the Trust, for the
period from July 3, 1996 (date of commencement of operations) to October 31,
1996, are set forth on the following pages of this Statement of Additional
Information.
An audited balance sheet dated December 2, 1996, and the report of Coopers
& Lybrand L.L.P., covering such balance sheet for each of Emerging Markets Small
Cap Portfolio and Series, is set forth on the following pages of this Statement
of Additional Information.
A shareholder may obtain a copy of the reports, 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.
29
<PAGE>
DFA INVESTMENT DIMENSIONS GROUP INC.
THE ENHANCED U.S. LARGE COMPANY PORTFOLIO
Period Ended October 31, 1996
(Unaudited)
<PAGE>
DFA Investment Dimensions Group Inc.
The Enhanced U.S. Large Company Portfolio
(Unaudited)
Table of Contents
Page
DFA Investment Dimensions Group Inc.
Statement of Assets and Liabilities. . . . . . . . . . . . . 1
Statement of Operations. . . . . . . . . . . . . . . . . . . 2
Statement of Changes in Net Assets . . . . . . . . . . . . . 3
Financial Highlights . . . . . . . . . . . . . . . . . . . . 4
Notes to Financial Statements. . . . . . . . . . . . . . . . 5-6
The DFA Investment Trust Company - The Enhanced U.S. Large Company Series
Statement of Net Assets. . . . . . . . . . . . . . . . . . . 7-11
Statement of Operations. . . . . . . . . . . . . . . . . . . 12
Statement of Changes in Net Assets . . . . . . . . . . . . . 13
Financial Highlights . . . . . . . . . . . . . . . . . . . . 14
Notes to Financial Statements. . . . . . . . . . . . . . . . 15-18
This report is submitted for the information of the Fund's
shareholders. It is not authorized for distribution to
prospective investors unless preceded or accompanied
by an effective prospectus.
<PAGE>
DFA INVESTMENT DIMENSIONS GROUP INC.
THE ENHANCED U.S. LARGE COMPANY PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1996
(Unaudited)
(Amounts in thousands, except share amounts)
ASSETS:
Investment in The Enhanced U.S. Large Company Series
of The DFA Investment Trust Company
(2,372,314 Shares, Cost $23,817) at Value. . . . . . . . . $26,232
Prepaid Expenses and Other Assets. . . . . . . . . . . . . . 26
----------
Total Assets. . . . . . . . . . . . . . . . . . . . . . 26,258
----------
LIABILITIES:
Accrued Expenses . . . . . . . . . . . . . . . . . . . . . . 7
----------
Net Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . $26,251
----------
SHARES OUTSTANDING, $.01 PAR VALUE
(Authorized 100,000,000). . . . . . . . . . . . . . . . . . . . 2,386,108
Net Asset Value, Offering and Redemption Price Per Share . . . . $11.00
NET ASSETS CONSIST OF:
Paid-In Capital. . . . . . . . . . . . . . . . . . . . . . . 23,861
Accumulated Net Investment Loss. . . . . . . . . . . . . . . (25)
Unrealized Appreciation of Investment Securities . . . . . . 2,415
----------
Total Net Assets . . . . . . . . . . . . . . . . . . . $26,251
----------
See accompanying Notes to Financial Statements
<PAGE>
DFA INVESTMENT DIMENSIONS GROUP INC.
THE ENHANCED U.S. LARGE COMPANY PORTFOLIO
STATEMENT OF OPERATIONS
FOR THE PERIOD JULY 3, 1996
(commencement of operations)
TO OCTOBER 31, 1996
(Unaudited)
(Amounts in thousands)
Investment Income
Income Distributions Received. . . . . . . . . . . . . . . . $ -
-------
Expenses
Administrative Services. . . . . . . . . . . . . . . . . . . 10
Accounting & Transfer Agent Fees . . . . . . . . . . . . . . 6
Legal Fees . . . . . . . . . . . . . . . . . . . . . . . . . 1
Audit Fees . . . . . . . . . . . . . . . . . . . . . . . . . 1
Filing Fees. . . . . . . . . . . . . . . . . . . . . . . . . 5
Shareholders Reports . . . . . . . . . . . . . . . . . . . . 1
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
-------
was $23,773,275 which resulted in an unrealized gain of
$1,630,700.
Risks may arise upon entering into futures contracts from potential imperfect
price correlations between the futures contracts and the underlying securities
and from the possibility of an illiquid secondary market for these instruments.
4. EQUITY INDEX SWAPS - The Series may enter into equity index swaps in
accordance with its investment objectives. A swap agreement obligates two
parties to exchange returns realized on a notional amount agreed upon by both
parties. The obligations of the parties are calculated on a net basis based on
the daily fluctuations in the indices on which the contract is based. The daily
net fluctuation is recorded as unrealized gains or losses by the Series. At the
termination of the agreement, the Series will receive from or pay to the counter
party, the accumulated net unrealized gain or loss, which will then be recorded
as realized.
At October 31, 1996, the Series had an outstanding equity index swap with Morgan
Stanley, dated July 15, 1996 (which represents approximately 8% of the net
assets of the Series), terminating on January 15, 1997. The notional value of
the swap was $2,000,000 and the Series had recorded unrealized appreciation of
$219,775 consisting of $33,426 owed to Morgan Stanley and $253,201 owed to the
Series. Payments made by the Series are based on the London Interbank Offered
Rate (LIBOR) plus 0.10% per annum calculated on the original notional amount
plus accumulated interest added on the monthly LIBOR reset date. Payments
received by the Series are based on the daily value of the S & P 500 Index plus
accumulated dividends as expressed in Index points calculated on the original
notional amount.
Risks may arise upon entering equity index swaps in the event of the default or
bankruptcy of a swap agreement counter party.
1
<PAGE>
DFA INVESTMENT DIMENSIONS GROUP INC.
THE EMERGING MARKETS SMALL CAP PORTFOLIO
--
DECEMBER 2, 1996
2
<PAGE>
DFA INVESTMENT DIMENSIONS GROUP INC.
The Emerging Markets Small Cap Portfolio
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 2, 1996
ASSETS:
Investments in The Emerging Markets Small Cap Series
of The DFA Investment Trust Company
(Cost $1,000) at Value . . . . . . . . . . . . . . . . . . $ 1,000
Deferred Organization Costs. . . . . . . . . . . . . . . . . 4,980
--------
Total Assets. . . . . . . . . . . . . . . . . . . . . . . 5,980
--------
LIABILITIES:
Organization Costs Payable . . . . . . . . . . . . . . . . . 4,980
Reimbursement Fee. . . . . . . . . . . . . . . . . . . . . . 10
--------
Total Liabilities . . . . . . . . . . . . . . . . . . . . 4,990
--------
Net Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 990
--------
--------
SHARES OUTSTANDING, $.01 PAR VALUE
(Authorized 100,000,000). . . . . . . . . . . . . . . . . . . . 99
Net Asset Value and Redemption Price Per Share . . . . . . . . . $ 10.00
--------
--------
Public Offering Price Per Share. . . . . . . . . . . . . . . . . $ 10.10
--------
--------
See accompanying Notes to Statement of Assets and Liabilities
3
<PAGE>
DFA INVESTMENT DIMENSIONS GROUP INC.
NOTES TO STATEMENT OF ASSETS AND LIABILITIES
A. Organization:
At December 2, 1996, DFA Investment Dimensions Group Inc. (the "Fund")
consisted of thirty portfolios: The U.S. 9-10 Small Company Portfolio, The U.S.
6-10 Small Company Portfolio, The U.S. Large Company Portfolio, The Enhanced
U.S. Large Company Portfolio, The U.S. Small Cap Value Portfolio, The U.S. Large
Cap Value Portfolio, The DFA/AEW Real Estate Securities Portfolio, The Japanese
Small Company Portfolio, The Pacific Rim Small Company Portfolio, The United
Kingdom Small Company Portfolio, The Continental Small Company Portfolio, The
International Small Company Portfolio, The RWB/DFA International High Book to
Market Portfolio, The Emerging Markets Portfolio, The Emerging Markets Small Cap
Portfolio. The Large Cap International Portfolio, The DFA International Small
Cap Value Portfolio, The DFA Intermediate Government Fixed Income Portfolio, The
DFA One-Year Fixed Income Portfolio, The DFA Two-Year Corporate Fixed Income
Portfolio, The DFA Two-Year Government Portfolio, The DFA Five-Year Government
Portfolio, The DFA Two-Year Global Fixed Income Portfolio, The DFA Global Fixed
Income Portfolio (the "Portfolios"), and VA Small Value Portfolio, VA Large
Value Portfolio, VA International Value Portfolio, VA International Small
Portfolio, VA Short-Term Fixed Portfolio and VA Global Bond Portfolio (the "VA
Portfolios"). The VA Portfolios are only available through a selected group of
insurance products. At December 2, 1996, The DFA Two-Year Corporate Fixed
Income Portfolio and The DFA Two-Year Government Portfolio had not yet commenced
operations. These financial statements relate solely to The Emerging Markets
Small Cap Portfolio (the "Portfolio").
The Portfolio has not yet commenced operations except those related to
organizational matters and the sale of 99 shares to Dimensional Fund Advisors,
Inc. (the "Advisor") on December 2, 1996.
The Portfolio invests all of its assets in The Emerging Markets Small Cap
Series (the "Series"), a corresponding series of The DFA Investment Trust
Company. At December 2, 1996, The Portfolio owned approximately 1% of the net
assets of The Series. The financial statements of the Series are included
elsewhere in this report and should be read in conjunction with the financial
statements of the Portfolio.
Certain officers of the Portfolio are also officers, directors and
shareholders of the Advisor.
B. Significant Accounting Policies:
The following significant accounting policies are in conformity with
generally accepted accounting principles for investment companies. Such
policies are consistently followed by the Fund in preparation of its financial
statements. The preparation of financial statements in accordance with
generally accepted accounting principles may require management to make
estimates and assumptions that affect the reported amounts and disclosures in
the financial statements. Actual results could differ from those estimates.
1. Security Valuation: The Portfolio's investment in the Series is
valued based on its proportionate interest in the net assets of the Series.
2. Organization Costs: Organization costs have been capitalized by the
Portfolio and are being amortized over sixty months commencing with operations.
In the event any of the initial shares of the Portfolio are redeemed by any
holder thereof during the period that the Portfolio is amortizing its
organization costs, the redemption proceeds payable to the holder thereof by the
Portfolio will be reduced by the unamortized organization costs in the same
ratio as the number of
5
<PAGE>
initial shares being redeemed bears to the number of initial shares outstanding
at the time of redemption.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Directors
of DFA Investment Dimensions Group Inc. - The Emerging Markets Small Cap
Portfolio:
We have audited the accompanying Statement of Assets and Liabilities of DFA
Investment Dimensions Group Inc. - The Emerging Markets Small Cap Portfolio as
of December 2, 1996. This financial statement is the responsibility of the
Portfolio's management. Our responsibility is to express an opinion on this
financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statement. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statement referred to above presents fairly, in
all material respects, the financial position of DFA Investment Dimensions
Group, Inc. - The Emerging Markets Small Cap Portfolio as of December 2, 1996 in
conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
2400 Eleven Penn Center
Philadelphia, Pennsylvania
December 5, 1996
<PAGE>
THE DFA INVESTMENT TRUST COMPANY
The Emerging Markets Small Cap Series
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 2, 1996
ASSETS:
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . $12,501,000
Receivable for Partnership Contribution. . . . . . . . . . . 92,500
Deferred Organization Costs. . . . . . . . . . . . . . . . . 5,520
-----------
Total Assets. . . . . . . . . . . . . . . . . . . . . . 12,599,020
-----------
LIABILITIES:
Organization Costs Payable . . . . . . . . . . . . . . . . . 5,520
Reimbursement Fee. . . . . . . . . . . . . . . . . . . . . . 124,688
-----------
Total Liabilities . . . . . . . . . . . . . . . . . . . 130,208
-----------
Net Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . $12,468,812
-----------
-----------
See accompanying Notes to Statement of Assets and Liabilities
6
<PAGE>
THE DFA INVESTMENT TRUST COMPANY
NOTES TO STATEMENT OF ASSETS AND LIABILITIES
A. Organization:
The DFA Investment Trust Company (the "Trust") is an open-end management
investment company registered under the Investment Company Act of 1940. At
December 2, 1996, The Trust consisted of sixteen investment portfolios: The U.S.
6-10 Small Company Series, The U.S. Large Company Series, The Enhanced U.S.
Large Company Series, The U.S. Small Cap Value Series, The U.S. Large Cap Value
Series, The DFA One-Year Fixed Income Series, The DFA Two-Year Corporate Fixed
Income Series, The DFA Two-Year Government Series, The DFA International Value
Series, The Japanese Small Company Series, The Pacific Rim Small Company Series,
The United Kingdom Small Company Series, The Continental Small Company Series,
The Emerging Markets Series, The Emerging Markets Small Cap Series and The DFA
Two-Year Global Fixed Income Series. These financial statements relate solely
to The Emerging Markets Small Cap Series (the "Series").
The Emerging Markets Small Cap Portfolio invests solely in the Series.
The Series also issues its shares to other investors.
Certain officers of the Series are also officers, directors and
shareholders of the Advisor.
B. Significant Accounting Policies:
The following significant accounting policies are in conformity with
generally accepted accounting principles for investment companies. Such
policies are consistently followed by the Trust in preparation of its financial
statements. The preparation of financial statements in accordance with
generally accepted accounting principles may require management to make
estimates and assumptions that affect the reported amounts and disclosures in
the financial statements. Actual results could differ from those estimates.
1. Organization Costs: Organization costs have been capitalized by the
Series and are being amortized over sixty months commencing with operations. In
the event any of the partners' equity is withdrawn by any holder thereof during
the period that the Series is amortizing its organization costs, the proceeds
payable to the holder thereof by the Series will be reduced by the unamortized
organization costs in the same ratio as the value of the initial contribution
being withdrawn bears to the value of the initial contribution at the time of
redemption.
7
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Directors
of The DFA Investment Trust Company - The Emerging Markets Small Cap Series:
We have audited the accompanying Statement of Assets and Liabilities of The DFA
Investment Trust Company - The Emerging Markets Small Cap Series as of December
2, 1996. This financial statement is the responsibility of the Series'
management. Our responsibility is to express an opinion on this financial
statement based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statement. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statement referred to above presents fairly, in
all material respects, the financial position of The DFA Investment Trust
Company - The Emerging Markets Small Cap Series as of December 2, 1996 in
conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
2400 Eleven Penn Center
Philadelphia, Pennsylvania
December 5, 1996
8
<PAGE>
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.
(a) FINANCIAL STATEMENTS.
PART A: Financial Highlights for each Series of shares of the
Registrant.
PART B: (1) Statement of Net Assets+
(2) Statement of Operations+
(3) Statement of Changes in Net Assets+
(4) Financial Highlights+
(5) Report of Coopers & Lybrand L.L.P.,
independent accountants, dated January 19, 1996+
(6) Notes to Financial Statements+
(b) EXHIBITS.
(1) Articles of Incorporation.
(a) Articles of Restatement dated August 8, 1995
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment No. 37 to the
Registration Statement of the Registrant on Form N-1A
File Nos.: 2-73948 and 811-3258
Filing Date: November 22, 1995.
(b) Articles of Amendment dated December 21, 1995.
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment No. 39 to the
Registration Statement of the Registrant on Form N-1A
File Nos.: 2-73948 and 811-3258
Filing Date: January 30, 1996.
(c) Articles Supplementary dated December 21, 1995
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment No. 39 to the
Registration Statement of the Registrant on Form N-1A
File Nos.: 2-73948 and 811-3258
Filing Date: January 30, 1996.
<PAGE>
(d) Articles Supplementary dated May 14, 1996
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment No. 41 to the
Registration Statement of the Registrant on Form N-1A
File Nos.: 2-73948 and 811-3258
Filing Date: May 24, 1996.
(e) Articles Supplementary dated October 18, 1996 re: the
Emerging Markets Small Cap Portfolio of the Registrant
are attached hereto as Exhibit 24(b)(1)(e).
(f) Articles of Amendment dated December 20, 1996 re: the
change in name of the DFA/AEW Real Estate Securities
Portfolio of the Registrant are attached hereto as
Exhibit 24(b)(1)(f).
(2) By-Laws of the Registrant, as approved through October 17, 1996,
are attached hereto as Exhibit 24(b)(2).
(3) None.
(4) (a) See Articles Fifth, Sixth, Eighth and Thirteenth of the
Registrant's Articles of Restatement dated August 8, 1995.
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment No. 43 to the Registration
Statement of the Registrant on Form N-1A
File Nos.: 2-73948 and 811-3258
Filing Date: October 4, 1996.
(b) Specimen Securities of the Registrant on behalf of the:
(1) Japanese Small Company Portfolio**.
(2) United Kingdom Small Company Portfolio**.
(3) U.S. 9-10 Small Company Portfolio**.
(4) DFA Five-Year Government Portfolio**.
(5) Continental Small Company Portfolio**.
(6) U.S. Large Company Portfolio**.
(7) DFA Global Bond Portfolio**.
C-2
<PAGE>
(8) DFA Intermediate Government Bond Portfolio**.
(9) Pacific Rim Small Company Portfolio (formerly the Asia-
Australia Small Company Portfolio)**.
(10) Large Company International Portfolio**.
(11) U.S. 6-10 Small Company Portfolio**.
(12) DFA Real Estate Securities Portfolio (formerly the
DFA/AEW Real Estate Securities Portfolio)**.
(13) U.S. Large Cap High Book to Market Portfolio**.
(14) U.S. Small Cap High Book to Market Portfolio**.
(15) RWB/DFA International High Book to Market Portfolio
(formerly the DFA International High Book to Market
Portfolio and the Reinhardt Werba Bowen International
Large Stock Portfolio)**.
(16) Emerging Markets Portfolio**.
(17) DFA Global Value Portfolio**.
(18) DFA Global Bond Portfolio**.
(19) DFA International Small Cap Value Portfolio**.
(20) VA Small Value Portfolio.
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment No. 33 to the
Registration Statement of the Registrant on Form N-1A
File Nos.: 2-73948 and 811-3258
Filing Date: June 19, 1995.
(21) VA International Value Portfolio.
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment No. 33 to the
Registration Statement of the Registrant on Form N-1A
File Nos.: 2-73948 and 811-3258
Filing Date: June 19, 1995.
C-3
<PAGE>
(22) VA International Small Portfolio.
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment No. 33 to the
Registration Statement of the Registrant on Form N-1A
File Nos.: 2-73948 and 811-3258
Filing Date: June 19, 1995.
(23) VA Short-Term Fixed Portfolio.
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment No. 33 to the
Registration Statement of the Registrant on Form N-1A
File Nos.: 2-73948 and 811-3258
Filing Date: June 19, 1995.
(24) DFA Two-Year Global Fixed Income Portfolio.
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment No. 37 to the
Registration Statement of the Registrant on Form N-1A
File Nos.: 2-73948 and 811-3258
Filing Date: November 22, 1995.
(25) Enhanced U.S. Large Company Portfolio.
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment No. 37 to the
Registration Statement of the Registrant on Form N-1A
File Nos.: 2-73948 and 811-3258
Filing Date: November 22, 1995.
(26) DFA Two-Year Corporate Fixed Income Portfolio.
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment No. 37 to the
Registration Statement of the Registrant on Form N-1A
File Nos.: 2-73948 and 811-3258
Filing Date: November 22, 1995.
(27) DFA Two-Year Government Portfolio.
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment No. 37 to the
Registration Statement of the Registrant on Form N-1A
File Nos.: 2-73948 and 811-3258
Filing Date: November 22, 1995.
C-4
<PAGE>
(28) International Small Company Portfolio.
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment No. 41 to the
Registration Statement of the Registrant on Form N-1A
File Nos.: 2-73948 and 811-3258
Filing Date: May 24, 1996.
(5) (a) Investment Advisory Agreements:
(1) Re: the U.S. 9-10 Small Company Portfolio**.
(2) Re: the Japanese Small Company Portfolio**.
(3) Re: the United Kingdom Portfolio**.
(4) Re: the DFA Five-Year Government Portfolio**.
(5) Re: the Continental Small Company Portfolio**.
(6) Form of re: the U.S. Large Company Portfolio**.
(7) Form of re: the DFA Global Bond Portfolio**.
(8) Form of re: the DFA Intermediate Government Bond
Portfolio**.
(9) Form of re: the Pacific Rim Small Company Portfolio
(formerly the Asia-Australia Small Company
Portfolio)**.
(10) Form of re: the Large Cap International Portfolio**.
(11) Form of re: the U.S. 6-10 Small Company Portfolio**.
(12) Re: the U.S. Large Cap High Book to Market Portfolio**.
(13) Form of re: the U.S. Small Cap High Book to Market
Portfolio**.
(14) Form of re: the DFA Real Estate Securities Portfolio
(formerly the DFA/AEW Real Estate Securities
Portfolio)**.
C-5
<PAGE>
(15) Form of re: the RWB/DFA International High Book to
Market Portfolio (formerly the DFA International High
Book to Market Portfolio and the Reinhardt Werba Bowen
International Large Stock Portfolio)**.
(16) Form of re: the VA Large Value Portfolio (formerly the
DFA Global Value Portfolio).
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment No. 33 to the
Registration Statement of the Registrant on Form N-1A
File Nos.: 2-73948 and 811-3258
Filing Date: June 19, 1995.
(17) Form of re: the DFA Global Bond Portfolio**.
(18) Form of re: the DFA International Small Cap Value
Portfolio**.
(19) Form of re: the VA Small Value Portfolio.
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment No. 33 to the
Registration Statement of the Registrant on Form N-1A
File Nos.: 2-73948 and 811-3258
Filing Date: June 19, 1995.
(20) Form of re: the VA International Value Portfolio.
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment No. 33 to the
Registration Statement of the Registrant on Form N-1A
File Nos.: 2-73948 and 811-3258
Filing Date: June 19, 1995.
(21) Form of re: the VA International Small Portfolio.
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment No. 33 to the
Registration Statement of the Registrant on Form N-1A
File Nos.: 2-73948 and 811-3258
Filing Date: June 19, 1995.
C-6
<PAGE>
(22) Form of re: the VA Short-Term Fixed Portfolio.
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment No. 33 to the
Registration Statement of the Registrant on Form N-1A
File Nos.: 2-73948 and 811-3258
Filing Date: June 19, 1995.
(23) Form of re: the International Small Company Portfolio
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment No. 41 to the
Registration Statement of the Registrant on Form N-1A
File Nos.: 2-73948 and 811-3258
Filing Date: May 24, 1996.
(b) Sub-Advisory Agreements:
(1) Re: the Japanese Small Company Portfolio**.
(2) Form of re: the Continental Small Company Portfolio**.
(3) Form of re: the United Kingdom Small Company
Portfolio**.
(4) Form of between the Registrant and Dimensional Fund
Advisers Asia Inc. re: the Japanese Small Company
Portfolio**.
(5) Form of re: the Pacific Rim Small Company Portfolio**.
(6) Between the Registrant and DFA Australia Pty Limited
re: the VA International Small Portfolio.
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment No. 37 to the
Registration Statement of the Registrant on Form N-1A
File Nos.: 2-73948 and 811-3258
Filing Date: November 22, 1995.
(7) Between the Registrant and Dimensional Fund Advisors
Ltd. re: the VA International Small Portfolio.
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment No. 37 to the
Registration Statement of the Registrant on Form N-1A
C-7
<PAGE>
File Nos.: 2-73948 and 811-3258
Filing Date: November 22, 1995.
(6) Agreement with DFA Securities Inc.**.
(7) None.
(8) (a) Custody Agreement between the Registrant and Boston Safe
Deposit and Trust Company.
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment No. 33 to the Registration
Statement of the Registrant on Form N-1A
File Nos.: 2-73948 and 811-3258
Filing Date: June 19, 1995.
(1) Amendment to Custody Agreement with Mellon Trust
(formerly the Boston Safe Deposit and Trust Company)
re: the RWB/DFA International High Book to Market
Portfolio (formerly the DFA International High Book to
Market Portfolio).
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment No. 33 to the
Registration Statement of the Registrant on Form N-1A
File Nos.: 2-73948 and 811-3258
Filing Date: June 19, 1995.
(2) Amendment to Custody Agreement with Mellon Trust
(formerly the Boston Safe Deposit and Trust Company)
re: the DFA International Small Cap Value Portfolio.
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment No. 33 to the
Registration Statement of the Registrant on Form N-1A
File Nos.: 2-73948 and 811-3258
Filing Date: June 19, 1995.
(3) Form of Amendment to Custody Agreement with Mellon
Trust (formerly Boston Safe Deposit and Trust Company)
re: the VA International Small Portfolio and VA
International Value Portfolio.
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment No. 33 to the
Registration Statement of the Registrant on Form N-1A
File Nos.: 2-73948 and 811-3258
Filing Date: June 19, 1995.
C-8
<PAGE>
(4) Form of Amendment to Custody Agreement with Mellon
Trust (formerly Boston Safe Deposit and Trust Company)
re: DFA Two-Year Global Fixed Income Portfolio.
INCORPORATED HEREIN BY REFERENCE TO:
Filing: No. 37 to the Registration Statement of the
Registrant on Form N-1A
File Nos.: 2-73948 and 811-3258
Filing Date: November 22, 1995.
(5) Form of Amendment to Custody Agreement with Mellon
Trust (formerly Boston Safe Deposit and Trust Company)
re: International Small Company Portfolio.
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment No. 41 to the
Registration Statement of the Registrant on Form N-1A
File Nos.: 2-73948 and 811-3258
Filing Date: May 24, 1996.
(6) FORM OF CUSTODY AGREEMENT WITH CHASE MANHATTAN BANK RE:
THE EMERGING MARKETS SMALL CAP PORTFOLIO OF THE
REGISTRANT IS ATTACHED HERETO AS EXHIBIT
24(b)(8)(a)(6).
(b) Form of Custodian Agreement between the DFA Investment
Dimensions Group Inc. and Provident National Bank re: the
U.S. 9-10 Small Company Portfolio, the U.S. Large Company
Portfolio, the DFA One-Year Fixed Income Portfolio, the DFA
Intermediate Government Bond Portfolio, and the DFA Five-
Year Government Portfolio**.
(1) Amendment Number One**.
(2) Amendment Number Two**.
(3) Form of Amendment Number Three**.
(4) Form of Amendment Number Four**.
(5) Form of Amendment Number Five.
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment No. 33 to the
Registration Statement of the Registrant on Form N-1A
File Nos.: 2-73948 and 811-3258
Filing Date: June 19, 1995.
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<PAGE>
(6) Form of Amendment Number Six.
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment No. 37 to the
Registration Statement of the Registrant on Form N-1A
File Nos.: 2-73948 and 811-3258
Filing Date: November 22, 1995.
(9) (a) Transfer Agency Agreement between the Registrant and PFPC
Inc. (formerly Provident Financial Processing
Corporation)**.
(1) Amendment Number One**.
(2) Amendment Number Two**.
(3) Form of Amendment Number Three**.
(4) Form of Amendment Number Four**.
(5) Form of Amendment Number Five**.
(6) Form of Amendment Number Six*.
(7) Form of Amendment Number Seven*.
(8) Form of Amendment Number Eight*.
(9) Form of Amendment Number Nine*.
(10) Form of Amendment Number Ten.
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment No. 33 to the
Registration Statement of the Registrant on Form N-1A
File Nos.: 2-73948 and 811-3258
Filing Date: June 19, 1995.
(11) Form of Amendment Number Eleven.
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment No. 37 to the
Registration Statement of the Registrant on Form N-1A
File Nos.: 2-73948 and 811-3258
Filing Date: November 22, 1995.
(12) Form of Amendment Number Twelve.
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post Effective Amendment No. 41 to the
Registration Statement of the Registrant on Form N-1A
Filing Nos.: 2-73948 and 811-3258
Filing Date: May 24, 1996.
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<PAGE>
(13) AMENDMENT NUMBER THIRTEEN DATED DECEMBER 19, 1996 RE:
THE EMERGING MARKETS SMALL CAP PORTFOLIO OF THE
REGISTRANT IS ATTACHED HERETO AS EXHIBIT
24(b)(9)(a)(13).
(b) Administration and Accounting Services Agreement between the
Registrant and PFPC Inc. (formerly Provident Financial
Processing Corporation)**.
(1) Amendment Number One**.
(2) Amendment Number Two**.
(3) Form of Amendment Number Three**.
(4) Form of Amendment Number Four**.
(5) Form of Amendment Number Five**.
(6) Form of Amendment Number Six*.
(7) Form of Amendment Number Seven*.
(8) Form of Amendment Number Eight*.
(9) Form of Amendment Number Nine*.
(10) Form of Amendment Number Ten.
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment No. 33 to the
Registration Statement of the
Registrant on Form N-1A
File Nos.: 2-73948 and 811-3258
Filing Date: June 19, 1995.
(11) Form of Amendment Number Eleven.
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment No. 37 to the
Registration Statement of the Registrant on Form N-1A
File Nos.: 2-73948 and 811-3258
Filing Date: November 22, 1995.
(12) Form of Amendment Number Twelve.
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post Effective Amendment No. 41 to the
Registration Statement of the Registrant on Form N-1A
Filing Nos.: 2-73948 and 811-3258
Filing Date: May 24, 1996.
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<PAGE>
(13) AMENDMENT NUMBER THIRTEEN DATED DECEMBER 19, 1996 RE:
THE EMERGING MARKETS SMALL CAP PORTFOLIO OF THE
REGISTRANT IS ATTACHED HERETO AS EXHIBIT
24(b)(9)(b)(13).
(c) Form of Administration Agreement re: the U.S. 6-10 Small
Company Portfolio**.
(d) Form of Administration Agreement re: the U.S. Large Company
Portfolio.
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment No. 37 to the Registration
Statement of the Registrant on Form N-1A
File Nos.: 2-73948 and 811-3258
Filing Date: November 22, 1995.
(e) Form of Administration Agreement re: the DFA One-Year Fixed
Income Portfolio**.
(f) Form of Administration Agreement re: the U.S. Large Cap High
Book to Market Portfolio**.
(g) Form of Administration Agreement re: the U.S. Small Cap High
Book to Market Portfolio**.
(h) Form of Administration Agreement re: the Pacific Rim Small
Company Portfolio (formerly the Asia-Australia Small
Company. Portfolio)**.
(i) Form of Administration Agreement re: the RWB/DFA
International High Book to Market Portfolio (formerly DFA
International High Book to Market Portfolio).
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment No. 37 to the Registration
Statement of the Registrant on Form N-1A
File Nos.: 2-73948 and 811-3258
Filing Date: November 22, 1995.
(j) Form of Administration Agreement re: the Emerging Markets
Portfolio**.
(k) Form of Administration Agreement re: DFA Five-Year
Government Portfolio**.
(l) Form of Administration Agreement re: Enhanced U.S. Large
Company Portfolio.
C-12
<PAGE>
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment No. 37 to the Registration
Statement of the Registrant on Form N-1A
File Nos.: 2-73948 and 811-3258
Filing Date: November 22, 1995.
(m) Form of Administration Agreement re: DFA Two-Year Global
Fixed Income Portfolio.
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment No. 37 to the Registration
Statement of the Registrant on Form N-1A
File Nos.: 2-73948 and 811-3258
Filing Date: November 22, 1995.
(n) Form of Administration Agreement re: DFA Two-Year Corporate
Fixed Income Portfolio.
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment No. 37 to the Registration
Statement of the Registrant on Form N-1A
File Nos.: 2-73948 and 811-3258
Filing Date: June 19, 1995.
(o) Form of Administration Agreement re: DFA Two-Year Government
Portfolio.
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment No. 37 to the Registration
Statement of the Registrant on Form N-1A
File Nos.: 2-73948 and 811-3258
Filing Date: November 22, 1995.
(p) Form of Administration Agreement re: Japanese Small Company
Portfolio.
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment No. 41 to the Registration
Statement of the Registrant on Form N-1A
File Nos.: 2-73948 and 811-3258
Filing Date: May 24, 1996.
(q) Form of Administration Agreement re: United Kingdom Small
Company Portfolio.
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment No. 41 to the Registration
Statement of the Registrant on Form N-1A
File Nos.: 2-73948 and 811-3258
Filing Date: May 24, 1996.
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<PAGE>
(r) Form of Administration Agreement re: Continental Small
Company Portfolio.
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment No. 41 to the Registration
Statement of the Registrant on Form N-1A
File Nos.: 2-73948 and 811-3258
Filing Date: May 24, 1996.
(s) Form of Administration Agreement re: Pacific Rim Small
Company Portfolio.
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment No. 41 to the Registration
Statement of the Registrant on Form N-1A
File Nos.: 2-73948 and 811-3258
Filing Date: May 24, 1996.
(t) Form of Administration Agreement re: International Small
Company Portfolio.
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment No. 41 to the Registration
Statement of the Registrant on Form N-1A
File Nos.: 2-73948 and 811-3258
Filing Date: May 24, 1996.
(U) ADMINISTRATION AGREEMENT DATED DECEMBER 19, 1996 BETWEEN THE
REGISTRANT AND DIMENSIONAL FUND ADVISORS INC. RE: THE
EMERGING MARKETS SMALL CAP PORTFOLIO OF THE REGISTRANT IS
ATTACHED HERETO AS EXHIBIT 24(b)(9)(u).
(v) Marketing Agreement with National Home Life Assurance
Company.
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment No. 33 to the Registration
Statement of Registrant on Form N-1A
File Nos.: 2-73948 and 811-3258
Filing Date: June 19, 1995.
(w) Participation Agreement with National Home Life Assurance
Company.
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment No. 33 to the Registration
Statement of Registrant on Form N-1A
File Nos.: 2-73948 and 811-3258
Filing Date: June 19, 1995.
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<PAGE>
(x) Form of Client Service Agent Agreement re: the RWB/DFA
International High Book to Market Portfolio (formerly the
DFA International High Book to Market Portfolio and
Reinhardt Werba Bowen International Large Stock Portfolio).
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment No. 37 to The Registration
Statement of Registrant on Form N-1A
File Nos.: 2-73948 and 811-3258
Filing Date: November 22, 1995.
(10) Opinion of counsel was filed on January 29, 1996 with the
Registrant's Rule 24f-2 Notice.
(11) Consent of Coopers & Lybrand, L.L.P. is attached hereto as
Exhibit 24(b)(11).
(12) Not applicable.
(13) Subscription Agreement under Section 14(a)(3) of the Investment
Company Act of 1940**.
(14) Not Applicable.
(15) Amended Distribution Plan**.
(i) Amended compensation agreement**.
(16) Schedule for Computation of Performance Data for the Enhanced
U.S. Large Company Portfolio of the Registrant is attached hereto
as Exhibit 24(b)(16).
(17) Financial Data Schedules:
(a) Re: the Enhanced U.S. Large Company Portfolio of the
Registrant for the period ended October 31, 1996 is attached
hereto as Exhibit 24(b)(17)(a).
(b) Re: the Emerging Markets Small-Cap Portfolio of the
Registrant as of December 2 is attached hereto as Exhibit
24(b)(17)(b).
+ For the VA Small Value Portfolio, VA Large Value Portfolio, VA
International Value Portfolio, VA International Small Portfolio, VA Short-
Term Fixed Portfolio and VA Global Bond Portfolio (the "VA Portfolios"),
the audited financial statements were filed via the EDGAR system on January
31, 1996 with the Securities and Exchange Commission ("SEC") as DFA
INVESTMENT DIMENSIONS GROUP INC. Annual Report to Shareholders for the year
ended November 30, 1995 pursuant
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<PAGE>
to Rule 30b2-1 under the Investment Company Act of 1940 ("1940 Act") and
are incorporated into the Statement of Additional Information dated March
29, 1996.
With respect to all series of shares of the Registrant except the VA
Portfolios, Enhanced U.S. Large Company Portfolio, DFA Two-Year Corporate
Fixed Income Portfolio, DFA Two-Year Global Fixed Income Portfolio, DFA
Two-Year Government Portfolio, International Small Company Portfolio and
Emerging Markets Small Cap Portfolio, the audited financial statements were
filed via the EDGAR system on January 26, 1996 with the SEC as DFA
INVESTMENT DIMENSIONS GROUP INC. Annual Report to Shareholders for the year
ended November 30, 1995 pursuant to Rule 30b2-1 under the 1940 Act and are
incorporated by reference into the Statement of Additional Information
dated December 20, 1996.
With respect to all series of shares of the Registrant, except the VA
Portfolios, Enhanced U.S. Large Company Portfolio, DFA Two-Year Corporate
Fixed Income Portfolio, DFA Two-Year Government Portfolio, International
Small Company Portfolio and Emerging Markets Small Cap Portfolio, the
unaudited financial statements were filed via the EDGAR system on August 2,
1996, with the SEC as DFA INVESTMENT DIMENSIONS GROUP INC. Semi-Annual
Report to shareholders for the six months ended May 31, 1996, pursuant to
Rule 30b2-1 under the 1940 Act and are incorporated by reference into the
Statement of Additional Information dated December 20, 1996.
The audited financial statements of 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, RWB/DFA International High Book to Market and Emerging Markets
Series of The DFA Investment Trust Company (the "Trust") for the fiscal
year ended November 30, 1995, as set forth in the Trust's Annual Report to
Shareholders, and the unaudited financial statements for such series for
the six months ended May 31, 1996, as set forth in the Trust's Semi-Annual
Report to Shareholders, were filed via the EDGAR system on January 26,
1996, and on August 2, 1996, respectively, with the SEC pursuant to Rule
30b2-1 under the 1940 Act and are incorporated by reference into the
Statement of Additional Information dated December 20, 1996.
The unaudited financial statements of the Enhanced U.S. Large Company
Portfolio of the Registrant and its corresponding Trust series for the
period from July 3, 1996 (date of commencement of operations) to October
31, 1996 are set forth in the Statement of Additional Information dated
December 20, 1996.
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<PAGE>
The audited balance sheet, dated December 2, 1996, of the Emerging Markets
Small Cap Portfolio of the Registrant is set forth in the Statement of
Additional Information dated December 20, 1996.
____
* To be filed by amendment.
** Previously filed with this registration statement and incorporated herein
by reference.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
None.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES.
(2)
(1) Number of Record
Holders as of
Title of Class November 30,
---------------- ------------
(Par Value $.01) 1996
----
U.S. 9-10 Small Company Portfolio 198
U.S. 6-10 Small Company Portfolio 40
U.S. Large Company Portfolio 64
U.S. Small Cap Value Portfolio 158
U.S. Large Cap Value Portfolio 119
DFA Real Estate Securities Portfolio 31
Japanese Small Company Portfolio 99
Pacific Rim Small Company Portfolio 81
United Kingdom Small Company
Portfolio 73
Emerging Markets Portfolio 78
Continental Small Company Portfolio 93
Large Cap International Portfolio 45
RWB/DFA International High Book
to Market Portfolio 7
DFA International Small Cap Value
Portfolio 53
DFA One-Year Fixed Income Portfolio 194
DFA Five-Year Government Portfolio 50
DFA Global Fixed Income Portfolio 51
DFA Intermediate Government
Fixed Income Portfolio 15
Enhanced U.S. Large Company
Portfolio 10
DFA Two-Year Corporate Fixed
Income Portfolio 1
DFA Two-Year Government Portfolio 1
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<PAGE>
DFA Two-Year Global Fixed Income
Portfolio 8
International Small Company
Portfolio 21
VA Global Bond Portfolio 2
VA Small Value Portfolio 1
VA Large Value Portfolio 1
VA International Value
Portfolio 1
VA International Small Portfolio 1
VA Short-Term Fixed Portfolio 1
ITEM 27. INDEMNIFICATION.
Section 1 of Article XI of the Registrant's By-Laws, as Approved
through 10/17/96) provides for indemnification, as set forth below.
With respect to the indemnification of the Officers and Directors of
the corporation:
(a) The Corporation shall indemnify each officer and Director made
party to a proceeding, by reason of service in such capacity, to
the fullest extent, and in the manner provided, under Section 2-
418 of the Maryland General Corporation Law: (i) unless it is
proved that the person seeking indemnification did not meet the
standard of conduct set forth in subsection (b)(1) of such
section; and (ii) provided, that the Corporation shall not
indemnify any officer or Director for any liability to the
Corporation or its security holders arising from the willful
misfeasance, bad faith, gross negligence or reckless disregard of
the duties involved in the conduct of such person's office.
(b) The provisions of clause (i) of paragraph (a) herein
notwithstanding, the Corporation shall indemnify each Officer and
Director against reasonable expenses incurred in connection with
the successful defense of any proceeding to which such officer or
Director is a party by reason of service in such capacity.
(c) The Corporation, in the manner and to the extent provided by
applicable law, shall advance to each officer and Director who is
made party to a proceeding by reason of service in such capacity
the reasonable expenses incurred by such person in connection
therewith.
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<PAGE>
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISOR.
Registrant's Investment Advisor, Dimensional Fund Advisors Inc. (the
"Advisor"), was organized in May, 1981. The principal place of
business of the Advisor is 1299 Ocean Avenue, 11th Floor, Santa
Monica, CA 90401. The Advisor is engaged in the business of
providing investment advice primarily to institutional investors.
The Sub-Advisor for the VA International Small Portfolio of the
Registrant, The Continental Small Company Portfolio and The United
Kingdom Small Company Portfolio of DFA Investment Dimensions Group
Inc. ("DFAIDG"), Dimensional Fund Advisors Ltd. ("DFAL"), was
organized under the laws of England in 1990. The principal place of
business of DFAL is 14 Berkeley Street, London W1X 5AD, England.
The Sub-Advisor for the VA International Small Portfolio of the
Registrant, The Japanese and Pacific Rim Small Company Portfolios of
DFAIDG, DFA Australia Pty Limited ("DFA Australia"), was organized
under the laws of Delaware in 1993. The principal place of business
of DFA Australia Pty Limited is Suite 4403 Gateway, 1 MacQuarie Place,
Sydney, New South Wales 2000, Australia.
The business, profession, vocation or employment of a substantial
nature in which each director and officer of the Advisor, DFAL and DFA
Australia is or has been, during the past two fiscal years, engaged
for his own account in the capacity of director, officer, employee,
partner or trustee is as follows:
David G. Booth is Chairman - Chief Executive Officer, President and a
Director of the Advisor and the Registrant and is President, Chairman
- Chief Executive Officer and a Trustee of The DFA Investment Trust
Company (the Trust"). Mr. Booth is also Chairman - Chief Executive
Officer and a Director of DFA Securities Inc., Dimensional Emerging
Markets Fund Inc. (registered investment company), Dimensional
Investment Group Inc. (registered investment company) and DFA
Australia. He is Chairman and Director of DFAL.
Rex A. Sinquefield is Chairman - Chief Investment Officer and a
Director of the Advisor and the Registrant. He is also Chairman -
Chief Investment Officer and a Director of DFA Securities Inc.,
Dimensional Emerging Markets Fund Inc., Dimensional Investment Group
Inc. and DFA Australia, Trustee and
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<PAGE>
Chairman - Chief Investment Officer of the Trust, and Chairman, Chief
Executive Officer and Director of DFAL.
Eugene Francis Fama, a Director of the Advisor, is the Robert R.
McCormick Distinguished Service Professor of Finance, and has been
engaged in teaching and research in finance and economics at the
Graduate School of Business, University of Chicago, Chicago, Illinois
since September, 1963. Mr. Fama also is a Director of DFA Securities
Inc.
John Andrew McQuown, a Director of the Advisor, has been self employed
since 1974 as an entrepreneur, financier and consultant to major
financial institutions. He is also a Director of Mortgage Information
Corporation, KMV Corporation and Microsource, Inc.
Lloyd Stockel, a Director of the Advisor, is a private investor and a
retired general partner of Goldman Sachs & Co.
Arthur Barlow is a Vice President of Registrant, the Advisor, the
Trust, DFA Securities Inc., Dimensional Emerging Markets Fund Inc.,
Dimensional Investment Group Inc., DFA Australia and DFAL.
Truman Clark is a Vice President of Registrant, the Advisor, the
Trust, DFA Securities Inc., Dimensional Emerging Markets Fund Inc.,
Dimensional Investment Group Inc., DFA Australia and DFAL. Mr. Clark
was a Consultant until October 1995 and Principal and Manager of
Product Development, Wells Fargo Nikko Investment Advisors, San
Francisco, CA from 1990-1994.
Maureen Connors is a Vice President of Registrant, the Advisor, the
Trust, DFA Securities Inc., Dimensional Emerging Markets Fund Inc.,
Dimensional Investment Group Inc., DFA Australia and DFAL.
Robert Deere is a Vice President of Registrant, the Advisor, the
Trust, DFA Securities Inc., Dimensional Emerging Markets Fund Inc.,
Dimensional Investment Group Inc., DFA Australia and DFAL.
Irene R. Diamant is a Vice President and Secretary of Registrant, the
Advisor, DFA Australia, DFA Securities Inc., the Trust, Dimensional
Emerging Markets Fund Inc. and Dimensional Investment Group Inc. Ms.
Diamant is also a Vice President of DFAL.
C-20
<PAGE>
Eugene Fama, Jr. is a Vice President of Registrant, the Advisor, the
Trust, DFA Securities Inc., Dimensional Emerging Markets Fund Inc.,
Dimensional Investment Group Inc., DFA Australia and DFAL.
David Plecha is a Vice President of Registrant, the Advisor, the Trust
DFA Securities Inc., Dimensional Emerging Markets Fund Inc.,
Dimensional Investment Group Inc., DFA Australia and DFAL.
George Sands is a Vice President of Registrant, the Adviser, DFA
Securities Inc., the Trust, Dimensional Emerging Markets Fund Inc.,
Dimensional Investment Group Inc., DFA Australia and DFAL. Mr. Sands
was a Managing Director of Asset Strategy Consulting in Los Angeles,
CA from March 1991 to August 1992 and a Vice President of Wilshire
Associates in Santa Monica, CA from 1985 to February 1991.
Michael T. Scardina is a Vice President, Chief Financial Officer,
Controller and Treasurer of the Registrant, the Advisor, the Trust,
DFA Securities Inc., Dimensional Emerging Markets Fund Inc.,
Dimensional Investment Group Inc., DFA Australia and DFAL.
Cem Severoglu is a Vice President of Registrant, the Advisor, the
Trust, DFA Securities Inc., Dimensional Emerging Markets Fund Inc.,
Dimensional Investment Group Inc., DFA Australia and DFAL.
Jeanne C. Sinquefield is Executive Vice President of the Registrant,
the Advisor, DFA Securities Inc., the Trust, Dimensional Emerging
Markets Fund Inc., Dimensional Investment Group Inc., DFA Australia
and DFAL.
Daniel Wheeler, 51, Marketing Officer of the Advisor, Santa Monica,
CA.
David Schneider, 50, Marketing Officer of the Advisor, Santa Monica,
CA.
Lawrence Spieth, 49, Marketing Officer of the Advisor, Santa Monica,
CA.
ITEM 29. PRINCIPAL UNDERWRITERS.
(a) None.
(b) Registrant distributes its own shares. It has entered into an
agreement, previously filed as Exhibit No. 6 to the Registration
Statement, which
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<PAGE>
provides that DFA Securities Inc., 1299 Ocean Avenue, 11th Floor,
Santa Monica, California 90401, will supervise the sale of
Registrant's shares. This agreement is subject to the
requirements of Section 15(b) of the Investment Company Act of
1940.
(c) Not applicable.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS.
All accounts and records are maintained by PFPC Inc., 400 Bellevue
Parkway, Wilmington, DE 19809.
ITEM 31. MANAGEMENT SERVICES.
None.
ITEM 32. UNDERTAKINGS.
(a) Not applicable.
(b)(i) Registrant undertakes to file a post-effective amendment,
using financial statements of the DFA Two-Year Corporate
Fixed Income Portfolio and the DFA Two-Year Government
Portfolio, which need not be certified, within four to six
months from the effective date of the Registration Statement
which includes the DFA Two-Year Corporate Fixed Income
Portfolio and DFA Two-Year Government Portfolio.
(ii) Registrant undertakes to file a post-effective amendment,
using financial statements of the International Small
Company Portfolio, which need not be certified, within four
to six months from the effective date of the Registration
Statement which includes the International Small Company
Portfolio.
(iii) Registrant undertakes to file a post-effective amendment,
using financial statements of the Emerging Markets Small Cap
Portfolio, which need not be certified, within four to six
months from the effective date of the Registration Statement
which includes the Emerging Markets Small Cap Portfolio.
(c) The Registrant hereby undertakes to furnish each person to whom a
prospectus is delivered with a copy of the Registrant's latest
annual report to shareholders, upon request and without charge.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant has duly caused this Amendment No. 44/45 to
the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Santa Monica and State of California
on the 19th day of December, 1996.
DFA INVESTMENT DIMENSIONS GROUP INC.
By: David G. Booth*
-------------------------------
David G. Booth
President
Pursuant to the requirements of the Securities Act of 1933, this Post-Effective
Amendment No. 44 to the Registration Statement has been signed by the following
persons in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
Director and
David G. Booth* Chairman-Chief December 19, 1996
- ------------------------- Executive Officer
David G. Booth
Director and
Rex A. Sinquefield* Chairman-Chief December 19, 1996
- ------------------------- Investment Officer
Rex A. Sinquefield
Chief Financial
Michael T. Scardina* Officer, Treasurer December 19, 1996
- ------------------------- and Vice President
Michael T. Scardina
George M. Constantinides* Director December 19, 1996
- -------------------------
George M. Constantinides
John P. Gould* Director December 19, 1996
- -------------------------
John P. Gould
Roger G. Ibbotson* Director December 19, 1996
- -------------------------
Roger G. Ibbotson
Merton H. Miller* Director December 19, 1996
- -------------------------
Merton H. Miller
Myron S. Scholes* Director December 19, 1996
- -------------------------
Myron S. Scholes
*By: Irene R. Diamant
----------------------------
Irene R. Diamant
Attorney-in-Fact
* (Pursuant to Powers-of-Attorney previously filed with the Securities and
Exchange Commission on October 3, 1994 as Exhibit 17 to Post-Effective
Amendment No. 31 to the Registration Statement of DFA Investment Dimensions
Group Inc. (File No. 2-73948)).
C-23
<PAGE>
SIGNATURES
The DFA Investment Trust Company consents to the filing of this Amendment to the
Registration Statement of DFA Investment Dimensions Group Inc. which is signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Santa Monica and State of California on the 19th day of December, 1996.
THE DFA INVESTMENT TRUST COMPANY
By: David G. Booth*
-------------------------------
David G. Booth
President
The undersigned Trustees and principal officers of The DFA Investment Trust
Company consent to the filing of this Amendment to the Registration Statement of
DFA Investment Dimensions Group Inc. on the dates indicated.
Signature Title Date
--------- ----- ----
Trustee and
David G. Booth* Chairman-Chief December 19, 1996
- ------------------------- Executive Officer
David G. Booth
Trustee and
Rex A. Sinquefield* Chairman-Chief December 19, 1996
- ------------------------- Investment Officer
Rex A. Sinquefield
Chief Financial
Michael T. Scardina* Officer, Treasurer December 19, 1996
- ------------------------- and Vice President
Michael T. Scardina
George M. Constantinides* Trustee December 19, 1996
- -------------------------
George M. Constantinides
John P. Gould* Trustee December 19, 1996
- -------------------------
John P. Gould
Roger G. Ibbotson* Trustee December 19, 1996
- -------------------------
Roger G. Ibbotson
Merton H. Miller* Trustee December 19, 1996
- -------------------------
Merton H. Miller
Myron S. Scholes* Trustee December 19, 1996
- -------------------------
Myron S. Scholes
*By: Irene R. Diamant
--------------------------
Irene R. Diamant
Attorney-in-Fact
* (Pursuant to Powers-of-Attorney filed with the Securities and Exchange
Commission on August 2, 1994 as Exhibit 17(ii) to the Registration
Statement of Dimensional Investment Group Inc. (File No. 33-33980)).
C-24
<PAGE>
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
- ----------- -----------
99.B1 Articles Supplementary re: the Emerging Markets Small
Cap Portfolio of the Registrant.
99.B1 Form of Articles of Amendment re: the change in name of
DFA/AEW Real Estate Securities Portfolio of the
Registrant.
99.B2 By-Laws of the Registrant, as approved through October
17, 1996.
99.B8 Amendment to Custody Agreement with
Mellon Trust (formerly the Boston Safe Deposit and
Trust Company) re: the Emerging Markets Small Cap
Portfolio of the Registrant. [TO BE PROVIDED].
99.B9 Amendment Number Thirteen dated December
19, 1989 to Transfer Agency Agreement dated June 19,
1989 re: the Emerging Markets Small Cap Portfolio of
the Registrant.
99.B9 Amendment Number Thirteen dated December
19, 1996 to Administration and Accounting Services
Agreement dated June 19, 1989 re: the Emerging Markets
Small Cap Portfolio of the Registrant.
99.B9 Administration Agreement dated December
19, 1996 between the Registrant and Dimensional Fund
Advisors Inc. re: the Emerging Markets Small Cap
Portfolio of the Registrant.
99B.11 Consent of Coopers & Lybrand, L.L.P. on behalf of the
Emerging Markets Small Cap Portfolio of the Registrant.
99B.16 Schedule for Computation of Performance Data re: the
Enhanced U.S. Large Company Portfolio of the
Registrant.
27.1(b)(17)(a) Financial Data Schedule re: the Enhanced U.S. Large
Company Portfolio of the Registrant.
27.1 Financial Data Schedule re: the Emerging Markets Small
Cap Portfolio of the Registrant.
C-25
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 30
<NAME> THE ENHANCED U.S. LARGE COMPANY PORTFOLIO
<S> <C>
<PERIOD-TYPE> 5-MOS
<FISCAL-YEAR-END> NOV-30-1996
<PERIOD-END> OCT-31-1996
<INVESTMENTS-AT-COST> 23817004
<INVESTMENTS-AT-VALUE> 26231537
<RECEIVABLES> 0
<ASSETS-OTHER> 26317
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 26257854
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 7002
<TOTAL-LIABILITIES> 7002
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 23861278
<SHARES-COMMON-STOCK> 2386108
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> (25128)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 169
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 2414533
<NET-ASSETS> 26250852
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 25128
<NET-INVESTMENT-INCOME> (25128)
<REALIZED-GAINS-CURRENT> 169
<APPREC-INCREASE-CURRENT> 2414533
<NET-CHANGE-FROM-OPS> 2389574
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2412391
<NUMBER-OF-SHARES-REDEEMED> 26284
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 26250852
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 25128
<AVERAGE-NET-ASSETS> 19478584
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> (.01)
<PER-SHARE-GAIN-APPREC> 1.01
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.00
<EXPENSE-RATIO> .68
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 32
<NAME> THE EMERGING MARKETS SMALL CAP PORTFOLIO
<S> <C>
<PERIOD-TYPE> 1-MO
<FISCAL-YEAR-END> NOV-30-1997
<PERIOD-END> DEC-02-1996
<INVESTMENTS-AT-COST> 1000
<INVESTMENTS-AT-VALUE> 1000
<RECEIVABLES> 0
<ASSETS-OTHER> 4980
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 5980
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 4990
<TOTAL-LIABILITIES> 4990
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 990
<SHARES-COMMON-STOCK> 99
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 990
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 99
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 990
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.00
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<PAGE>
Exhibit No. 99-B.1
DFA INVESTMENT DIMENSIONS GROUP INC.
ARTICLES SUPPLEMENTARY TO THE CHARTER
DFA INVESTMENT DIMENSIONS GROUP INC., a Maryland corporation having its
principal office in Baltimore, Maryland (hereinafter called the "Corporation")
and registered under the Investment Company Act of 1940 as an open-end company,
hereby certifies, in accordance with the requirements of Section 2-208 of the
Maryland General Corporation Law, to the State Department of Assessments and
Taxation of Maryland that:
FIRST: The Corporation has authority to issue a total of Three Billion
(3,000,000,000) shares of stock, with a par value of One Cent ($.01) per share,
having an aggregate par value of $30,000,000, all of which shall be considered
common stock. The allocation of shares to each of its twenty-nine existing
classes is as follows:
Number of Shares of Common Stock
(par value $.01 per share)
Class Designation Allocated
----------------- --------------------------------
The U.S. Large Company 200,000,000
Portfolio Shares
The U.S. 9-10 Small Company 300,000,000
Portfolio Shares
The DFA One-Year Fixed Income 100,000,000
Portfolio Shares
The DFA Five-Year Government 100,000,000
Portfolio Shares
The United Kingdom Small 20,000,000
Company Portfolio Shares
The Japanese Small Company 20,000,000
Portfolio Shares
The Continental Small Company 50,000,000
Portfolio Shares
The DFA Intermediate Government 100,000,000
Fixed Income Portfolio Shares
<PAGE>
The DFA Global Fixed Income 100,000,000
Portfolio Shares
The Pacific Rim Small Company 20,000,000
Portfolio Shares
The Large Cap International 150,000,000
Portfolio Shares
The U.S. 6-10 Small Company 100,000,000
Portfolio Shares
The U.S. Small Cap Value 100,000,000
Portfolio Shares
The U.S. Large Cap Value 100,000,000
Portfolio Shares
The DFA/AEW Real Estate 100,000,000
Securities Portfolio Shares
DFA International High Book 100,000,000
to Market Portfolio Shares
The Emerging Markets Portfolio 100,000,000
Shares
DFA International Small Cap 100,000,000
Value Portfolio Shares
VA Large Value Portfolio 50,000,000
Shares
VA Global Bond Portfolio 50,000,000
Shares
VA Small Value Portfolio 50,000,000
Shares
VA International Value 50,000,000
Portfolio Shares
VA International Small 50,000,000
Portfolio Shares
The VA Short-Term Fixed 50,000,000
Portfolio Shares
Enhanced U.S. Large Company 100,000,000
Portfolio Shares
-2-
<PAGE>
DFA Two-Year Corporate Fixed 100,000,000
Income Portfolio Shares
DFA Two-Year Global Fixed 100,000,000
Income Portfolio Shares
DFA Two-Year Government 100,000,000
Portfolio Shares
International Small Company 100,000,000
Portfolio Shares
The Board of Directors of the Corporation has adopted a resolution
classifying and allocating one-hundred million (100,000,000) shares of the
authorized, unissued and unallocated common stock (par value $.01 per share) of
the Corporation to a new class of common stock designated "Emerging Markets
Small Cap Portfolio."
SECOND: Following the aforesaid classification and allocation, the total
number of shares of stock which the Corporation is authorized to issue is Three
Billion (3,000,000,000) shares, with a par value of One Cent ($.01) per share
and an aggregate par value of Thirty Million Dollars ($30,000,000), and the
allocation of shares to each of the thirty classes (each a "Class" and,
collectively, the "Classes") is as follows:
Number of Shares of Common Stock
(par value $.01 per share)
Class Designation Allocated
----------------- --------------------------------
The U.S. Large Company 200,000,000
Portfolio Shares
The U.S. 9-10 Small Company 300,000,000
Portfolio Shares
The DFA One-Year Fixed Income 100,000,000
Portfolio Shares
The DFA Five-Year Government 100,000,000
Portfolio Shares
The United Kingdom Small 20,000,000
Company Portfolio Shares
The Japanese Small Company 20,000,000
Portfolio Shares
The Continental Small Company 50,000,000
Portfolio Shares
-3-
<PAGE>
The DFA Intermediate Government 100,000,000
Fixed Income Portfolio Shares
The DFA Global Fixed Income 100,000,000
Portfolio Shares
The Pacific Rim Small Company 20,000,000
Portfolio Shares
The Large Cap International 150,000,000
Portfolio Shares
The U.S. 6-10 Small Company 100,000,000
Portfolio Shares
The U.S. Small Cap Value 100,000,000
Portfolio Shares
The U.S. Large Cap Value 100,000,000
Portfolio Shares
The DFA/AEW Real Estate 100,000,000
Securities Portfolio Shares
DFA International High Book 100,000,000
to Market Portfolio Shares
The Emerging Markets Portfolio 100,000,000
Shares
DFA International Small Cap 100,000,000
Value Portfolio Shares
VA Large Value Portfolio 50,000,000
Shares
VA Global Bond Portfolio 50,000,000
Shares
VA Small Value Portfolio 50,000,000
Shares
VA International Value 50,000,000
Portfolio Shares
VA International Small 50,000,000
Portfolio Shares
The VA Short-Term Fixed 50,000,000
Portfolio Shares
-4-
<PAGE>
Enhanced U.S. Large Company 100,000,000
Portfolio Shares
DFA Two-Year Corporate Fixed 100,000,000
Income Portfolio Shares
DFA Two-Year Global Fixed 100,000,000
Income Portfolio Shares
DFA Two-Year Government 100,000,000
Portfolio Shares
International Small Company 100,000,000
Portfolio Shares
Emerging Markets Small Cap 100,000,000
Portfolio Shares
THIRD: A description of the shares of each Class, with the preferences,
conversion and other rights, voting powers, restrictions, limitations as to
dividends, qualifications and terms and conditions of redemption as set or
changed by the Board of Directors of the Corporation is as follows:
The holder of each share of each Class shall be entitled to one vote for
each full share, and a fractional vote for each fractional share of stock then
standing in his or her name on the books of the Corporation. All shares of the
Classes then issued and outstanding and entitled to vote, irrespective of Class,
shall be voted in the aggregate and not by Class, except: (1) when otherwise
expressly provided by the Maryland General Corporation Law; (2) when required by
the Investment Company Act of 1940, as amended, shares shall be voted by Class;
and (3) when a matter to be voted upon does not affect any interest of a
particular Class then only shareholders of the affected Class or Classes shall
be entitled to vote thereon.
Each share of each Class shall have the following preferences and special
rights, restrictions, and limitations:
(1) All consideration received by the Corporation for the issue or
sale of stock of a Class, together with all income, earnings, profits, and
proceeds thereof, and any funds or payments derived from any reinvestment
of such proceeds in whatever form the same may be, shall irrevocably belong
to such Class, subject only to the rights of the creditors.
(2) Dividends or distributions on shares of a Class and redemptions
of such Class shall be paid only out of
-5-
<PAGE>
earnings, surplus, or other lawfully available assets belonging to such
Class.
(3) The Corporation may deduct from the proceeds of redemption of
shares of each Class the cost incurred in liquidating investment securities
to pay redemptions in cash as set forth in the By-Laws.
(4) In the event of the liquidation or dissolution of the
Corporation, holders of each Class shall be entitled to receive, as a
Class, out of the assets of the Corporation available for distribution to
shareholders, but other than general assets not belonging to any particular
Class, the assets belonging to such Class; and the assets so distributable
to such shareholders shall be distributed among such shareholders in
proportion to the asset value of such shares. In addition, such holders
shall be entitled to receive their proportionate share of assets of the
Corporation which do not belong solely to any particular Class, as
determined by the Board of Directors.
(5) The assets belonging to each Class shall be charged with the
liabilities in respect to such Class, and shall also be charged with their
share of the general liabilities of the Corporation as determined by the
Board of Directors, such determination shall be conclusive for all
purposes.
FOURTH: The shares aforesaid have been duly classified and allocated by
the Board of Directors pursuant to authority contained in the charter of the
Corporation.
FIFTH: The undersigned President hereby acknowledges these Articles
Supplementary to the charter to be the corporate act of the Corporation and, as
to all matters or facts required to be verified under oath, the undersigned
President acknowledges that, to the best of his knowledge, information and
belief, these matters and facts are true in all material respects, and that this
statement is made under the penalties of perjury.
IN WITNESS WHEREOF, The Corporation has caused these Articles to be signed
in its name and on its behalf by its President and attested to by its Secretary
on this 18th day of October, 1996.
ATTEST: DFA INVESTMENT DIMENSIONS
GROUP INC.
/s/Irene R. Diamant By: /s/David G. Booth
- ------------------------------- -------------------------
Irene R. Diamant, Secretary David G. Booth, President
-6-
<PAGE>
Exhibit No. 99.B1
DFA INVESTMENT DIMENSIONS GROUP INC.
ARTICLES OF AMENDMENT
THIS IS TO CERTIFY THAT:
FIRST: The charter of DFA Investment Dimensions Group Inc., a Maryland
corporation (the Corporation"), is hereby amended by changing the name of "The
DFA/AEW Real Estate Securities Portfolio Shares" class of the common stock of
the Corporation to "DFA Real Estate Securities Portfolio Shares" and by deleting
from the charter of the Corporation the name "The DFA/AEW Real Estate Securities
Portfolio Shares" and inserting in lieu thereof the name "DFA Real Estate
Securities Portfolio Shares."
SECOND: The amendment to the charter of the Corporation as set forth above
has been duly approved by a majority of the entire Board of Directors of the
Corporation as required by law and is limited to a change expressly permitted by
Section 2-605(a)(4) of the Maryland General Corporation Law to be made without
action by the stockholders of the Corporation.
THIRD: The Corporation is registered as an open-end company under the
Investment Company Act of 1940.
FOURTH: The undersigned President acknowledges these Articles of Amendment
to be the corporate act of the Corporation and, as to all matters or facts
required to be verified under oath, the undersigned President acknowledges that
to the best of his knowledge, information and belief, these matters and facts
are true in all material respects and that this statement is made under the
penalties of perjury.
IN WITNESS WHEREOF, the Corporation has caused these Articles to be signed
in its name and on its behalf by its President and attested to by its Secretary
on this 20th day of December, 1996.
ATTEST: DFA INVESTMENT DIMENSIONS
GROUP INC.
By:
- ------------------------------------ --------------------------------
Irene R. Diamant, Secretary David G. Booth, President
<PAGE>
Exhibit 99.B.2
(Approved through 10/17/96)
DFA INVESTMENT DIMENSIONS GROUP INC.
* * * * * * * * *
BY-LAWS
* * * * * * * * *
ARTICLE I
SECTION 1. FISCAL YEAR. Unless otherwise provided by resolution of
the Board of Directors the fiscal year of the Corporation shall begin December 1
and end on the last day of November.
SECTION 2. REGISTERED OFFICE. The registered office of the
Corporation in Maryland shall be located at 32 South Street, Baltimore, Maryland
21202, and the name and address of its Resident Agent is The Corporation Trust
Incorporated.
SECTION 3. OTHER OFFICES. The Corporation shall also have a place of
business in Santa Monica, California, and the Corporation shall have the power
to open additional offices for the conduct of its business, either within or
outside the States of Maryland and California, at such places as the Board of
Directors may from time to time designate.
ARTICLE II
MEETINGS OF STOCKHOLDERS
SECTION 1. PLACE OF MEETING. Annual Meetings, if held, shall be held
in such place as the Board of Directors may by resolution establish. In the
absence of any specific resolution, Annual Meetings of Stockholders shall be
held at the Corporation's principal office in Santa Monica, California.
Meetings of stockholders for any other purpose may be held at such place as
shall be stated in the Notice of the Meeting, or in a duly executed Waiver of
Notice thereof.
SECTION 2. ANNUAL MEETINGS. The Corporation is not required to hold
an Annual Meeting of Stockholders in any year in which the Corporation is not
required to convene a meeting to elect directors under the Investment Company
Act of 1940. If the Corporation is required under the Investment Company Act of
1940 to hold a meeting of stockholders to elect directors, the meeting shall be
designated an Annual Meeting of Stockholders for that year
<PAGE>
and shall be held no later than 60 days after the occurrence of the event
requiring the meeting; except if an order is granted by the Securities and
Exchange Commission exempting the Corporation from the operation of Section
16(a) of the Investment Company Act of 1940 or a no-action position of similar
effect is obtained, in which event such meeting shall be held no later than 120
days after the occurrence of the event requiring the meeting. Otherwise, Annual
Meetings of Stockholders shall be held only if called by the Board of Directors
of the Corporation and, if called, shall be held during the month of May on such
date as fixed by the Board of Directors by resolution.
SECTION 3. SPECIAL MEETINGS. Special Meetings of Stockholders may be
called at any time by the President, or by a majority of the Board of Directors,
and shall be called by the President or Secretary upon written request of the
holders of shares entitled to cast not less than ten percent of all the votes
entitled to be cast at such meeting.
SECTION 4. NOTICE. Not less than ten or more than 90 days before the
date of every Annual or Special Meeting of Stockholders, the Secretary shall
give to each stockholder entitled to vote at such meeting written notice stating
the time and place of the meeting and, in the case of a Special Meeting of
Stockholders, the purpose or purposes for which the meeting is called. Business
transacted at any Special Meeting of Stockholders shall be limited to the
purposes stated in the Notice of the Meeting.
SECTION 5. RECORD DATE FOR MEETINGS. The Board of Directors may fix
in advance a date not more than 90 days, nor less than ten days, prior to the
date of any Annual or Special Meeting of Stockholders as a record date for the
determination of the stockholders entitled to receive notice of the meeting, and
to vote at any meeting and any adjournment thereof. If an Annual Meeting of
Stockholders is held to elect directors pursuant to the requirements of the
Investment Company Act of 1940, the Board shall fix the record date within the
time required for holding such Annual Meeting of Stockholders as provided in
Section 2 of this Article but not more than 90 nor less than ten days prior to
such meeting. Only those stockholders who are stockholders of record on the
date so fixed shall be entitled to receive notice of and to vote at such meeting
and any adjournment thereof as the case may be, notwithstanding any transfer of
any stock on the books of the Corporation after any such record date fixed as
aforesaid.
SECTION 6. QUORUM. At any meeting of stockholders, the presence in
person or by proxy of stockholders entitled to cast a majority of all the votes
entitled to be cast at the meeting shall constitute a quorum. If, however, such
quorum shall not be present or represented at any meeting of the stockholders,
the stockholders entitled to vote thereat, present in person or represented by
-2-
<PAGE>
proxy, shall have the power to adjourn the meeting, without notice other than
announcement at the meeting, until a time when a quorum shall be present or
represented. At such adjourned meeting at which a quorum shall be present or
represented any business may be transacted which might have been transacted at
the meeting as originally notified.
SECTION 7. MAJORITY. Except as otherwise provided by applicable law,
a majority of all votes cast at a meeting at which a quorum is present is
sufficient to approve any matter which properly comes before the meeting.
SECTION 8. VOTING. The holders of each share of stock of the
Corporation then issued and outstanding and entitled to vote, irrespective of
the class, shall be voted in the aggregate and not by class, except: (1) when
otherwise expressly provided by the Maryland General Corporation Law; (2) when
required by the Investment Company Act of 1940, shares shall be voted by class;
and (3) when a matter to be voted upon does not affect any interest of a
particular class, then only stockholders of the affected class or classes shall
be entitled to vote thereon.
A stockholder may cast his vote in person or by proxy, but no proxy
shall be valid after eleven months from its date, unless otherwise provided in
the proxy. At all meetings of stockholders, unless the voting is conducted by
inspectors, all questions relating to the qualification of voters and the
validity of proxies and the acceptance or rejection of votes shall be decided by
the Chairman of the meeting.
SECTION 9. INSPECTORS. At any election of Directors, the Board of
Directors prior thereto may, or, if they have not so acted, the Chairman of the
meeting may, and upon the request of the holders of ten percent of the shares
entitled to vote at such election shall, appoint two inspectors of election who
shall first subscribe an oath of affirmation to execute faithfully the duties of
inspectors at such election with strict impartiality and according to the best
of their ability, and shall after the election make a certificate of the result
of the vote taken. No candidate for the office of Director shall be appointed
such inspector. The Chairman of the meeting may cause a vote by ballot to be
taken upon any election or matter, and such vote shall be taken upon the request
of the holders of ten percent of the stock entitled to vote on such election or
matter.
-3-
<PAGE>
ARTICLE III
DIRECTORS
SECTION 1. GENERAL POWERS. The business of the Corporation shall be
managed by its Board of Directors, which may exercise all powers of the
Corporation, except such as are by statute, or the Articles of Incorporation, or
by these By-Laws conferred upon or reserved to the stockholders.
SECTION 2. NUMBER AND TERM OF OFFICE. The number of Directors which
shall constitute the whole Board shall be determined from time to time by the
Board of Directors, but shall not be fewer than three, nor more than fifteen.
Each Director shall hold office until his successor is elected and qualified.
Directors need not be stockholders.
SECTION 3. ELECTION. Subject to Article II, Section 2 of these
By-Laws, the Directors shall be elected at the Annual Meeting of Stockholders,
if held, or at a Special Meeting of Stockholders called for that purpose, except
that any vacancy in the Board of Directors may be filled by a majority vote of
the entire Board of Directors if immediately after filling the vacancy at least
two-thirds of the Board of Directors have been elected by the stockholders. In
the event that at any time less than a majority of the Directors of the
Corporation were elected by the holders of the outstanding voting securities of
the Corporation, the Corporation shall forthwith cause to be held as promptly as
possible, and in any event within 60 days, a meeting of stockholders for the
purpose of electing Directors to fill any existing vacancies in the Board of
Directors unless the Securities and Exchange Commission shall, by order, extend
such period.
SECTION 4. PLACE OF MEETING. Meetings of the Board of Directors,
regular or special, may be held at any place in or out of the State of Maryland
as the Board may from time to time determine.
SECTION 5. QUORUM. At all meetings of the Board of Directors, a
majority of the entire Board of Directors shall constitute a quorum for the
transaction of business and the action of a majority of the Directors present at
any meeting at which a quorum is present shall be the action of the Board of
Directors unless the concurrence of a greater proportion is required for such
action by the laws of Maryland, these By-Laws or the Articles of Incorporation.
If a quorum shall not be present at any meeting of Directors, the Directors
present thereat may by a majority vote adjourn the meeting from time to time,
without notice other than announcement at the meeting, until a quorum shall be
present.
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SECTION 6. REGULAR MEETINGS. Regular meetings of the Board of
Directors may be held without notice at such time and place as shall from time
to time be determined by the Board of Directors.
SECTION 7. SPECIAL MEETINGS. Special Meetings of the Board of
Directors may be called by the President on one day's notice to each Director;
Special Meetings shall be called by the President or Secretary in like manner
and on like notice on the written request of two Directors.
SECTION 8. INFORMAL ACTIONS. Any action required or permitted to be
taken at any meeting of the Board of Directors or of any Committee thereof may
be taken without a meeting, if a written consent to such action is signed in one
or more counterparts by all members of the Board or of such Committee, as the
case may be, and such written consent is filed with the minutes of proceedings
of the Board or Committee.
SECTION 9. COMMITTEES. The Board of Directors may by resolution
passed by a majority of the whole Board appoint from among its members an
Executive Committee and other Committees composed of two or more Directors, and
may delegate to such Committees, in the intervals between meetings of the Board
of Directors, any or all of the powers of the Board of Directors in the
management of the business and affairs of the Corporation, except the power to
declare dividends, to issue stock or to recommend to stockholders any action
requiring stockholders' approval. In the absence of any member of a Committee,
the members thereof present at any meeting, whether or not they constitute a
quorum, may appoint a member of the Board of Directors to act in the place of
such absent member.
SECTION 10. ACTION OF COMMITTEES. The Committees shall keep minutes
of their proceedings and shall report the same to the Board of Directors at the
meeting next succeeding, and any action by the Committees shall be subject to
revision and alteration by the Board of Directors, provided that no rights, of
third persons shall be affected by any such revision or alteration.
SECTION 11. COMPENSATION. Any Director, whether or not he is a
salaried officer or employee of the Corporation, may be compensated for his
services as Director or as a member of a Committee, or as Chairman of the Board
or Chairman of a Committee by fixed periodic payments or by fees for attendance
at meetings or by both, and in addition may be reimbursed for transportation and
other expenses, all in such manner and amounts as the Board of Directors may
from time to time determine.
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ARTICLE IV
NOTICES
SECTION 1. FORM. Notices to stockholders shall be in writing and
delivered personally or mailed to the stockholders at their addresses appearing
on the books of the Corporation. Notices to Directors shall be oral or by
telephone or telegram or in writing delivered personally or mailed to the
Directors at their addresses appearing on the books of the Corporation. Notice
by mail shall be deemed to be given at the time when the same shall be mailed.
Notice to Directors need not state the purpose of a regular or special meeting.
SECTION 2. WAIVER. Whenever any notice of the time, place or purpose
of any meeting of the stockholders, the Board of Directors or a Committee is
required to be given under the provisions of Maryland law or under the
provisions of the Articles of Incorporation or these By-Laws, a waiver thereof
in writing, signed by the person or persons entitled to such notice and filed
with the records of the meeting, whether before or after the holding thereof, or
actual attendance at the meeting of stockholders, in person or by proxy, or at
the meeting of the Board of Directors or the Committee, in person, shall be
deemed equivalent to the giving of such notice to such persons.
ARTICLE V
OFFICERS
SECTION 1. NUMBER. The officers of the Corporation shall be chosen
by the Board of Directors and shall include: a President who shall be the Chief
Operating Officer of the Corporation and a Director; a Secretary; and a
Treasurer. The Board of Directors may, from time to time, elect or
appoint a Controller, one or more Vice Presidents, Assistant Secretaries and
Assistant Treasurers. The Board of Directors shall also appoint two Chairmen,
one of whom shall be the Chief Executive Officer and the second shall be the
Chief Investment Officer of the Corporation and who shall perform and execute
such other duties and powers as the Board of Directors shall from time to time
prescribe. Two or more offices may be held by the same person but no officer
shall execute, acknowledge or verify any instrument in more than one capacity,
if such instrument is required by law, the Articles of Incorporation or these
By-Laws to be executed, acknowledged or verified by two or more officers.
SECTION 2. ELECTION. The Board of Directors shall choose a
President, a Secretary and a Treasurer who shall each serve until their
successors are chosen and shall qualify.
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SECTION 3. OTHER OFFICERS. The Board of Directors from time to time
may appoint such other officers and agents as it shall deem advisable, who shall
hold their offices for such terms and shall exercise such powers and perform
such duties as shall be determined from time to time by the Board. The Board of
Directors from time to time may delegate to one or more officers or agents the
power to appoint any such subordinate officers or agents and to prescribe the
respective rights, terms of office, authorities and duties.
SECTION 4. COMPENSATION. The salaries or other compensation of all
officers and agents of the Corporation shall be fixed by the Board of Directors,
except that the Board of Directors may delegate to any person or group of
persons the power to fix the salary or other compensation of any subordinate
officers or agents appointed pursuant to Section 3 of this Article V.
SECTION 5. TENURE. The officers of the Corporation shall serve until
their successors are chosen and qualify. Any officer or agent may be
removed by the affirmative vote of a majority of the Board of Directors
whenever, in its judgment, the best interests of the Corporation will be served
thereby. Any vacancy occurring in any office of the Corporation by death,
resignation, removal or otherwise shall be filled by the Board of Directors.
SECTION 6. PRESIDENT-CHIEF OPERATING OFFICER. The President shall be
the chief operating officer of the Corporation; he shall see that all orders and
resolutions of the Board of Directors are carried into effect. The President
shall perform such other duties and have such other powers as the Board of
Directors may from time to time prescribe. In the absence or disability of the
President, the Chairman-Chief Investment Officer shall perform the duties of the
President.
SECTION 7. VICE PRESIDENTS. The Vice Presidents, in the order of
their seniority, shall in the absence or disability of the President, perform
the duties and exercise the powers of the President and shall perform such other
duties as the Board of Directors may from time to time prescribe; provided that
the Vice President-Chief Administrative Officer, if any person has been elected
to such office by the Board of Directors and then holds such office, shall be
the chief administrative officer of the Corporation.
SECTION 8. SECRETARY. The Secretary and/or an Assistant Secretary
shall attend all meetings of the Board of Directors and all meetings of the
stockholders and record all the proceedings thereof and shall perform like
duties for any Committee when required. The Secretary shall give, or cause to
be given, notice of meetings of the stockholders, the Board of Directors and
each Committee, and shall perform such other duties as may be prescribed
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by the Board of Directors or President, under whose supervision the Secretary
shall be. The Secretary shall keep in safe custody the seal of the Corporation
and, when authorized by the Board of Directors, affix and attest the same to any
instrument requiring it. The Board of Directors may give general authority to
any other officer to affix the seal of the Corporation and to attest the
affixing by such officer's signature.
SECTION 9. ASSISTANT SECRETARIES. The Assistant Secretaries, in
order of their seniority, shall in the absence or disability of the Secretary,
perform the duties and exercise the powers of the Secretary and shall perform
such other duties as the Board of Directors shall prescribe.
SECTION 10. TREASURER. The Treasurer, unless another officer of the
Corporation has been so designated, shall be the chief financial officer of the
Corporation. He shall be responsible for the maintenance of its accounting
records and shall render to the Board of Directors, at its regular meetings, or
when the Board of Directors so requires, an account of all the Corporation's
financial transactions and a report of the financial condition of the
Corporation.
SECTION 11. CONTROLLER. The Board of Directors may designate a
Controller who shall be under the direct supervision of the Treasurer. He shall
maintain adequate records of all assets, liabilities and transactions of the
Corporation, establish and maintain internal accounting controls and, in
cooperation with the independent public accountants selected by the Board of
Directors, supervise internal auditing. He shall have such further powers and
duties as may be conferred upon him from time to time by the President or the
Board of Directors.
SECTION 12. ASSISTANT TREASURERS. The Assistant Treasurers, in the
order of their seniority, shall in the absence or disability of the Treasurer,
perform the duties and exercise the powers of the Treasurer and shall perform
such other duties as the Board of Directors may from time to time prescribe.
ARTICLE VI
NET ASSET VALUE
SECTION 1. NET ASSET VALUE. The net asset value per share of stock
of each class of the Corporation (each a "Portfolio") shall be determined by
dividing the total current market value of the investments and other assets
belonging to such Portfolio, less any liabilities attributable to such
Portfolio, by the total outstanding shares of such Portfolio. Securities which
are listed on a securities exchange for which market quotations are available
shall be valued at the last quoted sale price of the day
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or, if there is no such reported sale, at the mean between the most recent
quoted bid and asked prices. Price information on listed securities will be
taken from the exchange where the security is primarily traded. Unlisted
securities for which market quotations are readily available will be valued at
the mean between the most recent quoted bid and asked prices. The value of
other assets and securities for which no quotations are readily available
(including restricted securities) will be determined in good faith at fair value
using methods determined by the Board of Directors.
The net asset value per share of each Portfolio shall be determined
as of the close of the New York Stock Exchange on each day that the Exchange is
open for business, except as otherwise described in the registration statement
of the Corporation.
With respect to each Portfolio that pursues its investment
objectives by directly or indirectly investing substantially all of its assets
in fixed income securities (each a "Fixed Income Portfolio"), for purposes of
determining the net asset value per share of such Portfolio, (i) net asset value
shall include interest on fixed income securities, which shall be accrued daily,
and (ii) securities which are traded over-the-counter and on a stock exchange
may be valued according to the broadest and most representative market for such
securities, provided however, that such securities may be valued on the basis of
prices provided by a pricing service when such prices are believed to reflect
the fair market value of such securities.
SECTION 2. REDEMPTION EXPENSES. In the event that investment
securities must be liquidated in order to make redemption payments in cash, each
Portfolio that pursues its investment objective by directly or indirectly
investing substantially all of its assets in securities of foreign issuers (each
an "International Portfolio") may deduct from the proceeds of redemption the
costs associated with the liquidation of such investment securities, if the
intention to deduct such costs is disclosed in such International Portfolio's
Prospectus.
ARTICLE VII
FUNDAMENTAL POLICIES
SECTION 1. INVESTMENT LIMITATIONS. The following restrictions shall
apply to the Portfolios and may not be changed with respect to any Portfolio
without the approval of the lesser of (i) 67% or more of the shares entitled to
vote thereon present or represented by proxy at a meeting, if the holders of
more than 50% of the shares entitled to vote thereon are present or represented
by proxy, or (ii) more than 50% of the shares entitled to vote thereon:
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The Portfolios shall not:
(a) Invest in commodities or real estate, including limited
partnership interests therein, except The DFA/AEW Real Estate Securities
Portfolio, although (i) they may purchase and sell securities of companies which
deal in real estate and may purchase and sell securities which are secured by
interests in real estate and (ii) each Portfolio (except U.S. 9-10, U.S. 6-10,
DFA One-Year Fixed Income and DFA Five-Year Government Portfolios) may purchase
and sell financial futures contracts and options thereon;
(b) Make loans of cash, except by the purchase by a Fixed Income
Portfolio of privately issued obligations and except through the acquisition by
a Portfolio of bonds, debentures or other obligations (including repurchase
agreements) which are either publicly distributed or customarily purchased by
institutional investors;
(c) Purchase securities of any issuer (except obligations of the U.S.
Government and its instrumentalities) if, as the result, more than 5% of the
Portfolio's total assets, at market, would be invested in the securities of such
issuer, provided, however, that this limitation (i) shall not apply to DFA
Global Fixed Income Portfolio and VA Global Bond Portfolio and (ii) shall apply
only to 75% of the total assets of each other Portfolio, except U.S. 9-10 Small
Company Portfolio;
(d) Purchase or retain securities of an issuer if those officers and
directors of the Corporation or its investment adviser owning more than 1/2 of
1% of such securities together own more than 5% of such securities;
(e) 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
each Portfolio, other than U.S. 9-10 Small Company Portfolio, Japanese Small
Company Portfolio, DFA One-Year Fixed Income Portfolio, DFA Intermediated
Government Fixed Income Portfolio and DFA Five-Year Government 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;
(f) Pledge, mortgage, or hypothecate any of its assets to an extent
greater than ten percent of its total assets at fair market value, except as
provided in paragraph (e) of this section;
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(g) Invest more than ten percent 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, however, that (i) The U.S. 6-10 Small Company
Portfolio, The DFA/AEW Real Estate Securities Portfolio, The U.S. Large Cap
Value Portfolio, The U.S. Small Cap Value Portfolio, RWB/DFA International High
Book to Market Portfolio, The Emerging Markets Portfolio, DFA International
Small Cap Value Portfolio, VA International Value Portfolio, VA Global Bond
Portfolio, VA Small Value Portfolio, VA Large Value Portfolio, VA International
Small Portfolio and VA Short-Term Fixed Portfolio may invest not more than 15%
of the value of their total assets in illiquid securities and (ii) DFA Two-Year
Corporate Fixed Income Portfolio, DFA Two-Year Global Fixed Income Portfolio,
DFA Two-Year Government Portfolio, Enhanced U.S. Large Company Portfolio,
Emerging Markets Small Cap Portfolio and International Small Company Portfolio
are not subject to this limitation;
(h) Engage in the business of underwriting securities issued by
others;
(i) Invest for the purpose of exercising control over management of
any company;
(j) 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 real estate investment trust ("REIT") that is registered as an
investment company; and provided that Enhanced U.S. Large Company Portfolio,
Emerging Markets Portfolio, International Small Company Portfolio and Emerging
Markets Small Cap Portfolio may each invest its assets in securities of
investment companies and units of such companies;
(k) 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 that this limitation does not apply to The DFA/AEW
Real Estate Securities Portfolio, any Portfolio the shares of which are sold
only to insurance company separate accounts (each a "VA Portfolio"), and each
other Portfolio if so provided in the Corporation's registration statement under
the Investment Company Act of 1940;
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(l) 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,
provided, however, that the foregoing restriction shall not apply to obligations
issued or guaranteed by banks and bank holding companies or government
securities as defined by Section 2(a)(16) of the Investment Company Act of 1940
acquired by The DFA One-Year Fixed Income Portfolio, DFA Two-Year Corporate
Fixed Income Portfolio, DFA Two-Year Global Fixed Income Portfolio and VA
Short-Term Fixed Portfolio and also shall not apply to securities of companies
in the real estate industry acquired by The DFA/AEW Real Estate Securities
Portfolio;
(m) Write or acquire options (except as provided in paragraph (a) of
this section) or interests in oil, gas or other mineral exploration, leases or
development programs; provided that Enhanced U.S. Large Company Portfolio may
write or acquire options;
(n) Purchase warrants, provided that each Portfolio may acquire
warrants as a result of corporate holdings involving its holdings of other
equity securities if so provided in the Corporation's registration statement
under the Investment Company Act of 1940;
(o) Purchase securities on margin or sell short; or
(p) As to 75% of the assets of each Portfolio, acquire more than 10%
of the voting securities of any issuer, provided that this limitation shall
apply to (1) any class of securities of any issuer acquired by The U.S. 9-10
Small Company Portfolio and (2) 100% of the assets of the VA International
Small, U.S. 9-10 Small Company, U.S. 6-10 Small Company, U.S. Large Company,
Japanese Small Company, Pacific Rim Small Company, United Kingdom Small Company,
Continental Small Company, Large Cap International, RWB/DFA International High
Book to Market, and International Small Company Portfolios.
The investment limitations described in (c), (g), (i), (j), (k), (l)
and (p) above shall not prohibit any Portfolio from investing all or
substantially all of its assets in another registered, open-end investment
company or series thereof having the same investment objectives as such
Portfolio in accordance with its investment policy.
SECTION 2. Each of the Portfolios is authorized to lend its portfolio
securities to brokers, dealers and other institutional borrowers, provided that
a Portfolio shall not make any such loan if when made more than one-third of the
then total current market value of such Portfolio's assets would consist of lent
securities.
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ARTICLE VIII
OTHER RESTRICTIONS
SECTION 1. DEALINGS. The officers and Directors of the Corporation,
its investment adviser or any sub-adviser shall have no dealings for or on
behalf of the Corporation with themselves as principal or agent, or on behalf of
any corporation or partnership in which they have a financial interest, provided
that this section shall not prevent:
(a) officers or Directors of the Corporation from having a financial
interest in the Corporation, in any sponsor, manager, investment adviser or
promoter of the Corporation, or in any underwriter of securities issued by the
Corporation;
(b) The purchase of securities for any Portfolio, or sale of
securities owned by any Portfolio through a securities dealer, one or more of
whose partners, officers, directors or security holders is an officer or
Director of the Corporation, its investment adviser or its sub-adviser, provided
such transactions are handled in a brokerage capacity only, and provided
commissions charged do not exceed customary brokerage charges for such service;
(c) The employment of any legal counsel, registrar, transfer agent,
dividend disbursing agent or custodian having a partner, officer, director or
security holder who is an officer or Director of the Corporation; provided only
customary fees are charged for services rendered to or for the benefit of the
Corporation; and
(d) The purchase for any Portfolio of securities issued by an issuer
having an officer, director or security holder who is an officer or Director of
the Corporation or of any manager of the Corporation, unless the retention of
such securities for the Portfolio would be a violation of these By-Laws or the
Articles of Incorporation of the Corporation.
ARTICLE IX
STOCK
SECTION 1. ISSUANCE WITHOUT CERTIFICATES; STOCK LEDGER. The issuance
of shares of stock in the Corporation shall be recorded by electronic or other
means without the issuance of certificates, provided that shares of stock in the
Corporation represented by certificates shall not be affected until such
certificates are surrendered to the Corporation. The Corporation shall maintain
an original stock ledger containing the names and addresses of all stockholders
and the number and class of shares held by each stockholder. Such stock ledger
may be in written form
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or any other form capable of being converted into written form within a
reasonable time for visual inspection.
SECTION 2. LOST CERTIFICATES. If any stockholder alleges that such
stockholder's certificate or certificates for shares of stock in the Corporation
have been stolen, lost or destroyed, upon the making of an affidavit of that
fact by such stockholder or upon other satisfactory evidence of such loss or
destruction, the Board of Directors may direct that the Corporation's stock
ledger be marked to cancel such certificates and record the ownership of such
shares in accordance with Section 1 of this Article. When authorizing such
cancellation and recordation of ownership, the Board of Directors may, in its
discretion and as a condition precedent to such action, require the
stockholder, or his legal representative, to advertise the same in such manner
as it shall require and to give the Corporation a bond with sufficient surety to
indemnify the Corporation against any loss or claim that may be made by reason
of such action.
SECTION 3. REGISTERED STOCKHOLDERS. Except as otherwise provided by
laws of Maryland, the Corporation shall be entitled to (i) recognize the
exclusive right of a person registered on its books as the owner of shares to
receive dividends and vote such shares and (ii) to hold such person liable for
calls and assessments with respect to such shares and the Corporation shall not
be bound to recognize any equitable or other claim to or interest in such share
or shares on the part of any other person, whether or not it shall have express
or other notice thereof.
SECTION 4. TRANSFER AGENTS AND REGISTRARS. The Board of Directors
may, from time to time, appoint or remove transfer agents and/or registrars of
transfers of shares of stock of the Corporation, and it may appoint the same
person as both transfer agent and registrar.
ARTICLE X
GENERAL PROVISIONS
SECTION 1. DIVIDENDS. With respect to dividends (including
"dividends" designated as "short" or "long" term "capital gains" distributions
to satisfy requirements of the Investment Company Act of 1940 or the Internal
Revenue Code of 1986, as amended from time to time):
(a) Dividends on shares of a Portfolio may be reinvested in
additional shares of such Portfolio at the net asset value thereof as provided
in the Corporation's registration statement under the Investment Company Act of
1940.
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(b) The Board of Directors, in declaring any dividend, may fix a
record date not earlier than the date of declaration or more than 90 days after
the date of declaration, as of which the stockholders entitled to receive such
dividend shall be determined, notwithstanding any transfer or the repurchase or
issue (or sale) of any shares occurring after such record date.
(c) Dividends or distributions on shares of stock, whether payable in
stock or cash, shall be paid out of earnings, surplus or other lawfully
available assets; provided that no dividend payment, or distribution in the
nature of a dividend payment may be made wholly or partly from any source other
than accumulated, undistributed net income, determined in accordance with good
accounting practice, and not including profits or losses realized in the sale of
securities or other properties, unless such payment is accompanied by a written
statement clearly indicating what portion of such payment per share is made from
the following sources:
(i) Accumulated or undistributed net income, not including
profits or losses from the sale of securities or other properties;
(ii) Accumulated or undistributed net profits from the sale of
securities or other properties;
(iii) Net Profits from the sale of securities or other properties
during the then current fiscal year; and
(iv) Paid-in surplus or other capital source.
(d) In declaring dividends and in recognition that a goal of the
Corporation is for each Portfolio to qualify as a "regulated investment company"
under the Internal Revenue Code of 1986, as amended, the Board of Directors
shall be entitled to rely upon estimates made in the last two months of the
fiscal year (with the advice of the Corporation's auditors) as to the amounts of
distribution necessary for this purpose; and the Board of Directors, acting
consistently with good accounting practice and with the express provisions of
these By-Laws, may credit receipts and charge payments to income or otherwise,
as to it may seem proper.
(e) Any dividends declared, except as aforesaid, shall be deemed
liquidating dividends and the stockholders shall be so informed to whatever
extent may be required by law. A notice that dividends have been paid from
paid-in surplus, or a notice that dividends have been paid from paid-in capital,
shall be deemed to be a sufficient notice that the same constituted liquidating
dividends.
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(f) Anything in these By-Laws to the contrary notwithstanding, the
Board of Directors may at any time declare and distribute PRO RATA among the
stockholders of a Portfolio, as of a record date fixed as above provided, a
"stock dividend" of additional shares of such Portfolio, issuable out of either
authorized but unissued or treasury shares of the Corporation, or both.
SECTION 2. RIGHTS IN SECURITIES. The Board of Directors, on behalf
of the Corporation, shall have the authority to exercise all of the rights of
the Corporation as owner of any securities which might be exercised by any
individual owning such securities in his own right; including but not limited
to, the right to vote by proxy for any and all purposes and the right to
authorize any officer of the investment adviser or other delegate to execute
proxies.
SECTION 3. CLAIMS AGAINST PORTFOLIO ASSETS. In any loan agreement
by which funds are borrowed for a Portfolio and each related agreement to
pledge, mortgage or hypothecate any of the assets of such Portfolio, the
Corporation shall provide that such loan shall be repaid solely out of the
assets of such Portfolio and that, to the extent such loan may be secured only
by the assets of such Portfolio, no creditor of such Portfolio shall have any
rights to any assets of the Corporation other than the specific assets which
secure the agreement.
SECTION 4. REPORTS. The Corporation shall furnish stockholders with
reports of its financial condition as required by Section 30(d) of the
Investment Company Act of 1940 and the rules thereunder.
SECTION 5. BONDING OF OFFICERS AND EMPLOYEES. All officers and
employees of the Corporation shall be bonded to such extent, and in such manner,
as may be required by law.
SECTION 6. SEAL. The Corporate seal shall have inscribed thereon the
names of the Corporation, the year of its organization and the words "Corporate
Seal, Maryland." The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or reproduced or otherwise.
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ARTICLE XI
INDEMNIFICATION OF
OFFICERS AND DIRECTORS
SECTION 1. With respect to the indemnification of the officers and
Directors of the Corporation:
(a) The Corporation shall indemnify each officer and Director made
party to a proceeding, by reason of service in such capacity, to the fullest
extent, and in the manner provided, under section 2-418 of the Maryland General
Corporation Law: (i) unless it is proved that the person seeking indemnification
did not meet the standard of conduct set forth in subsection (b)(1) of such
section; and (ii) provided, that the Corporation shall not indemnify any
officer or Director for any liability to the Corporation or its security holders
arising from the willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of such person's office.
(b) The provisions of clause (i) of paragraph (a) herein
notwithstanding, the Corporation shall indemnify each officer and Director
against reasonable expenses incurred in connection with the successful defense
of any proceeding to which such officer or Director is a party by reason of
service in such capacity.
(c) The Corporation, in the manner and to the extent provided by
applicable law, shall advance to each officer and Director who is made party to
a proceeding by reason of service in such capacity the reasonable expenses
incurred by such person in connection therewith.
ARTICLE XII
AMENDMENTS
SECTION 1. These By-Laws may be altered or repealed at any meeting of
the Board of Directors, provided that the right of the Board of Directors to
amend and the amendment procedure meet the requirements of the Investment
Company Act of 1940, if any.
* * * * *
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DOMESTIC CUSTODY AGREEMENT
To: THE CHASE MANHATTAN BANK
Institutional Client Services
4 New York Plaza, 4th Floor
New York, New York 10004
Gentlemen:
We hereby request you to open and to maintain a Custody Account in our name
and to hold therein as our custodian, upon the following terms and conditions,
all stocks, bonds, rights, warrants and other negotiable and non-negotiable
paper issued in certificated or book-entry form and commonly treated or dealt
with on securities exchanges or securities markets as shall be received by and
acceptable to you for the Custody Account (hereinafter referred to as
"securities"). As used herein, the term Custody Account shall include all such
Custody Accounts opened pursuant to this Domestic Custody Agreement (the
"Agreement").
Securities held by you for the Custody Account shall be segregated at all
times from your proprietary assets.
1. TRANSACTIONS. Unless you receive contrary written instructions from
us, and subject to the provisions of this Agreement, you are authorized:
(a) to receive all interest and dividends payable on the securities
and (except as hereinafter set forth in the section entitled
"Miscellaneous") to credit such interest and dividends to the demand
deposit cash account of ours with you designated by us to receive all sums
collected in respect of transactions to the Custody Account (each such
account a "Cash Account");
(b) to credit all proceeds received from sales and redemptions of
securities to the Cash Account;
(c) to debit the Cash Account for the cost of acquiring securities
for the Custody Account;
(d) to present obligations (including coupons) for payment upon
maturity, when called for redemption and when income payments are due;
<PAGE>
(e) to exchange securities for other securities where the exchange is
purely ministerial as, for example, the exchange of securities in temporary
form for securities in definitive form or the mandatory exchange of
certificates;
(f) to sell fractional interests resulting from a stock split or a
stock dividend and to credit the Cash Account with the proceeds thereof;
(g) to execute in our name, whenever you deem it appropriate, such
ownership and other certificates as may be required to obtain payments with
respect to, or to effect the sale, transfer or other disposition of,
securities in the Custody Account and to guarantee as our signature the
signature so affixed;
(h) to receive and hold in the Custody Account securities which have
transfer limitations imposed upon them by the Securities Act of 1933, as
amended; and
(i) to convert moneys received with respect to securities of foreign
issue into United States dollars whenever it is practical to do so through
customary banking channels. In effecting such conversion you may use any
method or agency available to you, including the facilities of your own
divisions, subsidiaries or affiliates. You shall incur no liability on
account of any loss suffered or expense incurred as a result of such
conversion, including, without limitation, losses arising from fluctuations
in exchange rates affecting any such conversion.
2. INSTRUCTIONS. You are authorized to rely and act upon all further
written instructions given or purported to be given by one or more officers,
employees or agents of ours (i) authorized by or in accordance with a corporate
resolution of ours delivered to you or (ii) described as authorized in a
certificate delivered to you by our Secretary or an Assistant Secretary or
similar officer of ours (each such officer, employee or agent or combination of
officers, employees and agents authorized pursuant to clause (i) or described
pursuant to clause (ii) of this paragraph is hereinafter referred to as an
"Authorized Officer"). (The term "instructions" includes, without limitation,
instructions to sell, assign, transfer, deliver, purchase or receive for the
Custody Account, any and all stocks, bonds and other securities or to transfer
funds in the Cash Account.) You may also rely and act upon instructions when
bearing or purporting to bear the facsimile signature of any of the individuals
designated by an Authorized Officer regardless of by whom or by what means the
actual or purported facsimile signature or signatures thereon may have been
affixed thereto if such facsimile signature or signatures resemble the facsimile
specimen or specimens from time to time furnished to you by any of such
Authorized Officers, our Secretary or an Assistant Secretary or similar officer
of ours. In addition, you may rely and act upon instructions received by
telephone, telex, TWX, facsimile transmission, bank wire or other teleprocess or
electronic instruction or trade information system acceptable to
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you which you believe in good faith to have been given by an Authorized Officer
or which are transmitted with proper testing or authentication pursuant to terms
and conditions which you may specify. You may also rely and act upon
instructions transmitted electronically through your TITAN Data Entry System or
any similar electronic instruction system acceptable to you. You shall incur no
liability to us or otherwise as a result of any act or omission by you in
accordance with instructions on which you are authorized to rely pursuant to the
provisions of this paragraph. Any instructions delivered to you by telephone
shall promptly thereafter be confirmed in writing by an Authorized Officer, but
you shall incur no liability for our failure to send such confirmation in
writing, the failure of any such written confirmation to conform to the
telephone instructions which you received, the failure of any such written
confirmation to be signed or properly signed, or your failure to produce such
confirmation at any subsequent time. You shall incur no liability for
refraining from acting upon any instructions which for any reason you, in good
faith, are unable to verify to your own satisfaction. With respect to
instructions received hereunder to transfer funds from the Cash Account to any
other account or party, we agree to implement any callback or other
authentication method or procedure or security device required by you at any
time or from time to time. Unless otherwise expressly provided, all
authorizations and instructions shall continue in full force and effect until
canceled or superseded by subsequent authorizations or instructions received by
your safekeeping account administrator with reasonable opportunity to act
thereon. Your authorization to rely and act upon instructions pursuant to this
paragraph shall be in addition to, and shall not limit, any other authorization
which we may give you regarding our accounts with you.
We agree that, if you require test arrangements, authentication methods or
procedures or other security devices to be used with respect to instructions
which we may give hereunder, thereafter instructions given by us shall be given
and processed in accordance with terms and conditions for the use of such
arrangements, methods or procedures or devices as you may put into effect and
modify from time to time. We shall safeguard any testkeys, identification codes
or other security devices which you make available to us and agree that we shall
be responsible for any loss, liability or damage incurred by you or by us as a
result of your acting in accordance with instructions from any unauthorized
person using the proper security device. You may electronically record any
instructions given by telephone, and any other telephone discussions with
respect to the Custody Account or transactions pursuant to this Agreement.
If you are instructioned by us to purchase or sell securities for the
Custody Account you may enter purchase and sale orders and confirmations, and
perform any other acts incidental or necessary to the performance thereof with
brokers or dealers or similar agents selected by you, including any broker or
dealer or similar agent affiliated with you, for our account and risk in
accordance with accepted industry practices in the relevant market.
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Except as may be provided otherwise herein, you are authorized to execute
our instructions and take other actions pursuant to this Agreement in accordance
with your customary processing practices for customers similar to us and, in
accordance with such practices, you may retain agents, including subsidiaries or
affiliates of yours, to perform certain of such functions.
In acting upon instructions to deliver securities against payment, you are
authorized, in accordance with customary securities processing practices, to
deliver such securities to the purchaser thereof or dealer therefor (including
to an agent for any such purchaser or dealer) against a receipt, with the
expectation of collecting payment from the purchaser, dealer or agent to whom
the securities were so delivered before the close of business on the same day.
3. REGISTRATION. Unless you receive contrary instructions from us, you
are authorized to keep securities in your own vaults or in book entry form
registered in your name or in the name of your nominee or nominees or, where
securities are eligible for deposit in a Depository (hereinafter defined), such
as The Depository Trust Company, the Federal Reserve Bank of New York or
Participants Trust Company, you may use any such Depository and permit the
registration of registered securities in the name of its nominee or nominees,
and we agree to hold you and the nominees harmless from any liability as holders
of record. We shall accept the return or delivery of securities of the same
class and denomination as those deposited with you by us or otherwise received
by you for the Custody Account, and you need not retain the particular
certificates so deposited or received.
If any of our securities registered in your name or the name of your
nominee or held in a Depository and registered in the name of the Depository's
nominee are called for partial redemption by the issuer of such securities, you
are authorized to allot the called portion to the respective beneficial holders
of the securities in any manner deemed to be fair and equitable by you in your
sole discretion.
4. STATEMENTS. You shall notify us of each securities transaction
effected for the Custody Account and of income on and redemptions of the
securities in the Custody Account, as well as furnish us a listing of such
securities, at such times upon which you and we mutually agree. Periodic
statements shall be rendered to us as we may reasonably require, but not less
frequently than monthly. You shall at all times maintain proper books and
records that shall identify the securities as ours. Your books and records
relating to the Custody Account shall be available for inspection upon
reasonable notice to you during your regular business hours by duly authorized
officers, employees, or agents of ours, or by legally authorized regulatory
officials who are then in the process of reviewing our financial affairs upon
proof to you of such official status.
Unless we shall send to you a written exception or objection to any
statement of account within 60 days of our receipt of such statement from you,
we shall be deemed
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to have approved such statement. In such event, or where we have otherwise
approved such statement, you shall, to the extent permitted by law, be released,
relieved and discharged with respect to all matters set forth in such statement
or reasonably implied therefrom as though it had been settled by the decree of a
court of competent jurisdiction in an action where we and all persons having or
claiming an interest in the Custody Account or Cash Account were parties.
5. CORPORATE ACTIONS. You shall send us such proxies (signed in blank,
if issued in your name or the name of your nominee or a nominee of a Depository)
and communications with respect to securities in the Custody Account as call for
voting or relate to legal proceedings within a reasonable time after sufficient
copies are received by you for forwarding to customers. In addition, you shall
follow coupon payments, redemptions, exchanges or similar matters with respect
to securities in the Custody Account and advise us of rights issued, tender
offers or any other discretionary rights with respect to such securities, in
each case, of which you receive notice at your central corporate actions
department from the issuer or from the Depository in which such securities are
held or notice published in publications and reported in reporting services
routinely used by you for this purpose.
6. CUSTODIAN RESPONSIBILITY. Except as provided in the next following
paragraph, you shall be obligated to indemnify us for any loss of securities
credited to the Custody Account resulting from (i) the negligence or willful
misconduct of you or your officers, employees or agents retained by you to hold
such securities or (ii) the burglary, robbery, hold-up, theft or mysterious
disappearance, including loss by damage or destruction. In the event of a loss
of securities in the Custody Account for which you are required to indemnify us
pursuant to the immediately preceding sentence, at your option, you shall
promptly replace such securities (by among other means posting appropriate
security or bond with the issuer(s) of such securities and obtaining their
reissue) or the value thereof (determined based upon the market value of the
securities which are the subject of such loss as of the date of the discovery of
such loss) and the value of any loss of rights or privileges resulting from the
loss of such securities. The foregoing indemnity shall be your exclusive
liability to us for your loss of securities from the Custody Account. In
respect of all your other duties and obligations pursuant to the terms of this
Agreement, you shall be liable to us only to the extent of our general damages
suffered or incurred as a result of any act or omission of you or your officers,
employees or agents which constitutes negligence or willful misconduct. General
damages shall mean only those damages as directly and necessarily result from
such act or omission without reference to any special conditions or
circumstances of ours or of any transaction, whether or not you have been
advised of any such special conditions or circumstances. Anything in this
Agreement to the contrary notwithstanding, in no event shall you be liable to
us under this Agreement for special, indirect or consequential loss or damage of
any kind whatsoever, whether or not you are advised as to the possibility of
such loss or damage and regardless of the form of action any such loss or damage
may be claimed.
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You shall not be liable for the acts or omissions of (or the bankruptcy or
insolvency of) any Depository. If, however, as a result of any act or omission
of, or the bankruptcy or insolvency of, any Depository we suffer any loss or
liability, you will take such steps with respect thereto in order to effect a
recovery as you shall reasonably deem appropriate under the circumstances
(including the bringing and settling of legal proceedings), provided that unless
you shall be liable as set forth in the immediately preceding paragraph of this
Agreement, for such loss or liability by virtue of the negligence or misconduct
of you or your officers, employees or agents, the amount of any cost or expense
in effecting, or attempting to effect, such recovery shall be for our account,
and you shall have the right to charge such cost or expense to the Cash Account.
We further agree to be bound by the Depository rules and procedures applicable
to you as a participant in respect of any securities held by you in your account
with such Depository. "Depository" shall mean a federal reserve bank and any
"clearing corporation" as defined under Article 8 of the New York Uniform
Commercial Code, as amended from time to time.
All collection and receipt of funds or securities and all payment and
delivery of funds or securities under this Agreement shall be made by you as our
agent, at our risk with respect to our actions or omissions and those of persons
other than you, including, without limitation, the risk associated with the
securities processing practice of delivering securities against a receipt and
the risk that the counterparty in any transaction into which we enter will not
transfer funds or securities or otherwise perform in accordance with our
expectation of its obligations thereunder (including, without limitation, where,
as a result of such nonperformance, a Depository reverses, or requires repayment
of, any credit given in connection with the transfer of securities).
In no event shall you be responsible or liable for any loss due to forces
beyond your control, including, but not limited to, acts of God, flood, fire,
nuclear fusion, fission or radiation, war (declared or undeclared), terrorism,
insurrection, revolution, riot, strikes or work stoppages for any reason,
embargo, closure or disruption of any market, government action, including any
laws, ordinances, regulations or the like which restrict or prohibit the
providing of the services contemplated by this Agreement, inability to obtain
equipment or communications facilities, or the error in transmission of
information caused by any machines or systems or the failure of equipment or
interruption of communications facilities, and other causes whether or not of
the same class or kind as specifically named above. In the event that you are
unable substantially to perform for any of the reasons described in the
immediately preceding sentence, you shall so notify us as soon as reasonably
practicable.
You shall be responsible for only those duties expressly stated in this
Agreement or expressly contained in instructions to perform the services
described herein given to you pursuant to the provisions of this Agreement and
accepted by you and, without limiting the foregoing, you shall have no duty or
responsibility:
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(a) to supervise the investment of, or make recommendations with
respect to the purchase, retention or sale of, securities relating to the
Custody Account, or to maintain any insurance on securities in the Custody
Account for our benefit;
(b) with regard to any security in the Custody Account as to which a
default in the payment of principal or interest has occurred, to give
notice of default, make demand for payment or take any other action with
respect to such default;
(c) except as otherwise specifically provided in this section under
the heading "Custodian Responsibility", for any act or omission, or for the
solvency or insolvency, or notice to us of the solvency or insolvency, of
any broker or agent which is selected by you with reasonable care or by us
or any other person to effect any transaction for the Custody Account or to
perform any service under this Agreement;
(d) to evaluate, or report to us regarding, the financial condition
of any person, firm or corporation to which you deliver securities or funds
pursuant to this Agreement;
(e) for any loss occasioned by delay in the actual receipt of notice
by you of any payment, redemption or other transaction in respect to which
you are authorized to take some action pursuant to this Agreement; or
(f) for any errors or omissions made by any securities pricing
service used by you to value securities credited to the Custody Account as
part of any service subscribed to by us from you.
7. SETTLEMENTS. We agree with you that all credits of securities and
proceeds by you to the Custody Account and the Cash Account, respectively, on
the settlement or payable date shall be provisional when made and you shall be
entitled to reverse any such credits subject to actual receipt or collection of
immediately available funds.
We shall have sufficient immediately available funds each day in the Cash
Account to pay for the settlement of all securities delivered against payment to
you and credited to the Custody Account. Should we fail to have sufficient
immediately available funds in the Cash Account to settle these deliveries of
securities pursuant to the preceding sentence (a "Deficit"), you, in your sole
discretion, may elect (i) to reject the settlement of any or all of the
securities delivered to you that day to the Custody Account, (ii) to settle the
deliveries on our behalf and debit the Cash Account (A) for the amount of such
Deficit and (B) for the amount of the funding or other cost or expense incurred
or sustained by you for our failure to have sufficient immediately available
funds in the Cash Account by the applicable settlement deadline for you, or
(iii) to reverse the posting of the securities credited to the Custody Account.
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You shall have the right to reverse any erroneous or provisional credit
entries to the Cash Account retroactively to the date upon which the correct
entry, or no entry, should have been made.
The foregoing rights are in addition to and not in limitation of any other
rights or remedies available to you under this Agreement or otherwise. Any
advances made by you to us in connection with the purchase, sale, redemption,
transfer or other designation of securities or in connection with disbursements
of funds to any party, which create or result in an overdraft in the Cash
Account shall be deemed a loan by you to us, payable on demand, and bear
interest on the amount of the loan each day that the loan remains unpaid at your
prime rate in effect as announced by you from time to time, plus the cost to you
of any required reserves. We shall also bear the cost of any Federal Reserve
Bank daylight overdraft charge incurred by you and allocated to transactions
effected for the Custody Account or the Cash Account.
No prior action or course of dealing on your part with respect to the
settlement of securities transactions on our behalf shall be used by or give
rise to any claim or action by us against you for your refusal to pay or settle
for a securities transaction we have not timely funded as required herein.
8. RESPONSIBLE AS PRINCIPAL. We agree that we shall be responsible to
you as a principal for all of our obligations to you arising under or in
connection with this Agreement, notwithstanding that we may be acting on behalf
of other persons, and we warrant our authority to deposit in the Custody Account
and Cash Account, respectively, any securities and funds which you or your
agents receive therefor and to give instructions relative thereto. We further
agree that you shall not be subject to, nor shall your rights and obligations
with respect to this Agreement and the Custody Account or the Cash Account be
affected by, any agreement between us and any such person.
9. CREDITING AND DEBITING PROCEDURES. With respect to all transactions
for the Custody Account and the Cash Account, including, without limitation,
dividend and interest payments and sales and redemptions of securities,
availability of funds credited to the Custody Account and Cash Account shall be
based on the type of funds used in the trade settlement or payment, including,
but not limited to, same day availability for federal or same day funds and next
business day availability for clearing house or next day funds. Furthermore,
with respect to all purchases and sales of securities for the Custody Account,
the proceeds from the sale of securities shall be credited to the Cash Account
on the date proceeds are received by you and the cost of securities purchased
shall be debited to the Cash Account on the date securities are received by you,
unless we request your contractual settlement service for the Custody Account in
which case the following provisions shall apply with respect to the delivery and
receipt of securities for the Custody Account for those securities and
transactions as to which you customarily offer this service.
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(a) When we instruct you to deliver or receive securities, on the
contractual settlement date you shall credit the Cash Account with the
expected proceeds of the transaction and debit the Custody Account for the
securities which we have instructed you to deliver, in the case of
deliveries, and debit the Cash Account for the cost of the securities which
we have instructed you to receive and credit the Custody Account with such
securities, in the case of receives. These credits and debits are
provisional accounting entries which you shall reverse on our instructions
and which you may reverse, even in the absence of instructions from us, if
the transaction with respect to which they were made fails to settle within
a reasonable period, determined by you in your discretion, after the
contractual settlement date, except that if you deliver securities which
are returned by the recipient thereof, you may reverse such credits and
debits at any time. You have no obligation to use this crediting and
debiting procedure with respect to a delivery of securities if we do not
have actually in our account sufficient securities to make the delivery.
(b) As with other transactions processed by you, your responsibility
with respect to transactions for which you use this crediting and debiting
procedure shall be governed by the provisions of this Custody Agreement,
including the section headed "Custodian Responsibility". We agree that
your using this procedure is not an assurance by you that the transaction
will actually settle on the contractual settlement date and does not impose
any additional responsibility on you with respect to the transaction.
Without limiting your right to reverse credits and debits described above,
the account statements which you furnish to us shall reflect transactions
as to which you use this procedure as if they had actually settled on the
contractual settlement date, unless prior to the date to which the
statement relates, you have reversed such credits and debits.
(c) We agree that you may terminate this contractual settlement
service to us at any time and for any reason.
With respect to securities or transactions as to which you do not
customarily offer this service, you shall (i) in the case of deliveries of
securities, credit the proceeds of the transaction to the Cash Account on the
date they are received by you and debit the securities from the Custody Account
on the date they are delivered by you, and (ii) in the case of securities
received, debit the Cash Account for the cost of such securities and credit the
Custody Account with such securities on the date the securities are received by
you.
10. SWEEP OF CASH BALANCES. Unless you receive contrary instructions from
us, you are directed automatically to arrange for the investment of cash in the
Cash Account in mutual funds (including, without limitation, the VISTA Money
Market Funds and any other mutual fund with respect to which you or an
affiliate or subsidiary of yours serves as an investment adviser, administrator,
shareholder servicing agent,
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and/or custodian or subcustodian and regardless of whether or not you or an
affiliate or subsidiary of yours receives any fees for services rendered to any
such mutual fund in addition to the fees received by you pursuant to this
Agreement, all of which such fees you are specifically authorized to retain) or
money market accounts (including, without limitation, accounts of yours or an
affiliate or subsidiary of yours) which you make available for such purposes and
which we shall select through instructions to you. Further, in this regard, you
are directed automatically to arrange for the redemption of such mutual fund
shares or for the withdrawal of amounts from such money market accounts as may
be necessary to avoid any potential overdraft hereunder that you perceive based
upon the information available to you at the time of such redemption or
withdrawal. We agree that we shall read the prospectus for any mutual fund
prior to investing and acknowledge that investments in mutual fund shares are
not insured by the Federal Deposit Insurance Corporation and are not obligations
of or guaranteed by you.
11. TAXES. (a) You are authorized and directed, unless otherwise
instructed in particular transactions, to claim exemption from transfer taxes on
all transfers and deliveries of securities held for the Custody Account; and
(b) Unless we have already done so, we shall deliver promptly to you with
respect to each Custody Account established under this Agreement, two duly
completed and executed copies of the proper United States Internal Revenue
Service forms: (i) Form W-9, if we are a U.S. citizen or resident person; and
(ii) Form 1001, Form 4224, Form W-8 or Form 8709 (as applicable), if we are a
nonresident person, certifying our status as a nonresident person, and that we
are entitled to receive United States source payments under or in connection
with this Agreement without deduction as withholding or at a reduced rate of
withholding for United States federal income taxes. We agree to provide duly
executed and completed updates of such form(s) (or successor applicable forms),
on or before the date that such form(s) expire or become obsolete or after the
occurrence of an event requiring a change in the most recent form previously
delivered by us to you. We further agree to pay, indemnify, and hold you
harmless from and against any and all liabilities, penalties, interest or
additions to tax with respect to, or resulting from, any delay in, or failure
by, you (i) to pay, withhold or report any Federal, state or foreign taxes
imposed on, or in respect of, the property held in the Custody Account(s), or
this Agreement, or (ii) to report interest, dividend or other income paid or
credited to the Cash Account, whether such failure or delay by you to pay,
withhold or report tax or income is a result of (x) our failure to comply with
the terms of this sub-paragraph, or (y) your own acts or omissions; provided,
however, we shall not be liable to you for any penalty or additions to tax due
as a result of your failure to pay or withhold tax or to report to us interest,
dividend or other income paid or credited to the Cash Account solely as a result
of your negligent acts or omissions.
12. OTHER ACCOUNTS. From time to time we may instruct you to open and
maintain more than one Custody Account for us. Unless we and you otherwise
expressly agree, such accounts will be governed by the provisions of this
Agreement.
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13. FEES, INDEMNIFICATION. We agree to pay you compensation for your
services pursuant to this Agreement at the fees of which you shall notify us
from time to time. We also agree to hold you and your officers, employees and
agents harmless from, and to indemnify and reimburse you and them for, all
claims, liabilities, losses, damages and expenses (including out-of-pocket and
incidental expenses and legal fees) incurred by you or them in connection with
or relating to the Custody Account or your acting under this Agreement, provided
that you or they, as the case may be, have not acted with negligence or willful
misconduct with respect to the events resulting in such claims, liabilities,
losses, damages or expenses.
14. LIEN. We hereby pledge, assign and grant to you a continuing security
interest in, and a lien on the securities in the Custody Account and any
securities in your possession or under your control for credit to the Custody
Account, and you shall have all of the rights and remedies of a secured party
under the New York Uniform Commercial Code, as amended, as security for any and
all obligations, matured or not matured, direct or indirect, absolute or
contingent, now due or hereafter to become due of us to you pursuant to this
Agreement; provided,however, if the Custody Account in which such securities are
credited is clearly designated on your records as an account in which our
interest is that of an agent or fiduciary for others, your security interest in
a particular security in such account will terminate at the time we pay to you
the settlement amount for such security in immediately available funds.
15. SET-OFF. You may, without notice to us, setoff any sums held for us
or standing to the credit of any of our cash accounts with you in or towards the
satisfaction of any obligation of us to you under this Agreement, whether or not
any such sums or credits or obligations are matured or unmatured, direct or
indirect, absolute or contingent, and may do so notwithstanding that the
accounts may be maintained at different branches of yours and may not be
expressed in the same currency.
16. TERMINATION. Either party may terminate this Agreement at any time
upon thirty days written notice. Our obligations pursuant to the paragraphs
under the headings "Registration", "Settlements" and "Fees, Indemnification"
shall survive the termination of this Agreement.
17. NOTICES. Notices with respect to termination, specification of
Authorized Officers and terms and conditions for instructions required hereunder
shall be in writing, and shall be deemed to have been duly given if delivered
personally, by courier service or by mail, postage prepaid, to the following
addresses (or to such other address as either party hereto may from time to time
designate by notice duly given in accordance with this paragraph):
To us at:
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To you, to the attention of the individual designated by you as the
safekeeping account administrator for our account, at:
The Chase Manhattan Bank
Institutional Client Services
4 New York Plaza, 4th Floor
New York, New York 10004
18. GOVERNING LAW, SUCCESSORS AND ASSIGNS, HEADINGS. This Agreement shall
be governed by and construed in accordance with the laws of the State of New
York, without regard to laws as to conflicts of laws, and shall be binding on
our and your respective successors and assigns. We and you hereby irrevocably
submit to the exclusive jurisdiction of the state and federal courts in the
State and County of New York for the purposes of any suit, action or other
proceedings arising out of this Agreement. We and you hereby irrevocably waive
any objection on the ground of venue, forum non conveniens, or any similar
grounds, and irrevocably consent to service of process by mail or in any manner
permitted by New York law, and irrevocably waive our rights to any jury trial.
The headings of the paragraphs hereof are included for convenience of reference
only and do not form a part of this Agreement.
19. PRIOR PROPOSALS. This Agreement (including any Riders relating to
additional services in respect of the Custody Account we may request of you)
shall contain the complete agreement of the parties hereto with respect to the
Custody Account (except as may be expressly provided to the contrary herein)
and supersedes and replaces any previously made proposals, representations,
warranties or agreements with respect thereto by either or both of the parties
hereto. This Agreement shall become effective upon execution hereof by us and
acceptance by you.
20. SEPARABILITY. Any provisions of this Agreement which may be
determined by competent authority to be prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
21. RESERVATION OF RIGHT. You shall have the right not to accept for
deposit to the Custody Account any securities which are in a form or condition
which you, in your sole discretion, determine not to be suitable for the
services you provide under this Agreement.
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22. ADDITIONAL DUTIES. If we shall ask you to perform duties or
responsibilities not specifically set forth in this Agreement and you choose to
perform such additional duties or responsibilities, you shall be held to the
same standard of care and you shall be entitled to all the protective provisions
(including but not limited to limitation of liability and indemnification) set
forth herein.
23. COUNTERPARTS. This Agreement may be executed in several counterparts
each of which shall be deemed to be an original and together shall constitute
one and the same agreement.
24. MISCELLANEOUS. We understand that we may request to have a Custody
Account established under this Agreement which is not linked to a Cash Account.
We understand further that with respect to any such Custody Account so
established any funds received by you in respect of transactions for such
Custody Account will be credited to the Custody Account and, further, funds
credited to the Custody Account must be transferred by us by means of
instruction (a "payment order") to one of your account administrators assigned
by you for the Custody Account, which you will identify to us. We agree that
payment orders and communications seeking to cancel or amend payment orders
which are issued by telephone, telecopier or in writing shall be subject to a
mutually agreed security procedure and you may execute or pay payment orders
issued in our name when verified by you in accordance with such procedure.
In executing or paying a payment order you may rely upon the identifying
number (e.g. Fedwire routing number or account) or any party as instructed in
the payment order. We assume full responsibility for any inconsistency between
the name and identifying number of any party in payment orders issued to you in
our name.
With respect to any Custody Account established under this Agreement which
is not linked to a Cash Account, all references to Cash Account shall be read to
mean Custody Account.
----------------------------------
By:
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Title:
----------------------------
Date:
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Accepted by:
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THE CHASE MANHATTAN BANK
By:
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Title:
------------------------
Date:
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Exhibit No. 99.B9
TRANSFER AGENCY AGREEMENT
AMENDMENT NUMBER THIRTEEN
THIS AGREEMENT is made as of the 19th day of December, 1996, by and
between DFA INVESTMENT DIMENSIONS GROUP INC., a Maryland corporation (the
"Fund"), and PFPC INC., formerly "Provident Financial Processing Corporation"
("PFPC"), a Delaware corporation, which is an indirect wholly-owned subsidiary
of PNC Financial Corp.
W I T N E S S E T H :
WHEREAS, the Fund is registered as an open-end, management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act");
and
WHEREAS, the Fund has retained PFPC to provide certain transfer agency
services pursuant to a Transfer Agency Agreement dated as of June 19, 1989 and
as amended (the "Agreement") which, as of the date hereof, is in full force and
effect; and
WHEREAS, PFPC presently provides such services to the twenty-nine
existing Portfolios of the Fund; and
WHEREAS, the Fund has since organized a new Portfolio, designated
"Emerging Markets Small Cap Portfolio" (the "New Portfolio"), and the parties
hereto desire that PFPC shall provide the New Portfolio with the same services
that PFPC
<PAGE>
provides to the other twenty-nine Portfolios of the Fund pursuant to the
Agreement; and
WHEREAS, Section 1 of the Agreement provides that PFPC shall provide
such services to any Portfolio organized by the Fund after the date of the
Agreement as agreed to in writing by PFPC and the Fund.
NOW, THEREFORE, in consideration of the promises and mutual covenants
herein contained, and intending to be legally bound, the parties hereto agree as
follows:
1. The Fund has delivered to PFPC copies of:
(a) Post-Effective Amendment Number 44 to the registration
statement of the Fund, as effective with the U.S. Securities and Exchange
Commission on December 20, 1996, wherein the New Portfolio is described;
(b) The exhibits to such post-effective amendment, including the
form of Articles Supplementary to the Articles of Incorporation which pertain to
the New Portfolio; and
(c) Amendment Number Thirteen dated December 19, 1996 of the
Administration and Accounting Services Agreement between the parties dated as of
June 19, 1989.
2. The Agreement hereby is amended effective December 19, 1996
by:
(a) adding the following sentence immediately
after the fourteenth sentence of Section 1 therein, "As of
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<PAGE>
December 19, 1996, the Fund delivered to PFPC a Prospectus dated December 20,
1996 wherein a new class of Fund shares designated "Emerging Markets Small Cap
Portfolio" is described and the parties agree that the terms of this Agreement
shall apply to the Portfolios described in such Prospectus.";
(b) adding a new sentence immediately following the fourteenth
sentence of Section 19 as follows: "The foregoing provisions of this Section 19
notwithstanding, this Agreement with respect to Emerging Markets Small Cap
Portfolio may be terminated by either party upon not less than 180 days prior
written notice to the other party."
3. The Fee Schedules of PFPC applicable to the New Portfolio
shall be as agreed in writing from time to time.
4. In all other respects the Agreement shall remain unchanged
and in full force and effect.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment
Number Thirteen to the Agreement to be executed by
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<PAGE>
their duly authorized officers designated below on the day and year first above
written.
DFA INVESTMENT DIMENSIONS GROUP INC.
By: /s/Irene R. Diamant, VP
------------------------
PFPC INC.
By: /s/Joseph Gramlich
------------------------
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<PAGE>
Exhibit No. 99.B9(b)(9)(b)(13)
ADMINISTRATION AND ACCOUNTING SERVICES AGREEMENT
AMENDMENT NUMBER THIRTEEN
THIS AGREEMENT is made as of the 19th day of December, 1996 by and
between DFA INVESTMENT DIMENSIONS GROUP INC., a Maryland corporation (the
"Fund"), and PFPC INC., formerly "Provident Financial Processing Corporation"
("PFPC"), a Delaware corporation, which is an indirect wholly-owned subsidiary
of PNC Financial Corp.
W I T N E S S E T H :
WHEREAS, the Fund is registered as an open-end, management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act");
and
WHEREAS, the Fund has retained PFPC to provide certain administration
and accounting services pursuant to an Administration and Accounting Services
Agreement dated as of June 19, 1989 and as amended (the "Agreement") which, as
of the date hereof, is in full force and effect; and
WHEREAS, PFPC presently provides such services to the twenty-nine
existing Portfolios of the Fund; and
<PAGE>
WHEREAS, the Fund has since organized a new Portfolio, designated
"Emerging Markets Small Cap Portfolio" (the "New Portfolio"), and the parties
hereto desire that PFPC shall provide the New Portfolio with the same services
that PFPC provides to the other twenty-nine Portfolios of the Fund pursuant to
the Agreement; and
WHEREAS, Section 1 of the Agreement provides that PFPC shall provide
such services to any Portfolio organized by the Fund after the date of the
Agreement as agreed to in writing by PFPC and the Fund.
NOW, THEREFORE, in consideration of the promises and mutual covenants
herein contained, and intending to be legally bound, the parties hereto agree as
follows:
1. The Fund has delivered to PFPC copies of:
(a) Post-Effective Amendment Number 44 to the registration
statement of the Fund, as effective with the U.S. Securities and Exchange
Commission on December 20, 1996 wherein the New Portfolio is described;
(b) The exhibits to such post-effective amendment, including the
form of Articles Supplementary to the Articles of Incorporation which pertain to
the New Portfolio; and
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<PAGE>
(c) Amendment Number Thirteen dated December 19, 1996 of the
Transfer Agency Agreement between the parties dated as of June 19, 1989.
2. The Agreement hereby is amended effective December 19, 1996 by:
(a) adding the following sentence immediately after the
fourteenth sentence of Section 1 therein, "As of December 19, 1996, the Fund
delivered to PFPC a Prospectus dated December 20, 1996 wherein a new class of
shares designated "Emerging Markets Small Cap Portfolio" is described and the
parties agree that the terms of this Agreement shall apply to the Portfolios
described in such Prospectus.";
(b) adding a new sentence immediately following the fourteenth
sentence of Section 15 as follows: "The foregoing provisions of this Section 15
notwithstanding, this Agreement with respect to Emerging Markets Small Cap
Portfolio may be terminated by either party upon not less than 180 days prior
written notice to the other party."
3. The Fee Schedules of PFPC applicable to the New Portfolio shall
be as agreed in writing from time to time.
4. In all other respects the Agreement shall remain unchanged and in
full force and effect.
-3-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment
Number Thirteen to the Agreement to be executed by their duly authorized
officers designated below on the day and year first above written.
DFA INVESTMENT DIMENSIONS GROUP INC.
By: /s/Irene R. Diamant, VP
------------------------
PFPC INC.
By: /s/Joseph Gramlich
------------------------
<PAGE>
Exhibit No. 99.B9(b)(9)(u)
DFA INVESTMENT DIMENSIONS GROUP INC.
EMERGING MARKETS SMALL CAP PORTFOLIO
ADMINISTRATION AGREEMENT
AGREEMENT made this 19th day of December, 1996, by and between DFA
INVESTMENT DIMENSIONS GROUP INC., a Maryland corporation (the "Fund"), on behalf
of Emerging Markets Small Cap Portfolio (the "Portfolio"), a separate series of
the Fund, and DIMENSIONAL FUND ADVISORS INC., a Delaware corporation (the
"Administrator").
WHEREAS, the Fund has been organized and operates as an investment
company registered under the Investment Company Act of 1940 for the purposes of
investing and reinvesting its assets in securities, as set forth in its
Registration Statement under the Investment Company Act of 1940 and the
Securities Act of 1933, as heretofore amended and supplemented;
WHEREAS, the Portfolio, as a separate series of the Fund, desires to
avail itself of the services, assistance and facilities of an administrator and
to have an administrator perform various administrative and other services for
it; and
WHEREAS, the Administrator desires to provide such services to the
Portfolio.
NOW, THEREFORE, in consideration of the terms and conditions
hereinafter set forth, it is agreed as follows:
1. EMPLOYMENT OF THE ADMINISTRATOR. The Fund hereby employs the
Administrator to supervise the administrative affairs of the Portfolio, subject
to the direction of the board of directors and the officers of the Fund on the
terms hereinafter set forth. The Administrator hereby accepts such employment
and agrees to render the services described herein for the compensation herein
provided.
2. SERVICES TO BE PROVIDED BY THE ADMINISTRATOR.
A. The Administrator shall supervise the administrative affairs of
the Fund as they pertain to the Portfolio. Specifically, the Administrator
shall:
(1) supervise the services provided to the Fund for the benefit
of the Portfolio by the
<PAGE>
Portfolio's custodian, transfer and dividend disbursing
agent, printers, insurance carriers (as well as agents and
brokers), independent accountants, legal counsel and other
persons who provide services to the Fund for the benefit of
the Portfolio;
(2) assist the Fund to comply with the provisions of applicable
federal, state, local and foreign securities, tax,
organizational and other laws that (i) govern the business
of the Fund in respect of the Portfolio (except those that
govern investment of the Portfolio's assets), (ii) regulate
the offering of the Portfolio's shares and (iii) provide for
the taxation of the Portfolio;
(3) provide the shareholders of the Portfolio with such
information regarding the operation and affairs of the
Portfolio, and their investment in its shares, as they or
the Fund may reasonably request;
(4) assist the Portfolio to conduct meetings of its shareholders
if and when called by the board of directors of the Fund;
(5) furnish such information as the board of directors of the
Fund may require regarding any investment company in whose
shares the Portfolio may invest; and
(6) provide such other administrative services for the benefit
of the Portfolio as the board of directors may reasonably
request.
B. In carrying out its responsibilities under Section A herein, to
the extent the Administrator deems necessary or desirable and at the expense of
the Portfolio, the Administrator shall be entitled to consult with, and obtain
the assistance of, the persons described in Section A, paragraph (1) herein who
provide services to the Fund.
C. The Administrator, at its own expense, shall provide the Fund
with such office facilities and equipment as may be necessary to conduct the
administrative affairs of the Fund in respect of the Portfolio.
3. EXPENSES OF THE FUND. It is understood that the Portfolio will
pay all of its own expenses incurred to conduct its administrative affairs.
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<PAGE>
4. COMPENSATION OF THE ADMINISTRATOR. For the services to be
rendered by the Administrator as provided in Section 2 of this Agreement, the
Portfolio shall pay to the Administrator, at the end of each month, a fee equal
to one-twelfth of ____ percent of the average daily net assets of the Portfolio
during the month. If this Agreement is terminated prior to the end of any
month, the fee for such month shall be prorated.
5. ACTIVITIES OF THE ADMINISTRATOR. The services of the
Administrator to the Fund or in respect of the Portfolio are not to be deemed
exclusive, and the Administrator shall be free to render similar services to
others as long as its services to the Fund or in respect of the Portfolio are
not impaired thereby.
6. LIABILITY OF THE ADMINISTRATOR. No provision of this Agreement
shall be deemed to protect the Administrator against any liability to the Fund
or its shareholders to which it might otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence in the performance of its duties or
the reckless disregard of its obligations under this Agreement.
7. DURATION AND TERMINATION.
A. This Agreement shall become effective on the date written below,
provided that prior to such date it shall have been approved by the board of
directors of the Fund, and shall continue in effect until terminated by the Fund
or the Administrator on 60 days' written notice to the other.
B. Any notice under this Agreement shall be given in writing
addressed and delivered, or mailed post-paid, to the other party at the
principal business office of such party.
8. SEVERABILITY. If any provision of this Agreement shall be held
or made invalid by a court decision, statute, rule or otherwise, the remainder
of this Agreement shall not be affected thereby.
9. GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of California.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed and effective on the 19th day of December, 1996.
DIMENSIONAL FUND DFA INVESTMENT DIMENSIONS
ADVISORS INC. GROUP INC.
By: /s/Rex A. Sinquefield By: /s/ David G. Booth
------------------------ ---------------------
Chairman-Chief President
Investment Officer
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<PAGE>
EXHIBIT 99.B11(b)(11)
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the following with respect to Post-Effective Amendment No. 44 to
the Registration Statement (No. 2-73948) on Form N-1A under the Securities Act
of 1933 of DFA Investment Dimensions Group Inc. and The DFA Investment Trust
Company:
- The incorporation by reference of our reports dated January 19, 1996
on our audits of the financial statements and financial highlights of
DFA Investment Dimensions Group Inc. and the DFA Investment Trust
Company as of November 30, 1995 and for the respective periods then
ended.
- The inclusion of our reports dated December 5, 1996 on our audit of
the Statements of Assets and Liabilities of DFA Investment Dimensions
Group Inc. - The Emerging Markets Small Cap Portfolio and The DFA
Investment Trust Company - The Emerging Markets Small Cap Series as of
December 2, 1996.
- The reference to our Firm under the caption "Financial Statements" in
the Statement of Additional Information.
Coopers & Lybrand L.L.P.
2400 Eleven Penn Center
Philadelphia, Pennsylvania
December 16, 1996
<PAGE>
Exhibit 99.B16(b)(16)
SCHEDULE FOR COMPUTATION OF PERFORMANCE QUOTATIONS
I. STANDARDIZED COMPUTATION OF TOTAL RETURN
ENHANCED U.S. LARGE COMPANY PORTFOLIO:
n
TOTAL RETURN: P (1 + T) = ERV
Date of Initial Investment through October 31, 1996
P = $1,000
T = 33.31%
n = .331 years
ERV = 1100
