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As filed with the Securities and Exchange Commission on September 24, 1998.
File No. 2-73948
File No. 811-3258
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. [ ]
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Post-Effective Amendment No. 49 [X]
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and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 50
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(Check appropriate box or boxes.)
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 Offices) (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, CA 90401
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(Name and Address of Agent for Service)
Please send copies of all communications to:
Stephen W. Kline, Esquire
Stradley, Ronon, Stevens & Young, LLP
Great Valley Corporate Center
30 Valley Stream Parkway
Malvern, PA 19355
It is proposed that this filing will become effective (check appropriate box)
immediately upon filing pursuant to paragraph (b).
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on (date) pursuant to paragraph (b).
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60 days after filing pursuant to paragraph (a)(1).
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on (date) pursuant to paragraph (a)(1).
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X 75 days after filing pursuant to paragraph (a)(2).
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on (date) pursuant to paragraph (a)(2) of Rule 485.
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If appropriate, check the following box:
- --- This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
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The Trustees and principal officers of The DFA Investment Trust Company and
Dimensional Emerging Markets Fund Inc. have also have executed this registration
statement.
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FORM N-1A
DFA INVESTMENT DIMENSIONS GROUP, INC.
(the "Registrant")
CROSS REFERENCE SHEET
(as required by Rules 404 and 481)
PART A
INFORMATION REQUIRED IN PROSPECTUS
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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;
Financial Highlights
Item 4. General Description of Registrant . . . Cover Page; Highlights;
The Feeder Portfolios; Small Company
Portfolios; Investment Objectives and
Policies--Small Company Portfolio; U.S.
Large Company Portfolio; Enhanced U.S.
Large Company Portfolio; Standard & Poors--
Information and Disclaimers; Large Cap
International Portfolio; DFA Real Estate
Securities Portfolio; Value Portfolios;
RWB/DFA International High Book to Market
Portfolio; Tax-Managed DFA International
Value Portfolio; DFA International Small Cap
Value Portfolio; Emerging Markets Portfolio,
Emerging Markets Small Cap Portfolio and
Emerging Markets Value Portfolio; Securities
Loans; Investment Objectives and Policies-Fixed
Income Portfolios; Risk Factors-All Portfolios;
Tax Management Strategies; General Information
Item 5. Management of the Fund. . . . . . . . . Highlights;
Management of the
Fund
Item 5a. Management's Discussion of Fund
Peformance . . . . . . . . . . . . . . Incorporated herein by reference to Registrant's
Annual Report to Shareholders dated November 30, 1997,
as electronically filed with the Securities and
Exchange Commission's EDGAR system on January 16, 1998.
Item 6. Capital Stock and Other Securities. . . Highlights;
Dividends, Capital
Gains Distributions
and Taxes; General
Information
Item 7. Purchase of Securities Being Offered. . Highlights; Purchase of Shares; Valuation of Shares;
Distribution; Exchange of Shares
Item 8. Redemption or Repurchase. . . . . . . . Highlights; Redemption of Shares; Exchange of Shares
Item 9. Pending Legal Proceedings . . . . . . . Not Applicable
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PART B
INFORMATION REQUIRED IN A STATEMENT
OF ADDITIONAL INFORMATION
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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
</TABLE>
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Item 13. Investment Objectives and Policies. . . Portfolio
Characteristics and
Policies; Investment
Limitations; Options on Stock Indices; Futures
Contracts; Federal Tax Treatment of Options,
Futures Contracts and Similar Positions
Item 14. Management of the Registrant. . . . . . 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
Commissions
Item 18. Capital Stock and Other Securities. . . Other Information
Item 19. Purchase, Redemption and Pricing of
Securities Being Offered. . . . . . . . Purchase of Shares;
Redemption and Transfer of Shares
Item 20. Tax Status. . . . . . . . . . . . . . . Federal Tax
Treatment of Options, Futures
Contracts and Similar Positions
Item 21. Underwriters. . . . . . . . . . . . . . Not Applicable
Item 22. Calculation of Performance Data . . . . Calculation of
Performance Data
Item 23. Financial Statements. . . . . . . . . . Financial Statements
</TABLE>
PART C
OTHER INFORMATION
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FORM N-1A PART C ITEM NO. LOCATION IN PART C
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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
<PAGE>
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
</TABLE>
<PAGE>
PROSPECTUS
DECEMBER , 1998
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
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U.S. 9-10 SMALL COMPANY PORTFOLIO (FEEDER) U.S. 4-10 VALUE PORTFOLIO (FEEDER)
U.S. 6-10 SMALL COMPANY PORTFOLIO (FEEDER) TAX MANAGED U.S. 4-10 VALUE PORTFOLIO
TAX MANAGED U.S. 6-10 SMALL COMPANY PORTFOLIO U.S. 6-10 VALUE PORTFOLIO (FEEDER)
U.S. LARGE CAP VALUE PORTFOLIO (FEEDER) U.S. LARGE COMPANY PORTFOLIO (FEEDER)
TAX MANAGED U.S. LARGE CAP VALUE PORTFOLIO (FEEDER) DFA REAL ESTATE SECURITIES PORTFOLIO
ENHANCED U.S. LARGE COMPANY PORTFOLIO (FEEDER)
</TABLE>
INTERNATIONAL EQUITY PORTFOLIOS
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JAPANESE SMALL COMPANY PORTFOLIO (FEEDER) EMERGING MARKETS SMALL CAP PORTFOLIO (FEEDER)
PACIFIC RIM SMALL COMPANY PORTFOLIO (FEEDER) CONTINENTAL SMALL COMPANY PORTFOLIO (FEEDER)
UNITED KINGDOM SMALL COMPANY PORTFOLIO (FEEDER) LARGE CAP INTERNATIONAL PORTFOLIO
EMERGING MARKETS PORTFOLIO (FEEDER) DFA INTERNATIONAL SMALL CAP VALUE PORTFOLIO
RWB/DFA INTERNATIONAL HIGH BOOK TO INTERNATIONAL SMALL COMPANY PORTFOLIO
MARKET PORTFOLIO (FEEDER) EMERGING MARKETS VALUE PORTFOLIO (FEEDER)
TAX MANAGED DFA INTERNATIONAL VALUE PORTFOLIO
</TABLE>
FIXED INCOME PORTFOLIOS
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DFA ONE-YEAR FIXED INCOME PORTFOLIO (FEEDER) DFA FIVE-YEAR GOVERNMENT PORTFOLIO
DFA TWO-YEAR GLOBAL FIXED INCOME PORTFOLIO (FEEDER) DFA INTERMEDIATE GOVERNMENT FIXED INCOME PORTFOLIO
DFA FIVE-YEAR GLOBAL FIXED INCOME PORTFOLIO
</TABLE>
EACH OF THE "FEEDER" PORTFOLIOS INDICATED ABOVE 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"), OR IN THE CASE OF THE
EMERGING MARKETS VALUE PORTFOLIO, THE DIMENSIONAL EMERGING MARKETS VALUE FUND
INC. (THE "EMERGING MARKETS VALUE FUND"), BOTH OF WHICH ARE OPEN-END, MANAGEMENT
INVESTMENT COMPANIES. THE TRUST ISSUES SERIES (INDIVIDUALLY AND COLLECTIVELY,
THE "SERIES") HAVING THE SAME INVESTMENT OBJECTIVE, POLICIES AND LIMITATIONS AS
EACH FEEDER PORTFOLIO, OTHER THAN EMERGING MARKETS VALUE PORTFOLIO. IN THIS
PROSPECTUS, EACH OF THE "FEEDER" PORTFOLIOS INDICATED ABOVE ARE COLLECTIVELY
REFERRED TO AS THE "FEEDER PORTFOLIOS" AND THE TRUST SERIES AND THE EMERGING
MARKETS VALUE FUND ARE COLLECTIVELY REFERRED TO AS THE "MASTER FUNDS." THE
INTERNATIONAL SMALL COMPANY PORTFOLIO SEEKS TO ACHIEVE ITS INVESTMENT OBJECTIVE
BY INVESTING IN FOUR SERIES OF THE TRUST. THIS INVESTMENT ACTIVITY IS UNLIKE
MANY OTHER INVESTMENT COMPANIES THAT DIRECTLY ACQUIRE AND MANAGE THEIR OWN
PORTFOLIO OF SECURITIES. THE INVESTMENT EXPERIENCE OF EACH FEEDER PORTFOLIO WILL
CORRESPOND DIRECTLY WITH THE INVESTMENT EXPERIENCE OF ITS CORRESPONDING MASTER
FUND. INVESTORS SHOULD CAREFULLY CONSIDER THIS INVESTMENT APPROACH. FOR
ADDITIONAL INFORMATION, SEE "THE FEEDER PORTFOLIOS."
This prospectus sets forth concisely information about the Fund that
prospective investors should know before investing and should be read carefully
and retained for future reference. A statement of additional information about
the Fund, dated December , 1998, as amended from time to time, is incorporated
herein by reference. Such statement of additional information 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
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HIGHLIGHTS.......................................................................................... 4
CONDENSED FINANCIAL INFORMATION..................................................................... 12
THE FEEDER PORTFOLIOS............................................................................... 31
SMALL COMPANY PORTFOLIOS............................................................................ 32
Investment Objective and Policies................................................................. 32
INVESTMENT OBJECTIVES AND POLICIES--SMALL COMPANY PORTFOLIOS........................................ 33
U.S. 6-10 Small Company Portfolio................................................................. 33
Tax Managed U.S. 6-10 Small Company Portfolio..................................................... 33
U.S. 9-10 Small Company Portfolio................................................................. 33
Japanese Small Company Portfolio.................................................................. 34
United Kingdom Small Company Portfolio............................................................ 34
Continental Small Company Portfolio............................................................... 34
Pacific Rim Small Company Portfolio............................................................... 35
International Small Company Portfolio............................................................. 36
Portfolio Structure............................................................................... 36
Portfolio Transactions............................................................................ 38
U.S. LARGE COMPANY PORTFOLIO........................................................................ 38
Investment Objective and Policies................................................................. 38
ENHANCED U.S. LARGE COMPANY PORTFOLIO............................................................... 39
Investment Objective and Policies................................................................. 39
STANDARD & POOR'S--INFORMATION AND DISCLAIMERS...................................................... 40
LARGE CAP INTERNATIONAL PORTFOLIO................................................................... 41
Investment Objective and Policies................................................................. 41
DFA REAL ESTATE SECURITIES PORTFOLIO................................................................ 42
Investment Objective and Policies................................................................. 42
Portfolio Structure............................................................................... 43
Portfolio Transactions............................................................................ 44
VALUE PORTFOLIOS.................................................................................... 44
Investment Objectives and Policies................................................................ 44
Portfolio Structure............................................................................... 44
Portfolio Transactions............................................................................ 45
RWB/DFA INTERNATIONAL HIGH BOOK TO MARKET PORTFOLIO................................................. 46
Investment Objective and Policies................................................................. 46
TAX MANAGED DFA INTERNATIONAL VALUE PORTFOLIO....................................................... 48
Investment Objective and Policies................................................................. 48
DFA INTERNATIONAL SMALL CAP VALUE PORTFOLIO......................................................... 48
Investment Objective and Policies................................................................. 48
EMERGING MARKETS PORTFOLIO, EMERGING MARKETS SMALL CAP
PORTFOLIO AND EMERGING MARKETS VALUE PORTFOLIO.................................................... 50
Investment Objective and Policies................................................................. 50
Master Fund Characteristics and Policies.......................................................... 50
Portfolio Structure............................................................................... 52
SECURITIES LOANS.................................................................................... 53
</TABLE>
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INVESTMENT OBJECTIVES AND POLICIES--FIXED INCOME PORTFOLIOS......................................... 53
DFA One-Year Fixed Income Portfolio............................................................... 53
DFA Two-Year Global Fixed Income Portfolio........................................................ 54
DFA Five-Year Global Fixed Income Portfolio....................................................... 54
DFA Five-Year Government Portfolio................................................................ 55
DFA Intermediate Government Fixed Income Portfolio................................................ 55
Description of Investments........................................................................ 55
Investments in the Banking Industry............................................................... 57
Portfolio Strategy................................................................................ 57
TAX MANAGEMENT STRATEGIES........................................................................... 58
RISK FACTORS--ALL PORTFOLIOS........................................................................ 59
Small Company Securities.......................................................................... 59
Foreign Securities................................................................................ 59
Investing in Emerging Markets..................................................................... 60
Foreign Currencies and Related Transactions....................................................... 61
Borrowing......................................................................................... 62
Portfolio Strategies.............................................................................. 62
Futures Contracts and Options on Futures.......................................................... 62
Options on Stock Indices.......................................................................... 63
Swaps............................................................................................. 64
Banking Industry and Real Estate Concentrations................................................... 64
Repurchase Agreements............................................................................. 65
MANAGEMENT OF THE FUND.............................................................................. 65
Investment Services--United Kingdom and Continental Small Company Series.......................... 67
Investment Services--Japanese and Pacific Rim Small Company Series................................ 68
Consulting Services--DFA International Small Cap Value Portfolio, Large
Cap International Portfolio, DFA International Value Series, Emerging
Markets Series, Emerging Markets Small Cap Series and Dimensional Emerging
Markets Value Fund.............................................................................. 68
Administrative Services--The Feeder Portfolios and International Small Company Portfolio.......... 68
Administrative Services--All Portfolios........................................................... 70
Client Service Agent--RWB/DFA International High Book to Market Portfolio......................... 70
Directors and Officers............................................................................ 70
DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAXES.................................................... 70
PURCHASE OF SHARES.................................................................................. 73
In Kind Purchases................................................................................. 74
VALUATION OF SHARES................................................................................. 74
Public Offering Price............................................................................. 76
DISTRIBUTION........................................................................................ 77
EXCHANGE OF SHARES.................................................................................. 77
REDEMPTION OF SHARES................................................................................ 78
GENERAL INFORMATION................................................................................. 79
</TABLE>
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HIGHLIGHTS
PAGE
THE FUND
This prospectus relates to twenty-eight 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 --
The investment objective of each of the following Portfolios (the "Small
Company Portfolios") is to achieve long-term capital appreciation by investing
in marketable stocks of small companies. In addition, the Tax Managed U.S. 6-10
Small Company Portfolio seeks to minimize the impact of federal taxes on returns
by managing its portfolio in a manner that will defer the realization of net
capital gains and may minimize the receipt of dividend income in order to
minimize taxable distributions to investors:
U.S. 9-10 Small Company Portfolio U.S. 6-10 Small Company Portfolio
Japanese Small Company Portfolio Tax Managed U.S. 6-10 Small Company
Portfolio
Continental Small Company Portfolio United Kingdom Small Company Portfolio
International Small Company Portfolio Pacific Rim Small Company Portfolio
The size of a company will be measured by its relative market
capitalization. Each Portfolio, except the International Small Company Portfolio
and Tax Managed U.S. 6-10 Small Company Portfolio 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"). The Tax Managed U.S.
6-10 Small Company Portfolio directly invests in its own portfolio securities.
Each corresponding Series of the Trust and the Tax Managed U.S. 6-10 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 "INVESTMENT
OBJECTIVES AND POLICIES--THE SMALL COMPANY PORTFOLIOS.")
INVESTMENT OBJECTIVE--U.S. LARGE COMPANY PORTFOLIO --
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 OBJECTIVE--ENHANCED U.S. LARGE COMPANY PORTFOLIO --
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.
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INVESTMENT OBJECTIVE--LARGE CAP INTERNATIONAL PORTFOLIO --
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 --
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.
INVESTMENT OBJECTIVES--VALUE PORTFOLIOS --
The investment objective of U.S. Large Cap Value Portfolio, U.S. 4-10 Value
Portfolio, U.S. 6-10 Value Portfolio, Tax Managed U.S. Large Cap Value Portfolio
and Tax Managed U.S. 4-10 Value Portfolio (collectively, the "Value Portfolios")
is to achieve long-term capital appreciation. U.S. Large Cap Value Portfolio,
U.S. 4-10 Value Portfolio, U.S. 6-10 Value Portfolio and Tax Managed U.S. Large
Cap Value Portfolio will invest all of their assets in U.S. Large Cap Value
Series, U.S. 4-10 Value Series, U.S. 6-10 Value Series and Tax Managed U.S.
Large Cap Value Series (collectively, the "Value Series") of the Trust,
respectively. The Tax Managed U.S. 4-10 Value Portfolio directly invests in
portfolio securities. The Value Series and the Tax Managed U.S. 4-10 Value
Portfolio will invest in common stocks of U.S. companies that have a high book
value in relation to their market value. In addition, Tax Managed U.S. 4-10
Value Portfolio and Tax Managed U.S. Large Cap Value Portfolio seek to defer the
realization of net capital gains and may minimize the receipt of dividend income
in order to minimize taxable distributions to investors.
INVESTMENT OBJECTIVE--RWB/DFA INTERNATIONAL HIGH BOOK TO MARKET PORTFOLIO
AND TAX MANAGED DFA INTERNATIONAL VALUE PORTFOLIO --
The investment objective of the RWB/DFA International High Book to Market
Portfolio and the Tax Managed DFA International Value Portfolio is to achieve
long-term capital appreciation. The RWB/DFA International High Book to Market
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.
The Tax Managed DFA International Value Portfolio will invest in the stocks
of large non-U.S. companies that have a high book value in relation to their
market value. In addition, the Tax Managed DFA International Value Portfolio
seeks to minimize the impact of federal taxes on returns by managing its
portfolio in a manner that will defer the realization of net capital gains and
may minimize dividend income.
INVESTMENT OBJECTIVE--DFA INTERNATIONAL SMALL CAP VALUE PORTFOLIO --
The investment objective of the DFA International Small Cap Value 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, EMERGING MARKETS SMALL
CAP PORTFOLIO AND EMERGING MARKETS VALUE PORTFOLIO --
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
5
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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. The
investment objective of the Emerging Markets Value Portfolio is to achieve
long-term capital growth through investment primarily in emerging market equity
securities. The Emerging Markets Value Portfolio will invest all of its assets
in the Emerging Markets Value Fund, which in turn invests in emerging markets
equity securities that are deemed by Dimensional Fund Advisors Inc. to be value
stocks at the time of purchase.
INVESTMENT OBJECTIVES--FIXED INCOME PORTFOLIOS --
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 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.")
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 Five-Year 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 --
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, Tax Managed DFA International Value Portfolio, Emerging
Markets Portfolio, Emerging Markets Small Cap Portfolio and Emerging Markets
Value Portfolio (collectively, the "International Equity Portfolios"), DFA
Two-Year Global Fixed Income Portfolio, Enhanced U.S. Large Company Portfolio
and DFA Five-Year Global Fixed Income Portfolio (directly or indirectly through
their investment in the Master Funds) invest in foreign securities which are
traded abroad.
6
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DFA One-Year Fixed Income Series, 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 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, Tax Managed
DFA International Value 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 the corresponding Master Funds also
involves certain risks. (See "RISK FACTORS--ALL PORTFOLIOS" and "THE FEEDER
PORTFOLIOS.")
MANAGEMENT AND ADMINISTRATIVE SERVICES --
Dimensional Fund Advisors Inc. (the "Advisor") serves as investment advisor
to each of the Portfolios, except the Feeder Portfolios, and to each Master
Fund. Dimensional Fund Advisors Ltd. serves as sub-advisor of United Kingdom and
Continental Small Company Series of the Trust. DFA Australia Limited serves as
sub-advisor of Japanese and Pacific Rim Small Company Series of the Trust.
Dimensional Fund Advisors Ltd. and DFA Australia Limited also provide consulting
services to the Advisor with respect to DFA International Small Cap Value
Portfolio, Large Cap International Portfolio, DFA International Value Series,
Tax Managed DFA International Value Portfolio, Emerging Markets Series, Emerging
Markets Small Cap Series and Emerging Markets Value Fund. 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 --
The Domestic and International Equity Portfolios, except for U.S. Large
Company, Enhanced U.S. Large Company, U.S. Large Cap Value and Tax Managed 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, Tax Managed U.S. Large Cap Value, DFA
Intermediate Government Fixed Income, DFA Two-Year Global Fixed Income and DFA
Five-Year 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 --
Shares of the International Equity Portfolios (except United Kingdom Small
Company, Large Cap International, RWB/DFA International High Book to Market and
Tax Managed DFA International Value
7
<PAGE>
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, Emerging Markets Portfolio and
Emerging Markets Value Portfolio; and 0.675% of the net asset value of the
shares of DFA International Small Cap Value Portfolio. The reimbursement fee for
the International Small Company Portfolio is based on the current target
investment allocations among the Underlying Series. The reimbursement fee for
the International Small Company Portfolio will change from time to time if the
Portfolio changes the target investment allocation in the Underlying Series. As
of the date of this prospectus, the reimbursement fee for the Portfolio equals
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 Master Funds and Underlying Series 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.")
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<CAPTION>
REIMBURSEMENT FEES (AS PERCENTAGE OF ORIGINAL PURCHASE PRICE)(1)
- ------------------------------------------------------------------
<S> <C>
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%
Emerging Markets Value Portfolio............................ 0.50%
DFA International Small Cap Value Portfolio................. 0.675%
International Small Company Portfolio....................... 0.675%
</TABLE>
- ------------------------
(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,
Emerging Markets Small Cap Series of the Trust and the Emerging Markets
Value Fund 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.
8
<PAGE>
Except as indicated below, the expenses in the following table are based on
those incurred by the Portfolios and the Master Funds for the fiscal year ended
November 30, 1997.
<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(1)(2)................ 0.10% 0.40% 0.10% 0.60%
U.S. 6-10 Small Company(1)................... 0.03% 0.32% 0.10% 0.45%
Tax Managed U.S. 6-10 Small Company(9)....... 0.50% 0.13% 0.63%
U.S. Large Company(1)(3)
(after waivers and assumptions)............ 0.025% 0.125% -- 0.15%
Enhanced U.S. Large Company(1)(4)
(after fee waivers)........................ 0.05% 0.06% 0.34% 0.45%
U.S. 6-10 Value(1)........................... 0.20% 0.30% 0.10% 0.60%
U.S. Large Cap Value(1)...................... 0.10% 0.15% 0.10% 0.35%
Tax Managed U.S. Large Cap Value(1)(9)....... 0.20% 0.15% 0.13% 0.48%
U.S. 4-10 Value(1)(5)........................ 0.10% 0.40% 0.13% 0.63%
Tax Managed U.S. 4-10 Value(9)............... 0.50% 0.13% 0.63%
DFA Real Estate Securities(6)................ 0.30% 0.18% 0.48%
Japanese Small Company(1)(7)
(after waivers and assumptions)............ 0.10% 0.40% 0.23% 0.73%
Pacific Rim Small Company(1)(7)
(after waivers and assumptions)............ 0.10% 0.40% 0.34% 0.84%
United Kingdom Small Company(1)(7)
(after waivers and assumptions)............ 0.10% 0.40% 0.20% 0.70%
Emerging Markets(1).......................... 0.10% 0.40% 0.49% 0.99%
Emerging Markets Small Cap(1)(5)............. 0.20% 0.45% 0.60% 1.25%
Emerging Markets Value(1)(5)................. 0.10% 0.40% 0.55% 1.05%
Continental Small Company(1)(7)
(after waivers and assumptions)............ 0.10% 0.40% 0.22% 0.72%
International Small Company(8)
(after waivers and assumptions)............ 0.10% 0.40% 0.25% 0.75%
Large Cap International...................... 0.25% 0.22% 0.47%
RWB/DFA International High Book to
Market(1).................................. 0.20% 0.01% 0.29% 0.50%
Tax Managed DFA International Value(9)....... 0.50% 0.45% 0.95%
DFA International Small Cap Value............ 0.65% 0.25% 0.90%
DFA One-Year Fixed Income(1)................. 0.05% 0.10% 0.07% 0.22%
DFA Two-Year Global Fixed Income(1).......... 0.05% 0.10% 0.19% 0.34%
DFA Five-Year Global Fixed Income............ 0.25% 0.17% 0.42%
DFA Five-Year Government..................... 0.20% 0.09% 0.29%
DFA Intermediate Government Fixed Income..... 0.15% 0.10% 0.25%
</TABLE>
- ------------------------
(1) Feeder Portfolio
(2) Prior to November 30, 1997, the U.S. 9-10 Small Company Portfolio invested
its assets directly in stocks of small companies. The above figures have
been restated to reflect estimated aggregate annualized operating expenses
of the U.S. 9-10 Small Company Portfolio and its corresponding Series as
though the Portfolio's assets had been invested in the Series during the
fiscal year ended November 30, 1997.
(3) Effective 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.
9
<PAGE>
Beginning August 9, 1996, in addition to the waiver/assumption effective on
December 1, 1995, the Advisor 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. Absent
this arrangement, the annualized ratio of total operating expenses to
average net assets for U.S. Large Company Portfolio for the fiscal year
ended November 30, 1997, would have been 0.35%.
(4) Effective August 1, 1997, the Advisor has agreed to waive its fee under the
administration agreement to the extent necessary to reduce the direct and
indirect cumulative annual expenses of the Enhanced U.S. Large Company
Portfolio to not more than 0.45% of average net assets of the Portfolio on
an annualized basis; the Portfolio's direct and indirect cumulative annual
expenses may exceed 0.45% of its average net assets on an annualized basis
notwithstanding this fee waiver. This arrangement does not extend to the
fees of the Enhanced U.S. Large Company Series of the Trust. The above
figures have been restated to reflect operating expenses as though that
waiver had been in effect throughout the fiscal year ended November 30,
1997. Absent this arrangement, the annualized ratio of total operating
expenses to average net assets for the Portfolio was 0.54%.
(5) "Other Expenses" are annualized estimates based on anticipated fees and
expenses through the fiscal year ending November 30, 1998.
(6) 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% 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 11, 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 throughout the fiscal year ended November 30, 1997.
See "Management of the Fund."
(7) Effective August 9, 1996, the Advisor 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. For the fiscal year ended November 30, 1997,
the Advisor was not required to waive any portion of its fee pursuant to
such agreement.
(8) 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. 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. The Advisor was not required to waive
fees or assume expenses for the fiscal year ended November 30, 1997.
(9) "Other Expenses" are annualized estimates based on anticipated fees and
expenses through the fiscal year ending November 30, 1999.
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.
10
<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 19 33 75
U.S. 6-10 Small Company...................... 5 14 25 57
Tax Managed U.S. 6-10 Small Company.......... 6 20 n/a n/a
U.S. Large Company........................... 2 5 8 19
Enhanced U.S. Large Company.................. 5 14 25 57
U.S. 6-10 Value.............................. 6 19 33 75
U.S. Large Cap Value......................... 4 11 20 44
Tax Managed U.S. Large Cap Value............. 5 15 n/a n/a
U.S. 4-10 Value.............................. 6 20 n/a n/a
Tax Managed U.S. 4-10 Value.................. 6 20 n/a n/a
DFA Real Estate Securities................... 5 15 27 60
Japanese Small Company....................... 12 28 45 95
Pacific Rim Small Company.................... 18 37 56 113
United Kingdom Small Company................. 7 22 39 87
Emerging Markets............................. 15 36 59 126
Emerging Markets Small Cap................... 23 49 n/a n/a
Emerging Markets Value....................... 16 38 n/a n/a
Continental Small Company.................... 17 33 50 99
International Small Company.................. 14 31 48 99
Large Cap International...................... 5 15 26 59
RWB/DFA International High Book to Market.... 5 16 28 63
Tax Managed DFA International Value.......... 10 30 n/a n/a
DFA International Small Cap Value............ 16 35 56 117
DFA One-Year Fixed Income.................... 2 7 12 28
DFA Two-Year Global Fixed Income............. 3 11 19 43
DFA Five-Year Global Fixed Income............ 4 13 24 53
DFA Five-Year Government..................... 3 9 16 37
DFA Intermediate Government Fixed Income..... 3 8 14 32
</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.
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 Master Funds or Underlying Series in which the Portfolios
invest. (See "MANAGEMENT OF THE FUND" for a description of Portfolio, Master
Fund and Underlying Series expenses.) The Board of Directors of the Fund has
considered whether such expenses will be more or less than they would be if the
Feeder Portfolios were to invest directly in the securities held by the Master
Funds. The aggregate amount of expenses for a Feeder Portfolio and the
corresponding Master Fund may be greater than it would be if the Portfolio were
to invest directly in the securities held by the corresponding Master Fund.
However, the total expense ratios for the Feeder Portfolios and the Master Funds
are expected to be less over time than such ratios would be if the Portfolios
were 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
11
<PAGE>
expected to result in economies by spreading certain fixed costs over a larger
asset base. Each shareholder in a Master Fund, including a Feeder Portfolio,
will pay its proportionate share of the expenses of that Master Fund. 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 Emerging Markets Small Cap, the Emerging Markets Value, Tax Managed U.S.
6-10 Small Company, Tax Managed U.S. Large Cap Value, Tax Managed U.S. 4-10
Value and Tax Managed DFA International Value Portfolios (and their
corresponding Master Funds) are new and, therefore, the above example is based
on estimated expenses for their respective current fiscal years and does not
extend over five and ten-year periods.
For the fiscal year ended November 30, 1997, the equity Portfolios or Master
Funds 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 Master Fund:
<TABLE>
<CAPTION>
PERCENTAGE
PORTFOLIO/SERIES NET REVENUE OF ASSETS
- ------------------------------------------------------------ ----------- ----------
<S> <C> <C>
Large Cap International Portfolio........................... $ 56,000 0.07%
U.S. 9-10 Small Company Portfolio........................... $ 738,000 0.06%
DFA Real Estate Securities Portfolio........................ $ 17,000 0.02%
DFA International Small Cap Value Portfolio................. $ 250,000 0.06%
U.S. 6-10 Small Company Series.............................. $ 251,000 0.07%
U.S. Large Company Series................................... $ 41,000 0.01%
U.S. 6-10 Value Series...................................... $ 612,000 0.03%
U.S. Large Cap Value Series................................. $ 132,000 0.01%
Japanese Small Company Series............................... $ 648,000 0.25%
DFA International Value Series.............................. $1,236,000 0.08%
Pacific Rim Small Company Series............................ $ 178,000 0.08%
Continental Small Company Series............................ $ 116,000 0.03%
</TABLE>
CONDENSED FINANCIAL INFORMATION
The following financial highlights are part of the audited financial
statements of each Portfolio of the Fund other than the U.S. 4-10 Value, Tax
Managed U.S. 6-10 Small Company, Tax Managed U.S. 4-10 Value, Tax Managed U.S.
Large Cap Value, Tax Managed DFA International Value, Emerging Markets Value and
Emerging Markets Small Cap Portfolios, which had not commenced operations by
November 30, 1997. The information for the six month period ended May 31, 1998
has not been audited. The financial statements for each of the past fiscal years
has been audited by independent accountants. The financial statements, related
notes, and the report of the independent accountants covering such financial
information and financial highlights for the Fund's fiscal year ended November
30, 1997, are incorporated by reference into the statement of additional
information from the Fund's annual report to shareholders for the year ended
November 30, 1997. Further information about each Portfolio's performance (other
than the U.S. 4-10 Value, Tax Managed 6-10 Small Company, Tax Managed 4-10
Value, Tax Managed U.S. Large Cap Value, Tax Managed DFA International Value,
Emerging Markets Value and Emerging Markets Small Cap Portfolios) is contained
in the Fund's annual report to shareholders for the year ended November 30, 1997
and semi-annual report to shareholders for the period ended May 31, 1998. A copy
of the annual report (including the report of the independent accountants) and
semi-annual report may be obtained from the Fund upon request at no charge. The
"Transfer" transaction referred to below in footnotes to the Financial
Highlights refers to the transaction which took place on August 9, 1996, in
which four Portfolios of the Fund, the Japanese Small Company Portfolio, the
Pacific Rim Small Company Portfolio, the United Kingdom Small Company Portfolio,
and the Continental Small Company Portfolio, respectively, each transferred
their investable assets in exchange for shares with equal values of a
corresponding Series of the Trust.
12
<PAGE>
DFA INVESTMENT DIMENSIONS GROUP INC.
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
THE U.S. 9-10 SMALL COMPANY PORTFOLIO
-------------------------------------------------------------
SIX MONTHS YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
MAY 31, NOV. 30, NOV. 30, NOV. 30, NOV. 30,
1998 1997 1996 1995 1994
------------ ----------- --------- --------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period............................ $ 13.99 $ 12.14 $ 11.03 $ 8.49 $ 8.69
------------ ----------- --------- --------- --------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income (Loss)........ (0.02) 0.03 0.03 0.05 0.01
Net Gain (Losses) on Securities
(Realized and Unrealized)......... 0.58 3.01 1.85 2.61 0.40
------------ ----------- --------- --------- --------
Total From Investment Operations.... 0.56 3.04 1.88 2.66 0.41
------------ ----------- --------- --------- --------
LESS DISTRIBUTIONS
Net Investment Income............... (0.03) (0.03) (0.01) (0.04) (0.03)
Net Realized Gains.................. (1.89) (1.16) (0.76) (0.08) (0.58)
------------ ----------- --------- --------- --------
Total Distributions................. (1.92) (1.19) (0.77) (0.12) (0.61)
------------ ----------- --------- --------- --------
Net Asset Value, End of Period...... $ 12.63 $ 13.99 $ 12.14 $ 11.03 $ 8.49
------------ ----------- --------- --------- --------
------------ ----------- --------- --------- --------
Total Return........................ 5.39%# 27.46% 18.05% 31.37% 5.06%
------------ ----------- --------- --------- --------
Net Assets, End of Period
(thousands)....................... $1,587,226 $ 1,509,427 $1,181,804 $ 925,474 $659,221
Ratio of Expenses to Average Net
Assets**.......................... 0.58%* 0.60% 0.61% 0.62% 0.65%
Ratio of Net Investment Income to
Average Net Assets................ (0.31)%* 0.21% 0.22% 0.45% 0.16%
Portfolio Turnover Rate............. N/A 27.81% 23.68% 24.65% 16.56%
Average Commission Rate............. N/A $ 0.0579 $ 0.0604 N/A N/A
Portfolio Turnover Rate of Master
Fund Series....................... 26.05%* N/A N/A N/A N/A
Average Commission Rate of Master
Fund Series....................... $ 0.0502 N/A N/A N/A N/A
<CAPTION>
THE U.S. 9-10 SMALL COMPANY PORTFOLIO
---------------------------------------------------------------
YEAR YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
NOV. 30, NOV. 30, NOV. 30, NOV. 30, NOV. 30, NOV. 30,
1993 1992 1991 1990 1989 1988
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period............................ $ 7.75 $ 6.33 $ 5.34 $ 7.74 $ 7.66 $ 7.50
-------- -------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income (Loss)........ 0.03 0.04 0.04 0.07 0.07 0.10
Net Gain (Losses) on Securities
(Realized and Unrealized)......... 1.67 1.53 1.64 (1.77) 0.98 1.48
-------- -------- -------- -------- -------- --------
Total From Investment Operations.... 1.70 1.57 1.68 (1.70) 1.05 1.58
-------- -------- -------- -------- -------- --------
LESS DISTRIBUTIONS
Net Investment Income............... (0.05) (0.05) (0.07) (0.08) (0.09) (0.11)
Net Realized Gains.................. (0.71) (0.10) (0.62) (0.62) (0.88) (1.31)
-------- -------- -------- -------- -------- --------
Total Distributions................. (0.76) (0.15) (0.69) (0.70) (0.97) (1.42)
-------- -------- -------- -------- -------- --------
Net Asset Value, End of Period...... $ 8.69 $ 7.75 $ 6.33 $ 5.34 $ 7.74 $ 7.66
-------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- --------
Total Return........................ 23.91% 25.24% 39.08% (24.09)% 16.09% 24.36%
-------- -------- -------- -------- -------- --------
Net Assets, End of Period
(thousands)....................... $630,918 $651,313 $722,289 $561,102 $949,291 $912,518
Ratio of Expenses to Average Net
Assets**.......................... 0.70% 0.68% 0.64% 0.62% 0.62% 0.62%
Ratio of Net Investment Income to
Average Net Assets................ 0.26% 0.53% 0.75% 0.99% 0.86% 1.19%
Portfolio Turnover Rate............. 9.87% 9.72% 10.13% 3.79% 7.86% 25.98%
Average Commission Rate............. N/A N/A N/A N/A N/A N/A
Portfolio Turnover Rate of Master
Fund Series....................... N/A N/A N/A N/A N/A N/A
Average Commission Rate of Master
Fund Series....................... N/A N/A N/A N/A N/A N/A
</TABLE>
- ----------------------------------
* Annualized
# Non-annualized
** Represents the combined ratio for the portfolio and its respective pro-rata
share of its Master Fund Series for the period ended May 31, 1998.
13
<PAGE>
DFA INVESTMENT DIMENSIONS GROUP INC.
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
THE U.S. 6-10 SMALL COMPANY PORTFOLIO
--------------------------------------------------------------
SIX MONTHS YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
MAY 31, NOV. 30, NOV. 30, NOV. 30,
1998 1997 1996 1995
-------------- ------------- ------------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period.... $ 16.89 $ 14.53 $ 12.64 $ 11.08
-------------- ------------- ------------- -------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income................... -- 0.09 0.11 0.09
Net Gain (Losses) on Securities
(Realized and Unrealized)............. 0.87 3.42 2.20 2.81
-------------- ------------- ------------- -------------
Total From Investment Operations........ 0.87 3.51 2.31 2.90
-------------- ------------- ------------- -------------
LESS DISTRIBUTIONS
Net Investment Income................... (0.08) (0.12) (0.02) (0.14)
Net Realized Gains...................... (1.57) (1.03) (0.40) (1.20)
-------------- ------------- ------------- -------------
Total Distributions..................... (1.65) (1.15) (0.42) (1.34)
-------------- ------------- ------------- -------------
Net Asset Value, End of Period.......... $ 16.11 $ 16.89 $ 14.53 $ 12.64
-------------- ------------- ------------- -------------
-------------- ------------- ------------- -------------
Total Return............................ 6.15%# 26.12% 18.73% 28.75%
-------------- ------------- ------------- -------------
Net Assets, End of Period (thousands)... $ 378,902 $ 337,992 $ 234,194 $ 186,644
Ratio of Expenses to Average Net
Assets**.............................. 0.43%* 0.45% 0.48% 0.49%
Ratio of Net Investment Income to
Average Net Assets.................... (0.05)%* 0.48% 0.75% 0.83%
Portfolio Turnover Rate................. N/A N/A N/A N/A
Average Commission Rate................. N/A N/A N/A N/A
Portfolio Turnover Rate of Master Fund
Series................................ 33.72%* 30.04% 32.38% 21.16%
Average Commission Rate of Master Fund
Series................................ $ 0.0524 $ 0.0583 $ 0.0586 N/A
<CAPTION>
THE U.S. 6-10 SMALL COMPANY PORTFOLIO
------------------------------------------------
YEAR YEAR MARCH 20
ENDED ENDED TO
NOV. 30, NOV. 30, NOV. 30,
1994 1993 1992
------------- ------------- --------------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period.... $ 11.43 $ 10.35 $ 10.00
------------- ------------- --------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income................... 0.09 0.08 0.04
Net Gain (Losses) on Securities
(Realized and Unrealized)............. (0.07) 1.43 0.31
------------- ------------- --------------
Total From Investment Operations........ 0.02 1.51 0.35
------------- ------------- --------------
LESS DISTRIBUTIONS
Net Investment Income................... (0.09) (0.11) --
Net Realized Gains...................... (0.28) (0.32) --
------------- ------------- --------------
Total Distributions..................... (0.37) (0.43) --
------------- ------------- --------------
Net Asset Value, End of Period.......... $ 11.08 $ 11.43 $ 10.35
------------- ------------- --------------
------------- ------------- --------------
Total Return............................ 0.22% 14.72% 6.70%#
------------- ------------- --------------
Net Assets, End of Period (thousands)... $ 112,137 $ 136,863 $ 134,418
Ratio of Expenses to Average Net
Assets**.............................. 0.53% 0.58% 0.48%*
Ratio of Net Investment Income to
Average Net Assets.................... 0.72% 0.70% 0.96%*
Portfolio Turnover Rate................. N/A 1.81%*(a) 3.41%*
Average Commission Rate................. N/A N/A N/A
Portfolio Turnover Rate of Master Fund
Series................................ 27.65% 32.88%*(b) N/A
Average Commission Rate of Master Fund
Series................................ N/A N/A N/A
</TABLE>
- ----------------------------------
* Annualized
# Non-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.
(a) Portfolio turnover calculated for the period December 1, 1992 to February
2, 1993 (through the date on which the portfolio transferred its investable
assets to its corresponding Master Fund Series in a tax-free exchange).
(b) Master Fund Series turnover calculated for the period February 3 to
November 30, 1993.
14
<PAGE>
DFA INVESTMENT DIMENSIONS GROUP INC.
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
THE U.S. LARGE CAP VALUE PORTFOLIO
----------------------------------------------------------------------------------
SIX MONTHS YEAR YEAR YEAR YEAR FEB. 19
ENDED ENDED ENDED ENDED ENDED TO
MAY 31, NOV. 30, NOV. 30, NOV. 30, NOV. 30, NOV. 30,
1998 1997 1996 1995 1994 1993
------------- -------- -------- -------- -------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period...................... $ 19.22 $ 15.98 $ 13.29 $ 9.91 $ 10.60 $ 10.00
------------- -------- -------- -------- -------- ----------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income......... 0.09 0.29 0.30 0.29 0.32 0.18
Net Gain (Losses) on
Securities (Realized and
Unrealized)................. 3.11 3.60 2.62 3.55 (0.68) 0.59
------------- -------- -------- -------- -------- ----------
Total From Investment
Operations.................. 3.20 3.89 2.92 3.84 (0.36) 0.77
------------- -------- -------- -------- -------- ----------
LESS DISTRIBUTIONS
Net Investment Income......... (0.16) (0.30) (0.23) (0.29) (0.33) (0.17)
Net Realized Gains............ (0.84) (0.35) -- (0.17) -- --
------------- -------- -------- -------- -------- ----------
Total Distributions........... (1.00) (0.65) (0.23) (0.46) (0.33) (0.17)
------------- -------- -------- -------- -------- ----------
Net Asset Value, End of
Period...................... $ 21.42 $ 19.22 $ 15.98 $ 13.29 $ 9.91 $ 10.60
------------- -------- -------- -------- -------- ----------
------------- -------- -------- -------- -------- ----------
Total Return.................. 17.51%# 25.10% 22.20% 39.13% (3.27)% 7.59%#
------------- -------- -------- -------- -------- ----------
Net Assets, End of Period
(thousands)................. $1,068,705 $840,003 $541,149 $280,915 $197,566 $ 90,288
Ratio of Expenses to Average
Net Assets**................ 0.35%* 0.35% 0.36% 0.42% 0.44% 0.47%*
Ratio of Net Investment Income
to Average Net Assets....... 0.82%* 1.70% 2.17% 2.49% 3.50% 3.38%*
Portfolio Turnover Rate....... N/A N/A N/A N/A N/A N/A
Average Commission Rate....... N/A N/A N/A N/A N/A N/A
Portfolio Turnover Rate of
Master Fund Series.......... 22.09%* 17.71% 20.12% 29.41% 39.33% 0.75%*
Average Commission Rate of
Master Fund Series.......... $ 0.0484 $ 0.0494 $ 0.0499 N/A N/A N/A
<CAPTION>
THE ENHANCED U.S.
LARGE COMPANY
PORTFOLIO
---------------------------------
SIX
MONTHS YEAR JULY 3,
ENDED ENDED TO
MAY 31, NOV. 30, NOV. 30,
1998 1997 1996
--------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C>
Net Asset Value, Beginning of
Period...................... $ 13.61 $ 11.83 $ 10.00
--------- --------- ---------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income......... 0.33 0.54 0.12
Net Gain (Losses) on
Securities (Realized and
Unrealized)................. 1.44 2.40 1.71
--------- --------- ---------
Total From Investment
Operations.................. 1.77 2.94 1.83
--------- --------- ---------
LESS DISTRIBUTIONS
Net Investment Income......... (0.44) (0.55) --
Net Realized Gains............ (1.40) (0.61) --
--------- --------- ---------
Total Distributions........... (1.84) (1.16) --
--------- --------- ---------
Net Asset Value, End of
Period...................... $ 13.54 $ 13.61 $ 11.83
--------- --------- ---------
--------- --------- ---------
Total Return.................. 14.97%# 27.22% 18.30%#
--------- --------- ---------
Net Assets, End of Period
(thousands)................. $ 51,825 $ 47,642 $ 29,236
Ratio of Expenses to Average
Net Assets**................ 0.45%* 0.52%(d) 0.65%*
Ratio of Net Investment Income
to Average Net Assets....... 4.72%* 4.51%(d) 3.44%*
Portfolio Turnover Rate....... N/A N/A N/A
Average Commission Rate....... N/A N/A N/A
Portfolio Turnover Rate of
Master Fund Series.......... 66.49%* 193.78% 211.07%*
Average Commission Rate of
Master Fund Series.......... $ 0.0247 $ 0.0246 $ 0.0200
</TABLE>
- ----------------------------------
* Annualized
# Non-annualized
** Represents the combined ratios for the respective portfolio and its
respective pro-rata share of its Master Fund Series.
(d) Had certain waivers and assumption of expenses not been in effect, the
ratio of expenses to average net assets for the year end November 30, 1997
would have been 0.54% and the ratio of net investments income to average
net assets for the year ended November 30, 1997 would have been 4.49%.
15
<PAGE>
DFA INVESTMENT DIMENSIONS GROUP INC.
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
THE U.S. 6-10 VALUE PORTFOLIO
----------------------------------------------------------------------------------------
SIX MONTHS YEAR YEAR YEAR YEAR MARCH 2
ENDED ENDED ENDED ENDED ENDED TO
MAY 31, NOV. 30, NOV. 30, NOV. 30, NOV. 30, NOV. 30,
1998 1997 1996 1995 1994 1993
------------- ------------ ------------ ------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period...................... $ 22.09 $ 17.00 $ 14.03 $ 11.13 $ 11.04 $ 10.00
------------- ------------ ------------ ------------ ------------ ------------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income......... 0.02 0.07 0.11 0.10 0.14 0.11
Net Gain (Losses) on
Securities (Realized and
Unrealized)................. 1.74 5.49 2.93 3.06 0.10 1.03
------------- ------------ ------------ ------------ ------------ ------------
Total From Investment
Operations.................. 1.76 5.56 3.04 3.16 0.24 1.14
------------- ------------ ------------ ------------ ------------ ------------
LESS DISTRIBUTIONS
Net Investment Income......... (0.10) (0.11) (0.02) (0.10) (0.15) (0.10)
Net Realized Gain............. (0.92) (0.36) (0.05) (0.16) -- --
------------- ------------ ------------ ------------ ------------ ------------
Total Distributions........... (1.02) (0.47) (0.07) (0.26) (0.15) (0.10)
------------- ------------ ------------ ------------ ------------ ------------
Net Asset Value, End of
Period...................... $ 22.83 $ 22.09 $ 17.00 $ 14.03 $ 11.13 $ 11.04
------------- ------------ ------------ ------------ ------------ ------------
------------- ------------ ------------ ------------ ------------ ------------
Total Return.................. 8.45%# 33.57% 21.70% 28.41% 2.19% 11.39%#
------------- ------------ ------------ ------------ ------------ ------------
Net Assets, End of Period
(thousands)................. $2,490,235 $ 2,098,654 $ 1,207,298 $ 609,950 $ 344,148 $ 95,682
Ratio of Expenses to Average
Net Assets**................ 0.57%* 0.60% 0.61% 0.64% 0.66% 0.70%*
Ratio of Net Investment Income
to Average Net Assets....... 0.12%* 0.37% 0.78% 0.85% 1.69% 1.97%*
Portfolio Turnover Rate....... N/A N/A N/A N/A N/A N/A
Average Commission Rate....... N/A N/A N/A N/A N/A N/A
Portfolio Turnover Rate of
Master Fund Series.......... 25.99%* 25.47% 14.91% 20.62% 8.22% 1.07%*
Average Commission Rate of
Master Fund Series.......... $ 0.0522 $ 0.0645 $ 0.0658 N/A N/A N/A
</TABLE>
- ----------------------------------
* Annualized
# Non-annualized
** Represents the combined ratios for the respective portfolio and its
respective pro-rata share of its Master Fund Series.
16
<PAGE>
DFA INVESTMENT DIMENSIONS GROUP INC.
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
THE U.S. LARGE COMPANY PORTFOLIO
-----------------------------------------------------------
SIX MONTHS YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
MAY 31, NOV. 30, NOV. 30, NOV. 30,
1998 1997 1996 1995
------------ ------------ ------------ -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period.... $ 28.48 $ 22.73 $ 18.12 $ 13.58
------------ ------------ ------------ -----------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income................... 0.22 0.42 0.41 0.35
Net Gain (Losses) on Securities
(Realized and Unrealized)............. 4.02 5.89 4.52 4.57
------------ ------------ ------------ -----------
Total From Investment Operations........ 4.24 6.31 4.93 4.92
------------ ------------ ------------ -----------
LESS DISTRIBUTIONS
Net Investment Income................... (0.22) (0.43) (0.31) (0.36)
Net Realized Gain....................... (0.07) (0.13) (0.01) (0.02)
------------ ------------ ------------ -----------
Total Distributions..................... (0.29) (0.56) (0.32) (0.38)
------------ ------------ ------------ -----------
Net Asset Value, End of Period.......... $ 32.43 $ 28.48 $ 22.73 $ 18.12
------------ ------------ ------------ -----------
------------ ------------ ------------ -----------
Total Return............................ 15.00%# 28.26% 27.49% 36.54%
------------ ------------ ------------ -----------
Net Assets, End of Period (thousands)... $463,294 $ 343,537 $ 187,757 $97,111
Ratio of Expenses to Average Net
Assets**.............................. 0.15%*(a) 0.15%(a) 0.21%(a) 0.24%(a)
Ratio of Net Investment Income to
Average Net Assets.................... 1.44%*(a) 1.66%(a) 2.10%(a) 2.29%(a)
Portfolio Turnover Rate................. N/A N/A N/A N/A
Average Commission Rate................. N/A N/A N/A N/A
Portfolio Turnover Rate of Master Fund
Series................................ 12.57%* 4.28% 14.09% 2.38%
Average Commission Rate of Master Fund
Series................................ $ 0.0108 $ 0.0202 $ 0.0212 N/A
<CAPTION>
YEAR YEAR YEAR DEC. 31,
ENDED ENDED ENDED 1990 TO
NOV. 30, NOV. 30, NOV. 30, NOV. 30,
1994 1993 1992 1991
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period.... $ 13.91 $ 13.12 $ 11.44 $ 10.00
----------- ----------- ----------- -----------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income................... 0.37 0.36 0.36 0.34
Net Gain (Losses) on Securities
(Realized and Unrealized)............. (0.22) 0.87 1.69 1.34
----------- ----------- ----------- -----------
Total From Investment Operations........ 0.15 1.23 2.05 1.68
----------- ----------- ----------- -----------
LESS DISTRIBUTIONS
Net Investment Income................... (0.37) (0.44) (0.37) (0.24)
Net Realized Gain....................... (0.11) -- -- --
----------- ----------- ----------- -----------
Total Distributions..................... (0.48) (0.44) (0.37) (0.24)
----------- ----------- ----------- -----------
Net Asset Value, End of Period.......... $ 13.58 $ 13.91 $ 13.12 $ 11.44
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Total Return............................ 1.04% 9.48% 18.23% 16.80%#
----------- ----------- ----------- -----------
Net Assets, End of Period (thousands)... $48,638 $37,830 $34,908 $22,279
Ratio of Expenses to Average Net
Assets**.............................. 0.24%(a) 0.24%(a) 0.11%(a) 0.00%*(a)
Ratio of Net Investment Income to
Average Net Assets.................... 2.75%(a) 2.48%(a) 2.86%(a) 3.42%*(a)
Portfolio Turnover Rate................. N/A 27.67%*(b) 3.56% 0.97%*
Average Commission Rate................. N/A N/A N/A N/A
Portfolio Turnover Rate of Master Fund
Series................................ 8.52% 34.36%*(c) N/A N/A
Average Commission Rate of Master Fund
Series................................ N/A N/A N/A N/A
</TABLE>
- ----------------------------------
* Annualized
# Non-annualized
** Represents the combined ratios 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.
(a) Had certain waivers and assumptions of expenses not been in effect the
ratios of expenses to average net assets for the periods ended May 31, 1998
and November 30, 1997 through 1991 would have been 0.33%, 0.35%, 0.45%,
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, 1998
and November 30, 1997 through 1991 would have been 1.26%, 1.46%, 1.85 %,
2.23%, 2.64%, 2.28%, 2.44% and 2.90%, respectively.
(b) Portfolio turnover calculated for the period December 1, 1992 to February
7, 1993 (through the date on which the portfolio transferred its investable
assets to its corresponding Master Fund Series in a tax-free exchange).
(c) Master Fund Series turnover calculated for the period February 8 to
November 30, 1993.
17
<PAGE>
DFA INVESTMENT DIMENSIONS GROUP INC.
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
THE DFA REAL ESTATE SECURITIES PORTFOLIO
---------------------------------------------------------------------------
SIX MONTHS YEAR YEAR YEAR YEAR JAN. 5
ENDED ENDED ENDED ENDED ENDED TO
MAY 31, NOV. 30, NOV. 30, NOV. 30, NOV. 30, NOV. 30,
1998 1997 1996 1995 1994 1993
------------ -------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period......... $ 15.53 $ 12.65 $ 10.00 $ 9.28 $ 10.92 $ 10.00
------------ -------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income........................ 0.36 0.88 0.71 0.61 0.37 0.20
Net Gain (Losses) on Securities (Realized and
Unrealized)................................ (0.64) 2.68 2.08 0.68 (1.65) 0.91
------------ -------- -------- -------- -------- --------
Total From Investment Operations............. (0.28) 3.56 2.79 1.29 (1.28) 1.11
------------ -------- -------- -------- -------- --------
LESS DISTRIBUTIONS
Net Investment Income........................ (0.75) (0.68) (0.14) (0.46) (0.28) (0.19)
Net Realized Gain............................ -- -- -- -- -- --
Tax Return of Capital........................ -- -- -- (0.11) (0.08) --
------------ -------- -------- -------- -------- --------
Total Distributions.......................... (0.75) (0.68) (0.14) (0.57) (0.36) (0.19)
------------ -------- -------- -------- -------- --------
Net Asset Value, End of Period............... $ 14.50 $ 15.53 $ 12.65 $ 10.00 $ 9.28 $ 10.92
------------ -------- -------- -------- -------- --------
------------ -------- -------- -------- -------- --------
Total Return................................. (1.85)%# 29.13% 28.24% 14.00% (11.76)% 11.08%#
------------ -------- -------- -------- -------- --------
Net Assets, End of Period (thousands)........ $109,319 $95,072 $64,390 $43,435 $30,456 $22,106
Ratio of Expenses to Average Net Assets...... 0.47%* 0.48% 0.71% 0.82% 0.90% 0.88%*
Ratio of Net Investment Income to Average Net
Assets..................................... 0.56%* 5.73% 7.08% 6.76% 3.90% 2.63%*
Portfolio Turnover Rate...................... 0.49%* 30.73% 11.25% 0.66% 28.87% 0.55%*
Average Commission Rate...................... $ 0.0461 $0.0449 $0.0455 N/A N/A N/A
</TABLE>
- ----------------------------------
* Annualized
# Non-annualized.
18
<PAGE>
DFA INVESTMENT DIMENSIONS GROUP INC.
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
THE JAPANESE SMALL COMPANY PORTFOLIO
--------------------------------------------------------------------------------------
SIX MONTHS YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
MAY 31, NOV. 30, NOV. 30, NOV. 30, NOV. 30, NOV. 30,
1998 1997 1996 1995 1994 1993
----------- -------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period...................... $ 9.45 $ 21.03 $ 22.78 $ 25.06 $ 19.96 $ 18.92
----------- -------- -------- -------- -------- --------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income
(Loss)...................... -- 0.09 0.07 0.06 0.05 0.04
Net Gain (Losses) on
Securities (Realized and
Unrealized)................. (0.60) (10.45) (1.45) (1.65) 5.76 1.75
----------- -------- -------- -------- -------- --------
Total From Investment
Operations.................. (0.60) (10.36) (1.38) (1.59) 5.81 1.79
----------- -------- -------- -------- -------- --------
LESS DISTRIBUTIONS
Net Investment Income......... (0.11) (0.06) (0.01) (0.06) (0.04) (0.05)
Net Realized Gains............ -- (1.16) (0.36) (0.63) (0.67) (0.70)
----------- -------- -------- -------- -------- --------
Total Distributions........... (0.11) (1.22) (0.37) (0.69) (0.71) (0.75)
----------- -------- -------- -------- -------- --------
Net Asset Value, End of
Period...................... $ 8.74 $ 9.45 $ 21.03 $ 22.78 $ 25.06 $ 19.96
----------- -------- -------- -------- -------- --------
----------- -------- -------- -------- -------- --------
Total Return.................. (6.23)%# (51.90)% (6.28)% (6.54)% 29.59% 9.52%
----------- -------- -------- -------- -------- --------
Net Assets, End of Period
(thousands)................. $111,266 $114,017 $294,120 $371,113 $330,674 $209,244
Ratio of Expenses to Average
Net Assets**................ 0.75%* 0.73% 0.72% 0.74% 0.76% 0.82%
Ratio of Net Investment Income
to Average Net Assets....... 1.28%* 0.50% 0.24% 0.25% 0.10% 0.06%
Portfolio Turnover Rate....... N/A N/A 18.52%*(a) 7.79% 10.51% 9.36%
Average Commission Rate....... N/A N/A $ 0.0458(a) N/A N/A N/A
Portfolio Turnover Rate of
Master Fund Series.......... 12.16%* 13.17% 1.67%*(b) N/A N/A N/A
Average Commission Rate of
Master Fund Series.......... $ 0.0203 $ 0.0282 $ 0.0427(b) N/A N/A N/A
<CAPTION>
YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
NOV. 30, NOV. 30, NOV. 30, NOV. 30, NOV. 30,
1992 1991 1990 1989 1988
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period...................... $ 25.05 $ 26.27 $ 38.33 $ 31.03 $ 24.87
-------- -------- -------- -------- --------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income
(Loss)...................... 0.04 (0.01) (0.03) (0.09) (0.05)
Net Gain (Losses) on
Securities (Realized and
Unrealized)................. (5.69) 0.51 (10.74) 9.09 10.42
-------- -------- -------- -------- --------
Total From Investment
Operations.................. (5.65) 0.50 (10.77) 9.00 10.37
-------- -------- -------- -------- --------
LESS DISTRIBUTIONS
Net Investment Income......... -- -- -- -- --
Net Realized Gains............ (0.48) (1.72) (1.29) (1.70) (4.21)
-------- -------- -------- -------- --------
Total Distributions........... (0.48) (1.72) (1.29) (1.70) (4.21)
-------- -------- -------- -------- --------
Net Asset Value, End of
Period...................... $ 18.92 $ 25.05 $ 26.27 $ 38.33 $ 31.03
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Total Return.................. (23.01)% 1.68% (29.12)% 30.63% 47.62%
-------- -------- -------- -------- --------
Net Assets, End of Period
(thousands)................. $139,892 $159,475 $149,100 $168,820 $107,863
Ratio of Expenses to Average
Net Assets**................ 0.78% 0.78% 0.83% 0.76% 0.76%
Ratio of Net Investment Income
to Average Net Assets....... 0.10% (0.11)% (0.22)% (0.34)% (0.23)%
Portfolio Turnover Rate....... 5.00% 2.71% 10.26% 5.76% 9.14%
Average Commission Rate....... N/A N/A N/A N/A N/A
Portfolio Turnover Rate of
Master Fund Series.......... N/A N/A N/A N/A N/A
Average Commission Rate of
Master Fund Series.......... N/A N/A N/A N/A N/A
</TABLE>
- ----------------------------------
* Annualized
# Non-annualized
** Represents the combined ratios for the portfolio and its pro-rata share of
its Master Fund Series for the period ended November 30, 1996 and
subsequent periods.
(a) Portfolio turnover and average commission calculated for the period
December 1, 1995 to August 9, 1996 (through the date on which the portfolio
transferred its investable assets to its corresponding Master Fund Series
in a tax-free exchange).
(b) Items calculated for the period August 9 to November 30, 1996.
19
<PAGE>
DFA INVESTMENT DIMENSIONS GROUP INC.
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
THE PACIFIC RIM SMALL COMPANY PORTFOLIO
----------------------------------------------------------------------------------
YEAR YEAR YEAR YEAR
SIX MONTHS ENDED ENDED ENDED ENDED JAN. 5 TO
ENDED MAY NOV. 30, NOV. 30, NOV. 30, NOV. 30, NOV. 30,
31, 1998 1997 1996 1995 1994 1993
----------- --------- --------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period........ $ 9.52 $ 16.63 $ 14.38 $ 15.98 $ 16.45 $ 10.00
----------- --------- --------- --------- --------- ---------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income....................... 0.12 0.32 0.27 0.34 0.23 0.11
Net Gain (Losses) on Securities
(Realized and Unrealized)................. (1.99) (6.22) 2.40 (1.33) 0.47 6.46
----------- --------- --------- --------- --------- ---------
Total From Investment Operations............ (1.87) (5.90) 2.67 (0.99) 0.70 6.57
----------- --------- --------- --------- --------- ---------
LESS DISTRIBUTIONS
Net Investment Income....................... (0.32) (0.33) (0.02) (0.34) (0.23) (0.09)
Net Realized Gains.......................... (0.50) (0.88) (0.40) (0.27) (0.94) (0.03)
----------- --------- --------- --------- --------- ---------
Total Distributions......................... (0.82) (1.21) (0.42) (0.61) (1.17) (0.12)
----------- --------- --------- --------- --------- ---------
Net Asset Value, End of Period.............. $ 6.83 $ 9.52 $ 16.63 $ 14.38 $ 15.98 $ 16.45
----------- --------- --------- --------- --------- ---------
----------- --------- --------- --------- --------- ---------
Total Return................................ (20.73)%# (38.07)% 19.06% (6.27)% 4.26% 65.71%#
----------- --------- --------- --------- --------- ---------
Net Assets, End of Period (thousands)....... $89,077 $ 111,320 $ 215,542 $ 193,137 $ 212,953 $ 164,623
Ratio of Expenses to Average Net Assets**... 0.89%* 0.84% 0.84% 0.83% 0.95% 1.16%*
Ratio of Net Investment Income to Average
Net Assets................................ 2.51%* 1.95% 1.70% 2.22% 1.47% 1.27%*
Portfolio Turnover Rate..................... N/A N/A 7.05%*(a) 5.95% 26.05% 2.77%*
Average Commission Rate..................... N/A N/A $ 0.0094(a) N/A N/A N/A
Portfolio Turnover Rate of Master Fund
Series.................................... 42.44%* 24.00% 8.04%(b) N/A N/A N/A
Average Commission Rate of Master Fund
Series.................................... $0.0010 $ 0.0042 $ 0.0102(b) N/A N/A N/A
</TABLE>
- ----------------------------------
* Annualized
# Non-annualized
** Represents the combined ratios for the portfolio and its pro-rata share of
its Master Fund Series for the period ended November 30, 1996 and subsequent
periods.
(a) Portfolio turnover and average commission calculated for the period December
1, 1995 to August 9, 1996, (through the date on which the portfolio
transferred its investable assets to its corresponding Master Fund Series in
a tax-free exchange).
(b) Items calculated for the period August 9 to November 30, 1996.
20
<PAGE>
DFA INVESTMENT DIMENSIONS GROUP INC.
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
THE UNITED KINGDOM SMALL COMPANY PORTFOLIO
--------------------------------------------------------------------------------------
SIX MONTHS YEAR YEAR YEAR YEAR YEAR
ENDED MAY ENDED ENDED ENDED ENDED ENDED
31, NOV. 30, NOV. 30, NOV. 30, NOV. 30, NOV. 30,
1998 1997 1996 1995 1994 1993
----------- --------- --------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period...................... $ 28.69 $ 28.47 $ 24.09 $ 23.20 $ 21.22 $ 16.38
----------- --------- --------- --------- --------- ---------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income......... 0.43 0.81 0.72 0.84 0.48 0.45
Net Gain (Losses) on
Securities
(Realized and Unrealized)... 3.65 1.46 5.31 1.12 2.03 5.34
----------- --------- --------- --------- --------- ---------
Total From Investment
Operations.................. 4.08 2.27 6.03 1.96 2.51 5.79
----------- --------- --------- --------- --------- ---------
LESS DISTRIBUTIONS
Net Investment Income......... (0.84) (0.73) (0.06) (0.76) (0.53) (0.95)
Net Realized Gains............ (2.82) (1.32) (1.59) (0.31) -- --
----------- --------- --------- --------- --------- ---------
Total Distributions........... (3.66) (2.05) (1.65) (1.07) (0.53) (0.95)
----------- --------- --------- --------- --------- ---------
Net Asset Value, End of
Period...................... $ 29.11 $ 28.69 $ 28.47 $ 24.09 $ 23.20 $ 21.22
----------- --------- --------- --------- --------- ---------
Total Return.................. 16.33%# 8.45% 26.76% 8.39% 11.85% 36.42%
----------- --------- --------- --------- --------- ---------
Net Assets, End of Period
(thousands)................. $116,333 $ 130,891 $ 166,789 $ 167,730 $ 214,113 $ 181,789
Ratio of Expenses to Average
Net Assets**................ 0.71%* 0.70% 0.73% 0.72% 0.74% 0.78%
Ratio of Net Investment Income
to Average Net Assets....... 2.76%* 2.40% 2.49% 2.51% 1.95% 2.22%
Portfolio Turnover Rate....... N/A N/A 3.72%*(a) 7.82% 10.75% 8.21%
Average Commission Rate....... N/A N/A $ 0.0103(a) N/A N/A N/A
Portfolio Turnover Rate of
Master Fund Series.......... 5.26%* 4.26% 4.55%*(b) N/A N/A N/A
Average Commission Rate of
Master Fund Series.......... $ 0.0077 $ 0.0073 $ 0.0050(b) N/A N/A N/A
<CAPTION>
THE UNITED KINGDOM SMALL COMPANY PORTFOLIO
---------------------------------------------------------------------
YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
NOV. 30, NOV. 30, NOV. 30, NOV. 30, NOV. 30,
1992 1991 1990 1989 1988
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period...................... $ 21.37 $ 20.41 $ 22.55 $ 28.29 $ 23.41
--------- --------- --------- --------- ---------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income......... 0.64 0.69 0.92 0.52 0.61
Net Gain (Losses) on
Securities
(Realized and Unrealized)... (4.98) 1.71 (1.34) (4.75) 5.18
--------- --------- --------- --------- ---------
Total From Investment
Operations.................. (4.34) 2.40 (0.42) (4.23) 5.79
--------- --------- --------- --------- ---------
LESS DISTRIBUTIONS
Net Investment Income......... (0.65) (0.90) (0.75) (0.54) (0.28)
Net Realized Gains............ -- (0.54) (0.97) (0.97) (0.63)
--------- --------- --------- --------- ---------
Total Distributions........... (0.65) (1.44) (1.72) (1.51) (0.91)
--------- --------- --------- --------- ---------
Net Asset Value, End of
Period...................... $ 16.38 $ 21.37 $ 20.41 $ 22.55 $ 28.29
--------- --------- --------- --------- ---------
Total Return.................. (20.93)% 12.55% (2.22)% (15.40)% 23.66%
--------- --------- --------- --------- ---------
Net Assets, End of Period
(thousands)................. $ 121,086 $ 146,873 $ 127,137 $ 119,385 $ 121,337
Ratio of Expenses to Average
Net Assets**................ 0.76% 0.84% 0.83% 0.70% 0.71%
Ratio of Net Investment Income
to Average Net Assets....... 3.19% 3.44% 4.34% 2.24% 2.58%
Portfolio Turnover Rate....... 4.41% 4.50% 10.86% 11.38% 12.55%
Average Commission Rate....... N/A N/A N/A N/A N/A
Portfolio Turnover Rate of
Master Fund Series.......... N/A N/A N/A N/A N/A
Average Commission Rate of
Master Fund Series.......... N/A N/A N/A N/A N/A
</TABLE>
- ----------------------------------
* Annualized
# Non-annualized
** Represents the combined ratios for the portfolio and its pro-rata share of
its Master Fund Series for the period ended November 30, 1996 and
subsequent periods.
(a) Portfolio turnover and average commission calculated for the period
December 1, 1995 to August 9, 1996, (through the date on which the
portfolio transferred its investable assets to its corresponding Master
Fund Series in a tax-free exchange).
(b) Items calculated for the period August 9 to November 30, 1996.
21
<PAGE>
DFA INVESTMENT DIMENSIONS GROUP INC.
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
THE EMERGING MARKETS PORTFOLIO
--------------------------------------------------------------
SIX MONTHS YEAR YEAR YEAR APRIL 25
ENDED ENDED ENDED ENDED TO
MAY 31, NOV. 30, NOV. 30, NOV. 30, NOV. 30,
1998 1997 1996 1995 1994
---------- ---------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period.... $ 9.61 $ 11.71 $ 10.35 $ 11.30 $ 10.00
---------- ---------- ---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income................... 0.11 0.12 0.09 0.06 (0.02)
Net Gain (Losses) on Securities
(Realized and Unrealized)............. (0.47) (2.13) 1.27 (0.96) 1.32
---------- ---------- ---------- ---------- ----------
Total From Investment Operations........ (0.36) (2.01) 1.36 (0.90) 1.30
---------- ---------- ---------- ---------- ----------
LESS DISTRIBUTIONS
Net Investment Income................... (0.26) (0.09) -- (0.05) --
Net Realized Gains...................... -- -- -- -- --
---------- ---------- ---------- ---------- ----------
Total Distributions..................... (0.26) (0.09) -- (0.05) --
---------- ---------- ---------- ---------- ----------
Net Asset Value, End of Period.......... $ 8.99 $ 9.61 $ 11.71 $ 10.35 $ 11.30
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Total Return............................ (3.68)%# (17.27)% 13.18% (7.96)% 13.00%#
---------- ---------- ---------- ---------- ----------
Net Assets, End of Period (thousands)... $225,233 $ 212,048 $ 162,025 $ 49,337 $ 15,731
Ratio of Expenses to Average Net
Assets**.............................. 0.99%* 0.99% 1.15% 1.58% 2.43%*
Ratio of Net Investment Income to
Average Net Assets.................... 1.81%* 1.19% 1.14% 0.98% (0.44)%*
Portfolio Turnover Rate................. N/A N/A N/A N/A N/A
Average Commission Rate................. N/A N/A N/A N/A N/A
Portfolio Turnover Rate of Master Fund
Series................................ 14.13%* 0.54% 0.37% 8.17% 1.28%*
Average Commission Rate of Master Fund
Series................................ $ 0.0013 $ 0.0010 $ 0.0010 N/A N/A
<CAPTION>
THE
EMERGING
MARKETS
SMALL CAP
THE RWB/DFA INTERNATIONAL HIGH BOOK TO MARKET PORTFOLIO PORTFOLIO
--------------------------------------------------------------------------- ----------
SIX MONTHS YEAR YEAR YEAR YEAR YEAR MARCH 5,
ENDED ENDED ENDED ENDED ENDED ENDED TO
MAY 31, NOV. 30, NOV. 30, NOV. 30, NOV. 30, NOV. 30, MAY 31,
1998 1997 1996 1995 1994 1993 1998
---------- ---------- ---------- ---------- ---------- ---------- ----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period.... $ 12.84 $ 13.76 $ 12.02 $ 11.44 $ 9.92 $ 10.00 $ 10.00
---------- ---------- ---------- ---------- ---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income................... 0.07 0.22 0.22 0.19 0.14 0.06 (0.01)
Net Gain (Losses) on Securities
(Realized and Unrealized)............. 2.25 (0.77) 1.53 0.60 1.52 (0.11) 0.07
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total From Investment Operations........ 2.32 (0.55) 1.75 0.79 1.66 (0.05) 0.06
---------- ---------- ---------- ---------- ---------- ---------- ----------
LESS DISTRIBUTIONS
Net Investment Income................... (0.27) (0.23) (0.01) (0.19) (0.14) (0.03) --
Net Realized Gains...................... (0.22) (0.14) -- (0.02) -- -- --
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total Distributions..................... (0.49) (0.37) (0.01) (0.21) (0.14) (0.03) --
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net Asset Value, End of Period.......... $ 14.67 $ 12.84 $ 13.76 $ 12.02 $ 11.44 $ 9.92 $ 10.06
---------- ---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total Return............................ 18.85%# (4.04)% 14.61% 6.95% 16.71% (0.50)%# 0.60%#
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net Assets, End of Period (thousands)... $318,779 $ 275,057 $ 257,371 $ 172,017 $ 112,952 $ 63,235 $ 1,764
Ratio of Expenses to Average Net
Assets**.............................. 0.47%* 0.50% 0.54% 0.68% 0.69%(a) 0.65%*(a) 11.31%
*(b)
Ratio of Net Investment Income to
Average Net Assets.................... 0.90%* 1.72% 1.88% 1.85% 1.39%(a) 1.40%*(a) (0.85)
%*(b)
Portfolio Turnover Rate................. N/A N/A N/A N/A 0.15%*(b) 0.41%* N/A
Average Commission Rate................. N/A N/A N/A N/A N/A N/A N/A
Portfolio Turnover Rate of Master Fund
Series................................ 18.78%* 22.55% 12.23% 9.75% 1.90%*(c) N/A 12.51%*
Average Commission Rate of Master Fund
Series................................ $ 0.0167 $ 0.0068 $ 0.0112 N/A N/A N/A $ 0.0010
</TABLE>
- ----------------------------------
* Annualized
# Non-annualized
** Represents the combined ratios for The Emerging Markets Portfolio and The
Emerging Markets Small Cap Portfolio and their respective pro-rata share of
their Master Fund Series for the period ended November 30, 1996 and
subsequent periods.
(a) Had certain waivers and assumptions of expenses 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 ratio
of net investment income to average net assets for their periods ended
November 30, 1994 and 1993 would have been 1.38% and 1.23%, respectively.
(b) Because of commencement of operations and related preliminary transaction
costs, these ratios are not necessarily indicative of future ratios.
22
<PAGE>
DFA INVESTMENT DIMENSIONS GROUP INC.
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
THE CONTINENTAL SMALL COMPANY PORTFOLIO
-------------------------------------------------------------
SIX MONTHS YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
MAY 31, NOV. 30, NOV. 30, NOV. 30, NOV. 30,
1998 1997 1996 1995 1994
------------ ----------- --------- --------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period............................ $ 15.94 $ 15.26 $ 14.13 $ 14.63 $ 12.62
------------ ----------- --------- --------- --------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income............... 0.13 0.29 0.30 0.29 0.18
Net Gain (Losses) on Securities
(Realized and Unrealized)......... 4.89 1.55 1.58 (0.48) 2.10
------------ ----------- --------- --------- --------
Total From Investment Operations.... 5.02 1.84 1.88 (0.19) 2.28
------------ ----------- --------- --------- --------
LESS DISTRIBUTIONS
Net Investment Income............... (0.25) (0.29) (0.02) (0.29) (0.19)
Net Realized Gains.................. (1.10) (0.87) (0.73) (0.02) (0.07)
Tax Return of Capital............... -- -- -- -- (0.01)
------------ ----------- --------- --------- --------
Total Distributions................. (1.35) (1.16) (0.75) (0.31) (0.27)
------------ ----------- --------- --------- --------
Net Asset Value, End of Period...... $ 19.61 $ 15.94 $ 15.26 $ 14.13 $ 14.63
------------ ----------- --------- --------- --------
------------ ----------- --------- --------- --------
Total Return........................ 34.43%# 13.02% 13.96% (1.33)% 18.19%
------------ ----------- --------- --------- --------
Net Assets, End of Period
(thousands)....................... $ 252,091 $ 232,744 $ 299,325 $ 314,116 $340,992
Ratio of Expenses to Average Net
Assets**.......................... 0.72%* 0.72% 0.73% 0.74% 0.77%
Ratio of Net Investment Income to
Average Net Assets................ 1.32%* 1.41% 1.81% 1.69% 1.21%
Portfolio Turnover Rate............. N/A N/A 3.67%*(a) 9.79% 10.22%
Average Commission Rate............. N/A N/A $ 0.1030(a) N/A N/A
Portfolio Turnover Rate of Master
Fund Series....................... 0.28%* 3.46% 6.69%*(b) N/A N/A
Average Commission Rate of Master
Fund Series....................... $ 0.0382 $ 0.0586 $ 0.0392(b) N/A N/A
<CAPTION>
THE CONTINENTAL SMALL COMPANY PORTFOLIO
---------------------------------------------------------------
YEAR YEAR YEAR YEAR YEAR APRIL 15
ENDED ENDED ENDED ENDED ENDED TO
NOV. 30, NOV. 30, NOV. 30, NOV. 30, NOV. 30, NOV. 30,
1993 1992 1991 1990 1989 1988
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period............................ $ 11.39 $ 14.18 $ 16.24 $ 16.15 $ 12.02 $ 10.00
-------- -------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income............... 0.23 0.28 0.27 0.25 0.12 0.17
Net Gain (Losses) on Securities
(Realized and Unrealized)......... 1.46 (2.11) (1.66) 0.31 4.10 1.85
-------- -------- -------- -------- -------- --------
Total From Investment Operations.... 1.69 (1.83) (1.39) 0.56 4.22 2.02
-------- -------- -------- -------- -------- --------
LESS DISTRIBUTIONS
Net Investment Income............... (0.44) (0.26) (0.29) (0.20) (0.09) --
Net Realized Gains.................. (0.02) (0.70) (0.38) (0.27) -- --
Tax Return of Capital............... -- -- -- -- -- --
-------- -------- -------- -------- -------- --------
Total Distributions................. (0.46) (0.96) (0.67) (0.47) (0.09) --
-------- -------- -------- -------- -------- --------
Net Asset Value, End of Period...... $ 12.62 $ 11.39 $ 14.18 $ 16.24 $ 16.15 $ 12.02
-------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- --------
Total Return........................ 15.27% (13.85)% (9.11)% 3.50% 35.62% 20.01%#
-------- -------- -------- -------- -------- --------
Net Assets, End of Period
(thousands)....................... $266,175 $196,845 $214,054 $245,465 $199,065 $78,689
Ratio of Expenses to Average Net
Assets**.......................... 0.83% 0.90% 0.86% 0.89% 0.82% 1.05%*
Ratio of Net Investment Income to
Average Net Assets................ 1.61% 2.11% 1.68% 1.63% 1.41% 3.27%*
Portfolio Turnover Rate............. 8.99% 6.35% 7.69% 6.24% 5.70% 0.26%*
Average Commission Rate............. N/A N/A N/A N/A N/A N/A
Portfolio Turnover Rate of Master
Fund Series....................... N/A N/A N/A N/A N/A N/A
Average Commission Rate of Master
Fund Series....................... N/A N/A N/A N/A N/A N/A
</TABLE>
- ----------------------------------
* Annualized
# Non-annualized
** Represents the combined ratio for the portfolio and its respective pro-rata
share of its Master Fund Series for the period ended November 30, 1996 and
subsequent periods.
(a) Portfolio turnover and average commission calculated for the period
December 1, 1995 to August 9, 1996 (through the date on which the portfolio
transferred its investable assets to its corresponding Master Fund Series
in a tax-free exchange).
(b) Items calculated for the period August 9 to November 30, 1996.
23
<PAGE>
DFA INVESTMENT DIMENSIONS GROUP INC.
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
THE LARGE CAP INTERNATIONAL PORTFOLIO
-----------------------------------------------------------------------------------------------
SIX MONTHS YEAR YEAR YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED
MAY 31, NOV. 30, NOV. 30, NOV. 30, NOV. 30, NOV. 30, NOV. 30, NOV. 30,
1998 1997 1996 1995 1994 1993 1992 1991
---------- --------- --------- --------- --------- --------- --------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period...................... $ 14.27 $ 14.18 $ 12.60 $ 11.91 $ 11.26 $ 9.63 $ 10.64 $ 10.00
---------- --------- --------- --------- --------- --------- --------- ----------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income......... 0.15 0.23 0.21 0.15 0.09 0.15 0.11 0.06
Net Gain (Losses) on
Securities (Realized and
Unrealized)................. 1.96 0.15 1.39 0.95 1.11 1.72 (1.04) 0.58
---------- --------- --------- --------- --------- --------- --------- ----------
Total From Investment
Operations.................. 2.11 0.38 1.60 1.10 1.20 1.87 (0.93) 0.64
---------- --------- --------- --------- --------- --------- --------- ----------
LESS DISTRIBUTIONS
Net Investment Income......... (0.25) (0.21) (0.02) (0.18) (0.09) (0.24) (0.07) --
Net Realized Gain............. -- (0.08) -- (0.23) (0.46) -- (0.01) --
---------- --------- --------- --------- --------- --------- --------- ----------
Total Distributions........... (0.25) (0.29) (0.02) (0.41) (0.55) (0.24) (0.08) --
---------- --------- --------- --------- --------- --------- --------- ----------
Net Asset Value, End of
Period...................... $ 16.13 $ 14.27 $ 14.18 $ 12.60 $ 11.91 $ 11.26 $ 9.63 $ 10.64
---------- --------- --------- --------- --------- --------- --------- ----------
---------- --------- --------- --------- --------- --------- --------- ----------
Total Return.................. 15.06%# 2.80% 12.68% 9.37% 10.74% 19.55% (9.00)% 2.88%#
---------- --------- --------- --------- --------- --------- --------- ----------
Net Assets, End of Period
(thousands)................. $103,644 $87,223 $79,322 $67,940 $55,635 $78,472 $26,041 $ 4,360
Ratio of Expenses to Average
Net Assets.................. 0.46%* 0.47% 0.58% 0.57% 0.66% 0.55%(a) 0.50%(a) 0.50%*(a)
Ratio of Net Investment Income
to Average Net Assets....... 2.03%* 1.69% 1.57% 1.84% 1.18% 1.94%(a) 1.75%(a) 1.96%*(a)
Portfolio Turnover Rate....... 0.67%* 2.31% 17.65% 24.44% 33.15% 0.28% 0.20% 2.38%*
Average Commission Rate....... $ 0.0354 $0.0169 $0.0160 N/A N/A N/A N/A N/A
</TABLE>
- ----------------------------------
* Annualized
# Non-annualized.
(a) Had certain waivers and assumptions of expenses not been in effect, 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.
24
<PAGE>
DFA INVESTMENT DIMENSIONS GROUP INC.
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
THE DFA INTERNATIONAL THE INTERNATIONAL SMALL
SMALL CAP VALUE PORTFOLIO COMPANY PORTFOLIO
----------------------------------------------------- ---------------------------------------
SIX MONTHS YEAR YEAR DEC. 30, SIX MONTHS YEAR OCT. 1
ENDED ENDED ENDED 1994 TO ENDED ENDED TO
MAY 31, NOV. 30, NOV. 30, NOV. 30, MAY 31, NOV. 30, NOV. 30,
1998 1997 1996 1995 1998 1997 1996
----------- --------- --------- --------- ----------- --------- ---------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.... $ 7.95 $ 10.45 $ 9.68 $ 10.00 $ 7.82 $ 9.96 $ 10.00
----------- --------- --------- --------- ----------- --------- ---------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income.... 0.08 0.12 0.11 0.05 0.08 0.10 0.01
Net Gain (Losses) on
Securities (Realized
and Unrealized)........ 0.70 (2.19) 0.66 (0.32) 0.77 (2.22) (0.05)
----------- --------- --------- --------- ----------- --------- ---------
Total From Investment
Operations............. 0.78 (2.07) 0.77 (0.27) 0.85 (2.12) (0.04)
----------- --------- --------- --------- ----------- --------- ---------
LESS DISTRIBUTIONS
Net Investment Income.... (0.12) (0.13) -- (0.04) (0.11) (0.02) --
Net Realized Gains....... (0.28) (0.30) -- (0.01) -- -- --
----------- --------- --------- --------- ----------- --------- ---------
Total Distributions...... (0.40) (0.43) -- (0.05) (0.11) (0.02) --
----------- --------- --------- --------- ----------- --------- ---------
Net Asset Value, End of
Period................. $ 8.33 $ 7.95 $ 10.45 $ 9.68 $ 8.56 $ 7.82 $ 9.96
----------- --------- --------- --------- ----------- --------- ---------
----------- --------- --------- --------- ----------- --------- ---------
Total Return............. 10.66%# (20.60)% 8.01% (2.73)%# 11.09%# (21.35)% (0.40)%#
----------- --------- --------- --------- ----------- --------- ---------
Net Assets, End of Period
(thousands)............ $535,559 $ 431,257 $ 375,488 $ 147,125 $290,448 $ 230,469 $ 104,118
Ratio of Expenses to
Average Net Assets**... 0.85%* 0.90% 0.99% 1.23%* 0.75%* 0.75% 0.70%*(d)
Ratio of Net Investment
Income to Average Net
Assets................. 1.89%* 1.47% 1.38% 1.43%* 1.85%* 1.46% 0.54%*(d)
Portfolio Turnover
Rate................... 7.94%* 13.63% 14.52% 1.62%* N/A*** N/A*** N/A***
Average Commission
Rate................... $ 0.0032 $ 0.0056 $ 0.0092 N/A N/A*** N/A*** N/A***
Portfolio Turnover Rate
of Master Fund
Series................. N/A N/A N/A N/A N/A N/A N/A
Average Commission Rate
of Master Fund
Series................. N/A N/A N/A N/A N/A N/A N/A
</TABLE>
- ----------------------------------
* Annualized
# Non-annualized
** Represents the combined ratios for the respective portfolio and its
respective pro-rata share of its Master Fund Series for the period ended
November 30, 1994 and subsequent periods.
*** Refer to the respective Master Fund Series.
(d) Had certain waivers and assumptions of expenses not been in effect, the
ratio of expenses to average net assets, for the period ended November 30,
1996 would have been 0.79%, and the ratio of net investment income to
average net assets for the period ended November 30, 1996 would have been
0.45%.
25
<PAGE>
DFA INVESTMENT DIMENSIONS GROUP INC.
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
THE DFA ONE-YEAR FIXED INCOME PORTFOLIO
------------------------------------------------------------------------------------
SIX MONTHS YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
MAY 31, NOV. 30, NOV. 30, NOV. 30, NOV. 30, NOV. 30,
1998 1997 1996 1995 1994 1993
----------- -------- --------- --------- --------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period........................... $ 10.23 $ 10.24 $ 10.21 $ 10.05 $ 10.28 $ 10.35
----------- -------- --------- --------- --------- --------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income.............. 0.28 0.59 0.56 0.60 0.46 0.35
Net Gain (Losses) on Securities
(Realized and Unrealized)........ 0.01 (0.01) 0.03 0.17 (0.21) 0.11
----------- -------- --------- --------- --------- --------
Total From Investment Operations... 0.29 0.58 0.59 0.77 0.25 0.46
----------- -------- --------- --------- --------- --------
LESS DISTRIBUTIONS
Net Investment Income.............. (0.28) (0.59) (0.56) (0.60) (0.46) (0.38)
Net Realized Gains................. (0.01) -- -- (0.01) (0.02) (0.15)
----------- -------- --------- --------- --------- --------
Total Distributions................ (0.29) (0.59) (0.56) (0.61) (0.48) (0.53)
----------- -------- --------- --------- --------- --------
Net Asset Value, End of Period..... $ 10.23 $ 10.23 $ 10.24 $ 10.21 $ 10.05 $ 10.28
----------- -------- --------- --------- --------- --------
----------- -------- --------- --------- --------- --------
Total Return....................... 2.98%# 5.84% 5.94% 7.80% 2.48% 4.62%
----------- -------- --------- --------- --------- --------
Net Assets, End of Period
(thousands)...................... $771,056 $752,237 $ 854,521 $ 704,950 $ 592,226 $608,400
Ratio of Expenses to Average Net
Assets**......................... 0.21%* 0.22% 0.21% 0.20% 0.21% 0.21%
Ratio of Net Investment Income to
Average Net Assets............... 5.56%* 5.79% 5.39% 5.86% 4.47% 3.38%
Portfolio Turnover Rate............ N/A N/A N/A N/A N/A 61.95%*(a)
Portfolio Turnover Rate of Master
Fund Series...................... 12.37%* 82.84% 95.84% 81.31% 140.82% 111.67%*(b)
Average Commission Rate of Master
Fund Series...................... N/A N/A N/A N/A N/A N/A
<CAPTION>
THE DFA ONE-YEAR FIXED INCOME PORTFOLIO
----------------------------------------------------------------
YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
NOV. 30, NOV. 30, NOV. 30, NOV. 30, NOV. 30,
1992 1991 1990 1989 1988
-------- -------- -------- -------- --------
<S> <C><C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period........................... $ 10.33 $ 10.19 $ 10.16 $ 10.12 $ 10.12
-------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income.............. 0.43 0.68 0.83 0.82 0.78
Net Gain (Losses) on Securities
(Realized and Unrealized)........ 0.06 0.16 0.04 0.03 (0.04)
-------- -------- -------- -------- --------
Total From Investment Operations... 0.49 0.84 0.87 0.85 0.74
-------- -------- -------- -------- --------
LESS DISTRIBUTIONS
Net Investment Income.............. (0.44) (0.70) (0.84) (0.81) (0.74)
Net Realized Gains................. (0.03) -- -- -- --
-------- -------- -------- -------- --------
Total Distributions................ (0.47) (0.70) (0.84) (0.81) (0.74)
-------- -------- -------- -------- --------
Net Asset Value, End of Period..... $ 10.35 $ 10.33 $ 10.19 $ 10.16 $ 10.12
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Total Return....................... 5.64% 8.61% 8.88% 9.53% 7.61%
-------- -------- -------- -------- --------
Net Assets, End of Period
(thousands)...................... $561,879 $469,276 $412,907 $360,146 $341,551
Ratio of Expenses to Average Net
Assets**......................... 0.21% 0.21% 0.21% 0.22% 0.22%
Ratio of Net Investment Income to
Average Net Assets............... 4.81% 6.75% 8.27% 8.77% 7.70%
Portfolio Turnover Rate............ 125.56% 82.26% 96.30% 0.00% 80.74%
Portfolio Turnover Rate of Master
Fund Series...................... N/A N/A N/A N/A N/A
Average Commission Rate of Master
Fund Series...................... N/A N/A N/A N/A N/A
</TABLE>
- ----------------------------------
Restated to reflect a 900% stock dividend as of January 2, 1996.
* Annualized
# Non-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.
(a) Portfolio turnover calculated for period December 1, 1992 to February 7,
1993 (through the date on which the portfolio transferred its investable
assets to its corresponding Master Fund Series in a tax-free exchange).
(b) Master Fund Series turnover calculated for the period February 8 to
November 30, 1993.
See accompanying Notes to Financial Statements.
26
<PAGE>
DFA INVESTMENT DIMENSIONS GROUP INC.
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
THE DFA TWO-YEAR GLOBAL FIXED
INCOME PORTFOLIO
----------------------------------
SIX
MONTHS YEAR FEB. 9
ENDED ENDED TO
MAY 31, NOV. 30, NOV. 30,
1998 1997 1996
-------- -------- --------
(UNAUDITED)
<S> <C> <C> <C>
Net Asset Value, Beginning of Period........................ $ 10.40 $ 10.37 $ 10.00
-------- -------- --------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income....................................... 0.40 0.69 0.24
Net Gain (Losses) on Securities (Realized and Unrealized)... (0.08 ) (0.12) 0.35
-------- -------- --------
Total From Investment Operations............................ 0.32 0.57 0.59
-------- -------- --------
LESS DISTRIBUTIONS
Net Investment Income....................................... (0.58 ) (0.53) (0.22)
Net Realized Gains.......................................... (0.02 ) (0.01) --
-------- -------- --------
Total Distributions......................................... (0.60 ) (0.54) (0.22)
-------- -------- --------
Net Asset Value, End of Period.............................. $ 10.12 $ 10.40 $ 10.37
-------- -------- --------
-------- -------- --------
Total Return................................................ 3.18%# 5.66% 6.01%#
-------- -------- --------
Net Assets, End of Period (thousands)....................... $427,320 $418,905 $319,343
Ratio of Expenses to Average Net Assets**................... 0.30%* 0.34% 0.33%*
Ratio of Net Investment Income to Average Net Assets........ 7.76%* 6.70% 3.10%*
Portfolio Turnover Rate..................................... N/A N/A N/A
Portfolio Turnover Rate of Master Fund Series............... 80.22%* 119.27% 87.07%*
</TABLE>
- ----------------------------------
* Annualized
# Non-annualized
** Represents the combined ratio for the portfolio and its pro-rata share of
its Master Funds Series.
See accompanying Notes to Financial Statements.
27
<PAGE>
DFA INVESTMENT DIMENSIONS GROUP INC.
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
THE DFA FIVE-YEAR GLOBAL FIXED INCOME PORTFOLIO
------------------------------------------------------------------------------------------------------
NOV. 6
SIX MONTHS YEAR YEAR YEAR YEAR YEAR YEAR YEAR TO
ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED NOV.
MAY 31, NOV. 30, NOV. 30, NOV. 30, NOV. 30, NOV. 30, NOV. 30, NOV. 30, 30,
1998 1997 1996 1995 1994 1993 1992 1991 1990
---------- --------- --------- --------- --------- --------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
(UNAUDITED)
Net Asset Value,
Beginning of Period.... $ 10.88 $ 11.04 $ 10.51 $ 9.81 $ 10.56 $ 10.36 $ 10.47 $ 10.02 $10.00
---------- --------- --------- --------- --------- --------- -------- -------- -------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income.... 0.23 0.48 0.50 0.39 0.35 0.40 0.54 0.66 0.04
Net Gain (Losses) on
Securities (Realized
and Unrealized)........ 0.19 0.33 0.61 1.08 (0.65) 0.73 0.26 0.26 (0.02)
---------- --------- --------- --------- --------- --------- -------- -------- -------
Total From Investment
Operations............. 0.42 0.81 1.11 1.47 (0.30) 1.13 0.80 0.92 0.02
---------- --------- --------- --------- --------- --------- -------- -------- -------
LESS DISTRIBUTIONS
Net Investment Income.... (0.85) (0.88) (0.58) (0.77) (0.44) (0.45) (0.64) (0.47) --
Net Realized Gains....... (0.06) (0.09) -- -- (0.01) (0.48) (0.27) -- --
---------- --------- --------- --------- --------- --------- -------- -------- -------
Total Distributions...... (0.91) (0.97) (0.58) (0.77) (0.45) (0.93) (0.91) (0.47) --
---------- --------- --------- --------- --------- --------- -------- -------- -------
Net Asset Value, End of
Period................. $ 10.39 $ 10.88 $ 11.04 $ 10.51 $ 9.81 $ 10.56 $ 10.36 $ 10.47 $10.02
---------- --------- --------- --------- --------- --------- -------- -------- -------
---------- --------- --------- --------- --------- --------- -------- -------- -------
Total Return............. 4.20%# 7.87% 11.13% 15.23% (2.91)% 11.42% 8.00% 11.00% 0.22%#
---------- --------- --------- --------- --------- --------- -------- -------- -------
Net Assets, End of Period
(thousands)............ $297,699 $ 250,078 $ 165,772 $ 208,166 $ 135,529 $ 101,528 $54,607 $31,647 $8,474
Ratio of Expenses to
Average Net Assets..... 0.41%* 0.42% 0.46% 0.46% 0.49% 0.52% 0.58% 0.67% 0.51%*
Ratio of Net Investment
Income to Average Net
Assets................. 3.94%* 4.50% 4.88% 5.80% 5.75% 5.09% 5.52% 6.74% 6.92%*
Portfolio Turnover
Rate................... 44.91%* 95.12% 97.78% 130.41% 113.55% 139.57% 210.39% 194.25% 0.00%*
</TABLE>
- ------------------------------
Restated to reflect a 900% stock dividend as of January 2, 1996.
* Annualized
# Non-annualized
28
<PAGE>
DFA INVESTMENT DIMENSIONS GROUP INC.
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
THE DFA FIVE-YEAR GOVERNMENT PORTFOLIO
-----------------------------------------------------------------------------
SIX MONTHS YEAR YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED ENDED
MAY 31, NOV. 30, NOV. 30, NOV. 30, NOV. 30, NOV. 30, NOV. 30,
1998 1997 1996 1995 1994 1993 1992
---------- -------- -------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period.... $ 10.36 $ 10.42 $ 10.05 $ 9.75 $ 10.55 $ 10.88 $ 11.25
---------- -------- -------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income................... 0.27 0.59 0.65 0.59 0.48 0.47 0.57
Net Gain (Losses) on Securities
(Realized and Unrealized)............. 0.03 (0.06) 0.09 0.30 (0.80) 0.49 0.31
---------- -------- -------- -------- -------- -------- --------
Total From Investment Operations........ 0.30 0.53 0.74 0.89 (0.32) 0.96 0.88
---------- -------- -------- -------- -------- -------- --------
LESS DISTRIBUTIONS
Net Investment Income................... (0.35) (0.59) (0.37) (0.59) (0.48) (0.73) (0.76)
Net Realized Gains...................... -- -- -- -- -- (0.56) (0.49)
---------- -------- -------- -------- -------- -------- --------
Total Distributions..................... (0.35) (0.59) (0.37) (0.59) (0.48) (1.29) (1.25)
---------- -------- -------- -------- -------- -------- --------
Net Asset Value, End of Period.......... $ 10.31 $ 10.36 $ 10.42 $ 10.05 $ 9.75 $ 10.55 $ 10.88
---------- -------- -------- -------- -------- -------- --------
---------- -------- -------- -------- -------- -------- --------
Total Return............................ 2.94%# 5.39% 7.51% 9.35% (3.13)% 9.46% 8.59%
---------- -------- -------- -------- -------- -------- --------
Net Assets, End of Period (thousands)... $210,817 $204,377 $174,386 $300,921 $235,554 $164,504 $83,543
Ratio of Expenses to Average Net
Assets................................ 0.29%* 0.29% 0.30% 0.28% 0.31% 0.31% 0.31%
Ratio of Net Investment Income to
Average Net Assets.................... 5.27%* 5.95% 5.63% 6.14% 5.08% 4.75% 5.82%
Portfolio Turnover Rate................. 10.30%* 27.78% 211.97% 398.09% 52.39% 152.10% 218.60%
<CAPTION>
THE DFA FIVE-YEAR GOVERNMENT PORTFOLIO
--------------------------------------------
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
NOV. 30, NOV. 30, NOV. 30, NOV. 30,
1991 1990 1989 1988
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period.... $ 10.64 $ 10.46 $ 10.42 $ 10.33
-------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income................... 0.81 0.76 0.85 0.62
Net Gain (Losses) on Securities
(Realized and Unrealized)............. 0.54 0.20 0.05 0.09
-------- -------- -------- --------
Total From Investment Operations........ 1.35 0.96 0.90 0.71
-------- -------- -------- --------
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
-------- -------- -------- --------
-------- -------- -------- --------
Total Return............................ 13.44% 9.72% 9.33% 7.13%
-------- -------- -------- --------
Net Assets, End of Period (thousands)... $56,971 $52,260 $53,039 $ 4,863
Ratio of Expenses to Average Net
Assets................................ 0.30% 0.30% 0.30% 0.28%
Ratio of Net Investment Income to
Average Net Assets.................... 7.16% 7.91% 8.49% 7.97%
Portfolio Turnover Rate................. 223.18% 165.50% 312.59% 253.31%
</TABLE>
- ----------------------------------
Restated to reflect a 900% stock dividend as of January 2, 1996.
* Annualized
# Non-annualized
29
<PAGE>
DFA INVESTMENT DIMENSIONS GROUP INC.
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
THE DFA INTERMEDIATE GOVERNMENT FIXED INCOME PORTFOLIO
------------------------------------------------------------------------------------------------------
YEAR YEAR YEAR YEAR YEAR YEAR YEAR
SIX MONTHS ENDED ENDED ENDED ENDED ENDED ENDED ENDED OCT. 22
ENDED MAY NOV. 30, NOV. 30, NOV. 30, NOV. 30, NOV. 30, NOV. 30, NOV. 30, TO NOV.
31, 1998 1997 1996 1995 1994 1993 1992 1991 30, 1990
------------ --------- --------- -------- -------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.... $ 11.28 $ 11.22 $ 11.24 $ 10.22 $ 11.59 $ 11.20 $ 11.02 $ 10.27 $ 10.00
------------ --------- --------- -------- -------- -------- -------- -------- --------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income.... 0.32 0.66 0.65 0.70 0.69 0.55 0.76 0.84 0.09
Net Gain (Losses) on
Securities (Realized
and Unrealized)........ 0.15 0.06 (0.13) 1.11 (1.22) 0.66 0.26 0.63 0.18
------------ --------- --------- -------- -------- -------- -------- -------- --------
Total From Investment
Operations............. 0.47 0.72 0.52 1.81 (0.53) 1.21 1.02 1.47 0.27
------------ --------- --------- -------- -------- -------- -------- -------- --------
LESS DISTRIBUTIONS
Net Investment Income.... (0.33) (0.66) (0.50) (0.70) (0.68) (0.73) (0.78) (0.72) --
Net Realized Gains....... (0.05) -- (0.04) (0.09) (0.16) (0.09) (0.06) -- --
------------ --------- --------- -------- -------- -------- -------- -------- --------
Total Distributions...... (0.38) (0.66) (0.54) (0.79) (0.84) (0.82) (0.84) (0.72) --
------------ --------- --------- -------- -------- -------- -------- -------- --------
Net Asset Value, End of
Period................. $ 11.37 $ 11.28 $ 11.22 $ 11.24 $ 10.22 $ 11.59 $ 11.20 $ 11.02 $ 10.27
------------ --------- --------- -------- -------- -------- -------- -------- --------
------------ --------- --------- -------- -------- -------- -------- -------- --------
Total Return............. 4.27%# 6.75% 4.98% 18.04% (4.72)% 12.84% 9.70% 14.94% 2.63%#
------------ --------- --------- -------- -------- -------- -------- -------- --------
Net Assets, End of Period
(thousands)............ $ 157,383 $ 136,555 $ 107,944 $78,087 $60,827 $53,051 $40,160 $29,393 $25,567
Ratio of Expenses to
Average Net Assets..... 0.24%* 0.25% 0.26% 0.27% 0.29% 0.32% 0.29% 0.28% 0.23%*
Ratio of Net Investment
Income to Average Net
Assets................. 5.97%* 6.20% 6.22% 6.44% 6.45% 6.41% 7.05% 7.86% 8.73%*
Portfolio Turnover
Rate................... 20.60%* 24.06% 30.84% 40.79% 27.15% 16.91% 17.91% 19.72% 0.00%*
</TABLE>
- ----------------------------------
Restated to reflect a 900% stock dividend as of January 2, 1996.
* Annualized
# Non-annualized
30
<PAGE>
THE FEEDER PORTFOLIOS
Each of the eighteen Feeder Portfolios 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 (the "1940 Act"), that issues Series having the
same investment objective as each of those Portfolios. The Emerging Markets
Value Portfolio seeks to achieve its investment objective by investing all of
its investable assets in the Emerging Markets Value Fund, an open-end management
investment company, registered under the 1940 Act, that has the same investment
objective as the Emerging Markets Value Portfolio. This investment activity is
unlike many other investment companies which directly acquire and manage their
own portfolio of securities. The investment objective of a Feeder Portfolio may
not be changed without the approval of its shareholders. The investment
objective of a Master Fund may not be changed without approval of the
shareholders of that Master Fund. 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 Master Fund.
This prospectus describes the investment objective, policies and
restrictions of each Feeder Portfolio and its corresponding Master Fund. (See
"INVESTMENT OBJECTIVES AND POLICIES--SMALL COMPANY PORTFOLIOS--U.S. 6-10 Small
Company Portfolio, U.S. 9-10 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"; "VALUE PORTFOLIOS--Investment
Objectives and Policies"; "INVESTMENT OBJECTIVES AND POLICIES--FIXED INCOME
PORTFOLIOS-DFA One-Year Fixed Income Portfolio; DFA Two-Year Global Fixed Income
Portfolio"; "RWB/DFA INTERNATIONAL HIGH BOOK TO MARKET PORTFOLIO--Investment
Objective and Policies"; and "EMERGING MARKETS PORTFOLIO, EMERGING MARKETS SMALL
CAP PORTFOLIO AND EMERGING MARKETS VALUE 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 Master Funds. Other institutional investors,
including other mutual funds, may invest in each Master Fund, and the expenses
of such other funds and, correspondingly, their returns may differ from those of
the Feeder Portfolios. Please contact the Trust and the Emerging Markets Value
Fund 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 and
the Emerging Markets Value Fund other than through a Feeder Portfolio.
The shares of the Master Funds 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. Investment in a Master Fund by other
institutional investors offers potential benefits to the Master Fund and,
through their investment in the Master Funds, the Feeder Portfolios also.
However, such 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 Master Funds. Also,
if an institutional investor were to redeem its interest in a Master Fund, the
remaining investors in that Master Fund could experience higher pro rata
operating expenses, thereby producing lower returns, and the Master Fund's
security holdings may become less diverse, resulting in increased risk.
Institutional investors that have a greater pro rata ownership interest in a
Master Fund than the corresponding Feeder Portfolio could have effective voting
control over the operation of the Master Fund.
Further, if a Master Fund 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 Master Fund 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
31
<PAGE>
objective, possibly at increased cost. A withdrawal by a Feeder Portfolio of its
investment in the corresponding Master Fund 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. 9-10 Small Company, Enhanced
U.S. Large Company, DFA One-Year Fixed Income, DFA Two-Year Global Fixed Income,
U.S. 4-10 Value, U.S. 6-10 Value, U.S. Large Cap Value, RWB/DFA International
High Book to Market and Emerging Markets Value 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.
Finally, the Feeder Portfolios' investment in the shares of the Master Funds
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 Master Funds invest.
SMALL COMPANY PORTFOLIOS
INVESTMENT OBJECTIVE AND POLICIES
Each Small Company Portfolio, and the U.S. 6-10 Small Company, U.S. 9-10
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"), operate 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
solely on the basis of a company's market capitalization. "Market
capitalization" for domestic securities will be calculated by multiplying the
price of a company's stock by the number of its shares of outstanding common
stock. "Market capitalization" for foreign securities will be calculated using
the number of outstanding stocks of the company that are similar to domestic
common stocks.
Each Small Company Series and Tax Managed U.S. 6-10 Small Company Portfolio
intends to invest at least 80% of its assets in equity securities of U.S.,
Japanese, United Kingdom, European and Pacific Rim small companies, as defined
herein, and as applicable to the Series. The Small Company Series and Tax
Managed U.S. 6-10 Small Company Portfolio will be structured to reflect
reasonably the relative market capitalizations of their 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 Small Company Series and Tax
Managed U.S. 6-10 Small Company Portfolio, may participate in the investment
performance of these companies through ownership of a Portfolio's stock. The Tax
Managed U.S. 6-10 Small Company Portfolio seeks to minimize the impact of
federal taxes on returns by managing its portfolio to seek to defer the
realization of net capital gains and may seek to minimize the receipt of
dividend income in order to minimize taxable distributions to investors. For
this reason, its investment policies, including its portfolio structure and
transactions, differ slightly from the Small Company Series. For further
information on the Tax Managed U.S. 6-10 Small Company Portfolio's investment
policies, see "TAX MANAGEMENT STRATEGIES" in this prospectus.
32
<PAGE>
INVESTMENT OBJECTIVES 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. The 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 "INVESTMENT OBJECTIVES
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' net assets at the time of purchase.
TAX MANAGED U.S. 6-10 SMALL COMPANY PORTFOLIO
The Tax Managed U.S. 6-10 Small Company Portfolio pursues its investment
objective by investing its assets in the same way as the 6-10 Series, described
above. However, the Tax Managed U.S. 6-10 Small Company Portfolio will seek to
minimize the impact of federal taxes on returns by managing its portfolio in a
manner that will defer the realization of net capital gains and may minimize the
receipt of dividend income. (See "TAX MANAGEMENT STRATEGIES" below.)
U.S. 9-10 SMALL COMPANY PORTFOLIO
U.S. 9-10 Small Company Portfolio pursues its investment objective by
investing all of its assets in the U.S. 9-10 Small Company Series of the Trust
(the "9-10 Series"). The 9-10 Series 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 9-10 Series will purchase stocks of companies whose shares
are listed on the NYSE or AMEX or traded OTC. The 9-10 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. There
is some overlap in the companies in which the 9-10 Series and the 6-10 Series
invest. It is the intention of the 9-10 Series to acquire a portion of the stock
of each eligible NYSE, AMEX and OTC company on a market capitalization weighted
basis. (See "INVESTMENT OBJECTIVES AND POLICIES--SMALL COMPANY
PORTFOLIOS--Portfolio Structure.") In the future, the 9-10 Series may include
stocks of small U.S. companies which are listed on other U.S. securities
exchanges. The 9-10 Series 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 Series' net
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
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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. Generally, 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 "INVESTMENT OBJECTIVES 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"). Generally, 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 United States use the S&P 500
Index. While the FTA typically 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 "INVESTMENT OBJECTIVES AND
POLICIES--SMALL COMPANY PORTFOLIOS--Portfolio Structure.")
CONTINENTAL SMALL COMPANY PORTFOLIO
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. As of the date of this prospectus,
the Continental Series may invest in small companies located in Austria,
Belgium, Denmark, Finland, France, Germany, Ireland, Italy, the Netherlands,
Norway, Spain, Sweden, and Switzerland, 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 typically will use the appropriate country indices
of the Financial Times-Actuaries World Index ("FTW") converted to a common
currency, the U.S. 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
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are available for purchase by non-resident investors. Its constituents represent
about 70% of the total market capitalization of the respective markets.
Generally, 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 typically 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
Belgium, Denmark, France, Germany, Italy, the Netherlands, Spain, Sweden and
Switzerland. 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 "INVESTMENT
OBJECTIVES 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. As of the date of this prospectus, the Pacific Rim
Series may invest in small companies located in Australia, Hong Kong, Korea, New
Zealand and Singapore. In the future, the Advisor may add small companies
located in other Asian countries as securities markets in these countries become
accessible. As of September 10, 1998, the Pacific Rim Small Company Portfolio
ceased offering its shares to new investors as a consequence of certain
restrictions imposed by the Malaysian government on the repatriation of assets
by foreign investors, such as the Pacific Rim Series. See "RISK FACTORS--ALL
PORTFOLIOS--INVESTING IN EMERGING MARKETS."
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 typically
will use the appropriate country indices of the FTW converted to a common
currency and aggregated, to define "small companies." Generally, 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.
While the Advisor typically 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 companies located in the
Pacific Rim. (See "INVESTMENT OBJECTIVES AND POLICIES--SMALL COMPANY
PORTFOLIOS--Portfolio Structure.")
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INTERNATIONAL SMALL COMPANY PORTFOLIO
The International Small Company Portfolio seeks to achieve its investment
objective by investing virtually all of its assets in up to 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 "INVESTMENT OBJECTIVES 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.
As of the date of this prospectus, the Small Company Portfolio invests in
the shares of the Underlying Series within the following percentage ranges:
<TABLE>
<CAPTION>
INVESTMENT
UNDERLYING SERIES RANGE
- ---------------------------------------------------------------------------------- -----------
<S> <C>
Japanese Small Company............................................................ 20 - 45%
United Kingdom Small Company...................................................... 5 - 25%
Continental Small Company......................................................... 20 - 45%
Pacific Rim Small Company......................................................... 0 - 25%
</TABLE>
The allocation of the assets of International Small Company Portfolio to be
invested in the Underlying Series will be determined by the Advisor on at least
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 "INVESTMENT OBJECTIVES 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. The Advisor
expects to change the relative weights ascribed to each Underlying Series, based
on its updated 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. As of September 10, 1998, the International Small
Company Portfolio discontinued further investment in the Pacific Rim Series as a
consequence of certain restrictions imposed by the Malaysian government on the
repatriation of assets by foreign investors, such as the Series. See "RISK
FACTORS--ALL PORTFOLIOS--INVESTING IN EMERGING MARKETS." Under normal
conditions, the target allocations for investment by the Portfolio in the
Underlying Series are: Japanese Small Company Series-- 25%; United Kingdom Small
Company Series--20%; Continental Small Company Series--40%; and Pacific Rim
Small Company Series--15%. As of the date of this prospectus, the target
allocations noted above do not reflect current allocations because the Portfolio
is not investing in the Pacific Rim Small Company Series.
PORTFOLIO STRUCTURE
Each Small Company Series and Tax Managed U.S. 6-10 Small Company Portfolio
is structured by generally basing the amount of each security purchased on the
issuer's relative market capitalization with a view to creating in each Series
and Tax Managed U.S. 6-10 Small Company Portfolio a reasonable reflection of the
relative market capitalizations of its portfolio companies. The following
discussion applies
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to investment policies of each Small Company Series and Tax Managed U.S. 6-10
Small Company Portfolio.
The decision to include or exclude the shares of an issuer will be made on
the basis of such issuer's relative market capitalization determined by
reference to other companies located in the same country, except that with
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, each Small Company Series and Tax Managed
U.S. 6-10 Small Company Portfolio 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 "INVESTMENT OBJECTIVES 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 "INVESTMENT OBJECTIVES AND POLICIES--SMALL COMPANY
PORTFOLIOS--Portfolio Transactions.") A further deviation from market
capitalization weighting may occur if a Series or the Tax Managed U.S. 6-10
Small Company Portfolio invests a portion of its assets in privately placed
convertible debentures. Additional information regarding the investment policies
applicable to the U.S. 6-10 Small Company Portfolio appears in "TAX MANAGEMENT
STRATEGIES" below.
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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.
Generally, current income is not sought as an investment objective and
investments will not be based upon an issuer's dividend payment policy or
record. However, many of the companies whose securities will be selected for
investment do pay dividends. It is anticipated, therefore, that dividend income
will be received.
PORTFOLIO TRANSACTIONS
On a periodic basis, the Advisor will review the holdings of each Small
Company Series and Tax Managed U.S. 6-10 Small Company Portfolio 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 and Tax Managed U.S. 6-10
Small Company Portfolio) is to consider portfolio securities for sale when they
have appreciated sufficiently to rank, on a market capitalization basis, more
than one full decile higher than the company with the largest market
capitalization that is eligible for purchase by the particular 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.
In the case of the Tax Managed U.S. 6-10 Small Company Portfolio, management
strategies used by the Advisor to defer the realization of net capital gains and
to minimize dividend income may, from time to time, cause deviation from market
capitalization weighting. The Tax Managed U.S. 6-10 Small Company Portfolio
should not be expected to adhere to its market capitalization weightings with
the same precision as the Small Company Series. (See "TAX MANAGEMENT STRATEGIES"
below.)
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.
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<PAGE>
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 " INVESTMENT OBJECTIVES AND
POLICIES--FIXED INCOME PORTFOLIOS--Description of Investments.")
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.")
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 Rating Group, a Division of
The McGraw-Hill Companies ("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
1940 Act, 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 1940 Act, 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
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<PAGE>
time, within the discretion of the Advisor and according to restraints imposed
by the 1940 Act. 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 of 1986, as amended (the
"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 (the "SEC")
that over-the-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.
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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 Portfolio intends to invest in the stocks of large companies in
Europe, Australia and the Far East. As of the date of this prospectus, the
Portfolio may invest in the stocks of large companies in Australia, Belgium,
Denmark, France, Germany, Italy, Hong Kong, Japan, the Netherlands, New Zealand,
Norway, Singapore, Spain, Sweden, Switzerland and the United Kingdom. As the
Portfolio's asset growth permits and it may invest in the stocks of large
companies in Austria, Finland and Ireland. As of September 10, 1998, the
Portfolio ceased trading securities in Malaysia, as a consequence of recent
restrictions imposed by the Malaysian government on the repatriation of assets
by foreign investors, such as the Portfolio. (See "RISK FACTORS--ALL
PORTFOLIOS--Investing in Emerging 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. 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.
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.
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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.
DFA REAL ESTATE SECURITIES PORTFOLIO
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of DFA Real Estate Securities Portfolio is to
achieve long-term capital appreciation. 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,
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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 futures 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.
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
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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.
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
INVESTMENT OBJECTIVES AND POLICIES
The investment objective of each of these Portfolios is to achieve long-term
capital appreciation. U.S. Large Cap Value Portfolio, U.S. 4-10 Value Portfolio,
U.S. 6-10 Value Portfolio and Tax Managed U.S. Large 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"), U.S. 4-10 Value Series
(the "4-10 Value Series"), U.S. 6-10 Value Series (the "6-10 Value Series") and
Tax Managed U.S. Large Cap Value Series (the "Tax Managed Large Cap Series") of
the Trust, respectively. Each Value Series has the same investment objective and
policies as the corresponding Value Portfolio. The Tax Managed U.S. 4-10 Value
Portfolio invests directly in portfolio securities. Ordinarily, each of the
Series and Tax Managed U.S. 4-10 Value Portfolio will invest at least 80% of its
assets in a broad and diverse group of readily marketable common stocks of U.S.
companies which the Advisor believes to be value stocks at the time of purchase.
Securities are considered value stocks primarily because a company's shares have
a high book value in relation to their market value (a "book to market ratio").
Generally, 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 and Tax Managed Large Cap 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 6-10 Value Series will purchase common
stocks of companies whose market capitalizations are smaller than such company.
The 4-10 Value Series and Tax Managed U.S. 4-10 Value Portfolio will purchase
common stocks of companies whose market capitalizations are equal to the market
capitalizations of companies in the 4th through 10th deciles of those companies
listed on the NYSE. With respect to the 9th and 10th deciles, the 4-10 Series
and Tax Managed U.S. 4-10 Value Portfolio will only purchase such common stocks
when it is advantageous to do so through block trades with the Advisor's other
accounts. In measuring value, the Advisor may consider additional factors such
as cash flow, economic conditions and developments in the issuer's industry.
PORTFOLIO STRUCTURE
Each Series and Tax Managed U.S. 4-10 Value Portfolio will operate as a
diversified investment company. Further, each Series and Tax Managed U.S. 4-10
Value Portfolio will not invest more than 25% of its total assets in securities
of companies in a single industry. The Series and Tax Managed U.S. 4-10 Value
Portfolio 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 and short-term repurchase agreements. The Series and Tax Managed
U.S. 4-10 Value Portfolio will purchase securities that are listed on the
principal U.S. national securities exchanges and traded OTC.
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Each of the Value Series and Tax Managed U.S. 4-10 Value Portfolio 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 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
because the Series and Tax Managed U.S. 4-10 Value Portfolio intend to purchase
round lots only and, with respect to the 4-10 Value Series and Tax Managed U.S.
4-10 Value Portfolio, because they intend to purchase common stocks in the 9th
and 10th deciles only through block trades, as described above. In order to
retain sufficient liquidity, the relative amount of any security held by a
Series or Tax Managed U.S. 4-10 Value 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 a
Series' or Portfolio's assets may be invested in interest-bearing obligations,
as described above, thereby causing further deviation from strict market
capitalization weighting. The Series and Tax Managed U.S. 4-10 Value 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 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 or the Tax
Managed U.S. 4-10 Value Portfolio.
On not less than a semi-annual basis, for each Series and the Tax Managed
U.S. 4-10 Value Portfolio, the Advisor will calculate the book to market ratio
necessary to determine those companies whose stocks may be eligible for
investment. For additional information regarding the investment policies of the
Tax Managed U.S. 4-10 Value Portfolio, including its portfolio structure and
transactions, see "TAX MANAGEMENT STRATEGIES" below.
PORTFOLIO TRANSACTIONS
The Series and the Tax Managed U.S. 4-10 Value Portfolio 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.
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, the 4-10 and 6-10 Value Series and the Tax Managed
U.S. 4-10 Value Portfolio each 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. 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. The 4-10 and
6-10 Value Series and Tax Managed U.S. 4-10 Value Portfolio may also sell
portfolio securities in the same circumstances, however, it is anticipated that
they will generally 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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In the case of the Tax Managed U.S. 4-10 Value Portfolio, management
strategies used by the Advisor to defer the realization of net capital gains and
to minimize dividend income may, from time to time, cause deviation from market
capitalization weighting. The Tax Managed U.S. 4-10 Value Portfolio should not
be expected to adhere to its market capitalization weightings with the same
precision as the Series. (See "TAX MANAGEMENT STRATEGIES" below.)
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 the
Advisor believes to be value stocks at the time of purchase. Securities are
considered value stocks primarily because a company's shares have a high book
value in relation to their market value (a "book to market ratio"). In measuring
value, the Advisor may consider additional factors such as cash flow, economic
conditions and developments in the issuer's industry. Generally, 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. As of the date of
this prospectus, the International Value Series may invest in the stocks of
large companies in Australia, Belgium, Denmark, France, Germany, Hong Kong,
Italy, Japan, the Netherlands, New Zealand, Norway, Singapore, Spain, Sweden,
Switzerland and the United Kingdom. As the Series' asset growth permits, it may
invest in the stocks of large companies in other developed markets, including
Austria, Finland and Ireland. As of September 10, 1998, the International Value
Series ceased trading securities in Malaysia, as a consequence of recent
restrictions imposed by the Malaysian government on the repatriation of assets
by foreign investors, such as the Series. (See "RISK FACTORS--ALL
PORTFOLIOS--Investing in Emerging 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.
As of the date of this prospectus, the International Value Series intends to
invest in companies having at least $800 million of market capitalization, and
the Series will be approximately market capitalization weighted. The Advisor may
reset such floor from time to time to reflect changing market conditions. 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
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judgment that other conditions exist that make the purchase of such stock for
the International Value Series inappropriate.
Deviation from market capitalization weighting also 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 privately placed 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.
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
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light of the policy of maintaining a portfolio of companies with large market
capitalizations and high book to market ratios.
TAX MANAGED DFA INTERNATIONAL VALUE PORTFOLIO
INVESTMENT OBJECTIVE AND POLICIES
The Tax Managed DFA International Value Portfolio has the same investment
objective as, and investment policies that are similar to, the DFA International
Value Series. (See "RWB/DFA INTERNATIONAL HIGH BOOK TO MARKET
PORTFOLIO--Investment Objective and Policies" above.) However, the Portfolio
will manage its portfolio in a manner that will seek to defer the realization of
net capital gains and may minimize the receipt of dividend income in order to
minimize taxable distributions to investors. These tax management strategies
may, from time to time, cause deviation from market capitalization weighting.
The Tax Managed DFA International Value Portfolio should not be expected to
adhere to its market capitalization weightings with the same precision as the
other Series and Portfolios. In addition, the investment policies of the Tax
Managed DFA International Value Portfolio, including its portfolio structure and
transactions, differ slightly from the RWB/DFA International High Book to Market
Portfolio. (For additional information regarding the investment policies
applicable to the Tax Managed DFA International Value Portfolio, see "TAX
MANAGEMENT STRATEGIES" below.)
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 be value stocks at the time of purchase.
Securities are considered value stocks primarily because a company's shares have
a high book to market ratio. Generally, such shares will be considered eligible
for investment. In measuring value, the Advisor may consider additional factors
such as cash flow, economic conditions and developments in the issuer's
industry. 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. As of the date of this prospectus, the Portfolio may
invest in the stocks of small companies in Australia, Belgium, Denmark, France,
Germany, Hong Kong, Italy, Japan, the Netherlands, New Zealand, Norway,
Singapore, Spain, Sweden, Switzerland and the United Kingdom. As the Portfolio's
asset growth permits, it may invest in the stocks of small companies in other
developed markets, including Austria, Finland and Ireland. As of September 10,
1998, the Portfolio ceased trading securities in Malaysia, as a consequence of
recent restrictions imposed by the Malaysian government on the repatriation of
assets by foreign investors, such as the Portfolio. (See "RISK FACTORS--ALL
PORTFOLIOS--Investing in Emerging Markets.")
Under normal market conditions, at least 65% of the Portfolio's assets will
be invested in small companies, as defined herein, 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. Currently no more than 40% of the Portfolio's
assets is invested in such companies in any one country, and if this changes, a
supplement to this prospectus will disclose such change. 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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As of the date of this prospectus, the Portfolio intends to invest in small
companies which, for purposes of this Portfolio, are defined as companies having
no more than $800 million of market capitalization. The Advisor may reset such
ceiling from time to time to reflect changing market conditions. 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 also 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
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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.
EMERGING MARKETS PORTFOLIO,
EMERGING MARKETS SMALL CAP PORTFOLIO
AND EMERGING MARKETS VALUE 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. The investment objective of the
Emerging Markets Value Fund is to seek long-term capital growth through
investment primarily in emerging market equity securities. The Emerging Markets
Value Portfolio pursues its objective by investing all of its assets in the
Emerging Markets Value Fund, which has the same investment objective and
policies as the Portfolio. Each Master Fund operates as a diversified investment
company and seeks to achieve its investment objective by investing in emerging
markets designated by the Investment Committee of the Advisor ("Approved
Markets"). Each Master Fund 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").
MASTER FUND CHARACTERISTICS AND POLICIES
The Emerging Markets Series of the Trust 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 of the Trust will seek a broad market
coverage of smaller companies within each Approved Market. This Series will
attempt to own shares of companies whose 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.
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The Emerging Markets Value Fund seeks to achieve its objective by investing
in emerging market equity securities which are deemed by the Advisor to be value
stocks at the time of purchase. Securities are considered value stocks primarily
because they have a high book value in relation to their market value. In
measuring value, the Advisor may consider additional factors such as cash flow,
economic conditions and developments in the issuer's industry. No assurance can
be given that the Emerging Markets Value Fund's investment objective will be
achieved.
The Emerging Markets Value Fund's policy is to seek to achieve its
investment objective by investing in emerging market equity securities across
all market capitalizations, and specifically those which are deemed by the
Advisor to be value stocks at the time of purchase, as described above.
Each Master Fund 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 Master Fund's 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; the Emerging Markets
Small Cap Series will invest at least 65% of its assets in small company (as
defined above) Approved Market securities; and the Emerging Markets Value Fund
will invest at least 65% of its assets in Approved Market equity securities that
are deemed by the Advisor to be value stocks at the time of purchase. Approved
Market securities are defined to be (a) securities of companies organized in a
country in an Approved Market or for which the principal trading market is in an
Approved Market, (b) securities issued or guaranteed by the government of an
Approved Market country, its agencies or instrumentalities, or the central bank
of such country, (c) securities denominated in an Approved Market currency
issued by companies to finance operations in Approved Markets, (d) securities of
companies that derive at least 50% of their revenues primarily from either goods
or services produced in Approved Markets or sales made in Approved Markets and
(e) Approved Markets equity securities in the form of depositary shares.
Securities of Approved Markets may include securities of companies that have
characteristics and business relationships common to companies in other
countries. As a result, the value of the securities of such companies may
reflect economic and market forces in such other countries as well as in the
Approved Markets. The Advisor, however, will select only those companies which,
in its view, have sufficiently strong exposure to economic and market forces in
Approved Markets such that their value will tend to reflect developments in
Approved Markets to a greater extent than developments in other regions. For
example, the Advisor may invest in companies organized and located in the United
States or other countries outside of Approved Markets, including companies
having their entire production facilities outside of Approved Markets, when such
companies meet the definition of Approved Markets securities so long as the
Advisor believes at the time of investment that the value of the company's
securities will reflect principally conditions in Approved Markets.
With respect to the Emerging Markets Series and Emerging Markets Small Cap
Series, the Advisor defines the term "emerging market" to mean a country which
is considered to be an emerging market by the International Finance Corporation.
In determining what countries have emerging markets with respect to the Emerging
Markets Value Fund, the Fund will consider among other things, the data,
analysis and classification of countries published or disseminated by the
International Bank for Reconstruction (commonly known as the World Bank) and the
International Finance Corporation. Approved emerging markets may not include all
such emerging markets. In determining whether to approve markets for investment,
the Advisor will take into account, among other things, market liquidity,
investor information, government regulation, including fiscal and foreign
exchange repatriation rules and the availability of other access to these
markets by the investors of the Emerging Markets Series, the Emerging Markets
Small Cap Series and the Emerging Markets Value Fund.
As of the date of this prospectus, the following countries are designated as
Approved Markets: Argentina, Brazil, Chile, Indonesia, Israel, Mexico,
Philippines, Portugal, South Korea, Thailand and
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Turkey. Countries that may be approved in the future include but are not limited
to Colombia, Czech Republic, Greece, Hungary, India, Jordan, Nigeria, Pakistan,
Poland, Republic of China (Taiwan), Republic of South Africa, Venezuela and
Zimbabwe. As of September 10, 1998, the Emerging Markets Series, the Emerging
Markets Small Cap Series and the Emerging Markets Value Fund ceased trading
securities in Malaysia, as a consequence of recent restrictions imposed by the
Malaysian government on the repatriation of assets by foreign investors, such as
the Series and the Fund. (See "RISK FACTORS--ALL PORTFOLIOS--Investing in
Emerging Markets.")
Each Master Fund 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 Master Fund 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 Master Fund 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 no Master Fund
expects the aggregate of all such amounts to exceed 10% of its net assets under
normal circumstances.
The Master Funds 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 Master
Funds may also invest in money market mutual funds for temporary cash management
purposes. The 1940 Act limits investment by a Master Fund in shares of other
investment companies to no more than 10% of the value of a Master Fund's total
assets. If a Master Fund invests in another investment company, the Master
Fund's shareholders will bear not only their proportionate share of expenses of
the Master Fund (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 Master Fund to
establish a wholly-owned subsidiary or a trust for the purpose of investing in
the local markets. Each Master Fund also may invest up to 5% of its assets in
convertible debentures issued by companies organized in Approved Markets.
PORTFOLIO STRUCTURE
The Emerging Markets Series' and Emerging Markets Small Cap 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 for a Series or the Emerging Markets Value Fund's criterion for
investment, it may not be included in a Master Fund 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 Code). 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.
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Changes in the composition and relative ranking (in terms of book to market
ratio) of the stocks which are eligible for purchase by the Emerging Markets
Value Fund 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 value stocks which are
eligible for investment. Such list will be revised no less than semi-annually.
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.
The Master Funds do 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 a
Master Fund do pay dividends. It is anticipated, therefore, that the Master
Funds 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.
For the purpose of converting U.S. dollars to another currency, or vice
versa, or converting one foreign currency to another foreign currency, each
Master Fund may enter into forward foreign exchange contracts. In addition, to
hedge against changes in the relative value of foreign currencies, each Master
Fund may purchase foreign currency futures contracts. A Master Fund will only
enter into such a futures contract if it is expected that the Master Fund 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 Master
Fund may suffer a loss.
SECURITIES LOANS
All of the Portfolios and Master Funds 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 Master Fund, these Portfolios do not
intend to lend those shares. While a Portfolio or Master Fund may earn
additional income from lending securities, such activity is incidental to the
investment objective of a Portfolio or Master Fund. The value of securities
loaned may not exceed 33 1/3% of the value of a Portfolio's or Master Fund's
total assets. In connection with such loans, a Portfolio or Master Fund 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 Master
Funds 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,
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including U.S. subsidiaries and branches of foreign banks, corporate
obligations, commercial paper, repurchase agreements and obligations of
supranational organizations. Generally, the Series will acquire obligations
which mature within one year from the date of settlement, but substantial
investments may be made in obligations maturing within two years from the date
of settlement when greater returns are available. It is the Series' policy that
the weighted average length of maturity of investments will not exceed one year.
The Series principally invests in certificates of deposit, commercial paper,
bankers' acceptances, notes and bonds. The Series will invest more than 25% of
its total assets in obligations of U.S. and/or foreign banks and bank holding
companies when the yield to maturity on these instruments exceeds the yield to
maturity on all other eligible portfolio investments of similar quality for a
period of five consecutive days when the NYSE is open for trading. (See
"Investments in the Banking Industry.")
DFA 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
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 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 FIVE-YEAR GLOBAL FIXED INCOME PORTFOLIO
The investment objective of DFA Five-Year 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 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
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operating income in, at least three different countries, one of which may be the
United States. The Portfolio will acquire obligations which mature within five
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 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. Ordinarily, the Portfolio will
invest at least 65% of its assets in 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.
Ordinarily, the Portfolio will invest at least 65% of its assets 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, based upon market values, of between seven to ten
years. One of the benefits of the Portfolio is expected to be that in a period
of steeply falling interest rates, the Portfolio should perform well because of
its average weighted maturity and the high quality and non-callable nature of
its investments. The Portfolio is expected to match or exceed the returns of the
Lehman Brothers Treasury Index, without exceeding the volatility of that Index.
The Portfolio may invest more than 5% of its assets in the obligations of
foreign governments. Those obligations at the time of purchase must be either
rated in the highest rating category of a nationally recognized statistical
rating organization or, in the case of any obligation that is unrated, of
comparable quality. The Portfolio also may invest in futures contracts on U.S.
Treasury securities or options on such contracts for the purposes of remaining
fully invested and maintaining liquidity to pay redemptions. However, the
Portfolio will not purchase futures contracts or options thereon if as a result
more than 5% of its total assets would then consist of initial and variation
margin deposits on such contracts or options. Such investments entail certain
risks. (See "RISK FACTORS--ALL PORTFOLIOS.")
DESCRIPTION OF INVESTMENTS
The following is a description of the categories of investments which may be
acquired by the Fixed Income Portfolios and the One-Year Fixed Income and
Two-Year Global Fixed Income Series.
<TABLE>
<CAPTION>
PERMISSIBLE
CATEGORIES:
-------------
<S> <C>
DFA One-Year Fixed Income Series............................................... 1- 6, 8
DFA Five-Year Government Portfolio............................................. 1, 2, 6
DFA Two-Year Global Fixed Income Series........................................ 1-10
DFA Five-Year Global Fixed Income Portfolio.................................... 1-10
DFA Intermediate Government Fixed Income Portfolio............................. 1, 2, 6, 7, 8
</TABLE>
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.
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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.
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 or 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.
The categories of investments that may be acquired by each of the Fixed
Income Portfolios (other than DFA Intermediate Government Fixed Income
Portfolio) and the One-Year Fixed Income and Two-Year Global Fixed Income Series
may include both fixed and floating rate securities. Floating rate securities
bear interest at rates that vary with prevailing market rates. Interest rate
adjustments are made periodically (E.G., every six months), usually based on a
money market index such as the London Interbank Offered Rate (LIBOR) or the
Treasury bill rate.
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INVESTMENTS IN THE BANKING INDUSTRY
The One-Year 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 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 concentrating its investment in this industry.
The types of bank and bank holding company obligations in which the One-Year
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, both 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 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 on investment
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 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
Global Fixed Income Series, could be 0% to 200%. While the Fixed Income
Portfolios, the One-Year Fixed Income Series and Two-Year Global Fixed Income
Series acquire securities in principal transactions and, therefore, do not pay
brokerage commissions, the spread between the bid and asked prices of a security
may be considered to be a "cost" of trading. Such costs ordinarily increase with
trading activity. However, as stated above, securities ordinarily will be sold
when, in the Advisor's judgment, the monthly return of a Portfolio, the One-Year
Fixed Income 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 Five-Year 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
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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 Five-Year Global Fixed Income Portfolio is "non-diversified," as
defined in the 1940 Act, 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 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.
TAX MANAGEMENT STRATEGIES
The Tax Managed U.S. 6-10 Small Company Portfolio, Tax Managed Large Cap
Value Series, Tax Managed U.S. 4-10 Value Portfolio and Tax Managed DFA
International Value Portfolio (individually, a "Tax Managed Portfolio or Series"
and collectively, the "Tax Managed Portfolios and Series") seek to minimize the
impact of federal taxes on returns by managing their portfolios in a manner that
will defer the realization of net capital gains where possible and may minimize
dividend income.
When selling securities, each Tax Managed Portfolio or Series typically will
select the highest cost shares of the specific security in order to minimize the
realization of capital gains. In certain cases, the highest cost shares may
produce a short-term capital gain. Since short-term capital gains are taxed at
higher tax rates than long-term capital gains, the highest cost shares with a
long-term holding period may be disposed of instead. Each Tax Managed Portfolio
or Series also will seek, when possible, not to dispose of a security until the
long-term holding period for capital gains for tax purposes has been satisfied.
Additionally, each Tax Managed Portfolio or Series may, when consistent with all
other tax management policies, sell securities in order to realize capital
losses. Realized capital losses can be used to offset realized capital gains,
thus reducing capital gains distributions. However, realization of capital gains
is not entirely within the Advisor's control. Capital gains distributions may
vary considerably from year to year; there will be no capital gains
distributions in years when a Tax Managed Portfolio or Series realizes net
capital losses.
The timing of purchases and sales of securities may be managed to minimize
dividends to the extent possible. With respect to dividends that are received,
the Tax Managed Portfolios and Series may not be eligible to flow through the
dividends received deduction to corporate shareholders, if because of timing
activities, the requisite holding period is not met. Except for the Tax Managed
Large Cap Value Series, portfolio holdings may be managed to minimize high
dividend-yielding securities and to emphasize low dividend-yielding securities.
The Tax Managed Portfolios and Series are expected to deviate from their
market capitalization weightings to a greater extent than the other Portfolios
and Series. For example, the Advisor may exclude
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the stock of a company that meets applicable market capitalization criterion in
order to avoid dividend income, and the Advisor may sell the stock of a company
that meets applicable market capitalization criterion in order to realize a
capital loss. Additionally, while the Value Series are managed so that
securities will generally be held for longer than one year, the Tax Managed
Portfolios and Series may dispose of any securities whenever the Advisor
determines that such disposition would be consistent with the tax management
strategies of the Tax Managed Portfolios and Series.
Although the Advisor seeks to manage each Tax Managed Portfolio or Series in
order to minimize the realization of capital gains and taxable dividend
distributions during a particular year, the Tax Managed Portfolio or Series may
nonetheless distribute taxable gains and taxable income to shareholders from
time to time. Furthermore, shareholders may be required to pay taxes on capital
gains realized, if any, upon redemption of shares of a Tax Managed Portfolio or
Series, if the amount realized on redemption is greater than the amount the
shareholders paid for the shares.
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. In addition, the prices of
small company securities may fluctuate more sharply than those of other
securities.
FOREIGN SECURITIES
The International Equity Portfolios, International Value Series, DFA
Five-Year Global Fixed Income Portfolio, One-Year Fixed Income Series, Two-Year
Global Fixed Income Series and Enhanced U.S. Large Company Series (directly or
indirectly through their investment in the Master Funds) 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 Master
Funds. (Also see "Foreign Currencies and Related Transactions" below.) Further,
foreign issuers are not generally subject to uniform accounting, auditing and
financial reporting standards comparable to those of U.S. public companies, and
there may be less publicly available information about such companies than
comparable U.S. companies. The One-Year Fixed Income Series, Two-Year Global
Fixed Income Series, Enhanced U.S. Large Company Series and the Intermediate
Government Fixed Income and Five-Year Global Fixed Income Portfolios may invest
in obligations of supranational organizations. The value of the obligations of
these organizations may be adversely affected if one or more of their supporting
governments discontinue their support. Also, there can be no assurance that any
of the Portfolios will achieve its investment objective.
The economies of many countries in which the Portfolios identified above and
the Master Funds invest are not as diverse or resilient as the U.S. economy, and
have significantly less financial resources. Some countries are more heavily
dependent on international trade and may be affected to a greater extent by
protectionist measures of their governments, or dependent upon a relatively
limited number of commodities and, thus, resistive to changes in world prices
for these commodities.
In many foreign countries, stock markets are more variable than U.S. markets
for two reasons. Contemporaneous declines in both (i) foreign securities prices
in local currencies and (ii) the value of local currencies in relation to the
U.S. dollar can have a significant negative impact on the net asset value of a
Portfolio or Master Fund that holds the foreign securities. The net asset value
of the Portfolios and Master Funds are denominated in U.S. dollars, and,
therefore, declines in market price of both the foreign
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securities held by a Portfolio or a Master Fund and the foreign currency in
which these securities are denominated will be reflected in the net asset value
of the Portfolio's and Master Fund's shares.
INVESTING IN EMERGING MARKETS
The investments of the Emerging Markets Series, Emerging Markets Small Cap
Series and Emerging Markets Value Fund 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, Emerging Markets Small Cap Series and Emerging Markets Value
Fund 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 Master Fund's investment. If such restrictions were
imposed subsequent to investment in the securities of a particular country, a
Master Fund might, among other things, discontinue the purchasing of securities
in that country. Such restrictions will be considered in relation to the Master
Fund's 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 Master Fund is the responsibility of the
Master Fund's Board of Trustees or Directors, 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 Master Funds 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, Emerging Markets Small
Cap Series and Emerging Markets Value Fund 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 Master Fund to make intended securities purchases due to settlement problems
could cause the Master Fund to miss investment opportunities. Inability to
dispose of a portfolio security caused by settlement problems could result
either in losses to a Master Fund due to subsequent declines in value of the
portfolio security or, if the Master Fund 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 Master Fund's portfolio securities in
such markets may not be readily available. The Master Fund's 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 or Directors of
the relevant Master Fund.
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Government involvement in the private sector varies in degrees among the
emerging securities markets contemplated for investment by each Master Fund.
Such involvement may, in some cases, include government ownership of companies
in certain commercial business sectors, wage and price controls or imposition of
trade barriers and other protectionist measures. With respect to any developing
country, there is no guarantee that some future economic or political crisis
will not lead to price controls, forced mergers of companies, expropriation, the
creation of government monopolies, or other measures which could be detrimental
to the investments of a Master Fund.
On September 1, 1998, the Malaysian government announced a series of capital
and foreign exchange controls on the Malaysian currency, the ringgit, and on
transactions on the Kuala Lampur Stock Exchange, that operate to severely
constrain or prohibit foreign investors, including the corresponding Series in
which certain Portfolios invest their assets, from repatriating assets. While
there is some confusion in the market concerning the interpretations of these
changes, it appears that the Portfolios and Series will not be permitted to
convert the proceeds of the sale of their Malaysian investments into U.S.
dollars prior to September 1, 1999.
As a consequence of these developments, the Portfolios and Series have
stopped trading securities in Malaysia. With respect to the current Malaysian
investments owned by the Portfolios and Series, the Portfolios and Series are
presently valuing the securities in good faith at fair value by discounting the
current market prices of the Malaysian securities and discounting the U.S.
dollar-ringgit currency exchange rate. Pending further clarification from
Malaysian regulatory authorities regarding the controls identified above, the
Portfolios and Series will treat their investments in Malaysian securities as
illiquid.
As of the date of this prospectus, Malaysian securities constitute
approximately the following percentages of the net asset value of the designated
Series and Portfolios: Pacific Rim Series, 26.34%; International Small Company
Portfolio, 3.86%; DFA International Small Cap Value Portfolio, 2.25%; Emerging
Markets Series, 9.60%; Dimensional Emerging Markets Value Fund Inc. (Emerging
Markets Value Portfolio), 6.09%; and Emerging Markets Small Cap Series, 9.45%.
Malaysian securities constitute less than one percent of the net asset value of
the Large Cap International Portfolio and the RWB/DFA International High Book to
Market Portfolio.
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, Emerging
Markets Small Cap Series and Emerging Markets Value Fund 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 Master Funds) and DFA Five-Year 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 Master Funds. These
Portfolios and Master Funds 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 Master Funds 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
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dates of Portfolio and Master Fund 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 interest rates and other economic factors.
BORROWING
Each Portfolio and each corresponding Master Fund, except the 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 Master Fund 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 Master Fund may increase or decrease at a
greater rate than would be the case if the Portfolio or Master Fund had not
leveraged. The interest payable on the amount borrowed would increase the
Portfolio's or Master Fund's expenses and, if the appreciation and income
produced by the investments purchased when the Portfolio or Master Fund 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, Enhanced U.S. Large
Company Portfolio and their corresponding Series) and, in respect of those that
are Feeder Portfolios, the corresponding Master Funds, will differ from the
process employed by many other investment advisors in that the Advisor will rely
on fundamental analysis of the investment merits of securities to a limited
extent to eliminate potential portfolio acquisitions rather than rely on this
technique to select securities. Further, because securities generally will be
held long-term and will not be eliminated based on short-term price
fluctuations, the Advisor generally will not act upon general market movements
or short-term price fluctuations of securities to as great an extent as many
other investment advisors. U.S. Large Company Series will operate as an index
fund and, therefore, represents a passive method of investing in all stocks that
comprise the S&P 500 Index, which does not entail selection of securities based
on the individual investment merits of their issuers. The investment performance
of the U.S. Large Company Series and the corresponding Portfolio is expected to
approximate the investment performance of the S&P 500 Index, which tends to be
cyclical in nature, reflecting periods when stock prices generally rise or fall.
FUTURES CONTRACTS AND OPTIONS ON FUTURES
U.S. Large Company Series, Enhanced U.S. Large Company Series, Large Cap
International Portfolio, the Value Series, the Tax Managed DFA International
Value Portfolio, DFA Real Estate Securities Portfolio, the International Value
Series, the Emerging Markets Series, the Emerging Markets Small Cap Series, the
DFA International Small Cap Value Portfolio and the Emerging Markets Value Fund
may invest in index futures contracts and options on index futures. To the
extent that such Master Funds or Portfolios invest in futures contracts and
options thereon for other than bona fide hedging purposes, no Master Fund 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 Master Fund's 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
Master Fund and the prices of such futures contracts
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and options, and, at times, the market for such contracts and options might lack
liquidity, thereby inhibiting a Portfolio's or Master Fund's 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. The Portfolio's and Master Fund's investment in futures
contracts and options are subject to special tax rules that may affect the
amount, timing and character of the income earned by the Portfolios and the
Master Funds, and the Portfolios' and the Master Funds' distributions to their
shareholders. (These special rules are discussed in the statement of additional
information.)
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 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 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
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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
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 and Two-Year Global Fixed Income Series (and, thus, DFA One-Year 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 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
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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 Master Funds may invest in
repurchase agreements. In the event of the bankruptcy of the other party to a
repurchase agreement, the Fund or a Master Fund 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 Master Fund.
As such, the Advisor is responsible for the management of their respective
assets. Investment decisions for all Portfolios of the Fund and all Master Funds
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 Master Funds and Underlying
Series with a trading department and selects brokers and dealers to effect
securities transactions. 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, 1997, (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 Master Funds 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
Master Fund; and (ii) the total expenses of each Portfolio were the following
percentages of respective average net assets:
<TABLE>
<CAPTION>
MANAGEMENT TOTAL
PORTFOLIO FEE EXPENSES
- --------------------------------------------------------------------- ------------ ------------
<S> <C> <C>
U.S. 9-10 Small Company(1)........................................... 0.50% 0.60%
U.S. 6-10 Small Company.............................................. 0.03% 0.45%
U.S. Large Company(2)................................................ 0.025% 0.15%
Enhanced U.S. Large Company(3)....................................... 0.05% 0.52%
U.S. 6-10 Value...................................................... 0.20% 0.60%
U.S. Large Cap Value................................................. 0.10% 0.35%
DFA Real Estate Securities(4)........................................ 0.30% 0.48%
Japanese Small Company(5)............................................ 0.10% 0.73%
Pacific Rim Small Company(5)......................................... 0.10% 0.84%
United Kingdom Small Company(5)...................................... 0.10% 0.70%
Continental Small Company(5)......................................... 0.10% 0.72%
International Small Company(6)....................................... 0.10% 0.75%
Emerging Markets..................................................... 0.10% 0.99%
Large Cap International.............................................. 0.25% 0.47%
RWB/DFA International High Book to Market............................ 0.20% 0.50%
DFA International Small Cap Value.................................... 0.65% 0.90%
DFA One-Year Fixed Income............................................ 0.05% 0.22%
DFA Five-Year Government............................................. 0.20% 0.29%
DFA Five-Year Global Fixed Income.................................... 0.25% 0.42%
</TABLE>
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<TABLE>
<CAPTION>
MANAGEMENT TOTAL
PORTFOLIO FEE EXPENSES
- --------------------------------------------------------------------- ------------ ------------
<S> <C> <C>
DFA Intermediate Government Fixed Income............................. 0.15% 0.25%
DFA Two-Year Global Fixed Income..................................... 0.05% 0.34%
</TABLE>
- ------------------------
(1) Prior to November 30, 1997, the U.S. 9-10 Small Company Portfolio invested
its assets directly in stocks of small companies. Prior to November 30,
1997, the Fund, on behalf of the Portfolio, had an investment management
agreement with the Advisor; the percentage in the above table reflects the
management fee as a percentage of average net assets paid by the Portfolio
to the Advisor for the fiscal year ended November 30, 1997.
(2) For the fiscal year ended November 30, 1997, pursuant to the terms of the
current administration agreement between U.S. Large Company Portfolio and
the Advisor, the Advisor 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 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. Absent this arrangement, the annualized ratio of total
operating expenses to average net assets for U.S. Large Company Portfolio
for the fiscal year ended November 30, 1997, was 0.35%.
(3) Effective August 1, 1997, the Advisor has agreed to waive its fee under the
administration agreement to the extent necessary to reduce the direct and
indirect cumulative annual expenses of the Enhanced U.S. Large Company
Portfolio to not more than 0.45% of average net assets of the Portfolio on
an annualized basis; the Portfolio's direct and indirect cumulative annual
expenses may exceed 0.45% of its average net assets on an annualized basis
notwithstanding this fee waiver. This arrangement does not extend to the
fees of the Enhanced U.S. Large Company Series of the Trust. Absent this
arrangement, the annualized ratio of total operating expenses to average net
assets for the Enhanced U.S. Large Company Portfolio for the fiscal year
ended November 30, 1997, was 0.54%.
(4) 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 11, 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.
(5) Effective August 9, 1996, the Advisor 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. For the fiscal year ended November 30, 1997,
the Advisor was not required to waive any portion of its fee pursuant to
such agreement.
(6) 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. The Advisor has agreed to waive its
administration fee and assume the direct
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<PAGE>
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 the fiscal year ended November 30,
1997, the Advisor was not required to waive any portion of its fee pursuant
to such agreement.
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.
With respect to the Emerging Markets Small Cap Portfolio, U.S. 4-10 Value
Portfolio, Emerging Markets Value Portfolio and the Tax Managed Portfolios and
Series, the investment management fees which the Portfolios and, with respect to
the Feeder Portfolios, the corresponding Master Funds are obligated to pay,
calculated as a percentage of the average net assets on an annual basis, are:
Emerging Markets Small Cap Series--.20%, U.S. 4-10 Value Series--.10%, Emerging
Markets Value Fund--.10%, Tax Managed U.S. 6-10 Small Company Portfolio--.50%,
Tax Managed U.S. 4-10 Value Portfolio--.50%, Tax Managed Large Cap Series--.20%,
and Tax Managed DFA International Value Portfolio--.50%.
The Fund and the Master Funds bear all of their own costs and expenses,
including: services of their 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 their shareholders and directors or trustees, the cost of filing
their registration statements under the federal securities laws and the cost of
any filings required under 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. The expenses of the Fund which are not allocable to a particular
Portfolio are to be borne by each Portfolio on the basis of its relative net
assets. Similarly, the expenses of the Trust which are not allocable to a
particular Series are to be borne by each Series on the basis of its relative
net assets.
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 $27 billion. David G. Booth and Rex A.
Sinquefield, directors and officers of the Fund, the Emerging Markets Value Fund
and the Advisor, 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 beneficially owns 100% of DFA Australia 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
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<PAGE>
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 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 $13,000 per year for the sub-advisory
services that DFA Australia provides to the Advisor with respect to the Japanese
and Pacific Rim Small Company Series.
CONSULTING SERVICES--DFA INTERNATIONAL SMALL CAP VALUE PORTFOLIO, LARGE CAP
INTERNATIONAL PORTFOLIO, DFA INTERNATIONAL VALUE SERIES, TAX MANAGED DFA
INTERNATIONAL VALUE PORTFOLIO, EMERGING MARKETS SERIES, EMERGING MARKETS SMALL
CAP SERIES AND DIMENSIONAL EMERGING MARKETS VALUE FUND
The Advisor has entered into a Consulting Services Agreement with DFAL and
DFA Australia, respectively. Pursuant to the terms of each Consulting Services
Agreement, DFAL and DFA Australia provide certain trading and administrative
services to the Advisor with respect to DFA International Small Cap Value
Portfolio, Large Cap International Portfolio, DFA International Value Series,
Tax Managed DFA International Value Portfolio, Emerging Markets Series, Emerging
Markets Small Cap Series and Emerging Markets Value Fund.
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
Master Fund; and any other administrative services for the benefit of the
Portfolio as the Board of Directors may reasonably request. For its
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<PAGE>
administrative services, the Feeder Portfolios and International Small Company
Portfolio are obligated to pay the Advisor a monthly fee equal to one-twelfth of
the percentages listed below:
<TABLE>
<S> <C>
U.S. 6-10 Small Company............................................... .32%
U.S. 9-10 Small Company............................................... .40%
U.S. Large Company.................................................... .125%(a)
Enhanced U.S. Large Company........................................... .15%(b)
U.S. 4-10 Value....................................................... .40%
U.S. 6-10 Value....................................................... .30%
U.S. Large Cap Value.................................................. .15%
Tax Managed U.S. Large Cap Value...................................... .15%
RWB/DFA International High Book to Market............................. .01%
Japanese Small Company................................................ .40%(c)
Pacific Rim Small Company............................................. .40%(c)
United Kingdom Small Company.......................................... .40%(c)
Continental Small Company............................................. .40%(c)
International Small Company........................................... .40%(d)
Emerging Markets...................................................... .40%
Emerging Markets Small Cap............................................ .45%
Emerging Markets Value................................................ .40%
DFA One-Year Fixed Income............................................. .10%
DFA Two-Year Global Fixed Income...................................... .10%
</TABLE>
- ------------------------
(a) 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.
(b) Effective August 1, 1997, the Advisor has agreed to waive its
administration fee to the extent necessary to reduce the direct and
indirect cumulative annual expenses of the Enhanced U.S. Large Company
Portfolio to not more than 0.45% of average net assets of the Portfolio on
an annualized basis.
(c) 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.
(d) 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.
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<PAGE>
ADMINISTRATIVE SERVICES--ALL PORTFOLIOS
PFPC Inc. ("PFPC" or the "Transfer Agent") serves as the administrative and
accounting services, dividend disbursing and transfer agent for all Fund
Portfolios and Master Funds. The services provided by PFPC are subject to
supervision by the executive officers and the Board of Directors of the Fund and
include administrative services such as 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.
CLIENT SERVICE AGENT--RWB/DFA INTERNATIONAL HIGH BOOK TO MARKET PORTFOLIO
Pursuant to a Client Service Agent Agreement, Reinhardt Werba Bowen Advisory
Services, San Jose, CA ("RWBAS") performs various services for the 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. 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 and a Director and officer of
the Emerging Markets Value Fund. 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
Master Funds. Information as to the Directors and officers of the Fund and the
Emerging Markets Value Fund and the Trustees and officers of 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 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, U.S. Large Cap Value Portfolio and Tax Managed 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, U.S. Large Cap Value Portfolio and Tax Managed
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 and DFA Five-Year 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 following the
dividend record date), unless as to U.S. 9-10 Small Company Portfolio,
U.S. 6-10 Small Company Portfolio, Tax Managed 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
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<PAGE>
upon written notice to PFPC, 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 PFPC, 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.
U.S. 6-10 Small Company, Enhanced U.S. Large Company, DFA One-Year Fixed
Income, DFA Two-Year Global Fixed Income, U.S. 9-10 Small Company, U.S. 4-10
Value, U.S. 6-10 Value, U.S. Large Cap Value, RWB/DFA International High Book to
Market and Emerging Markets Value Portfolios (collectively, the "Corporate
Feeder Portfolios") seek to achieve their investment objectives by investing all
of their investable assets in a corresponding Master Fund (collectively, the
"Corporate Master Funds"). The Corporate Master Funds 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 Master Fund. 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 Master Fund and may realize capital gains upon the
redemption of the shares of the corresponding Corporate Master Fund. Any net
realized capital gains of a Corporate Feeder Portfolio will be distributed as
described above.
The U.S. Large Company, Tax Managed U.S. Large Cap Value, Emerging Markets,
Emerging Markets Small Cap, Japanese Small Company, Pacific Rim Small Company,
United Kingdom Small Company, Continental Small Company and International Small
Company Portfolios ("Partnership Feeder 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 Corporate and Partnership 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 Master Fund purchases
shares in PFICs, such Master Fund 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 Master Fund to the Corporate Feeder Portfolio. In the case of a
Partnership Feeder Portfolio, if the corresponding Partnership Series purchases
shares in PFICs, the Partnership Feeder 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 Corporate or Partnership Feeder
Portfolio or International Small Company Portfolio, the corresponding Master
Funds) 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 Feeder Portfolio (but not a Corporate
Feeder Portfolio) its corresponding Master Fund, 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,
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<PAGE>
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 affect 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 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. The attempts of the Tax
Managed Portfolios and Series to time investments in order to tax manage the
minimization of dividends could result in the Tax Managed Portfolios or Series
being unable to flow through the corporate dividends received deduction on
stock. This will occur if they hold the stock for 45 days or less during the 90
day period that begins on the date that is 45 days before the date on which the
shares became ex-dividend with respect to such dividend. Preferred stock, if
any, must be held for more than 90 days during the 180 day period beginning 90
days before the ex-date to be eligible for pass-through of the dividends
received deduction.
The Advisor seeks to manage each Tax Managed Portfolio or Series in order to
minimize the realization of net capital gains where possible and may minimize
taxable dividend distributions during a particular year. However, the
realization of capital gains and receipt of income is not entirely within the
Advisor's control and, for the tax reasons discussed above, each Tax Managed
Portfolio or Series will distribute substantially all of the net investment
income and net capital gains that it has realized on the sale of securities.
Thus, capital gains distributions may vary considerably from year to year. There
will be no capital gains distributions in years when a Tax Managed Portfolio or
Series realizes net capital losses. Furthermore, the realization of capital
gains by a shareholder is dependent on the shareholder's purchase and redemption
activity. In the situation where a dividend option is available, if a
shareholder elects to receive capital gains distributions in cash, instead of
reinvesting them in additional shares, the capital at work in a Tax Managed
Portfolio or Series will be reduced. Also, purchases of shares in a Tax Managed
Portfolio or Series shortly before the record date for a dividend or capital
gains distribution may cause a portion of the investment to be returned to the
shareholder as a taxable distribution, regardless of whether the distribution is
being reinvested or paid in cash.
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,
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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. Citibank, N.A. ("Citibank"), 111 Wall Street, New
York, New York 10005, serves as the global custodian for the following
Portfolios and Series: DFA International Small Cap Value Portfolio, Large Cap
International Portfolio, DFA Five-Year Global Fixed Income Portfolio, DFA
International Value Series, Tax Managed DFA International Value Portfolio, the
Japanese Small Company Series, the Pacific Rim Small Company Series, the United
Kingdom Small Company Series, the Continental Small Company Series, DFA Two-Year
Global Fixed Income Series, and Enhanced U.S. Large Company Series (co-custodian
with PNC Bank, N.A.). The Chase Manhattan Bank serves as the custodian for the
Emerging Markets Series, Emerging Markets Small Cap Series and Dimensional
Emerging Markets Value Fund Inc., and PNC Bank, N.A. will serve as the custodian
for all of the Feeder Portfolios and the other Series of the Trust.
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
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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 Master Funds) 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 Five-Year 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 Five-Year 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 Master Fund) 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 Master Fund may not
exceed 5% of the net assets of the Portfolio or Master Fund immediately after
the transaction, however, this last limitation does not apply to DFA Five-Year
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 Master
Fund 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 Master Fund. 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 Master Funds or Underlying Series in which such
Portfolios invest. Securities held by the Portfolios and Master Funds which are
listed on a 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, the 9-10 Series, the 6-10 Series, Tax Managed U.S. 6-10 Small
Company, the U.S. Large Company Series, DFA Real Estate Securities Portfolio,
the Value Series, Emerging Markets Series, Emerging Markets Small Cap Series and
Emerging Markets Value Fund value such securities at the mean between the most
recent quoted bid and asked prices. Price information on listed securities is
taken from the
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<PAGE>
exchange where the security is primarily traded. Securities issued by open-end
investment companies, such as the Master Funds, 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 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 Master
Funds or Underlying Series), the International Value Series, Two-Year Global
Fixed Income Series and DFA Five-Year Global Fixed Income Portfolio are
expressed in U.S. dollars by translating the net assets of each Portfolio,
Master Fund or Underlying 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 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 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 Master Funds that invest in such securities are
determined as of such times for the purpose of computing the net asset values of
the Portfolios and Master Funds. If events which materially affect the value of
the investments of a Portfolio or Master Fund 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, Emerging
Markets Small Cap Series and the Emerging Markets Value Fund in Approved Markets
may be subject to tax, investment and
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currency repatriation regulations of the Approved Markets that could have a
material effect on the valuation of the securities. For example, such Master
Funds 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 Master Funds may
also be subject to certain contractual arrangements with investment authorities
in an Approved Market which require a Master Fund 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 Master Fund makes at that time concerning
the anticipated holding period for the securities. Absent special circumstances
as determined by the Board of Directors or Trustees of the Master Funds, it is
presently intended that the valuation of such securities will be based upon the
assumption that they will be held for at least the amount of time necessary to
avoid higher tax rates or penalties and currency repatriation restrictions.
However, the use of such valuation standards will not prevent the Master Funds
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 Master Funds.
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 Master Fund 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 Master Funds and is paid to
the Portfolios and Master Funds 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 in "SHAREHOLDER TRANSACTION EXPENSES" in this prospectus identifies 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 the respective Portfolios.
For each Portfolio that charges a reimbursement fee, except the DFA
International Small Cap Value and the International Small Company Portfolios,
the Master Fund in which the Portfolio invests also charges a reimbursement fee
equal to that charged by the respective Portfolio.
In the case of the International Small Company Portfolio, 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.
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<PAGE>
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.
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 any of the Portfolios of the Fund offered in this prospectus. Such
exchange is subject to any applicable reimbursement fee charged by a Portfolio
in connection with the sale of its shares.
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.
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<PAGE>
There is no fee imposed on an exchange. However, the Fund reserves the right
to impose an administrative fee in order to cover the costs incurred in
processing an exchange. Any such fee will be disclosed in the prospectus. An
exchange is treated as a redemption and a purchase. Therefore, an investor could
realize a taxable gain or a loss on the transaction. The Fund reserves the right
to revise or terminate the exchange privilege, waive the minimum amount
requirement, limit the amount of or reject any exchange, as deemed necessary, at
any time.
REDEMPTION OF SHARES
Investors who desire to redeem shares of a Portfolio must first contact the
Advisor at the telephone number shown under "PURCHASE OF SHARES." Each Portfolio
will redeem shares at the net asset value of such shares next determined,
either: (1) where stock certificates have not been issued, after receipt of a
written request for redemption in good order, by the Fund's Transfer Agent or
(2) if stock certificates have been issued, after receipt of the stock
certificates in good order at the office of the Transfer Agent. "Good order"
means that the request to redeem shares must include all necessary
documentation, to be received in writing by the Advisor no later than the close
of regular trading on the NYSE (ordinarily 1:00 p.m. PST), including: the stock
certificate(s), if issued; a letter of instruction or a stock assignment
specifying the number of shares or dollar amount to be redeemed, signed by all
registered owners (or authorized representatives thereof) of the shares; 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. A signature
guarantee may be obtained from a domestic bank or trust company, broker, dealer,
clearing agency or savings association who are participants in a medallion
program recognized by the Securities Transfer Association. The three recognized
medallion programs are Securities Transfer Agents Medallion (STAMP), Stock
Exchanges Medallion Program (SEMP) and New York Stock Exchange, Inc. Medallion
Signature Program (MSP). Signature guarantees which are not a part of these
programs will not be accepted.
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.") As of the date of this
prospectus, in the interests of economy and convenience, certificates for shares
will no longer be issued.
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
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<PAGE>
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.
When in the best interests of a Feeder Portfolio, the Feeder Portfolio may
make a redemption payment, in whole or in part, by a distribution of portfolio
securities that the Feeder Portfolio receives from the Master Fund in lieu of
cash in accordance with Rule 18f-1 under the 1940 Act. A Portfolio that is not a
Feeder Portfolio may also make a redemption payment, in whole or in part, by a
distribution of Portfolio securities in lieu of cash in accordance with Rule
18f-1 under the 1940 Act, when in the best interests of the Portfolio. 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 DFA Five-Year 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 Master Funds' or Underlying Series'
investments, respectively) 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. The Tax Managed Portfolios and
Series are authorized to make redemption payments solely by a distribution of
portfolio securities when it is determined by the Advisor to be consistent with
the tax management strategies described in this prospectus.
The Tax Managed Portfolios will value securities delivered in lieu of a cash
redemption at their most recent bid price. Securities may be selected due to tax
benefits that such an in kind distribution may generate for a Tax Managed
Portfolio. Using the bid price will reduce the net asset value remaining in such
Portfolio by the difference between the securities' bid price and their price
calculated as described under "Valuation of Shares." However, for tax purposes,
a portfolio does not realize gains or losses on in kind distributions. An in
kind distribution may benefit such Portfolio and corresponding Series by
reducing both brokerage and trading costs and unrealized gains or dividend
income.
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 1940 Act or
other applicable law. The Fund's bylaws provide that special meetings of
shareholders shall be called at the written request of at least 10% of the votes
entitled to be cast at such meeting. Such meeting may be called to consider any
matter, including the removal of one or more directors. Shareholders will
receive shareholder communications with respect to such matters as required by
the 1940 Act, 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. Dimensional Emerging Markets Value Fund was
incorporated under Maryland law on January 9, 1991, and offers its shares only
to institutional investors in private offerings. On November 21, 1997, the
shareholders of Dimensional Emerging Markets Value Fund approved the Fund's
conversion from a closed-end management investment company to an open-end
management investment company. The Fund may withdraw the
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<PAGE>
investment of a Feeder Portfolio in a Master Fund 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 Master
Fund, 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 Master Fund 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 of
the Trust 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 Master Funds 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 Master Fund. 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. In all cases, disclosures are
made when performance quotations differ from the SEC Guideline. Performance data
is based on historical earnings and is not intended to indicate future
performances. 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, 1997 and semi-annual report to shareholders
for the period ended May 31, 1998 contain additional performance information. A
copy of the annual report is available upon request and without charge.
With respect to the International Equity Portfolios and DFA Five-Year 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 Five-Year 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.
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As of August 31, 1998, the following persons owned more than 25% of the
voting securities of the following Portfolios:
<TABLE>
<S> <C> <C>
U.S. LARGE COMPANY PORTFOLIO
Charles Schwab & Company, Inc.--REIN* 67.63%
101 Montgomery Street, San Francisco, CA 94104
U.S. LARGE CAP VALUE PORTFOLIO
Charles Schwab & Company, Inc.--REIN* (see above address) 52.21%
DFA REAL ESTATE SECURITIES PORTFOLIO
Charles Schwab & Company, Inc.--REIN* (see above address) 64.30%
JAPANESE SMALL COMPANY PORTFOLIO
BellSouth Corporation Master Pension Trust 60.53%
1155 Peachtree Street, N.E., Atlanta, GA 30367
PACIFIC RIM SMALL COMPANY PORTFOLIO
BellSouth Corporation Master Pension Trust (see above address) 71.86%
UNITED KINGDOM SMALL COMPANY PORTFOLIO
BellSouth Corporation Master Pension Trust (see above address) 61.13%
Charles Schwab & Company, Inc.--REIN* (see above address) 31.28%
DFA ONE-YEAR FIXED INCOME PORTFOLIO
Charles Schwab & Company, Inc.--REIN* (see above address) 28.64%
EMERGING MARKETS PORTFOLIO
Charles Schwab & Company, Inc.--REIN* (see above address) 66.70%
CONTINENTAL SMALL COMPANY PORTFOLIO
BellSouth Corporation Master Pension Trust (see above address) 61.67%
Charles Schwab & Company, Inc.--REIN* (see above address) 31.56%
LARGE CAP INTERNATIONAL PORTFOLIO
Charles Schwab & Company, Inc.--REIN* (see above address) 77.79%
RWB/DFA INTERNATIONAL HIGH BOOK TO MARKET PORTFOLIO
Charles Schwab & Company, Inc.--REIN* (see above address) 90.28%
DFA INTERNATIONAL SMALL CAP VALUE PORTFOLIO
Charles Schwab & Company, Inc.--REIN* (see above address) 61.78%
DFA FIVE-YEAR GOVERNMENT PORTFOLIO
Charles Schwab & Company, Inc.--REIN* (see above address) 55.03%
DFA FIVE-YEAR GLOBAL FIXED INCOME PORTFOLIO
Charles Schwab & Company, Inc.--REIN* (see above address) 46.86%
DFA INTERMEDIATE GOVERNMENT FIXED INCOME PORTFOLIO
Charles Schwab & Company, Inc.--CAP* (see above address) 83.88%
</TABLE>
- ------------------------
* Owner of record only.
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<PAGE>
<TABLE>
<S> <C> <C>
DFA TWO-YEAR GLOBAL FIXED INCOME PORTFOLIO
Charles Schwab & Company, Inc.--REIN* (see above address) 45.74%
Charles Schwab & Company, Inc.--CAP* (see above address) 40.08%
ENHANCED U.S. LARGE COMPANY PORTFOLIO
Charles Schwab & Company, Inc.--REIN* (see above address) 34.02%
Charles Schwab & Company, Inc.--CAP* (see above address) 25.59%
INTERNATIONAL SMALL COMPANY PORTFOLIO
Charles Schwab & Company, Inc--REIN (see above address) 59.42%
San Diego County Employees Retirement 26.65%
Association
1495 Pacific Highway
San Diego, CA 92101
U.S. 6-10 VALUE PORTFOLIO
Charles Schwab & Company, Inc.--REIN* (see above address) 28.44%
- ------------------------
* Owner of record only.
U.S. 9-10 SMALL COMPANY PORTFOLIO
Charles Schwab & Company, Inc.--REIN* (see above address) 28.30%
U.S. 6-10 SMALL COMPANY PORTFOLIO
McKinsey & Company Master Retirement Trust 30.64%
55 E. 52nd Street
New York, NY 10055
EMERGING MARKETS SMALL CAP PORTFOLIO
Charles Schwab & Company, Inc.--REIN* (see above address) 48.87%
EMERGING MARKETS VALUE PORTFOLIO
Charles Schwab & Company, Inc.--REIN* (see above address) 63.92%
U.S. 4-10 VALUE PORTFOLIO
Dimensional Fund Advisors Inc. (see above address) 100.00%
299 Ocean Avenue 11th Floor
Santa Monica, CA 90401
</TABLE>
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.
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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 LIMITED
Suite 4403 Gateway
1 MacQuarie Place
Sydney, New South Wales 2000
Australia
CUSTODIANS--INTERNATIONAL
CITIBANK, N.A.
111 Wall Street
New York, NY 10005
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
ACCOUNTING SERVICES, DIVIDEND DISBURSING AND TRANSFER 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
PRICEWATERHOUSECOOPERS LLP
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 __, 1998
DFA Investment Dimensions Group Inc. (the "Fund") offers thirty-four series
of shares. This statement of additional information relates to twenty-eight of
those series (individually, a "Portfolio" and collectively, the "Portfolios"):
DOMESTIC EQUITY PORTFOLIOS
<TABLE>
<CAPTION>
<S> <C>
U.S. 9-10 Small Company Portfolio U.S. 4-10 Value Portfolio
U.S. 6-10 Small Company Portfolio Tax Managed U.S. 4-10 Value Portfolio
Tax Managed U.S. 6-10 Small Company Portfolio Enhanced U.S. Large Company Portfolio
U.S. Large Cap Value Portfolio U.S. Large Cap Value Portfolio
Tax Managed U.S. Large Cap Value Portfolio DFA Real Estate Securities Portfolio
INTERNATIONAL EQUITY PORTFOLIOS
Japanese Small Company Portfolio Emerging Markets Small Cap Portfolio
Pacific Rim Small Company Portfolio Continental Small Company Portfolio
United Kingdom Small Company Portfolio Large Cap International Portfolio
Emerging Markets Portfolio DFA International Small Cap Value Portfolio
RWB/DFA International High Book to International Small Company Portfolio
Market Portfolio Emerging Markets Value Portfolio
Tax Managed DFA International Value Portfolio
FIXED INCOME PORTFOLIOS
DFA One-Year Fixed Income Portfolio DFA Five-Year Government Portfolio
DFA Two-Year Global Fixed Income Portfolio DFA Intermediate Government Fixed Income Portfolio
DFA Five-Year Global Fixed Income Portfolio
</TABLE>
This statement of additional information is not a prospectus but should be
read in conjunction with the Portfolios' prospectus dated December __, 1998, 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.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
PORTFOLIO CHARACTERISTICS AND POLICIES . . . . . . . . . . . . . . . . . . . . . 3
BROKERAGE COMMISSIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
INVESTMENT LIMITATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
OPTIONS ON STOCK INDICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
FUTURES CONTRACTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
FEDERAL TAX TREATMENT OF OPTIONS, FUTURES CONTRACTS AND SIMILAR
POSITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
DIRECTORS AND OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
ADMINISTRATIVE SERVICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
OTHER INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
PRINCIPAL HOLDERS OF SECURITIES. . . . . . . . . . . . . . . . . . . . . . . . . 18
PURCHASE OF SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
REDEMPTION AND TRANSFER OF SHARES. . . . . . . . . . . . . . . . . . . . . . . . 23
CALCULATION OF PERFORMANCE DATA. . . . . . . . . . . . . . . . . . . . . . . . . 24
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
</TABLE>
2
<PAGE>
PORTFOLIO CHARACTERISTICS AND POLICIES
The following information supplements the information set forth in the
prospectus under the captions "PORTFOLIO CHARACTERISTICS AND POLICIES - SMALL
COMPANY PORTFOLIOS," "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," "TAX MANAGED DFA INTERNATIONAL VALUE PORTFOLIO -
Investment Objective and Policies," "EMERGING MARKETS PORTFOLIO, EMERGING
MARKETS SMALL CAP PORTFOLIO AND EMERGING MARKETS VALUE 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 (the "1940 Act") and certain requirements of the 1940 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
nonconvertible 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.
The portfolio turnover rate for the U.S. 4-10 Value Series is anticipated
to be approximately 35%. The portfolio turnover rate for the Tax Managed U.S.
4-10 Value Portfolio is anticipated to be approximately 60%. 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. 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.
3
<PAGE>
BROKERAGE COMMISSIONS
The following table depicts brokerage commissions paid by the Fund
Portfolios. For the Feeder Portfolios, the amounts include commissions paid by
the corresponding Master Funds.
BROKERAGE COMMISSIONS
FISCAL YEARS ENDED NOVEMBER 30, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
U.S. 9-10 Small Company Portfolio. . . . . . . . . . . . . . . . . . . . . . $1,641,020 $1,704,251 $1,120,40
U.S. 6-10 Small Company Series . . . . . . . . . . . . . . . . . . . . . . . 855,652 473,887 361,784
U.S. Large Company Series. . . . . . . . . . . . . . . . . . . . . . . . . . 40,689 72,262 15,289
Japanese Small Company Series. . . . . . . . . . . . . . . . . . . . . . . . 602,098 466,795 768,765
United Kingdom Small Company Series. . . . . . . . . . . . . . . . . . . . . 68,028 86,854 236,754
Continental Small Company Series . . . . . . . . . . . . . . . . . . . . . . 145,195 214,631 244,705
Large Cap International Portfolio. . . . . . . . . . . . . . . . . . . . . . 9,322 42,633 61,048
U.S. 6-10 Value Series . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,591,853 2,754,009 1,027,015
U.S. Large Cap Value Series. . . . . . . . . . . . . . . . . . . . . . . . . 929,005 934,452 410,503
DFA Real Estate Securities Portfolio . . . . . . . . . . . . . . . . . . . . 53,646 39,007 26,084
Pacific Rim Small Company Series . . . . . . . . . . . . . . . . . . . . . . 485,846 181,812 142,227
RWB/DFA International High Book to Market Portfolio. . . . . . . . . . . . . 1,133,787 1,251,242 542,306
Emerging Markets Series. . . . . . . . . . . . . . . . . . . . . . . . . . . 559,853 437,088 166,601
DFA International Small Cap Value Portfolio. . . . . . . . . . . . . . . . . 921,326 1,472,685 745,562
Enhanced U.S. Large Company Series . . . . . . . . . . . . . . . . . . . . . 10,284 1,650 -0-
Emerging Markets Value Portfolio . . . . . . . . . . . . . . . . . . . . . . 79,005 14,699 85,081
----------- ----------- ---------
TOTAL $12,126,609 $10,147,957 5,869,093
</TABLE>
The substantial increases or decreases in the amount of brokerage
commissions paid by certain Portfolios from year to year indicated in the
foregoing table resulted from increases or decreases in the amount of securities
that were bought and sold by those Portfolios.
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 Master Fund 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 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 Limited performs
4
<PAGE>
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.
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. 6-10 Value Portfolio,
the U.S. 4-10 Value Portfolio, the DFA Real Estate Securities Portfolio, the Tax
Managed U.S. 4-10 Value Portfolio, the Tax Managed U.S. 6-10 Small Company
Portfolio, and the Tax Managed U.S. Large Cap Value Series 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 Tax Managed 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 1997, the Portfolios or, in the case of a Feeder
Portfolio, its corresponding Master Fund, paid commissions for securities
transactions to brokers which provided market price monitoring services, market
studies and research services to the Portfolios or Master Funds as follows:
<TABLE>
<CAPTION>
VALUE OF BROKERAGE
SECURITIES COMMISSIONS
TRANSACTIONS -----------
------------
<S> <C> <C>
U.S. 9-10 Small Company. . . . . . . . . . $207,113,667 $742,872
U.S. 6-10 Small Company. . . . . . . . . . 153,272,761 486,637
U.S. 6-10 Value. . . . . . . . . . . . . . 453,009,643 1,899,654
U.S. Large Cap Value . . . . . . . . . . . 78,961,638 122,527
DFA Real Estate Securities . . . . . . . . 16,165,969 25,440
RWB/DFA International High Book to Market. 4,623,558 13,922
DFA International Small Cap Value. . . . . 15,496,595 84,031
Japanese Small Company . . . . . . . . . . 40,864,513 253,707
Pacific Rim Small Company. . . . . . . . . 8,885,178 35,584
Emerging Markets Value . . . . . . . . . . -0- -0-
------------ ----------
TOTAL $978,393,522 $3,664,374
</TABLE>
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
5
<PAGE>
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 Series has been able to avail
itself of institutional discounts. The Series' 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
Master Fund.
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; and, with respect to the Emerging Markets Value
Portfolio, except through the acquisition of publicly-traded debt
securities and short-term money instruments;
(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 Five-Year 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;
provided that the U.S. 4-10 Value, Tax Managed U.S. 4-10 Value,
Tax Managed U.S. 6-10 Small Company, Tax Managed U.S. Large Cap
Value, Tax Managed DFA International Value and Emerging Markets
Value Portfolios are not subject to this limitation;
(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 each Portfolio, other than the U.S.
9-10 Small Company, Japanese Small Company, DFA One-Year Fixed
Income, DFA Intermediate
6
<PAGE>
Government Fixed Income, DFA Five-Year Government and Emerging
Markets Value Portfolios, 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; and with respect to the Emerging
Markets Value Portfolio, borrow, except in connection with a
foreign currency transaction, the settlement of a portfolio
trade, as a temporary measure for extraordinary or emergency
purposes, including to meet redemption requests, and, in no event
in excess of 33% of the Fund's net assets valued at market;
(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; provided that the U.S. 4-10 Value
Portfolio, Tax Managed U.S. 4-10 Value Portfolio, Tax Managed
U.S. 6-10 Small Company Portfolio, Tax Managed U.S. Large Cap
Value Portfolio, Tax Managed DFA International Value Portfolio
and Emerging Markets Value Portfolio are not subject to this
limitation;
(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, U.S. 4-10 Value, Tax Managed U.S.
4-10 Value, Tax Managed U.S. 6-10 Small Company, Tax Managed U.S.
Large Cap Value, Tax Managed DFA International Value, DFA
Two-Year Global Fixed Income, International Small Company,
Emerging Markets Small Cap and Emerging Markets Value Portfolios
are not subject to this limitation and the DFA Real Estate
Securities Portfolio, the U.S. 6-10 Value Portfolio, the U.S.
Large Cap Value Portfolio, the RWB/DFA International High Book to
Market Portfolio, the U.S. 6-10 Small Company Portfolio, the
Emerging Markets Portfolio and 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; provided that the U.S. 9-10 Small Company Portfolio,
U.S. 4-10 Value Portfolio, Tax Managed U.S. 4-10 Value Portfolio,
Tax Managed U.S. 6-10 Small Company Portfolio, Tax Managed U.S.
Large Cap Value Portfolio and Tax Managed DFA International Value
Portfolio are not subject to this limitation;
(10) invest its assets in securities of any investment company, except
in connection with a merger, acquisition of assets, consolidation
or reorganization; provided that (a) the DFA Real Estate
Securities Portfolio may invest in a REIT that is registered as
an investment company; (b) each of the U.S. 4-10 Value, Enhanced
U.S. Large Company, Emerging Markets, Emerging Markets Small Cap,
Emerging Markets Value, International Small Company, U.S. 9-10
Small Company, Tax Managed 4-10 Value, Tax Managed U.S. 6-10
Small Company, Tax Managed U.S. Large Cap Value and Tax Managed
DFA International Value Portfolios may invest its assets in
securities of investment companies and units of such companies
such as, but not limited to, S&P Depository Receipts;
(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 U.S. 9-10 Small Company, U.S. 4-10 Value, Tax
Managed 4-10 Value, Tax Managed U.S. 6-10 Small Company, Tax
Managed U.S. Large Cap Value, Tax Managed DFA International
Value, Emerging Markets Value and DFA Real Estate Securities
Portfolios;
(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
7
<PAGE>
of companies within such industry; except that (a) DFA One-Year
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;" and (b) 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 that the Enhanced U.S. Large
Company Portfolio, the U.S. 4-10 Value Portfolio, Tax Managed
U.S. 4-10 Value Portfolio, Tax Managed U.S. 6-10 Small Company
Portfolio, Tax Managed U.S. Large Cap Value Portfolio, Tax
Managed DFA International Value Portfolio and Emerging Markets
Value 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; provided
that the U.S. 4-10 Value Portfolio, Tax Managed U.S. 4-10 Value
Portfolio, Tax Managed U.S. 6-10 Small Company Portfolio, Tax
Managed U.S. Large Cap Value Portfolio, Tax Managed DFA
International Value Portfolio and Emerging Markets Value
Portfolio are not subject to this limitation;
(15) purchase securities on margin or sell short; provided that the
U.S. 4-10 Value Portfolio, Tax Managed U.S. 4-10 Value Portfolio,
Tax Managed U.S. 6-10 Small Company Portfolio, Tax Managed U.S.
Large Cap Value Portfolio, Tax Managed DFA International Value
Portfolio and Emerging Markets Value Portfolio are not subject to
the limitation on selling securities short;
(16) acquire more than 10% of the voting securities of any issuer;
provided that (a) 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, the DFA International Small Cap Value
Portfolio and the Emerging Markets Value Portfolio; and (b) the
Tax Managed U.S. 6-10 Small Company Portfolio, Tax Managed DFA
International Value Portfolio and U.S. 9-10 Small Company
Portfolio are not subject to this limitation; or
(17) issue senior securities (as such term is defined in Section 18(f)
of the 1940 Act), except to the extent permitted by the 1940 Act.
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
Master Funds or the Underlying Series, respectively. The investment
limitations of each Master Fund 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, Emerging
Markets Small Cap Portfolio and Emerging Markets Value Portfolio (indirectly
through their investment in the corresponding Master Funds) may
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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 Master Fund's behalf in lieu of
depositing initial margin in connection with currency futures contracts, and
the Master Funds 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 Master
Funds or Underlying Series, respectively, these Portfolios do not intend to
lend those shares.
For the purposes of (7) above, DFA One-Year Fixed Income Portfolio,
DFA Two-Year Global Fixed Income Portfolio (indirectly through their
investment in the corresponding Series) and DFA Five-Year 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 Rule 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.
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, Tax Managed 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 Master Funds, do not intend to purchase interests in any real estate
investment trust; and (2) the Enhanced U.S. Large Company, U.S. 4-10 Value,
Tax Managed U.S. 4-10 Value, Tax Managed U.S. 6-10 Small Company, Tax Managed
U.S. Large Cap Value, Tax Managed DFA International Value, DFA Two-Year
Global Fixed Income, International Small Company, Emerging Markets Small Cap
and Emerging Markets Value Portfolios (directly or indirectly through their
investment in the Master Funds or Underlying Series, as applicable) do not
intend to invest more than 15% of their net assets in illiquid securities.
The International Equity, DFA Two-Year Global Fixed Income and DFA
Five-Year Global Fixed Income Portfolios (directly or indirectly through
their investment in the Master Funds or Underlying Series, as applicable) 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, the RWB/DFA
International High Book to Market Portfolio, the Tax Managed DFA
International Value Portfolio and the 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, the Emerging Markets Small Cap Series and the Emerging
Markets Fund 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 the Emerging Markets Fund
or whose use is otherwise considered by the Series or the Emerging Markets
Fund to be advisable. Each Series or the Emerging Markets Fund would "look
through" any such vehicle to determine compliance with its investment
restrictions.
Subject to future regulatory guidance, for purposes of those investment
limitations identified above that are based on total assets, "total assets"
refers to the assets that the Portfolios and Master Funds own, and does not
include assets which the Portfolios and Master Funds do not own but over
which they have effective control. For example, when applying a percentage
investment limitation that is based on total assets, a Portfolio or Series
will exclude from its total assets those assets which represent collateral
received by the Portfolio or Series for its securities lending transactions.
Unless otherwise indicated, all limitations applicable to the
Portfolios' and Master Funds' investments apply only at the time that a
transaction is undertaken. Any subsequent change in a rating assigned by any
rating service
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<PAGE>
to a security or change in the percentage of a Portfolio's or Master Funds'
assets invested in certain securities or other instruments resulting from
market fluctuations or other changes in a Portfolio's or Master Fund's total
assets will not require a Portfolio or Master Fund 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
("Commission"), 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 Commission 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.
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.
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<PAGE>
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.
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 Master Fund in which the Feeder Portfolio invests all of its assets and,
with respect to the International Small Company Portfolio, the Underlying
Series.
All Portfolios, except the U.S. 9-10, 6-10 Small Company and Tax Managed
U.S. 6-10 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 Master Fund) 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 Master Funds will be
required to make a margin deposit in cash or government securities with a
broker
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<PAGE>
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
Master Fund. Variation margin payments are made to and from the futures
broker for as long as the contract remains open. The Portfolios or Master
Funds expect to earn income on their margin deposits. To the extent that a
Master Fund or Portfolio invests in futures contracts and options thereon for
other than bona fide hedging purposes, no Master Fund 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 Master Fund's 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 Commission, the
Portfolios or Master Funds 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.
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
Master Fund would continue to be required to make variation margin deposits.
In such circumstances, if the Portfolio or Master Fund 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
its corresponding Master Fund) and, in the case of the International Small
Company Portfolio by the Underlying 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 Master Fund 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 Master Fund 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 Master Fund's 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 Master
Fund. The acceleration of income on Section 1256 positions may require a
Portfolio or Master Fund 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 Master Fund 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 Master Fund's 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.
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<PAGE>
When a Portfolio (or in the case of a Feeder Portfolio, the Master Fund
and, in the case of the International Small Company Portfolio, the Underlying
Series) holds an option or contract which substantially diminishes a
Portfolio's or Master Fund's risk of loss with respect to another position of
a Portfolio or Master Fund (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 Master Fund's 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 Taxpayer Relief Act of 1997 has added new provisions for dealing
with transactions that are generally called "Constructive Sale Transactions."
Under these rules, a Portfolio or Series must recognize gain (but not loss)
on any constructive sale of an appreciated financial position in stock, a
partnership interest or certain debt instruments. A Portfolio or Series will
generally be treated as making a constructive sale when it: 1) enters into a
short sale on the same property, 2) enters into an offsetting notional
principal contract, or 3) enters into a futures or forward contract to
deliver the same or substantially similar property. Other transactions
(including certain financial instruments called collars) will be treated as
constructive sales as provided in Treasury regulations to be published.
There are also certain exceptions that apply for transactions that are closed
before the end of the 30th day after the close of the taxable year.
A Portfolio (or in the case of a Feeder Portfolio, the Master Fund or
Underlying 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
Master Fund as a regulated investment company under Subchapter M of the Code.
DIRECTORS AND OFFICERS
The names, locations and dates of birth 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*, (12/2/46), Director, President and Chairman Chief
Executive Officer, Santa Monica, CA. President, Chairman-Chief Executive
Officer and Director of the following companies: Dimensional Fund Advisors
Inc., DFA Securities Inc., DFA Australia 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
(registered investment company). Chairman and Director, Dimensional Fund
Advisors Ltd.
George M. Constantinides, (9/22/47), 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, (1/19/39), 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, (5/27/43), 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).
13
<PAGE>
Merton H. Miller, (5/16/23), 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.
and Public Director, Chicago Mercantile Exchange.
Myron S. Scholes, (7/1/41), Director, Greenwich, CT. Limited Partner,
Long-Term Capital Management L.P. (money manager). Frank E. Buck Professor
Emeritus of Finance, Graduate School of Business and Professor of Law, Law
School, Senior Research Fellow, Hoover Institution, (all) Stanford
University. Trustee, The DFA Investment Trust Company. Director, Dimensional
Investment Group Inc., Dimensional Emerging Markets Fund Inc., Benham Capital
Management Group of Investment Companies and Smith Breeden Group of
Investment Companies.
Rex A. Sinquefield*, (9/7/44), Director, Chairman-Chief Investment
Officer, Santa Monica, CA. Chairman-Chief Investment Officer and Director,
Dimensional Fund Advisors Inc., DFA Securities Inc., DFA Australia 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 (except as
otherwise noted) in the following entities: Dimensional Fund Advisors Inc.,
DFA Securities Inc., DFA Australia Limited, Dimensional Investment Group
Inc., The DFA Investment Trust Company, Dimensional Fund Advisors Ltd., and
Dimensional Emerging Markets Fund Inc.
Arthur Barlow, (11/7/55), Vice President, Santa Monica, CA.
Truman Clark, (4/8/41), 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.
Maureen Connors, (11/17/36), Vice President and Assistant Secretary,
Santa Monica, CA.
Robert Deere, (10/8/57), Vice President, Santa Monica, CA.
Irene R. Diamant, (7/16/50), Vice President and Secretary (for all
entities other than Dimensional Fund Advisors Ltd.), Santa Monica, CA.
Richard Eustice, (8/5/65), Vice President and Assistant Secretary (for
all entities other than Dimensional Fund Advisors Ltd.), Santa Monica, CA.
Eugene Fama, Jr., (1/21/61), Vice President, Santa Monica, CA.
Kamyab Hashemi-Nejad, (1/22/61), Vice President, Controller and
Assistant Treasurer, Santa Monica, CA.
Stephen P. Manus, (12/26/50), Vice President, Santa Monica, CA. Managing
Director, ANB Investment Management and Trust Company from 1985-1993;
President, ANB Investment Management and Trust Company from 1993-1997.
Karen McGinley, (3/10/66), Vice President, Santa Monica, CA.
Catherine L. Newell, (5/7/64), Vice President and Assistant Secretary
(for all entities other than Dimensional Fund Advisors Ltd.), Santa Monica,
CA. Associate, Morrison & Foerster, LLP from 1989 to 1996.
14
<PAGE>
David Plecha, (10/26/61), Vice President, Santa Monica, CA.
George Sands, (2/8/56), Vice President, Santa Monica, CA.
Michael T. Scardina, (10/12/55), Vice President, Chief Financial Officer
and Treasurer, Santa Monica, CA.
Jeanne C. Sinquefield, Ph.D., (12/2/46), Executive Vice President, Santa
Monica, CA.
Scott Thornton, (3/1/63), Vice President, Santa Monica, CA.
Weston Wellington, (3/1/51), Vice President, Santa Monica, CA. Director
of Research, LPL Financial Services, Inc., Boston, MA from 1987 to 1994.
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, 1997 and the total compensation received from
all four registered investment companies for which the Advisor serves as
investment advisor during that same fiscal year.
<TABLE>
<CAPTION>
DIRECTOR AGGREGATE TOTAL COMPENSATION FROM
- -------- COMPENSATION FUND
FROM FUND AND FUND COMPLEX
------------ -----------------------
<S> <C> <C>
George M. Constantinides $15,000 $30,000
John P. Gould $15,000 $30,000
Roger G. Ibbotson $15,000 $30,000
Merton H. Miller $15,000 $30,000
Myron S. Scholes $15,000 $30,000
</TABLE>
ADMINISTRATIVE SERVICES
PFPC Inc. ("PFPC") serves as the accounting services, dividend
disbursing and transfer agent for all Fund Portfolios and Master Funds. 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:
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.
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LARGE CAP INTERNATIONAL PORTFOLIO
DFA INTERNATIONAL SMALL CAP VALUE PORTFOLIO
TAX MANAGED DFA INTERNATIONAL 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 FIVE-YEAR GLOBAL FIXED INCOME PORTFOLIO
.1230% of the first $150 million of net assets
.0820% of the next $150 million of net assets
.0615% of the next $300 million of net assets
.0410% of the next $250 million of net assets
.0205% of net assets over $850 million
The DFA Five-Year 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. 9-10 SMALL COMPANY PORTFOLIO
U.S. 6-10 SMALL COMPANY PORTFOLIO
U.S. 4-10 VALUE PORTFOLIO
U.S. LARGE CAP VALUE PORTFOLIO
U.S. 6-10 VALUE PORTFOLIO
RWB/DFA INTERNATIONAL HIGH BOOK TO MARKET PORTFOLIO
EMERGING MARKETS VALUE PORTFOLIO
ENHANCED U.S. LARGE COMPANY PORTFOLIO
DFA TWO-YEAR GLOBAL FIXED INCOME PORTFOLIO
The above portfolios are feeder portfolios. PFPC's charges for its services
to feeder portfolios are based on the number of feeder portfolios investing
in each master series and whether the master series is organized to be taxed
as a corporation or partnership for tax purposes. PFPC's charges are
allocated amongst the feeders based on the relative net assets of the
feeders. PFPC's charges in the aggregate to a group of feeder portfolios
investing in master series which are taxed as corporations are $1,000 per
month multiplied by the number of feeders. These feeder portfolios invest in
master series taxed as corporations.
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
U.S. LARGE COMPANY PORTFOLIO
TAX MANAGED U.S. LARGE CAP VALUE PORTFOLIO
These feeder portfolios invest in master series taxed as partnerships. PFPC
charges $2,600 per month multiplied by the number of feeders investing in
master series taxed as partnerships.
INTERNATIONAL SMALL COMPANY PORTFOLIO
16
<PAGE>
$2,000 per month (includes custodian fees)
TAX MANAGED U.S. 6-10 SMALL COMPANY PORTFOLIO
TAX MANAGED U.S. 4-10 VALUE 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 net assets over $850 million
PFPC has agreed that it may from time to time limit the fee rates.
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 Master Fund),
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 Master Fund). For the fiscal years ended November 30, 1995, 1996
and 1997, the Portfolios (or their corresponding Master Funds) paid management
fees as set forth in the following table:
<TABLE>
<CAPTION>
1995 1996 1997
(000) (000) (000)
------ ------ ------
<S> <C> <C> <C>
U.S. 9-10 Small Company Portfolio (a) $4,045 $5,511 $6,538
U.S. 6-10 Small Company Portfolio (b) $ 57 $ 81 $ 102
U.S. Large Company Portfolio $ 19 $ 62 $ 160
U.S. 6-10 Value Portfolio (b) $ 976 $1,933 $3,534
U.S. Large Cap Value Portfolio (b) $ 306 $ 699 $1,255
DFA Real Estate Securities Portfolio $ 183 $ 251 $ 290
Japanese Small Company Portfolio (c) $1,704 $1,483 $ 258
Pacific Rim Small Company Portfolio (c) $1,020 $ 772 $ 230
United Kingdom Small Company Portfolio (c) $1,096 $ 636 $ 180
Emerging Markets Portfolio (b) $ 30 $ 111 $ 226
Continental Small Company Portfolio (c) $1,781 $1,258 $ 351
Large Cap International Portfolio $ 147 $ 183 $ 211
DFA International Small Cap Value Portfolio $ 299 $1,877 $2,783
RWB/DFA International High Book to Market Portfolio (b) $ 536 $2,124 $2,997
DFA One-Year Fixed Income Portfolio (b) $ 311 $ 386 $ 392
DFA Five-Year Government Portfolio $ 427 $ 402 $ 382
DFA Five-Year Global Fixed Income Portfolio $ 311 $ 377 $ 519
DFA Intermediate Government Fixed Income Portfolio $ 88 $ 131 $ 184
Enhanced U.S. Large Company Portfolio (b) n/a $ 4 $ 17
DFA Two-Year Global Fixed Income Portfolio n/a $ 108 $ 185
International Small Company Portfolio (d) n/a $ 178 $1,019
Emerging Markets Value Portfolio $ 733 $ 865 $1,020
Emerging Markets Small Cap Portfolio (b) n/a n/a $ 47
</TABLE>
17
<PAGE>
- -----------------------------
(a) Prior to November 30, 1997, 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 for the 1995, 1996 and 1997 fiscal years.
(b) 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.
(c) 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 to the
Advisor by the Portfolio for fiscal years 1994 and 1995 and by the Portfolio
and its corresponding Series for fiscal year 1996.
(d) Each of the four Underlying Series in which the Portfolio invests its
assets has more than one Feeder Portfolio (which are also included elsewhere
in this table). The dollar amount represents the total dollar amount of
management fees paid by each Underlying Series to the Advisor for the period
October 1, 1996 (the Portfolio's commencement of operations) to November 30,
1996 and for the 1997 fiscal year.
The Fund commenced offering shares of DFA International Small Cap Value
Portfolio in December, 1994; DFA Two-Year Global Fixed Income Portfolio in
February, 1996; Enhanced U.S. Large Company Portfolio in July, 1996; and
International Small Company Portfolio in October, 1996. Emerging Markets
Small Cap and Emerging Markets Value Portfolios had not commenced operations
as of November 30, 1996. The U.S. 4-10 Value Portfolio and the Tax Managed
Portfolios and Series had not commenced operations as of November 30, 1997.
Until September, 1995, The DFA Intermediate Government Fixed Income
Portfolio was named The DFA Intermediate Government Bond Portfolio, The DFA
Five-Year 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. 6-10
Value Portfolio was named The U.S. Small Cap High Book to Market Portfolio,
The U.S. 9-10 Small Company Portfolio was named the Small Company Shares, The
DFA One-Year Fixed Income Portfolio was named The DFA Fixed Income Shares,
and The Continental Small Company Portfolio was named the Continental
European 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. From September,
1995 until August, 1997, the U.S. 6-10 Value Portfolio was named the U.S.
Small Cap Value Portfolio.
PriceWaterhouseCoopers LLP, the Fund's independent accountants, audits
the Fund's financial statements.
PRINCIPAL HOLDERS OF SECURITIES
As of August 31, 1998, the following persons beneficially owned 5% or
more of the outstanding stock of the Portfolios, as set forth below:
<TABLE>
<CAPTION>
THE U.S. 9-10 SMALL COMPANY PORTFOLIO
<S> <C>
Charles Schwab & Company, Inc.-REIN*
101 Montgomery Street
San Francisco, CA 94104 28.30%
State Farm Insurance Companies
One State Farm Plaza
Bloomington, IL 61710 10.02%
Charles Schwab & Company, Inc.-CASH*
101 Montgomery Street
San Francisco, CA 94104 7.10%
National Electrical Benefit Fund
1125 15th Street NW
Washington, DC 20005 7.03%
18
<PAGE>
PepsiCo Inc. Master Trust
The Northern Trust Company Trustee
Chicago, IL 60675 6.75%
THE U.S. 6-10 SMALL COMPANY PORTFOLIO
McKinsey & Company Master Retirement Trust
55 E. 52nd Street
New York, NY 10055 30.64%
Charles Schwab & Company, Inc.-REIN*(1) 15.18%
Salvation Army-ETHQ
440 W. Nyack Road
West Nyack, NY 10994 7.15%
Northern Telecom Inc.
Bankers Trust Co., Trustee
34 Exchange Place
Jersey City, NJ 07302 6.38%
The Salvation Army Central Territory
10 W. Algonquin Road
Des Plaines, IL 60016 5.30%
Credit Union Benefit Services
P.O. Box 2978
Madison, WI 53701 5.16%
THE JAPANESE SMALL COMPANY PORTFOLIO
BellSouth Corporation Master Pension Trust
1155 Peachtree Street, N.E.
Atlanta, GA 30367 60.53%
Charles Schwab & Company, Inc.-REIN*(1) 24.66%
THE UNITED KINGDOM SMALL COMPANY PORTFOLIO
BellSouth Corporation Master Pension Trust(1) 61.13%
Charles Schwab & Company, Inc.-REIN*(1) 31.28%
THE CONTINENTAL SMALL COMPANY PORTFOLIO
BellSouth Corporation Master Pension Trust(1) 61.67%
Charles Schwab & Company, Inc.-REIN*(1) 31.56%
19
<PAGE>
THE LARGE CAP INTERNATIONAL PORTFOLIO
Charles Schwab & Company, Inc.-REIN*(1) 77.79%
Donaldson Lufkin & Jenrette Securities Corp.*
P.O. Box 2052
Jersey City, NJ 07303 7.08%
THE U.S. LARGE COMPANY PORTFOLIO
Charles Schwab & Company, Inc.-REIN*(1) 67.63%
Charles Schwab & Company, Inc.-CASH*(1) 13.99%
Donaldson Lufkin & Jenrette Securities Corp.*(1) 5.06%
THE DFA ONE-YEAR FIXED INCOME PORTFOLIO
Charles Schwab & Company, Inc.-REIN*(1) 28.64%
Charles Schwab & Company, Inc.-CASH*(1) 14.22%
Peoples Energy Corporation Pension Trust
130 E. Randolph Dr., 24th Floor
Chicago, IL 60601 6.76%
The McConnell Foundation
P.O. Box 492050
Redding, CA 96049 5.10%
THE DFA FIVE-YEAR GOVERNMENT PORTFOLIO
Charles Schwab & Company, Inc.-REIN*(1) 55.03%
Charles Schwab & Company, Inc.-CASH*(1) 18.75%
FTC & CO*
P.O. Box 173736
Denver, CO 80217 6.29%
Donaldson Lufkin & Jenrette Securities Corp.*(1) 6.17%
THE DFA FIVE-YEAR GLOBAL FIXED INCOME PORTFOLIO
Charles Schwab & Company, Inc.-REIN*(1) 46.86%
Charles Schwab & Company, Inc.-CAP*(1) 20.01%
Charles Schwab & Company, Inc.-CASH*(1) 15.40%
Donaldson Lufkin & Jenrette Securities Corp.*(1) 5.31%
20
<PAGE>
THE DFA INTERMEDIATE GOVERNMENT FIXED INCOME PORTFOLIO
Charles Schwab & Company, Inc.-CAP*(1) 83.88%
Charles Schwab & Company, Inc.-REIN*(1) 9.62%
PACIFIC RIM SMALL COMPANY PORTFOLIO
BellSouth Corporation Master Pension Trust(1) 71.86%
Charles Schwab & Company, Inc.-REIN*(1) 17.56%
U.S. LARGE CAP VALUE PORTFOLIO
Charles Schwab & Company, Inc.-REIN*(1) 52.21%
Charles Schwab & Company, Inc.-CASH*(1) 13.01%
Charles Schwab & Company, Inc.-CAP*(1) 6.88%
Donaldson Lufkin & Jenrette Securities Corp.*(1) 5.41%
DFA REAL ESTATE SECURITIES PORTFOLIO
Charles Schwab & Company, Inc. REIN*(1) 64.30%
Charles Schwab & Company, Inc. CASH*(1) 15.94%
Donaldson Lufkin & Jenrette Securities Corp.*(1) 7.34%
U.S. 6-10 VALUE PORTFOLIO
Charles Schwab & Company, Inc. REIN*(1) 28.44%
Mac & Co.*
P.O. Box 320
Pittsburgh, PA 15230 6.90%
Charles Schwab & Company, Inc. CAP*(1) 6.80%
Charles Schwab & Company, Inc. CASH*(1) 5.37%
RWB/DFA INTERNATIONAL HIGH BOOK TO MARKET PORTFOLIO
Charles Schwab & Company, Inc.-REIN*(1) 90.28%
Donaldson Lufkin & Jenrette Securities Corp.*(1) 9.10%
EMERGING MARKETS PORTFOLIO
Charles Schwab & Company, Inc.-REIN*(1) 66.70%
Donaldson Lufkin & Jenrette Securities Corp.*(1) 7.11%
21
<PAGE>
California Institute of Technology
Mail Code 212-31
Pasadena, CA 91125 6.03%
U.S. 4-10 VALUE PORTFOLIO
Dimensional Fund Advisers Inc.
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401 100.00%
DFA INTERNATIONAL SMALL CAP VALUE PORTFOLIO
Charles Schwab & Company, Inc. REIN*(1) 61.78%
BellSouth Corporation Master Pension Trust(1) 19.45%
DFA TWO-YEAR GLOBAL FIXED INCOME PORTFOLIO
Charles Schwab & Company, Inc.-REIN*(1) 45.74%
Charles Schwab & Company, Inc.-CAP*(1) 40.08%
ENHANCED U.S. LARGE COMPANY PORTFOLIO
Charles Schwab & Company, Inc.-REIN*(1) 34.02%
Charles Schwab & Company, Inc.-CAP*(1) 26.59%
Misericordia Home Endowment
6300 N. Drive Avenue
Chicago, IL 60660 23.59%
INTERNATIONAL SMALL COMPANY PORTFOLIO
Charles Schwab & Company, Inc.-REIN*(1) 59.42%
San Diego County Employees Retirement Association
1495 Pacific Highway
San Diego, CA 92101 26.65%
Donaldson Lufkin & Jenrette Securities Corp.*(1) 5.44%
EMERGING MARKETS SMALL CAP PORTFOLIO
Charles Schwab & Company, Inc.-REIN*(1) 48.87%
Birmingham Waterworks Board
National Bank of Commerce Trustee
1927 First Avenue North
Birmingham, AL 35242 21.58%
Donaldson Lufkin & Jenrette Securities Corp.*(1) 13.18%
22
<PAGE>
Sinquefield Family Trust
c/o Dimensional Fund Advisors Inc.
1299 Ocean Avenue, 11th floor
Santa Monica, CA 90401 9.49%
FTC & Co.*(1) 6.85%
EMERGING MARKETS VALUE PORTFOLIO
Charles Schwab & Company, Inc.-REIN*(1) 63.92%
Birmingham Water Works Board*(1) 17.33%
Donaldson Lufkin & Jenrette Securities Corp.*(1) 12.47%
</TABLE>
- ------------------------------
* Owner of record only.
(1) See address for shareholder previously noted above in list.
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 NYSE is scheduled
to be open Monday through Friday throughout the year except for days closed
to recognize New Year's Day, Martin Luther King, Jr. 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 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 1998: January
1, 2, 3 and 15, February 11, March 21, April 29, May 3, 4 and 5, July 20,
September 15 and 23, October 10, November 3 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. 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 Commission, (2) during any period
23
<PAGE>
when an emergency exists as defined by the rules of the Commission as a
result of which it is not reasonably practicable for the Fund to dispose of
securities owned by it, or fairly to determine the value of its assets and
(3) for such other periods as the Commission may permit.
Shareholders may transfer shares of any Portfolio to another person by
making a written request therefore to the Advisor who will transmit the
request to the Fund's Transfer Agent. The request should clearly identify the
account and number of shares to be transferred, and include the signature of
all registered owners and all stock certificates, if any, which are subject
to the transfer. The signature on the letter of request, the stock
certificate or any stock power must be guaranteed in the same manner as
described in the prospectus under "REDEMPTION OF SHARES." As with
redemptions, the written request must be received in good order before any
transfer can be made.
CALCULATION OF PERFORMANCE DATA
Following are quotations of the annualized percentage total returns for
the one, five, and ten-year periods ended November 30, 1997 (as applicable)
using the standardized method of calculation required by the Commission,
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 DFA Two-Year Global Fixed Income
Portfolio (for the period from February 9, 1996, the date of commencement of
operations), the Enhanced U.S. Large Company Portfolio (for the period from
July 3, 1996, the date of commencement of operations) and the International
Small Company Portfolio (for the period from October 1, 1996, the date of
commencement of operations) to November 30, 1997 using the standardized
method of calculation required by the Commission. 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 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-.675%; 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. . . . . . . . . . . . . 27.46 20.80 17.14
U.S. 6-10 Small Company Portfolio. . . . . . . . . . . . . 26.04 17.24 15.52
(69 MONTHS)
U.S. Large Company Portfolio . . . . . . . . . . . . . . . 28.25 19.81 19.40
(83 MONTHS)
U.S. 6-10 Value Portfolio. . . . . . . . . . . . . . . . . 33.49 20.58 n/a
(56 MONTHS)
U.S. Large Cap Value Portfolio . . . . . . . . . . . . . . 25.10 17.86 n/a
(58 MONTHS)
Enhanced U.S. Large Company Portfolio. . . . . . . . . . . 27.22 37.43 n/a
(16 MONTHS)
24
<PAGE>
DFA Real Estate Securities Portfolio . . . . . . . . . . . 29.16 13.35 n/a
(59 MONTHS)
Japanese Small Company Portfolio . . . . . . . . . . . . . -52.14 -9.95 -4.47
Pacific Rim Small Company Portfolio. . . . . . . . . . . . -38.68 3.39 n/a
(59 MONTHS)
United Kingdom Small Company Portfolio . . . . . . . . . . 8.44 17.50 7.38
Emerging Markets Portfolio . . . . . . . . . . . . . . . . -17.70 -1.16 n/a
(43 MONTHS)
Continental Small Company Portfolio. . . . . . . . . . . . 11.89 11.27 8.79
(116 MONTHS)
Large Cap International Portfolio. . . . . . . . . . . . . 2.79 10.90 7.39
(76 MONTHS)
RWB/DFA International High Book to Market Portfolio. . . . -4.44 7.08 n/a
(54 MONTHS)
DFA One-Year Fixed Income Portfolio. . . . . . . . . . . . 5.72 5.30 6.66
DFA Five-Year Government Portfolio . . . . . . . . . . . . 5.39 5.62 7.60
DFA Five-Year Global Fixed Income Portfolio. . . . . . . . 7.87 8.37 8.69
(84 MONTHS)
DFA Intermediate Government Fixed Income Portfolio . . . . 6.76 7.31 9.00
(85 MONTHS)
DFA International Small Cap Value Portfolio. . . . . . . . -21.16 -6.35 n/a
(35 MONTHS)
DFA Two-Year Global Fixed Income Portfolio . . . . . . . . 5.77 6.39 n/a
(22 MONTHS)
International Small Company Portfolio. . . . . . . . . . . -21.87 -20.01 n/a
(13 MONTHS)
</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 Commission
formula:
n
P(1 + T) = 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).
In addition to the standardized method of calculating performance used
by the Commission, the Portfolios may disseminate other performance data and
may advertise total return performance calculated on a monthly basis.
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
25
<PAGE>
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, 1997, as set forth in the Fund's
annual report to shareholders, and the report thereon of
PricewaterhouseCoopers LLP (formerly Coopers & Lybrand L.L.P.), independent
accountants, also appearing therein, and the unaudited financial statements
for the period ended May 31, 1998, as set forth in the semi-annual report to
shareholders, are incorporated herein by reference. The annual and
semi-annual reports do not contain any data regarding the Tax Managed
Portfolios and Series because they had not commenced operations as of May 31,
1998, and the annual report does not contain any data regarding U.S. 4-10
Value Portfolio, Emerging Markets Value and Emerging Markets Small Cap
Portfolio because those Portfolios had not commenced operations as of
November 30, 1997.
The audited financial statements of U.S. 9-10 Small Company, U.S.
6-10 Small Company, U.S. Large Company, Enhanced U.S. Large Company, DFA
One-Year Fixed Income, DFA Two-Year Global Fixed Income, U.S. 6-10 Value,
U.S. Large Cap Value, DFA International Value, Japanese Small Company, United
Kingdom Small Company, Pacific Rim Small Company, Continental Small Company
and Emerging Markets of the Trust and the audited financial statements of
Dimensional Emerging Series Markets Fund Inc. for the fiscal year ended
November 30, 1997, as set forth in the Trust's and Dimensional Emerging
Markets Fund Inc.'s annual reports to shareholders, and the reports thereon
of PricewaterhouseCoopers LLP (formerly, Coopers & Lybrand L.L.P.),
independent accountants, also appearing therein, and the unaudited financial
statements for the period ended May 31, 1998, as set forth in the semi-annual
report to shareholders, are incorporated herein by reference.
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 this statement of additional information.
26
<PAGE>
DFA INVESTMENT DIMENSIONS GROUP, INC.
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 are incorporated
herein by reference.
Part B:
(1) Statement of Net Assets*.
(2) Statement of Operations*.
(3) Statement of Changes in Net Assets*.
(4) Financial Highlights*.
(5) Notes to Financial Statements*.
(6) Report of Independent Accountants*.
+ Audited financial statements of 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")
are contained within the Annual Report to Shareholders dated
November 30, 1997, of DFA INVESTMENT DIMENSIONS GROUP INC. (the "Registrant")
and were filed electronically on February 5, 1998 via the Securities and
Exchange Commission's EDGAR system pursuant to Rule 30b2-1 under the Investment
Company Act of 1940 and are herein incorporated by reference into Part B, the
Statement of Additional Information.
The audited financial statements of all other series of
shares of the Registrant except the VA Portfolios and Emerging Markets Small Cap
Portfolio were filed electronically on February 5, 1998 via the Securities and
Exchange Commission's EDGAR system pursuant to Rule 30b2-1 under the Investment
Company Act of 1940, and are herein incorporated by reference into Part B, the
Statement of Additional Information.
Unaudited financials statements of all other series of shares of the Registrant
contained in the Semi-Annual Report to Shareholders dated May 31, 1998 of the
Registrant. On August 6, 1998, such report was filed electronically via the
Securities and Exchange Commission's EDGAR system pursuant to Rule 30b2-1 under
the Investment Company Act of 1940, and are herein incorporated by reference
into Part B, the Statement of Additional Information.
<PAGE>
Unaudited financial statements for the VA Portfolios are
contained in the Semi-Annual Report to Shareholders dated May 31, 1998 of the
Registration. On August 6, 1998, such report was also filed via the Securities
and Exchange Commission's EDGAR system pursuant to rule 30b2-1 under the
Investment Company Act of 1940 and are herein incorporated by reference into
Part B, the Statement of Additional Information.
Audited financial statements of the:
* U.S. 6-10 Small Company Series;
* U.S. Large Company Series;
* Enhanced U.S. Large Company Series;
* U.S. 6-10 Value Series;
* U.S. Large Cap Value Series;
* Japanese Small Company Series;
* Pacific Rim Small Company Series;
* United Kingdom Small Company Series;
* Continental Small Company Series;
* DFA International Value Series;
* Emerging Markets Series;
* DFA One-Year Fixed Income Series; and
* DFA Two-Year Global Fixed Income Series.
(the "Portfolios")
are contained within the Annual Report to Shareholders dated
November 30, 1997, of THE DFA INVESTMENT TRUST COMPANY INC. (the "Registrant")
and were filed electronically on February 5, 1998, via the Securities and
Exchange Commission's EDGAR system pursuant to Rule 30b2-1 under the Investment
Company Act of 1940 and are herein incorporated by reference into Part B, the
Statement of Additional Information.
Unaudited financial statements for the Portfolios are
contained in the Semi-Annual Report of Shareholders dated May 31, 1998 of the
Registrant. On August 6, 1998, such report was also filed via the Securities
and Exchange Commission's EDGAR system pursuant to rule 30b2-1 under the
Investment Company Act of 1940 and are herein incorporated by reference into
Part B, the Statement of Additional Information.
<TABLE>
<S><C>
EMERGING MARKETS [TO BE ADDED].
(b) Exhibits.
(1) Copies of the charter, as now in effect.
(a) Articles of Restatement dated August 8, 1995.
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment No. 43/44
to the Registrant's Registration
Statement on Form N-1A.
File Nos.: 2-73948 and 811-3258.
Filing Date: October 4, 1996.
-2-
<PAGE>
(b) Articles of Amendment dated December 21, 1995.
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment No. 39/40
to the Registrant's Registration
Statement 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. 39/40
to the Registrant's Registration
Statement on Form N-1A.
File Nos.: 2-73948 and 811-3258.
Filing Date: January 30, 1996.
(d) Articles Supplementary dated May 14, 1996.
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment No. 41/42
to the Registrant's Registration
Statement on Form N-1A.
File Nos.: 2-73948 and 811-3258.
Filing Date: May 24, 1996.
(e) Articles Supplementary dated October 18, 1996.
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment No. 44/45
to the Registrant's Registration
Statement on Form N-1A.
File Nos.: 2-73948 and 811-3258.
Filing Date: December 19, 1996.
(f) Articles of Amendment dated December 20, 1996.
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment No. 44/45
to the Registrant's Registration
Statement on Form N-1A.
File Nos.: 2-73948 and 811-3258.
Filing Date: December 19, 1996.
(g) Articles of Amendment dated July 28, 1997
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment No. 46/47
to Registrant's Registration
Statement on Form
-3-
<PAGE>
N-1A.
File Nos.: 2-73948 and 811-3258.
Filing Date: September 16, 1997.
(h) Articles Supplementary dated September 16, 1997.
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment No. 46/47
to Registrant's Registration
Statement on Form N-1A.
File Nos.: 2-73948 and 811-3258.
Filing Date: September 16, 1997.
(i) Articles Supplementary dated September __, 1998
re: the addition of the:
* Tax Managed U.S. 4-10 Value Portfolio;
* Tax Managed U.S. 6-10 Small Company
Portfolio; and
* Tax Managed DFA International Value
Portfolio.
See Footnote (1)
(2) Copies of the existing bylaws or instruments
corresponding thereto.
By-Laws of the Registrant, as approved through September
2, 1997.
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment No. 48/49 to
Registrant's Registration Statement on Form
N-1A.
File Nos.: 2-73948 and 811-3258.
Filing Date: March 20, 1998.
(3) Copies of any voting trust agreement with respect to more
than 5 percent of any class of equity securities of the
Registrant. Not applicable.
(4) Copies of all instruments defining the rights of holders
of the securities being registered including where
applicable, the relevant portion of the articles or
incorporation or bylaws of the Registrant.
-4-
<PAGE>
(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. 43/44
to the Registrant's Registration
Statement on Form N-1A.
File Nos.: 2-73948 and 811-3258.
Filing Date: October 4, 1996.
(5) Copies of all investment advisory contracts relating to
the management of the assets of the Registrant.
(a) Investment Management Agreements.
(1) Investment Management Agreement
between the Registrant and Dimensional
Fund Advisors Inc. ("DFA") dated May 13,
1987 re: the:
* DFA Five-Year Government Portfolio.
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment
No. 48/49 to Registrant's
Registration Statement on
Form N-1A.
File Nos.: 2-73948 and 811-3258.
Filing Date: March 20, 1998.
(2) Investment Management Agreement between the
Registrant and DFA dated April 26, 1994 re: the:
* DFA Global Fixed Income Portfolio
(formerly the DFA Global Bond Portfolio).
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment
No. 48/49 to Registrant's
Registration Statement on
Form N-1A.
File Nos.: 2-73948 and 811-3258.
Filing Date: March 20, 1998.
(3) Investment Management Agreement between
the Registrant and DFA dated September 24, 1990
re: the:
* DFA Intermediate Government Fixed
Income Portfolio (formerly the DFA
Intermediate Government Bond Portfolio)
-5-
<PAGE>
See Footnote (1)
(4) Investment Advisory Agreement between the
Registrant and DFA dated April 2, 1991 re:
the:
* Large Cap International Portfolio
See Footnote (1)
(5) Investment Advisory Agreement between the
Registrant and DFA dated December 21, 1992,
as amended re: the:
* DFA Real Estate Securities Portfolio
(formerly the DFA/AEW Real Estate
Securities Portfolio)
See Footnote (1)
(6) Amendment to Investment Advisory Agreement
between the Registrant and DFA dated
September 21, 1992, effective on December 20,
1996 re: the:
* DFA Real Estate Securities Portfolio
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment
No. 48/49 to Registrant's
Registration Statement on
Form N-1A.
File Nos.: 2-73948 and 811-3258.
Filing Date: March 20, 1998.
(7) Investment Advisory Agreement between the
Registrant and DFA dated April 26, 1994 re:
the:
* DFA Global Fixed Income Portfolio
(formerly the DFA Global Bond
Portfolio).
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment
No. 48/49 to Registrant's
Registration Statement on
Form N-1A.
File Nos.: 2-73948 and 811-3258.
Filing Date: March 20, 1998.
(8) Investment Advisory Agreement between the
-6-
<PAGE>
Registrant and DFA dated December 20, 1994
re: the:
* DFA International Small Cap Value
Portfolio )
See Footnote (1)
(9) Investment Advisory Agreement between the
Registrant and DFA dated September 8, 1995
re: the:
* VA Large Value Portfolio (formerly known
as the DFA Global Value Portfolio)
See Footnote (1)
(10) Investment Advisory Agreement between the
Registrant and DFA dated September 8, 1995
re: the:
* VA Small Value Portfolio
See Footnote (1)
(11) Investment Advisory Agreement between the
Registrant and DFA dated September 8, 1995
re: the:
* VA International Value Portfolio
See Footnote (1)
(12) Investment Advisory Agreement between the
Registrant and DFA dated September 8, 1995
re: the:
* VA International Small Portfolio
Portfolio
See Footnote (1)
(13) Investment Advisory Agreement between the
Registrant and DFA dated September 8, 1995
re: the:
* VA Short-Term Fixed Portfolio
See Footnote (1)
-7-
<PAGE>
(14) Investment Advisory Agreement between the
Registrant and DFA dated August 8, 1996 re:
the:
* International Small Company Portfolio
See Footnote (1)
(15) FORM OF Investment Advisory Agreement
between the Registrant and DFA dated
_________ re: the
* Tax Managed U.S. 4-10 Value Portfolio
See Footnote (1)
(16) FORM OF Investment Advisory Agreement
between the Registrant and DFA dated
_________ re: the:
* Tax Managed U.S. Large Cap Value
Portfolio
See Footnote (1)
(17) FORM OF Investment Advisory Agreement
between the Registrant and DFA dated
_________ re: the:
* Tax Managed U.S. 6-10 Small Company
Portfolio
See Footnote (1)
(18) FORM OF Investment Advisory Agreement
between the Registrant and DFA dated
_________ re: the:
* Tax Managed DFA International Value
Portfolio
See Footnote (1)
(b) Sub-advisory Agreements.
(1) Sub-Advisory Agreement between the
Registrant, DFA and DFA Australia Ltd.
(formerly DFA Australia Pty Limited) dated
September 21, 1995 re: the:
* VA International Small Portfolio.
INCORPORATED HEREIN BY REFERENCE TO:
-8-
<PAGE>
Filing: Post-Effective Amendment No.
37/38 to the Registrant's
Registration Statement on Form
N-1A.
File Nos.: 2-73948 and 811-3258.
Filing Date: November 22, 1995.
(2) Sub-Advisory Agreement between the
Registrant, DFA and Dimensional Fund Advisors
Ltd. dated September 21, 1995 re: the:
* VA International Small Portfolio.
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment No.
37/38 to the Registrant's
Registration Statement on Form
N-1A.
File Nos.: 2-73948 and 811-3258.
Filing Date: November 22, 1995.
(3) FORM OF Consultant Services Agreement
between the Registrant DFA and DFA Australia
Ltd. (formerly DFA Australia Pty Limited)
dated _____________ re: the:
* Tax Managed DFA International Value
Portfolio
See Footnote (1)
(6) Copies of each underwriting or distribution contract
between the Registrant and a principal underwriter, and
specimens or copies of all agreements between principal
underwriters and dealers.
(1) Agreement between the Registrant and DFA
Securities Inc.
Filing: Post-Effective Amendment No. 48/49
to Registrant's Registration
Statement on Form N-1A.
File Nos.: 2-73948 and 811-3258.
Filing Date: March 20, 1998.
(2) Amendments.
(a) Amendment to Agreement between Registrant and
DFA Securities Inc. re: the addition of the:
* Tax-Managed U.S. 4-10 Value Portfolio;
* Tax-Managed U.S. Large Cap Value
Portfolio(?);
* Tax-Managed U.S. 6-10 Small Company
Portfolio; and
-9-
<PAGE>
* Tax-Managed DFA International Value
Portfolio
See Footnote (1)
(7) Copies of all bonus, profit sharing, pension or other
similar contracts or arrangements wholly or partly for
the benefit of directors or officers of the Registrant
in their capacity as such; any such plan that is not
set forth in a formal document, furnish a reasonably
detailed description thereof. Not applicable.
(8) Copies of all custodian agreements and depository
contracts under Section 17(f) of the Investment Company
Act of 1940, as amended (the "1940 Act") [15 U.S.C.
80a 17(f)] with respect to securities and similar
investments of the Registrant, including the schedule
of remuneration.
(a) Between the Registrant and Boston Safe Deposit
and Trust Company dated July 22, 1991 re: the:
* Japanese Small Company Portfolio;
* Pacific Rim Small Company Portfolio;
(formerly the Asia-Australia Small Company
Portfolio),
* United Kingdom Small Company Portfolio;
* Continental Small Company Portfolio;
* Large Cap International Portfolio; and;
* DFA Global Bond Portfolio.
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment No. 33/34
of the Registrant's 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 dated July 22,
1991 between the Registrant and the Boston
Safe Deposit and Trust Company dated May 26,
1993.
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment No.
33/34 of the Registrant's
Registration Statement on Form
N-1A.
File Nos.: 2-73948 and 811-3258.
Filing Date: June 19, 1995.
-10-
<PAGE>
(2) Amendment to Custody Agreement dated July 22,
1991 between the Registrant and Mellon Trust
dated December 20, 1994 re: the:
* Japanese Small Company Portfolio;
* Pacific Rim Small Company Portfolio;
(Asia-Australia Small Company
Portfolio);
* United Kingdom Small Company Portfolio;
* Continental Small Company Portfolio;
* Large Cap International Portfolio; and
* DFA Global Bond Portfolio.
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment No.
33/34 of the Registrant's
Registration Statement on Form
N-1A.
File Nos.: 2-73948 and 811-3258.
Filing Date: June 19, 1995.
(3) Amendment to Custody Agreement dated July 22,
1991 between the Registrant and Boston Safe
Deposit and Trust Company dated September
__ , 1995 re: the:
* Small Value Portfolio;
* VA Large Value Portfolio; and
* VA Short-Term Fixed Portfolio
See Footnote (1)
(4) Amendment to Custody Agreement dated July 22,
1991 between the Registrant and Boston Safe
Deposit and Trust Company dated February ___,
1996 re: the:
* DFA Two-Year Global Fixed Income
Portfolio
See Footnote (1)
(5) Amendment to Custody Agreement dated July 22,
1991 between the Registrant and Boston Safe
Deposit and Trust Company dated August 8,
1996 re: the:
* International Small Company Portfolio
See Footnote (1)
-11-
<PAGE>
(6) FORM OF Amendment to Custody Agreement
dated July 22, 1991 between the Registrant
and Boston Safe Deposit and Trust Company
dated _________ re: the:
* Tax Managed DFA International
Value Portfolio
See Footnote (1)
(b) Custodian Services Agreement between the
Registrant and PNC Bank, N.A. (formerly
Provident National Bank) dated February 8, 1996
re: the:
* Enhanced U.S. Large Company Portfolio;
* DFA Two-Year Corporate Fixed
Income Portfolio; and
* DFA Two-Year Government Portfolio
See Footnote (1)
(c) Custody Agreement between the Registrant and
____________ re: the:
* Emerging Markets Small Cap
Portfolio; and
* Emerging Markets Value Portfolio
See Footnote (1)
(d) Custodian Agreement between the Registrant and
PNC Bank, N.A. (formerly Provident National
Bank) re: the:
* U.S. 9-10 Small Company Portfolio;
* U.S. Large Company Portfolio;
* DFA One-Year Fixed Income Portfolio;
* DFA Intermediate Government Fixed
Income Portfolio (formerly known as the
DFA Intermediate Government Bond
Portfolio; and
* DFA Five-Year Government Portfolio
See Footnote (1)
(1) Amendment Number One
INCORPORATED HEREIN BY REFERENCE TO:
-12-
<PAGE>
Filing: Post-Effective Amendment No.
48/49 to Registrant's
Registration Statement on Form
N-1A.
File Nos.: 2-73948 and 811-3258
Filing Date: March 20, 1998
(2) Amendment Number Two.
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective amendment No.
48/49 to Registrant's
Registration Statement on Form
N-1A.
File Nos.: 2-73948 and 811-3258
Filing Date: March 20, 1998
(3) Amendment Number Three IS
See Footnote (1)
(4) Amendment Number FOUR IS
See Footnote (1)
(5) Amendment Number Five IS
See Footnote (1)
(6) Amendment Number Six IS
See Footnote (1)
(7) Amendment Number Seven re: the:
* U.S. 4-10 Value Portfolio
See Footnote (1)
(8) FORM OF Amendment Number Seven re:
the:
* Tax Managed U.S. 4-10 Value
Portfolio;
* Tax Managed U.S. Large Cap
-13-
<PAGE>
Portfolio;
* Tax Managed U.S. 6-10 Small
Company Portfolio; and
* Tax Managed DFA International
Value Portfolio.
See Footnote (1)
(9) Copies of all other material contracts not made in the
ordinary course of business which are to be performed
in whole or in part at or after the date of filing of
the Registration Statement.
(a) Transfer Agency Agreement between the Registrant
and PFPC Inc. (formerly Provident Financial
Processing Corporation).
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment No. 48/49
to the Registrant's Registration
Statement on Form N-1A.
File Nos.: 2-73948 and 811-3258.
Filing Date: March 20, 1998.
(1) Amendments.
(a) Amendment Number One.
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment
No. 48/49 to Registrant's
Registration Statement on
Form N-1A.
File Nos.: 2-73948 and 811-3258.
Filing Date: March 20, 1998.
(b) Amendment Number Two.
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment
No. 48/49 to Registrant's
Registration Statement on
Form N-1A.
File Nos.: 2-73948 and 811-3258.
Filing Date: March 20, 1998.
(c) Amendment Number Three.
See Footnote (1)
(d) Amendment Number Four.
-14-
<PAGE>
See Footnote (1)
(e) AMENDMENT NUMBER FIVE
See Footnote (1)
(f) Amendment Number Six
See Footnote (1)
(g) AMENDMENT NUMBER SEVEN
See Footnote (1)
(h) AMENDMENT NUMBER EIGHT
See Footnote (1)
(i) Amendment Number Nine
See Footnote (1)
(j) Amendment Number Ten dated September
8, 1995 re: the:
* VA Small Value Portfolio;
* VA International Value Portfolio;
* VA Short-Term Fixed Portfolio; and
* VA International Small Portfolio.
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment
No. 33/34 to the
Registrant's Registration
Statement on Form N-1A.
File Nos.: 2-73948 and 811-3258.
Filing Date: June 19, 1995.
(k) Amendment Number Eleven dated February
8, 1996 re: the:
* Enhanced U.S. Large Company
Portfolio,
* DFA Two-Year Corporate Fixed
Income Portfolio;
* DFA Two-Year Global Fixed
Income Portfolio; and
-15-
<PAGE>
* DFA Two-Year Government
Portfolio
See Footnote (1)
(l) Amendment Number Twelve dated August
8, 1996 re: the:
* International Small Company
Portfolio
See Footnote (1)
(m) Amendment Number Thirteen dated
December 19, 1996 re: the:
* Emerging Markets Small Cap
Portfolio.
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post Effective Amendment
No. 44/45 to the
Registrant's Registration
Statement on Form N-1A.
File Nos.: 2-73948 and 811-3258.
Filing Date: December 19, 1996.
(n) Amendment Number Fourteen dated
November 30, 1997 re: the:
* U.S. 4-10 Value Portfolio; and
* Emerging Markets Value Portfolio.
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment
No. 46/47 to the
Registrant's Registration
Statement on Form N-1A.
File Nos.: 2-73948 and 811-3258.
Filing Date: September 16, 1997.
(o) FORM OF Amendment Number Fifteen
dated ______________ re: the:
* Tax Managed U.S. 4-10 Value
Portfolio;
* Tax Managed U.S. Large Cap
Portfolio;
* Tax Managed U.S. 6-10 Small
-16-
<PAGE>
Company Portfolio; and
* Tax Managed DFA International
Value Portfolio.
(b) Administration and Accounting Services Agreement
between the Registrant and PFPC.
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment
No. 48/49 to Registrant's
Registration Statement on
Form N-1A.
File Nos.: 2-73948 and 811-3258.
Filing Date: March 20, 1998.
(1) Amendment Number One.
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment
No. 48/49 to Registrant's
Registration Statement on
Form N-1A.
File Nos.: 2-73948 and 811-3258.
Filing Date: March 20, 1998.
(2) Amendment Number Two.
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment
No. 48/49 to Registrant's
Registration Statement on
Form N-1A.
File Nos.: 2-73948 and 811-3258.
Filing Date: March 20, 1998.
(3) Amendment Number Three
See Footnote (1)
(4) Amendment Number Four
See Footnote (1)
(5) AMENDMENT NUMBER FIVE
See Footnote (1)
(6) Amendment Number Six
See Footnote (1)
-17-
<PAGE>
of previously filed).
(7) AMENDMENT NUMBER SEVEN
See Footnote (1)
(8) AMENDMENT NUMBER EIGHT
See Footnote (1)
(9) Amendment Number Nine
See Footnote (1)
(10) Amendment Number Ten dated September 8,
1995 re: the:
* VA Portfolios (elaborate HERE)
See Footnote (1)
(11) Amendment Number Eleven dated February 8,
1996 re: the:
* Enhanced U.S. Large Company Portfolio;
* DFA Two-Year Corporate Fixed Income
Portfolio;
* DFA Two-Year Global Fixed Income
Portfolio; and
* DFA Two-Year Government Portfolio
See Footnote (1)
(12) Amendment Number Twelve re: the:
* International Small Company Portfolio
See Footnote (1)
(13) Amendment Number Thirteen dated December 19,
1996 re: the:
* Emerging Markets Small Cap Portfolio
See Footnote (1)
(14) Amendment Number Fourteen dated November 30,
1997 re: the:
* U.S. 4-10 Value Portfolio; and
* Emerging Markets Value Portfolio.
-18-
<PAGE>
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment No.
46/47 to the Registrant's
Registration Statement on Form
N-1A.
File Nos.: 2-73948 and 811-3258.
Filing Date: September 16, 1997.
(15) FORM OF Amendment Number Fifteen dated
_________ re: the:
* Tax Managed U.S. 4-10 Value Portfolio;
* Tax Managed U.S. Large Cap Value
Portfolio;
* Tax Managed U.S. 6-10 Small Company
Portfolio; and
* Tax-Managed DFA International Value
Portfolio
See Footnote (1)
(c) Administration Agreements between the Registrant
and DFA.
(1) Dated January 6, 1993 re: the
* DFA One-Year Fixed Income Portfolio
(formerly The DFA Fixed Income Shares)
See Footnote (1)
(2) Dated August 8, 1996 re: the:
* Japanese Small Company Portfolio
See Footnote (1)
(3) Dated August 8, 1996 re: the
* United Kingdom Small Company Portfolio
See Footnote (1)
(4) Dated August 8, 1996 re: the
* Continental Small Company Portfolio
See Footnote (1)
(5) Dated December 1, 1995 re: the:
* U.S. Large Company Portfolio
See Footnote (1)
-19-
<PAGE>
See Footnote (1)
(6) Dated August 8, 1996 re: the
* Pacific Rim Small Company Portfolio (The
Series became a feeder portfolio of
DFA/ITC on January 15, 1993.)
See Footnote (1)
(7) Dated January 6, 1993 re: the
* U.S. 6-10 Small Company Portfolio
See Footnote (1)
(8) Dated January 6, 1993 re: the:
* U.S. Large Cap Value Portfolio (formerly
the U.S. Large Cap High Book to Market
Portfolio)
See Footnote (1)
(9) Dated January 6, 1993 re: the:
* U.S. 6-10 Value Portfolio (formerly the
U.S Small Cap High Book to Market
Portfolio)
See Footnote (1)
(10) Dated February 8, 1996 re: the
* RWB/DFA International High Book to
Market Portfolio (formerly DFA
International High Book to
Market Portfolio; formerly the Reinhardt
Werba Bowen International Large
Stock Portfolio)
See Footnote (1)
(11) Dated February 8, 1996 re: the:
* Enhanced U.S. Large Company Portfolio
See Footnote (1)
-20-
<PAGE>
(12) Dated February 8, 1996 re: the:
* DFA Two-Year Corporate Fixed Income
Portfolio
See Footnote (1)
(13) Dated February 8, 1996 re: the
* DFA Two-Year Global Fixed Income
Portfolio
See Footnote (1)
(14) Dated February 8, 1996 re: the:
* DFA Two-Year Government Portfolio
See Footnote (1)
(15) Dated August 8, 1996 re: the:
* International Small Company Portfolio
See Footnote (1)
(16) Dated December 19, 1996 re: the:
* Emerging Markets Small Cap Portfolio
See Footnote (1)
(17) Dated November 30, 1997 re: the:
* U.S. 9-10 Small Company Portfolio
See Footnote (1)
(18) Dated November 30, 1997 re: the:
* U.S. 4-10 Value Portfolio
See Footnote (1)
(19) Dated November 30, 1997 re: the:
* Emerging Markets Value Portfolio
See Footnote (1)
(20) FORM OF Dated ___________ re: the:
* Tax Managed U.S. 4-10 Value Portfolio;
* Tax Managed U.S. 6-10 Small Company
-21-
<PAGE>
Portfolio; and
* Tax-Managed DFA International Value
Portfolio
See Footnote (1)
(d) Other.
(1) Marketing Agreement dated June 29, 1994
between DFA and National Home Life Assurance
Company.
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment
No. 33/34 to the
Registrant's Registration
Statement on Form N-1A.
File Nos.: 2-73948 and 811-3258.
Filing Date: June 19, 1995.
(2) Participation Agreement between DFA
Investment Dimensions Group, Inc., DFA, DFA
Securities, Inc. and National Home Life
Assurance Company.
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment
No. 33/34 to the
Registrant's Registration
Statement on Form N-1A.
File Nos.: 2-73948 and 811-3258.
Filing Date: June 19, 1995.
(3) 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. 37/38 to the
Registrant's Registration
Statement on Form N-1A.
File Nos.: 2-73948 and 811-3258.
Filing Date: November 22, 1995.
-22-
<PAGE>
(10) An opinion and consent of counsel as to the legality
of the securities being registered, indicating whether
they will, when sold, be legally issued, fully-paid and
non-assessable. Not applicable.
(11) Copies of any other opinions, appraisals or rulings and
consents to the use, thereof relied on in the
preparation of this Registration Statement and required
by Section 7 of the 1933 Act [15 U.S.C. 77g].
(a) Consent of PriceWaterhouseCoopers LLP dated
September 24, 1998 is
See Footnote (1)
(12) All financial statements omitted from Item 23.
Not applicable.
(13) Copies of any agreements or understandings made
in consideration for providing the initial capital
between or among the Registrant, the underwriter,
adviser, promoter or initial stockholders and written
assurances from promoters of initial stockholders that
their purchases were made for investment purposes
without any present intention of redeeming or
reselling.
Subscription Agreement under Section 14(a)
(3) of the Investment Company Act of 1940.
INCORPORATED HEREIN BY REFERENCE TO: (When was this
filed?)
Filing: Post-Effective Amendment No. _____ to
the Registrant's Registration Statement
on Form N-1A.
File Nos.: 2-73948 and 811-3258.
Filing Date: ___________.
(14) Copies of the model plan used with establishment of any
retirement plan in conjunction with which Registrant
offers its securities, any instructions thereto and any
other documents making up the model plan. Such form(s)
should disclose the costs and fees charged in
connection therewith. Not applicable.
(15) Copies of any plan entered into by Registrant pursuant
to Rule 12b-1 under the 1940 Act, which describes all
material aspects of the financing of distribution of
Registrant's shares, and any agreements with any person
relating to implementation of such plan.
-23-
<PAGE>
Not applicable.
(16) Schedule for computation of each performance quotation
provided in the Registration Statement in response to
Item 22 (which need not be audited).
(17) Electronic Filers. A Financial Data Schedule meeting
the requirements of rule 483 under the Securities Act
of 1933. Financial Data Schedules as of May 31, 1998
and November 30, 1997 re: the:
(1) U.S. 9-10 Small Company Portfolio
(2) DFA One-Year Fixed Income Portfolio
(3) Japanese Small Company Portfolio
(4) United Kingdom Small Company Portfolio
(5) DFA Five-Year Government Portfolio
(6) Continental Small Company Portfolio
(7) U.S. Large Company Portfolio
-24-
<PAGE>
(8) DFA Global Fixed Income Portfolio
(9) DFA Intermediate Government Fixed Income Portfolio
(10) Large Cap International Portfolio
(11) Pacific Rim Small Company Portfolio
(12) U.S. 6-10 Small Company Portfolio
(13) U.S. Large Cap Value Portfolio
(14) U.S. 6-10 Value Portfolio
(15) DFA Real Estate Securities Portfolio
(16) RWB/DFA International High Book-to-Market
Portfolio
(17) Emerging Markets Portfolio
(18) DFA International Small Cap Value Portfolio
-25-
<PAGE>
(19) VA Global Bond Portfolio
(20) VA Large Value Portfolio
(21) VA Small Value Portfolio
(22) VA International Value Portfolio
(23) VA International Small Portfolio
(24) VA Short-Term Fixed Portfolio
(25) Enhanced U.S. Large Company Portfolio
(26) DFA Two-Year Global Fixed Income Portfolio
(27) International Small Company Portfolio
(28) Emerging Markets Small Cap Portfolio
(18) Copies of any plan entered into by Registrant pursuant
to Rule 18f-3 under the 1940 Act, any agreement with
any person relating to the implementation of a plan,
any amendment to a plan or agreement, and a copy of the
portion of the minutes of
-26-
<PAGE>
a meeting of the Registrant's directors describing any
action taken to revoke a plan.
Not Applicable.
(19) Powers-of-Attorney.
(a) Power-of-Attorney appointing David G. Booth, Rex
A. Sinquefield, Michael T. Scardina, Irene R.
Diamant and Stephen W. Kline, Esq. as
attorney-in-fact for the Registrant and certified
resolution relating thereto on behalf of the
Registrant.
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment No. 31/32
to the Registrant's Registration
Statement on Form N-1A.
Filing Nos.: 2-73948 and 811-3258.
Filing Date: October 3, 1994.
(b) Power-of-Attorney appointing David G. Booth,
Rex A. Sinquefield, Michael T. Scardina, Irene
R. Diamant and Stephen W. Kline, Esq. as
attorney-in-fact for THE DFA INVESTMENT TRUST
COMPANY ("DFA/ITC") and certified resolution
relating thereto on behalf of DFA/ITC.
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment No. 13/14
to the Registrant's Registration
Statement of the Registrant on Form
N-1A.
File Nos.: 33-33980 and 811-6067.
Filing Date: March 21, 1996.
(c) Powers-of-Attorney for Registrant, DFA/ITC and
Dimensional Emerging Markets Fund Inc. dated
July 18, 1997.
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment No. 47/48
to the Registrant's Registration
Statement on Form N-1A.
File Nos.: 2-73948 and 811-3258.
Filing Date: November 30, 1997.
</TABLE>
- -----------------------------------------------------------------
(1) To be filed by amendment on December 8, 1998
ITEM 25. Persons Controlled by or Under Common Control with Registrant.
None.
ITEM 26. Number of Holders of Securities.
(2)
-27-
<PAGE>
(1) Number of Record
Title of Class Holders as of
(Par Value $.01) August 31, 1998
U.S. 9-10 Small Company Portfolio
DFA One-Year Fixed Income Portfolio
Japanese Small Company Portfolio
United Kingdom Small Company Portfolio
DFA Five-Year Government Portfolio
Continental Small Company Portfolio
U.S. Large Company Portfolio
DFA Global Fixed Income Portfolio
DFA Intermediate Government
Fixed Income Portfolio
Large Cap International Portfolio
Pacific Rim Small Company Portfolio
U.S. 6-10 Small Company Portfolio
U.S. Large Cap Value Portfolio
U.S. 6-10 Value Portfolio
DFA Real Estate Securities Portfolio
RWB/DFA International High
Book-to-Market Portfolio
Emerging Markets Portfolio
DFA International Small Cap
Value Portfolio
VA Global Bond Portfolio
VA Large Value Portfolio
VA Small Value Portfolio
VA International Value
Portfolio
VA International Small Portfolio
VA Short-Term Fixed Portfolio
Enhanced U.S. Large Company Portfolio
DFA Two-Year Global Fixed
Income Portfolio
International Small Company Portfolio
Emerging Markets Small Cap Portfolio
ITEM 27. Indemnification.
Reference is made to Section 1 of Article XI of the Registrant's
By-Laws (as approved through 10/17/96), incorporated herein by
reference, which 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
-28-
<PAGE>
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.
(d) [Does indemnification undertaking need to be included?]
ITEM 28. Business and Other Connections of the Investment Advisor.
(a) Dimensional Fund Advisors Inc., with a principal place
of business located at 1299 Ocean Drive, 11th Floor,
Santa Monica, CA 90401, the investment manager for the
Registrant, is also the investment manager for three
other registered open-end investment companies, The DFA
Investment Trust Company, Dimensional Emerging
Markets Funds Inc. and Dimensional Investment Group
Inc. The Advisor also serves as sub-advisor for
certain other registered investment companies.
-29-
<PAGE>
The Advisor is engaged in the business of providing
investment advice primarily to institutional investors.
For additional information, please see "Management of
the Fund" in PART A and "Directors and Officers" in
PART B of this Registration Statement.
Additional information as to the Advisor and the
directors and officers of the Advisor is included in
the Advisor's Form ADV filed with the Commission
(File No. 801-16283), which is incorporated herein by
reference and sets forth the officers and directors of
the Advisor and information as to any business,
profession, vocation or employment or a substantial
nature engaged in by those officers and directors
during the past two years.
(b) The Sub-Advisor for the VA International Small
Portfolio of the Registrant is Dimensional Fund
Advisors Ltd. ("DFAL"). DFAL has its principal
place of business is 14 Berkeley Street, London
W1X 5AD, England.
(c) The Sub-Advisor for the VA International Small
Portfolio of the Registrant is DFA Australia Limited
("DFA Australia"). DFA has its principal placed of
business is Suite 4403 Gateway, 1 MacQuarie Place,
Sydney, New South Wales 2000, Australia.
ITEM 29. Principal Underwriters.
Names of investment companies for which the Registrant's
principal underwriter also acts as principal underwriter.
(a) Not applicable.
(b) Registrant distributes its own shares. It has entered
into an agreement with DFA Securities Inc. dated March
31, 1989, which provides that DFA Securities Inc., 1299
Ocean Avenue, 11th Floor, Santa Monica, CA 90401, will
supervise the sale of Registrant's shares.
(c) Not applicable.
ITEM 30. Location of Accounts and Records.
The accounts and records of the Registrant are located at
the office of the Registrant and at additional locations,
as follows:
Name Address
DFA Investment Dimensions 1299 Ocean Avenue
Group Inc. 11th Floor
Santa Monica, CA 90401
-30-
<PAGE>
PFPC Inc. 400 Bellevue Parkway,
Wilmington, DE 19809.
ITEM 31. Management Services.
None.
ITEM 32. Undertakings.
(a) Not applicable.
(b) Not applicable.
(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.
-31-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant has duly caused Post-Effective Amendment No.
49/50 to this 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 24th day of September, 1998.
DFA INVESTMENT DIMENSIONS GROUP INC.
(Registrant)
By: David G. Booth*
David G. Booth, President
(Signature and Title)David G. Booth
Pursuant to the requirements of the Securities Act of 1933, Post-Effective
Amendment No. 49/50 to this Registration Statement has been signed below by the
following persons in the capacities and on the dates indicated.
Signature Title Date
David G. Booth* Director and September 24th, 1998
David G. Booth Chairman-Chief
Executive Officer
Rex A. Sinquefield* Director and September 24th, 1998
Rex A. Sinquefield Chairman-Chief
Investment Officer
Michael T. Scardina* Chief Financial September 24th, 1998
Michael T. Scardina Officer, Treasurer
and Vice President
George M. Constantinides* Director September 24th, 1998
George M. Constantinides
John P. Gould* Director September 24th, 1998
John P. Gould
Roger G. Ibbotson* Director September 24th, 1998
Roger G. Ibbotson
Merton H. Miller* Director September 24th, 1998
Merton H. Miller
-32-
<PAGE>
Myron S. Scholes* Director September 24th, 1998
Myron S. Scholes
* By: Catherine L. Newell
Catherine L. Newell
Attorney-in-Fact (Pursuant to a Power-of-Attorney)
-33-
<PAGE>
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 24th day of September, 1998.
THE DFA INVESTMENT TRUST COMPANY
(Registrant)
By: David G. Booth*
David G. Booth, President
(Signature and Title)
The undersigned Directors 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
David G. Booth* Director and September 24th, 1998
David G. Booth Chairman-Chief
Executive Officer
Rex A. Sinquefield* Director and September 24th, 1998
Rex A. Sinquefield Chairman-Chief
Investment Officer
Michael T. Scardina* Chief Financial September 24th, 1998
Michael T. Scardina Officer, Treasurer
and Vice President
George M. Constantinides* Director September 24th, 1998
George M. Constantinides
John P. Gould* Director September 24th, 1998
John P. Gould
Roger G. Ibbotson* Director September 24th, 1998
Roger G. Ibbotson
Merton H. Miller* Director September 24th, 1998
Merton H. Miller
Myron S. Scholes* Director September 24th, 1998
Myron S. Scholes
-34-
<PAGE>
* By: Catherine L. Newell
Catherine L. Newell
Attorney-in-Fact (Pursuant to a Power-of-Attorney)
-35-
<PAGE>
DIMENSIONAL EMERGING MARKETS FUND INC. 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 24th day of September, 1998.
DIMENSIONAL EMERGING MARKETS FUND INC.
(Registrant)
By: David G. Booth*
David G. Booth, President
(Signature and Title)
The undersigned Directors and principal officers of DIMENSIONAL EMERGING MARKETS
FUND INC. consent to the filing of this Amendment to the Registration Statement
of DFA Investment Dimensions Group Inc. on the dates indicated.
Signature Title Date
David G. Booth* Director and September 24th, 1998
David G. Booth Chairman-Chief
Executive Officer
Rex A. Sinquefield* Director and September 24th, 1998
Rex A. Sinquefield Chairman-Chief
Investment Officer
Michael T. Scardina* Chief Financial September 24th, 1998
Michael T. Scardina Officer, Treasurer
and Vice President
George M. Constantinides* Director September 24th, 1998
George M. Constantinides
John P. Gould* Director September 24th, 1998
John P. Gould
Roger G. Ibbotson* Director September 24th, 1998
Roger G. Ibbotson
Merton H. Miller* Director September 24th, 1998
Merton H. Miller
Myron S. Scholes* Director September 24th, 1998
Myron S. Scholes
-36-
<PAGE>
* By: Catherine L. Newell
Catherine L. Newell
Attorney-in-Fact (Pursuant to a Power-of-Attorney)
-37-
<PAGE>
EXHIBIT INDEX
N-1A EDGAR
Exhibit No. Exhibit No. Description
24(b)(11) EX-99.b.11 Consent of PriceWaterhouseCoopers LLP
24(b)(17) EX-27. Financial Data Schedules containing
May 31, 1998 and November 30,
1997 financial information relating
to the:
[List each series and ensure that
extension refers to number
reported/assigned in Form N-SAR].
-38-
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this Post-Effective Amendment
No. 49 (File No. 33-2-73948) under the Securities Act of 1933 and
Post-Effective Amendment No. 50 (File No. 811-3258) under the Investment
Company Act of 1940 to the Registration Statement on Form N-1A of DFA
Investment Dimensions Group Inc. of the following:
- - Our report, dated January 16, 1998 on our audits of the financial
statements and financial highlights as of November 30, 1997 and for the
respective periods then ended for DFA Investment Dimensions Group, Inc.
- - Our report, dated January 16, 1998 on our audits of the financial
statements and financial highlights as of November 30, 1997 and for the
respective periods then ended of the DFA Investment Trust Company and
Dimensional Emerging Markets Fund, Inc.
- - Our report, dated January 16, 1998 on our audits of the financial
statements and financial highlights as of November 30, 1997 and for the
respective periods then ended of the Dimensional Emerging Markets Fund,
Inc.
We also consent to the reference to our firm under the captions "Other
Information" and "Financial Statements" in the Statement of Additional
Information.
PricewaterhouseCoopers LLP
2400 Eleven Penn Center
Philadelphia, PA
September 24, 1998
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