<PAGE>
As filed with the U.S. Securities and Exchange Commission on March 29, 1999
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. [ ]
Post-Effective Amendment No. 53 [X]
--
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 54 [X]
--
(Check appropriate box or boxes.)
DFA INVESTMENT DIMENSIONS GROUP INC.
------------------------------------------
(Exact Name of Registrant as Specified in Charter)
1299 Ocean Avenue, 11th Floor, Santa Monica CA 90401
- ---------------------------------------------- -----
(Address of Principal Executive Office) (Zip Code)
Registrant's Telephone Number, including Area Code (310) 395-8005
------------------
Irene R. Diamant, Vice President and Secretary
DFA Investment Dimensions Group Inc.,
1299 Ocean Avenue, 11th Floor, Santa Monica, California 90401
--------------------------------------------------------------
(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, (610) 640-5801
It is proposed that this filing will become effective (check appropriate box):
..... immediately upon filing pursuant to paragraph (b).
..X.. on March 30, 1999 pursuant to paragraph (b)
..... 60 days after filing pursuant to paragraph (a)(1)
..... on (date) pursuant to paragraph (a)(1)
..... 75 days after filing pursuant to paragraph (a)(2)
..... on (date) pursuant to paragraph (a)(2) of Rule 485.
If appropriate, check the following box:
..... This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
<PAGE>
The Trustees and principal officers of The DFA Investment Trust
Company also have executed this registration statement.
Title of Securities Being Registered
............................................................
VA Large Value Portfolio
VA Small Value Portfolio
VA International Value Portfolio
VA International Small Portfolio
VA Short-Term Fixed Portfolio
VA Global Bond Portfolio
RWB/DFA International High Book to Market Portfolio
C O N T E N T S
This Post-Effective Amendment No. 51 to Registration File Nos. 2-73948/811-3258
includes the following:
1. Facing Page (1)
2. Contents Page
3. Part A - Prospectus relating to the Registrant's VA Large Value Portfolio,
VA Small Value Portfolio, VA International Value Portfolio, VA
International Small Portfolio, VA Short-Term Fixed Portfolio, and VA Global
Bond Portfolio series of shares
4. Part A - Prospectus (2)
5. Part B - Statement of Additional Information relating to the Registrant's
VA Large Value Portfolio, VA Small Value Portfolio, VA International Value
Portfolio, VA International Small Portfolio, VA Short-Term Fixed Portfolio,
and VA Global Bond Portfolio series of shares
6. Part B - Statement of Additional Information (2)
7. Part C - Other Information
8. Signatures
(1) This Post-Effective Amendment relates to the Registrant's VA Large Value
Portfolio, VA Small Value Portfolio, VA International Value Portfolio, VA
International Small Portfolio, VA Short-Term Fixed Portfolio, VA Global
Bond Portfolio, and RWB/DFA International High Book to Market Portfolio
series of shares.
(2) The Registrant's Prospectus and Statement of Additional Information
relating to the RWB/DFA International High Book to Market Portfolio series
dated March 30, 1999 are incorporated into this filing by reference to the
electronic filing of 1933 Act Post-Effective Amendment No. 53 to the
Registration Statement of Dimensional Investment Group, Inc. filed January
26, 1999 (File Nos. 33-33980/811-6067).
<PAGE>
PROSPECTUS
March 30, 1999
PLEASE CAREFULLY READ THE IMPORTANT INFORMATION IT CONTAINS BEFORE INVESTING.
DFA INVESTMENT DIMENSIONS GROUP INC.
The mutual fund described in this Prospectus offers a variety of investment
portfolios. Each listed Portfolio: -Has its own investment objective and
policies, and is the equivalent of a separate mutual fund. -Is exclusively
available to insurance company separate accounts funding variable life and
variable annuity contracts. -Does not charge a sales commission or "load".-
-Is designed for long-term investors.
DOMESTIC EQUITY PORTFOLIOS
VA Large Value Portfolio VA Small Value Portfolio
INTERNATIONAL EQUITY PORTFOLIOS
VA International Value Portfolio VA International Small Portfolio
FIXED INCOME PORTFOLIOS
VA Short-Term Fixed Portfolio VA Global Bond Portfolio
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED
THESE SECURITIES OR PASSED UPON THE ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
RISK/RETURN SUMMARY............................................................3
MANAGEMENT..................................................................3
INVESTMENT OBJECTIVES, STRATEGIES AND RISKS.................................4
OTHER RISKS.................................................................5
RISK AND RETURN BAR CHARTS AND TABLES.......................................6
ANNUAL FUND OPERATING EXPENSES.................................................9
SECURITIES LENDING REVENUE.....................................................9
HIGHLIGHTS....................................................................10
DOMESTIC EQUITY PORTFOLIOS....................................................10
INVESTMENT OBJECTIVES AND POLICIES.........................................11
INTERNATIONAL EQUITY PORTFOLIOS...............................................11
VA INTERNATIONAL VALUE PORTFOLIO..............................................11
INVESTMENT OBJECTIVE AND POLICIES..........................................11
VA INTERNATIONAL SMALL PORTFOLIO..............................................12
INVESTMENT OBJECTIVE AND POLICIES..........................................12
PORTFOLIO CONSTRUCTION.....................................................13
MALAYSIAN SECURITIES -- INTERNATIONAL EQUITY PORTFOLIOS.......................14
FIXED INCOME PORTFOLIOS INVESTMENT OBJECTIVES AND POLICIES....................14
VA SHORT-TERM FIXED PORTFOLIO..............................................14
VA GLOBAL BOND PORTFOLIO...................................................15
DESCRIPTION OF INVESTMENTS.................................................15
INVESTMENTS IN THE BANKING INDUSTRY........................................16
PORTFOLIO STRATEGY.........................................................16
PORTFOLIO TRANSACTIONS -- DOMESTIC AND INTERNATIONAL EQUITY PORTFOLIOS........17
DEVIATION FROM MARKET CAPITALIZATION WEIGHTING................................18
SECURITIES LOANS..............................................................18
MANAGEMENT OF THE FUND........................................................18
CONSULTING SERVICES -- VA INTERNATIONAL VALUE PORTFOLIO....................19
INVESTMENT SERVICES - VA INTERNATIONAL SMALL PORTFOLIO.....................19
DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAXES..............................20
PURCHASE AND REDEMPTION OF SHARES.............................................20
VALUATION OF SHARES...........................................................20
FINANCIAL HIGHLIGHTS..........................................................22
SERVICE PROVIDERS.............................................................26
</TABLE>
2
<PAGE>
MARKET CAPITALIZATION means the number of shares of a company's stock
outstanding times price per share.
MARKET CAPITALIZATION WEIGHTED means the amount of a stock in an index or
portfolio is keyed to that stock's market capitalization compared to all
eligible stocks. The higher the stock's relative market cap, the greater its
representation.
RISK/RETURN SUMMARY
MANAGEMENT
Dimensional Fund Advisors Inc. (the "Advisor") is the investment manager
and administrator for the Portfolios.
EQUITY INVESTMENT APPROACH:
The Advisor believes that equity investing should involve a long-term
view and a focus on asset class (e.g., small company stocks) selection,
not stock picking. It places priority on limiting expenses, portfolio
turnover, and trading costs. Many other investment managers concentrate
on reacting to price movements and choosing individual securities.
NO MARKET TIMING OR STOCK PICKING: In contrast to some other managers, the
Advisor does not take defensive positions in anticipation of negative
investment conditions, or try to pick potentially outperforming securities.
PORTFOLIO CONSTRUCTION: Generally, the Advisor structures a portfolio by:
1. Selecting a starting universe of securities (for example, all publicly traded
U.S. common stocks).
2. Creating a sub-set of companies meeting the Advisor's investment guidelines.
3. Excluding certain companies after analyzing various factors (for example,
solvency).
4. Purchasing stocks so the portfolio is generally market cap weighted.
FIXED INCOME INVESTMENT APPROACH:
PORTFOLIO CONSTRUCTION: Generally, the Advisor structures a portfolio by:
1. Setting a maturity range.
2. Implementing the Advisor's quality and eligibility guidelines.
3. Purchasing securities with a view to maximizing returns.
MARKET RISK: Even a long-term investment approach cannot guarantee a profit.
Economic, political and issuer specific events will cause the value of
securities, and the Portfolios that own them, to rise or fall. Fixed income
Portfolios are particularly sensitive to changing interest rates.
3
<PAGE>
- -"VALUE STOCKS":
Compared to other stocks, value stocks sell for low prices relative to their
earnings, dividends or book value.
- -In selecting value stocks, the Advisor primarily considers price relative to
book value.
- -Most Portfolios do not hedge their foreign currency risks.
INVESTMENT OBJECTIVES, STRATEGIES AND RISKS
DOMESTIC EQUITY PORTFOLIOS:
VA LARGE VALUE PORTFOLIO
VA SMALL VALUE PORTFOLIO
- - INVESTMENT OBJECTIVE (EACH PORTFOLIO): Long-term capital appreciation.
- - INVESTMENT STRATEGY (EACH PORTFOLIO): Purchases value stocks of United
States companies on a market capitalization weighted basis.
- - HOW THE PORTFOLIOS DIFFER: VA Large Value Portfolio focuses on large
capitalization stocks, VA Small Value Portfolio on small company issues.
SMALL COMPANY RISK: Securities of small firms are often less liquid than
those of large companies. As a result, small company stocks may fluctuate
relatively more in price than the stocks of larger companies.
INTERNATIONAL PORTFOLIOS:
VA INTERNATIONAL VALUE PORTFOLIO
VA INTERNATIONAL SMALL COMPANY PORTFOLIO
- - INVESTMENT OBJECTIVE (EACH PORTFOLIO): Long-term capital appreciation.
- - INVESTMENT STRATEGY:
- VA INTERNATIONAL VALUE PORTFOLIO: Buy value stocks of large, non-U.S.
companies on a market capitalization weighted basis in each applicable
country.
- VA INTERNATIONAL SMALL COMPANY PORTFOLIO: Buy Japanese, United Kingdom,
other European, and Pacific Rim small company stocks on a market
capitalization weighted basis in each applicable country.
THE INTERNATIONAL PORTFOLIOS HAVE STOPPED PURCHASING MALAYSIAN STOCKS. This
action was taken because the Malaysian government restricted the ability of
foreign investors -- including the Portfolios -- to withdraw their
investments from Malaysia.
FOREIGN SECURITIES AND CURRENCIES RISK: Foreign securities prices may decline
or fluctuate because of: (a) economic or political action of foreign
governments, and/or (b) less regulated or liquid securities markets.
Investors holding these securities are also exposed to foreign currency risk
(the possibility that foreign currency will fluctuate in value against the
U.S. dollar). Foreign currency risk can be minimized by hedging. However,
hedging may be expensive.
4
<PAGE>
FIXED INCOME PORTFOLIOS:
VA SHORT-TERM FIXED PORTFOLIO
- - INVESTMENT OBJECTIVE: Maximize total return available from a universe of high
quality fixed income investments with an average maturity of one year or less.
- - INVESTMENT STRATEGY: Acquire high quality obligations maturing in a year or
less. The Portfolio may, however, take a large position in higher yielding
securities maturing within two years. It also intends to concentrate
investments in the banking industry in certain cases.
RISK OF BANKING CONCENTRATION: Focus on the banking industry would link the
performance of the VA Short-Term Fixed Portfolio to changes in performance of
the banking industry generally.
VA GLOBAL BOND PORTFOLIO
- - INVESTMENT OBJECTIVE: Maximize total return available from a universe of high
quality fixed income instruments maturing in five years or less.
- - INVESTMENT STRATEGY: Buy obligations of issuers that might include the U.S.
and other national governments, supranational organizations (e.g., the World
Bank) and domestic and foreign corporations. The Portfolio hedges all foreign
currency risks.
OTHER RISKS
DERIVATIVES:
Derivatives are securities, such as futures contracts, whose value is derived
from that of other securities or indices. Derivatives can be used for hedging
(attempting to reduce risk by offsetting one investment position with
another) or speculation (taking a position in the hope of increasing return).
VA Global Bond Portfolio uses long-term foreign currency futures contracts to
hedge foreign currency risks. The VA International Equity Portfolios may also
do so. Hedging with derivatives may increase expenses, and there is no
guarantee that a hedging strategy will work.
INTRODUCTION OF THE EURO:
On January 1, 1999, The European Monetary Union ("EMU") introduced a common
currency, the Euro, replacing its members' national currencies. This
development may affect the International Portfolios (they may invest in EMU
countries) to the extent it changes investment practices, opportunities,
risks and investor behavior or creates administrative problems. The Advisor
and its global custodians are attempting to assure on an ongoing basis that
the Portfolios will remain unaffected by any transition related disruptions.
However, they cannot guarantee that their efforts will succeed completely.
The relative value of the U.S. dollar and Euro will fluctuate. Accordingly,
currency risk (discussed above) will continue to apply to VA International
Equity Portfolio investments in EMU countries.
5
<PAGE>
SECURITIES LENDING:
The Portfolios may lend their portfolio securities to generate additional
income. If they do so, they will use various strategies (for example, only
making fully collateralized and bank guaranteed loans) to reduce related
risks.
YEAR 2000 ISSUE:
Unless modified, many computer programs will not properly process information
from the year 2000 on. While the issue is international in scope, there is
particular concern with foreign entities. The Advisor has taken steps
designed to ensure that its computers and those of Portfolio service
providers (e.g., custodians) will operate properly. Portfolios may be
negatively affected if the Advisor's efforts prove inadequate, and/or Year
2000 problems hurt portfolio securities or economic conditions generally.
RISK AND RETURN BAR CHARTS AND TABLES
The Bar Charts and Tables below illustrate the variability of each
Portfolio's returns and is meant to provide some indication of the risks of
investing in the Portfolios. Shown are changes in performance from year to
year, and how annualized 1 year, 5 year, and since inception returns compare
with those of a broad measure of market performance. Past performance is not
an indication of future results.
6
<PAGE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
VA SMALL VALUE
PORTFOLIO
<TABLE>
<CAPTION>
1996 1997 1998
- ------------------------------------------------------
<S> <C> <C> <C>
Total Returns (%) 22.05 30.45 -6.62
</TABLE>
<TABLE>
<CAPTION>
OCTOBER 1995-DECEMBER 1998
--------------------------------------------------
HIGHEST QUARTER LOWEST QUARTER
--------------------------------------------------
<S> <C>
18.24 (7/97-9/97) -21.73 (7/98-9/98)
</TABLE>
<TABLE>
<CAPTION>
PERIODS ENDING DECEMBER 31, 1998
--------------------------------
ONE SINCE 10/95
ANNUALIZED RETURNS (%) YEAR INCEPTION
- ----------------------------------------------------------------------------
<S> <C> <C>
VA Small Value Portfolio -6.62 12.47
Russell 2000 Value Index -6.44 14.21
</TABLE>
VA LARGE VALUE
PORTFOLIO
<TABLE>
<CAPTION>
1996 1997 1998
- ------------------------------------------------------
<S> <C> <C> <C>
Total Returns (%) 18.47 29.21 10.74
</TABLE>
<TABLE>
<CAPTION>
FEBRUARY 1995-DECEMBER 1998
--------------------------------------------------
HIGHEST QUARTER LOWEST QUARTER
--------------------------------------------------
<S> <C>
15.27 (10/98-12/98) -15.84 (7/98-9/98)
</TABLE>
<TABLE>
<CAPTION>
PERIODS ENDING DECEMBER 31, 1998
--------------------------------
ONE SINCE 2/95
ANNUALIZED RETURNS (%) YEAR INCEPTION
- ----------------------------------------------------------------------------
<S> <C> <C>
VA Large Value Portfolio 10.74 20.55
Russell 1000 Value Index 15.65 27.03
</TABLE>
VA INTERNATIONAL
VALUE PORTFOLIO
<TABLE>
<CAPTION>
1996 1997 1998
- ------------------------------------------------------
<S> <C> <C> <C>
Total Returns (%) 7.12 -2.23 11.72
</TABLE>
<TABLE>
<CAPTION>
OCTOBER 1995-DECEMBER 1998
--------------------------------------------------
HIGHEST QUARTER LOWEST QUARTER
--------------------------------------------------
<S> <C>
17.29 (10/98-12/98) -18.20 (7/98-9/98)
</TABLE>
<TABLE>
<CAPTION>
PERIODS ENDING DECEMBER 31, 1998
--------------------------------
ONE SINCE 10/95
ANNUALIZED RETURNS (%) YEAR INCEPTION
- ----------------------------------------------------------------------------
<S> <C> <C>
VA International Value Portfolio 11.72 6.71
MSCI EAFE Index 19.99 9.62
</TABLE>
VA INTERNATIONAL
SMALL PORTFOLIO
<TABLE>
<CAPTION>
1996 1997 1998
- ------------------------------------------------------
<S> <C> <C> <C>
Total Returns (%) 0.27 -23.23 5.17
</TABLE>
<TABLE>
<CAPTION>
OCTOBER 1995-DECEMBER 1998
--------------------------------------------------
HIGHEST QUARTER LOWEST QUARTER
--------------------------------------------------
<S> <C>
18.98(1/98-3/96) -16.67 (7/98-9/98)
</TABLE>
<TABLE>
<CAPTION>
PERIODS ENDING DECEMBER 31, 1998
--------------------------------
ONE SINCE 10/95
ANNUALIZED RETURNS (%) YEAR INCEPTION
- ----------------------------------------------------------------------------
<S> <C> <C>
VA International Small Portfolio 5.17 -5.98
Salomon Extended Market Index 12.15 3.28
</TABLE>
7
<PAGE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
VA SHORT-TERM
FIXED PORTFOLIO
<TABLE>
<CAPTION>
1996 1997 1998
- ------------------------------------------------------
<S> <C> <C> <C>
Total Returns (%) 5.20 5.70 5.50
</TABLE>
<TABLE>
<CAPTION>
OCTOBER 1995-DECEMBER 1998
--------------------------------------------------
HIGHEST QUARTER LOWEST QUARTER
--------------------------------------------------
<S> <C>
1.73 (4/97-6/97) 0.90 (1/97-3/97)
</TABLE>
<TABLE>
<CAPTION>
PERIODS ENDING DECEMBER 31, 1998
--------------------------------
ONE SINCE 10/95
ANNUALIZED RETURNS (%) YEAR INCEPTION
- ------------------------------------------------------------------------------------------
<S> <C> <C>
VA Short-Term Fixed Portfolio 5.70 5.45
3-Month U.S. Treasury Bill Index 5.24 5.35
Merrill Lynch U.S. Corporate & Government, 1-3 Yrs. Index 6.93 6.56
</TABLE>
VA GLOBAL BOND
PORTFOLIO
<TABLE>
<CAPTION>
1996 1997 1998
- ------------------------------------------------------
<S> <C> <C> <C>
Total Returns (%) 8.97 7.78 8.24
</TABLE>
<TABLE>
<CAPTION>
FEBRUARY 1995-DECEMBER 1998
--------------------------------------------------
HIGHEST QUARTER LOWEST QUARTER
--------------------------------------------------
<S> <C>
4.20 (7/96-9/96) -0.15 (1/96-3/96)
</TABLE>
<TABLE>
<CAPTION>
PERIODS ENDING DECEMBER 31, 1998
--------------------------------
ONE SINCE 2/95
ANNUALIZED RETURNS (%) YEAR INCEPTION
- ----------------------------------------------------------------------------
<S> <C> <C>
VA Global Bond Portfolio 8.24 9.72
Lehman Intermediate Government/Corporate Index 8.42 8.57
</TABLE>
8
<PAGE>
ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM PORTFOLIO ASSETS)
The expenses in the following table are based on those incurred by the
Portfolios for the fiscal year ended November 30, 1998.
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES MANAGEMENT OTHER TOTAL
(AS A PERCENTAGE OF AVERAGE NET ASSETS) FEE EXPENSES OPERATING EXPENSES
---------- -------- ------------------
<S> <C> <C> <C>
VA Small Value 0.50% 0.20% 0.70%
VA Large Value 0.25% 0.21% 0.46%
VA International Value 0.40% 0.28% 0.68%
VA International Small 0.50% 0.40% 0.90%
VA Short-Term Fixed 0.25% 0.16% 0.41%
VA Global Bond 0.25% 0.32% 0.57%
</TABLE>
EXAMPLE
This Example is meant to help you compare the cost of investing in the
Portfolios with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in the Portfolio for the
time periods indicated and then redeem all of your shares at the end of those
periods. The Example also assumes that your investment has a 5% return each
year and that the Portfolio's operating expenses remain the same. Although
your actual costs may be higher or lower, based on these assumptions your
costs would be:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
VA Small Value $72 $224 $390 $871
VA Large Value $47 $148 $258 $579
VA International Value $69 $218 $379 $847
VA International Small $92 $287 $498 $1,108
VA Short-Term Fixed $42 $132 $230 $518
VA Global Bond $58 $183 $318 $714
</TABLE>
SECURITIES LENDING REVENUE
For the fiscal year ended November 30, 1998, the International Equity
Portfolios received the following net revenue from a securities lending
program (see "Securities Loans") which constituted a percentage of the
average daily net assets of each Portfolio:
9
<PAGE>
<TABLE>
<CAPTION>
Portfolio Net Revenue Percentage of Assets
--------- ----------- --------------------
<S> <C> <C>
VA International Value Portfolio $14,000 0.07%
VA International Small Portfolio $ 8,000 0.07%
</TABLE>
HIGHLIGHTS
MANAGEMENT OF THE FUND
Dimensional Fund Advisors Inc. (the "Advisor") serves as investment
advisor to each Portfolio. Dimensional Fund Advisors Ltd. and DFA Australia
Limited each serve as a sub-advisor to VA International Small Portfolio.
(See "MANAGEMENT OF THE FUND.")
DIVIDEND POLICY
All the Portfolios distribute substantially all of their net
investment income in December of each year. 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 Portfolios are sold only to separate accounts of insurance
companies to fund variable life and variable annuity insurance contracts.
Purchases and redemptions are made at net asset value. To invest in a
Portfolio, please see the prospectus of the insurance company's separate
account which offers variable life and variable annuity insurance contracts
to investors.
The value of the shares issued by the Portfolios will fluctuate in
relation to their own investment experience. Unlike money market funds, the
shares of VA Short-Term Fixed Portfolio will tend to reflect fluctuations in
interest rates because the Portfolio does not seek to stabilize the price of
its shares by use of the "amortized cost" method of securities valuation.
(See "PURCHASE AND REDEMPTION OF SHARES" and "VALUATION OF SHARES.")
DOMESTIC EQUITY PORTFOLIOS
INVESTMENT OBJECTIVES AND POLICIES
The investment objective of each of the Domestic Equity Portfolios is to
achieve long-term capital appreciation. VA Large Value Portfolio and VA Small
Value Portfolio will invest in 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 New York Stock Exchange ("NYSE") and 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. VA Large Value Portfolio 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 VA Small Value Portfolio will purchase common stocks of
companies whose market capitalizations are smaller than such company having
the median market capitalization of companies whose shares are listed on the
NYSE.
10
<PAGE>
On not less than a semi-annual basis, for each Portfolio the Advisor will
calculate the book to market ratio necessary to determine those companies
whose stocks may be eligible for investment.
Ordinarily, at least 80% of the assets of each Domestic Equity Portfolio
will be invested in a broad and diverse group of readily marketable common
stocks of U.S. companies with high book to market ratios, as described above.
The Portfolios also may invest in index futures contracts and options on
index futures contracts provided that, in accordance with current
regulations, not more than 5% of its net assets are then invested as initial
margin deposits on such contracts or options. The Portfolios will purchase
securities that are listed on the principal U.S. national securities
exchanges and traded in the over-the-counter market ("OTC").
INTERNATIONAL EQUITY PORTFOLIOS
VA INTERNATIONAL VALUE PORTFOLIO
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of VA International Value Portfolio is to
achieve long-term capital appreciation. The Portfolio invests in the value
stocks of large non-U.S. companies. A company's shares will be considered
eligible for investment if the Advisor believes such shares are value stocks
at the time of purchase. Securities are considered value stocks primarily
because a company's shares have a book to market ratio that equals or exceeds
the ratios of any of the 30% of companies in that country with the highest
positive book to market ratios. In measuring value, the Advisor may consider
additional factors such as cash flow, economic conditions and developments in
the issuer's industry. As of the date of this prospectus, the VA
International Value Portfolio intends to invest in companies which have a
market capitalization of at least $800 million and are listed on a major
exchange in such country. The Advisor may reset such floor from time to time
to reflect changing market conditions. The Portfolio will be approximately
market capitalization weighted.
Under normal market conditions, the Portfolio will invest at least 65%
of the value of its assets in issuers organized or having a majority of their
assets in or deriving a majority of their operating income in at least three
non-U.S. countries. The Portfolio will not invest more than 25% of its total
assets in securities of companies in a single industry.
The Portfolio reserves the right to invest in index futures contracts
and options on index futures contracts to commit funds awaiting investment or
to maintain liquidity. The Portfolio will not purchase futures contracts if
as a result more than 5% of its net assets would then consist of initial
margin deposits required to establish such contracts. The Portfolio intends
to invest in the stocks of large companies in countries with developed
markets. As of the date of this prospectus, the Portfolio 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 Portfolio's growth
permits, it may invest in the stocks of large companies in other developed
markets, including Austria, Finland and Ireland.
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 companies
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. On at least a semi-annual
basis, the Advisor will prepare lists of non-U.S. large companies with high
book to market ratios whose shares may be eligible for investment.
It is management's belief that the value 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 large company stocks for
inclusion in the Portfolio involves greater risk than including a large
number of them.
11
<PAGE>
VA INTERNATIONAL SMALL PORTFOLIO
INVESTMENT OBJECTIVE AND POLICIES
VA International Small Portfolio's investment objective is to achieve
long-term capital appreciation. It provides investors with access to
securities portfolios consisting of small Japanese, United Kingdom,
Continental and Pacific Rim companies. It invests its assets in a broad and
diverse group of marketable stocks of (1) Japanese small companies which are
traded in the Japanese securities markets; (2) United Kingdom small companies
which are traded principally on the International Stock Exchange of the
United Kingdom and the Republic of Ireland ("ISE"); (3) small companies
organized under the laws of certain European countries; and (4) small
companies located in Australia, New Zealand and Pacific Rim Asian countries
whose shares are traded principally on the securities markets located in
those countries. The Advisor will determine the initial allocation of assets
among the four segments of VA International Small Portfolio and will
periodically review and adjust such allocation, all in its sole discretion.
Company size will be determined for purposes of this Portfolio solely
on the basis of a company's market capitalization. "Market capitalization"
will be calculated by multiplying the price of a company's stock by the
number of its shares of that stock outstanding. Each segment of VA
International Small Portfolio will be structured to reflect reasonably the
relative market capitalizations of the portfolio companies in that segment.
The Advisor believes that over the long term the investment performance of
small companies in developed countries is superior to large companies, and
that investment in the Portfolio is an effective way to improve global
diversification.
JAPANESE SMALL COMPANY SEGMENT
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 onehalf (deciles 6 through
10) of companies whose securities are listed on the First Section of the
Tokyo Stock Exchange ("TSE"). While the Portfolio will invest primarily in
the stocks of small companies which are listed on the TSE, it may acquire the
stocks of Japanese small companies which are traded in other Japanese
securities markets as well.
UNITED KINGDOM SMALL COMPANY SEGMENT
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 onehalf (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
Standard & Poor's 500 Composite Stock Index ("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 Portfolio to determine the maximum
market capitalization of any company whose stock the Portfolio will purchase,
Portfolio acquisitions will not be limited to stocks which are included in
the FTA. The Portfolio will not, however, purchase shares of any investment
trust or of any company whose market capitalization is less than $5,000,000.
CONTINENTAL SMALL COMPANY SEGMENT
The Portfolio is authorized to invest in readily marketable stocks of a
broad and diverse group of small companies organized under the laws of
certain European countries. As of the date of this prospectus, the Portfolio
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 of this segment in which the Portfolio invests. The Advisor
typically will use the appropriate country indices of the Financial
TimesActuaries
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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
are available for purchase by nonresident 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 this segment will be considered to be "Continental small
companies" and will be eligible for purchase by the Portfolio.
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 Portfolio does not intend, however, to purchase shares of any company
whose market capitalization is less than the equivalent of $5,000,000. The
Advisor may in its discretion either limit further investments in a
particular country or divest the Portfolio of holdings in a particular
country. (See "Portfolio Structure.")
PACIFIC RIM SMALL COMPANY SEGMENT
The Portfolio is authorized to invest in stocks of small companies
located in Australia, New Zealand and Pacific Rim Asian countries whose
shares are traded principally on the securities markets located in those
countries. Company size will be determined by the Advisor in a manner that
will compare the market capitalizations of the companies in all countries of
this segment in which the Portfolio invests. 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% (8th, 9th and 10th deciles) of companies listed in
the FTW as combined for the countries in this segment will be considered to
be "Pacific Rim small companies" and will be eligible for purchase by the
Portfolio. As of the date of this prospectus, the Portfolio invests in the
Pacific Rim small companies in Australia, Hong Kong, Malaysia, 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.
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 Portfolio does not intend to purchase shares of any company whose market
capitalization is less than $5,000,000. The Advisor may in its discretion
either limit further investments in a particular country or divest the
Portfolio of holdings in a particular country.
PORTFOLIO CONSTRUCTION
With respect to each segment, VA International Small Portfolio intends
to acquire a portion of the stock of each eligible company on a market
capitalization basis.
VA International Small Portfolio is market capitalization weighted. That
is, each security is generally purchased in each segment based on the
issuer's relative market capitalization within that segment. In this way, the
amount of a particular security owned is keyed to that security's market
capitalization compared to all securities in the segment. The decision to
include or exclude the shares of an issuer will be made on the basis of such
issuer's relative market capitalization determined by reference to other
companies located in the same country, except with respect to Continental and
Pacific Rim small companies, such determination shall be made by reference to
other companies located in all countries in the respective segment. Company
size is measured in terms of local currencies in order to eliminate the
effect of variations in currency exchange rates, except with respect to
Continental and Pacific Rim small company segments, in which segments company
size will be measured in terms of a common currency. On at least a
semi-annual basis, the Advisor will determine the market capitalization of
the largest small company eligible for investment in each segment. Common
stocks whose market capitalizations are not greater than such company will be
purchased. On a periodic basis, the Advisor will review each Portfolio's
holdings and determine which, at the time of such review, are no longer
considered Japanese, United Kingdom, Continental or Pacific Rim small
companies.
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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. The Portfolio intends
to invest at least 80% of its assets in equity securities of Japanese, United
Kingdom, Continental and Pacific Rim small companies.
MALAYSIAN SECURITIES - INTERNATIONAL EQUITY PORTFOLIOS
As of September 10, 1998, the International Equity Portfolios, which
invest in Malaysian securities discontinued further investment in such
securities as a consequence of certain restrictions imposed by the Malaysian
government on the repatriation of assets by foreign investors such as the
International Equity Portfolios.
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 Lumpur Stock Exchange, that
operated to severely constrain or prohibit foreign investors, including the
International Equity Portfolios, from repatriating assets. Pursuant to
these regulations, the Portfolios were 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 International Equity
Portfolios have stopped trading securities in Malaysia effective
September 8, 1998. On February 14, 1999, the Malaysian government
announced the imposition of a levy on repatriation of portfolio capital.
The levy replaced the 12-month holding period imposed under the September
1, 1998 exchange control rules. The amount of the levy depends on the
duration that funds have been held in Malaysia. With respect to funds
invested in Malaysia prior to February 15, 1999, which includes all the
funds so invested by the Portfolios and Master Funds, profits from
investment made during the 12-month holding period are exempt from
imposition of a levy. A levy will be imposed, however, on the amount of
capital that is repatriated. Although there is some confusion in the
market concerning the mechanics of the levy, it appears that any principal
repatriated after one year from September 1, 1998 will not attract any levy.
Principal amounts that are repatriated after one year will be subject
to a levy at a decreasing rate, depending on the duration the principal
is held. The Advisor is closely monitoring the situation to determine
when to begin divesting the Portfolios and Master Funds of their Malaysian
assets.
With respect to the current Malaysian investments owned by the
Portfolios, the Portfolios are presently valuing the securities at 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 are treating their investments in Malaysian securities as illiquid.
As of March 1, 1999, Malaysian securities constitute approximately the
following percentages of the net asset value of the designated International
Equity Portfolios: VA International Small Portfolio, 3.62%; and VA
International Value Portfolio, 0.29%.
FIXED INCOME PORTFOLIOS INVESTMENT OBJECTIVES AND POLICIES
VA SHORT-TERM FIXED PORTFOLIO
The investment objective of VA Short-Term Fixed Portfolio is to
achieve a stable real return in excess of the rate of inflation with a
minimum of risk. The Portfolio will invest in U.S. government obligations,
U.S. government agency obligations, dollar-denominated obligations of foreign
issuers issued in the U.S., bank obligations, including U.S. subsidiaries and
branches of foreign banks, corporate obligations, commercial paper,
repurchase agreements and obligations of supranational organizations.
Generally, the Portfolio 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 Portfolio's policy that the weighted
average length of maturity of investments will not exceed one year. The
Portfolio principally invests in certificates of deposit, commercial paper,
bankers' acceptances, notes and bonds. The Portfolio will invest more than
25% of its total assets in obligations of U.S. and/or foreign banks and bank
holding companies when the yield to maturity on these instruments exceeds the
yield to maturity on all other eligible portfolio investments of similar
quality for a period of five consecutive days when the NYSE is open for
trading. (See "Investments in the Banking Industry.")
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VA GLOBAL BOND PORTFOLIO
The investment objective of VA Global Bond Portfolio is to provide a
market rate of return for a fixed income portfolio with low relative
volatility of returns. The Portfolio will invest primarily in obligations
issued or guaranteed by the U.S. and foreign governments, their agencies and
instrumentalities, obligations of other foreign issuers rated AA or better
and supranational organizations, such as the World Bank, the European
Investment Bank, European Economic Community, and European Coal and Steel
Community or corporate debt obligations. At the present time, the Advisor
expects that most investments will be made in the obligations of issuers
which are developed countries, such as those countries which are members of
the Organization of Economic Cooperation and Development (OECD). However, in
the future, the Advisor anticipates investing in issuers located in other
countries as well. Under normal market conditions, the Portfolio will invest
at least 65% of the value of its assets in issuers organized or having a
majority of their assets in, or deriving a majority of their operating income
in, at least three different countries, one of which may be the United
States. The Portfolio will invest at least 65% of its assets in 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.
Inasmuch as VA Global Bond 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.
DESCRIPTION OF INVESTMENTS
The following is a description of the categories of investments which
may be acquired by the Fixed Income Portfolios. VA Short-Term Fixed Portfolio
may invest in all of the securities and obligations listed in categories 16
and 8, and VA Global Bond Portfolio may invest in the securities and
obligations listed in categories 1-10.
1. U.S. GOVERNMENT OBLIGATIONS Debt securities issued by the U.S.
Treasury which are direct obligations of the U.S. government, including
bills, notes and bonds.
2. U.S. GOVERNMENT AGENCY OBLIGATIONS Issued or guaranteed by U.S.
government sponsored instrumentalities and federal agencies, including the
Federal National Mortgage Association, Federal Home Loan Bank and the Federal
Housing Administration.
3. CORPORATE DEBT OBLIGATIONS Non-convertible corporate debt securities
(e.g., bonds and debentures) which are issued by companies whose commercial
paper is rated Prime-1 by Moody's Investors Services, Inc. ("Moody's") or A-1
by Standard & Poor's Rating Group, a Division of The McGraw-Hill Companies
("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 with 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
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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 and Aa2 or better by Moody's.
10. EURODOLLAR OBLIGATIONS - Debt securities of domestic or foreign
issuers denominated in U.S. dollars but not trading in the United States.
Investors should be aware that the net asset values of the Fixed Income
Portfolios may change as general levels of interest rates fluctuate. When
interest rates increase, the value of a portfolio of fixed-income securities
can be expected to decline. Conversely, when interest rates decline, the
value of a portfolio of fixed-income securities can be expected to increase.
The categories of investments that may be acquired by the Fixed Income
Portfolios 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.
INVESTMENTS IN THE BANKING INDUSTRY
VA Short-Term Fixed Portfolio will invest more than 25% of its total
assets in obligations of U.S. and/or foreign banks and bank holding companies
when the yield to maturity on these investments exceeds the yield to maturity
on all other eligible portfolio investments for a period of five consecutive
days when the NYSE is open for trading. This policy can only be changed by a
vote of shareholders of the Portfolio. Banks and bank holding companies are
considered to constitute a single industry, the banking industry. When
investment in such obligations exceeds 25% of the total net assets of the
Portfolio, the Portfolio will be considered to be concentrating its
investments in the banking industry. As of the date of this prospectus, the
Portfolio is not concentrating its investments in this industry.
The types of bank and bank holding company obligations in which VA
Short-Term Fixed Portfolio may invest include: dollar-denominated
certificates of deposit, bankers' acceptances, commercial paper and other
debt obligations issued in the United States and which mature within two
years of the date of settlement, provided such obligations meet the
Portfolio's established credit rating criteria as stated under "Description
of Investments." In addition, the Portfolio is authorized to invest more than
25% of its total assets in U.S. Treasury bonds, bills and notes and
obligations of federal agencies and instrumentalities.
PORTFOLIO STRATEGY
VA Short-Term Fixed Portfolio will be managed with a view to capturing
credit risk premiums and term or maturity premiums. 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,
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certificates of deposit and corporate obligations. The holding period for
assets of the Portfolio will be chosen with a view to maximizing anticipated
returns, net of trading costs.
VA Global Bond Portfolio will be managed with a view to capturing
maturity risk premiums. Ordinarily the Portfolio will invest primarily in
obligations issued or guaranteed by foreign governments and their agencies
and instrumentalities, obligations of other foreign issuers rated AA or
better and supranational organizations. Supranational issuers include the
European Economic Community, the European Coal and Steel Community, the
Nordic Investment Bank, the World Bank and the Japanese Development Bank. The
Portfolio will own obligations issued or guaranteed by the U.S. government
and its agencies and instrumentalities also. At times when, in the Advisor's
judgment, 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.
VA Global Bond Portfolio will not invest more than 25% of its total
assets in securities issued by issuers in a single industry, or by any one
foreign government or in obligations of supranational organizations. VA
Short-Term Fixed Portfolio is expected to have a high portfolio turnover rate
due to the relatively short maturities of the securities to be acquired. It
is anticipated that the annual rate of VA Short-Term Fixed Portfolio could be
0% to 200%. 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. While the Fixed Income Portfolios 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 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.
PORTFOLIO TRANSACTIONS - DOMESTIC AND INTERNATIONAL EQUITY PORTFOLIOS
The Domestic and International Equity Portfolios 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 above, 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.
VA Large Value and VA International Value Portfolios 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 Portfolio. VA Small Value Portfolio may sell
portfolio securities when the issuer's market capitalization increases to a
level that substantially exceeds that of the issuer with the largest market
capitalization which is then eligible for investment by the Portfolio. The
present policy of VA International Small Portfolio is to consider selling
portfolio securities when they have appreciated sufficiently to rank more
than one full decile higher than the company with the largest market
capitalization eligible for purchase by the Portfolio. The Advisor may change
that policy if, in its opinion, such revision is necessary to maintain
appropriate market capitalization weighting. However, securities, including
those eligible for purchase, may be sold at any time when, in the Advisor's
judgment, circumstances warrant their sale.
In addition, VA Large Value and VA International Value Portfolios 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 Portfolio. VA Small Value Portfolio may also sell
portfolio securities in the same circumstances; however, that Portfolio
anticipates generally to retain securities of issuers with relatively smaller
market capitalizations for longer periods, despite any decrease in the
issuer's book to market ratio. VA International Small Portfolio will not sell
securities which have depreciated in value solely because prospects for the
issuer are not considered attractive or due to an expected or realized
decline in securities prices in general.
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DEVIATION FROM MARKET CAPITALIZATION WEIGHTING
The portfolio structures of each Domestic and International Equity
Portfolio involve market capitalization weighting. That is, the amount of
each security is generally purchased based on the issuer's relative market
capitalization. In this way, the amount of a particular security owned is
keyed to that security's market capitalization compared to all securities
eligible for purchase. Deviation from strict market capitalization weighting
may occur for several reasons.
The Advisor may exclude the securities of a company that otherwise meets
the applicable criteria if the Advisor determines in its best judgment that
the purchase of such security is inappropriate given other conditions. (With
regard to VA International Small Portfolio, 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)). The Advisor does not anticipate that a significant
number of securities that meet the market capitalization criteria will be
selectively excluded from the Portfolios. Deviation also will occur because
the Advisor intends to purchase in round lots only. Furthermore, the Advisor
may reduce the relative amount of any security held from the level of strict
adherence to market capitalization weighting, in order to retain sufficient
portfolio liquidity. If securities must be sold in order to obtain funds to
make redemption payments, such securities may be repurchased as additional
cash becomes available. However, the VA International Value Portfolio has
retained the right to borrow to make redemption payments and is also
authorized to redeem its shares in kind. A portion, but generally not in
excess of 20%, of a Portfolio's assets may be invested in interest-bearing
obligations, thereby causing further deviation from strict market
capitalization weighting. A further deviation may occur due to investments in
privately placed convertible debentures.
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 market capitalization weighting would otherwise
require. In addition, securities eligible for purchase or otherwise
represented in a Portfolio may be acquired in exchange for the issuance of
shares. While such transactions might cause a temporary deviation from market
capitalization weighting, they would ordinarily be made in anticipation of
further growth of assets.
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 at least a semi-annual basis,
the Advisor will prepare lists of companies eligible for investment by a
Portfolio. Additional investments generally will not be made in securities
which have changed in value sufficiently to be excluded from the Advisor's
then current market capitalization requirement for eligible portfolio
securities. This may result in further deviation from strict market
capitalization weighting. Such deviation could be substantial if a
significant amount of a Portfolio's holdings change in value sufficiently to
be excluded from the requirement for eligible securities, but not by a
sufficient amount to warrant their sale.
SECURITIES LOANS
All of the Portfolios are authorized to lend securities to qualified
brokers, dealers, banks and other financial institutions for the purpose of
earning additional income. While a Portfolio may earn additional income from
lending securities, such activity is incidental to the investment objective
of a Portfolio. The value of securities loaned may not exceed 33-1/3% of the
value of a Portfolio's total assets. In connection with such loans, a
Portfolio 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 will be able to terminate the loan at any time, will receive
reasonable compensation 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 could experience delay in
recovering the loaned securities. Management believes that this risk can be
controlled through careful monitoring procedures.
MANAGEMENT OF THE FUND
The Advisor serves as investment advisor to each of the Portfolios. As
such, the Advisor is responsible for the management of their respective
assets. Investment decisions for all Portfolios of the Fund are
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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 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.
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 $28 billion. For advisory fees
that the Portfolios have incurred for the fiscal year ended November 30,
1998, see "ANNUAL FUND OPERATING EXPENSES."
The Fund bears all of its own costs and expenses, including: services of
its independent accountants, legal counsel, brokerage fees, commissions and
transfer taxes in connection with the acquisition and disposition of
portfolio securities, taxes, insurance premiums, costs incidental to meetings
of its shareholders and directors, the cost of filing its registration
statements under federal and state securities laws, reports to shareholders,
and transfer and dividend disbursing agency, administrative services and
custodian fees. Expenses allocable to a particular Portfolio are so
allocated. Expenses which are not allocable to a particular Portfolio are
borne by each Portfolio on the basis of its relative net assets.
CONSULTING SERVICES - VA INTERNATIONAL VALUE PORTFOLIO
The Advisor has entered into a Consulting Services Agreement with
Dimensional Fund Advisers Ltd. ("DFAL") and DFA Australia Limited ("DFA
Australia") whereby DFAL and DFA Australia each provide certain trading and
administrative services with respect to the VA International Value Portfolio.
The Advisor owns 100% of the outstanding shares of DFAL and beneficially owns
100% of DFA Australia.
INVESTMENT SERVICES - VA INTERNATIONAL SMALL PORTFOLIO
Pursuant to a Sub-Advisory Agreement 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 the United Kingdom and Continental
small company segments of VA International Small Portfolio. Pursuant to a
Sub-Advisory Agreement 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 the
Japanese and Pacific Rim small company segments of VA International Small
Portfolio. The duties of DFAL with respect to the United Kingdom and
Continental small company segments of the Portfolio and DFA Australia with
respect to the Japanese and Pacific Rim small company segments of the
Portfolio include the maintenance of a trading desk for the Portfolio and the
determination of the best and most efficient means of executing securities
transactions. The Advisor is responsible for determining those securities
which are eligible for purchase and sale by the Portfolio and may delegate
this task, subject to its own review, to DFAL and DFA Australia. On at least
a semi-annual basis, the Advisor reviews the holdings of United Kingdom,
Continental, Japanese and Pacific Rim small company segments and reviews the
trading process and the execution of securities transactions.
DFAL maintains and furnishes to the Advisor information and reports on
United Kingdom and Continental small companies, including its recommendations
of securities to be added to the securities in those segments that are
eligible for purchase by the Portfolio. DFAL is a member of the Investment
Management Regulatory Organization Limited, a self-regulatory organization
for investment managers operating under the laws of England. 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 in those segments that are eligible for
purchase by the Portfolio.
19
<PAGE>
DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAXES
The policy of all the portfolios is to distribute substantially all of
their net investment income together with any net realized capital gains in
December of each year.
Shareholders of the Portfolios will automatically receive all income
dividends and capital gains distributions in additional shares of the
Portfolio whose shares they hold at net asset value (as of the business date
following the dividend record date). Shareholders are notified annually by
the Fund as to the federal tax status of dividends and distributions paid by
the Portfolio whose shares they own.
Shares of the Portfolio must be purchased through variable annuity
contracts. As a result, it is anticipated that any dividend or capital gains
distributions from a Portfolio of the Fund will be exempt from current
taxation if left to accumulate within a variable annuity contract.
Withdrawals from such contracts may be subject to ordinary income tax plus a
10% penalty tax if made before age 59 1/2.
The tax status of your investment in the Portfolios depends upon the
features of your variable life or variable annuity contract. For further
information, please refer to the prospectus of the insurance company separate
account that offers your contract.
PURCHASE AND REDEMPTION OF SHARES
Shares of the Portfolios are sold only to insurance company separate
accounts. Purchases and redemptions of shares of each Portfolio by a separate
account will be effected at the net asset value per share. (See "VALUATION OF
SHARES.") Contract owners do not deal directly with the Fund with respect to
the acquisition or redemption of shares of the Portfolios. Please see the
prospectus of the insurance company separate account for information
regarding the purchase and redemption of shares of the Portfolios. When in
the best interests of a Portfolio, the Portfolio may make a redemption
payment, in whole or in part, by a distribution of portfolio securities that
the Portfolio receives from the Series in lieu of cash in accordance with
Rule 18f-1 under the 1940 Act. Investors may incur brokerage charges and
other transaction costs selling securities that were received in payment of
redemptions. The International Equity Portfolios and the VA Global Bond
Portfolio reserve the right to redeem their shares in the currencies in which
their investments are denominated. Investors may incur charges in converting
such securities to dollars and the value of the securities may be affected by
currency exchange fluctuations.
VALUATION OF SHARES
The net asset value per share of each Portfolio 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. The value of the shares of each
Portfolio will fluctuate in relation to its own investment experience.
Securities held by the Domestic Equity and International Equity Portfolios
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. If there is no
such reported sale, such securities are valued at the mean between the most
recent quoted bid and asked prices. Price information on listed securities is
taken from the exchange where the security is primarily traded. Unlisted
securities for which market quotations are readily available are valued at
the mean between the most recent bid and asked prices. The value of other
assets and securities for which no quotations are readily available
(including restricted securities) are determined in good faith at fair value
in accordance with procedures adopted by the Board of Directors. The net
asset values per share of the International Equity Portfolios and VA Global
Bond Portfolio are expressed in U.S. dollars by translating the net assets of
each Portfolio using the mean between the most recent bid and asked prices
for the dollar as quoted by generally recognized reliable sources.
The value of the shares of the Fixed Income Portfolios will tend to
fluctuate with interest rates because, unlike money market funds, these
Portfolios 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 over-the-counter and on a stock exchange will be
valued according to the broadest and most representative market; it is
expected that for bonds and other fixed income securities this ordinarily
will be the over-the-counter market. Securities held by the Fixed Income
Portfolios may be
20
<PAGE>
valued on the basis of prices provided by a pricing service when such prices
are believed to reflect the current market value of such securities. Other
assets and securities for which quotations are not readily available will be
valued in good faith at fair value using methods determined by the Board of
Directors.
Generally, trading in foreign securities markets is completed each day
at various times prior to the close of the NYSE. The values of foreign
securities held by the International Equity Portfolios and VA Global Bond
Portfolio are determined as of such times for the purpose of computing the
net asset values of these Portfolios. If events which materially affect the
value of the foreign investments 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.
21
<PAGE>
FINANCIAL HIGHLIGHTS
The Financial Highlights table is meant to help you understand
each Portfolio's financial performance for the past 5 years or, if shorter, the
period of that Portfolio's operations, as indicated by the table. The total
returns in the table represent the rate that you would have earned (or lost) on
an investment in the Portfolio, assuming reinvestment of all dividends and
distributions. This information has been audited by PricewaterhouseCoopers LLP
(formerly Coopers & Lybrand L.L.P.), whose report, along with the Portfolios'
financial statements, are included in the annual report which is available upon
request.
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
VA SMALL
VALUE PORTFOLIO
---------------------------------------------------
YEAR YEAR OCT. 3,
YEAR ENDED ENDED ENDED TO
NOV. 30, NOV. 30, NOV. 30, NOV. 30,
1998 1997 1996 1995
---------- -------- -------- ----------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period.............. $ 15.45 $ 11.75 $ 9.69 $ 10.00
---------- -------- -------- ----------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income........................... 0.04 0.06 0.03 0.01
Net Gains (Losses) on Securities (Realized and
Unrealized)................................... (1.27) 3.78 2.05 (0.31)
---------- -------- -------- ----------
Total from Investment Operations.............. (1.23) 3.84 2.08 (0.30)
---------- -------- -------- ----------
LESS DISTRIBUTIONS
Net Investment Income........................... (0.06) (0.03) (0.02) (0.01)
Net Realized Gains.............................. (1.05) (0.11) -- --
---------- -------- -------- ----------
Total Distributions........................... (1.11) (0.14) (0.02) (0.01)
---------- -------- -------- ----------
Net Asset Value, End of Period.................... $ 13.11 $ 15.45 $11.75 $ 9.69
---------- -------- -------- ----------
---------- -------- -------- ----------
Total Return...................................... (8.45)% 33.02% 21.47% (3.04)%#
Net Assets, End of Period (thousands)............. $ 17,832 $ 17,428 $8,058 $ 4,848
Ratio of Expenses to Average Net Assets........... 0.70% 0.71% 1.05% 0.99%*
Ratio of Net Investment Income to Average Net
Assets.......................................... 0.32% 0.45% 0.34% 0.91%*
Portfolio Turnover Rate........................... 22.81% 21.18% 5.19% 0.00%*
<CAPTION>
VA LARGE
VALUE PORTFOLIO
--------------------------------------------------
YEAR YEAR YEAR JAN. 13,
ENDED ENDED ENDED TO
NOV. 30, NOV. 30, NOV. 30, NOV. 30,
1998 1997 1996 1995
-------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period.............. $ 16.08 $ 13.46 $ 11.29 $ 10.00
-------- --------- --------- ---------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income........................... 0.24 0.24 0.17 0.19
Net Gains (Losses) on Securities (Realized and
Unrealized)................................... 1.47 3.07 2.12 1.85
-------- --------- --------- ---------
Total from Investment Operations.............. 1.71 3.31 2.29 2.04
-------- --------- --------- ---------
LESS DISTRIBUTIONS
Net Investment Income........................... (0.24) (0.23) (0.12) (0.16)
Net Realized Gains.............................. (1.04) (0.46 -- (0.59)
-------- --------- --------- ---------
Total Distributions........................... (1.28) (0.69) (0.12) (0.75)
-------- --------- --------- ---------
Net Asset Value, End of Period.................... $ 16.51 $ 16.08 $ 13.46 $ 11.29
-------- --------- --------- ---------
-------- --------- --------- ---------
Total Return...................................... 11.46% 25.72% 20.45% 20.41%#
Net Assets, End of Period (thousands)............. $ 30,187 $ 24,545 $ 13,570 $ 6,562
Ratio of Expenses to Average Net Assets........... 0.46% 0.48% 1.03% 1.20%*
Ratio of Net Investment Income to Average Net
Assets.......................................... 1.49% 1.71% 1.59% 2.03%*
Portfolio Turnover Rate........................... 22.98% 20.49% 18.54% 65.38%*
</TABLE>
- ------------------
* Annualized
# Non-Annualized
See accompanying Notes to Financial Statements.
22
<PAGE>
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
VA INTERNATIONAL
VALUE PORTFOLIO
---------------------------------------------------
YEAR YEAR OCT. 3,
YEAR ENDED ENDED ENDED TO
NOV. 30, NOV. 30, NOV. 30, NOV. 30,
1998 1997 1996 1995
---------- -------- -------- ----------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period.............. $ 10.87 $ 11.41 $ 10.03 $ 10.00
---------- -------- -------- ----------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income (Loss).................... 0.19 0.17 0.11 --
Net Gains (Losses) on Securities (Realized and
Unrealized)................................... 0.91 (0.56) 1.29 0.03
---------- -------- -------- ----------
Total from Investment Operations.............. 1.10 (0.39) 1.40 0.03
---------- -------- -------- ----------
LESS DISTRIBUTIONS
Investment Income............................... (0.18) (0.10) -- --
Net Realized Gains.............................. (0.14) (0.05) (0.02) --
---------- -------- -------- ----------
Total Distributions........................... (0.32) (0.15) (0.02) --
---------- -------- -------- ----------
Net Asset Value, End of Period.................... $ 11.65 $ 10.87 $ 11.41 $ 10.03
---------- -------- -------- ----------
---------- -------- -------- ----------
Total Return...................................... 10.43% (3.45)% 13.92% 0.30%#
Net Assets, End of Period (thousands)............. $ 21,091 $ 17,610 $10,517 $ 5,014
Ratio of Expenses to Average Net Assets........... 0.68% 0.76% 1.17% 1.32%*
Ratio of Net Investment Income to Average Net
Assets.......................................... 1.63% 1.83% 1.29% (0.20)%*
Portfolio Turnover Rate........................... 27.11% 7.95% 4.14% 0.00%*
<CAPTION>
VA INTERNATIONAL
SMALL PORTFOLIO
--------------------------------------------------
YEAR YEAR YEAR JAN. 13,
ENDED ENDED ENDED TO
NOV. 30, NOV. 30, NOV. 30, NOV. 30,
1998 1997 1996 1995
-------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period.............. $ 7.99 $ 10.48 $ 9.71 $ 10.00
-------- --------- --------- ---------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income (Loss).................... 0.11 0.09 0.06 (0.01)
Net Gains (Losses) on Securities (Realized and
Unrealized)................................... (0.14) (2.30) 0.71 (0.28)
-------- --------- --------- ---------
Total from Investment Operations.............. (0.03) (2.21) 0.77 (0.29)
-------- --------- --------- ---------
LESS DISTRIBUTIONS
Investment Income............................... (0.09) (0.06) -- --
Net Realized Gains.............................. (0.09) (0.22) -- --
-------- --------- --------- ---------
Total Distributions........................... (0.18) (0.28) -- --
-------- --------- --------- ---------
Net Asset Value, End of Period.................... $ 7.78 $ 7.99 $ 10.48 $ 9.71
-------- --------- --------- ---------
-------- --------- --------- ---------
Total Return...................................... (0.23)% (21.54)% 7.93% (2.90)%#
Net Assets, End of Period (thousands)............. $ 12,748 $ 9,884 $ 6,007 $ 4,856
Ratio of Expenses to Average Net Assets........... 0.90% 0.99% 1.27% 2.52%*
Ratio of Net Investment Income to Average Net
Assets.......................................... 1.56% 1.32% 0.63% (0.39)%*
Portfolio Turnover Rate........................... 20.82% 8.57% 6.40% 0.00%*
</TABLE>
- ------------------
* Annualized
# Non-Annualized
See accompanying Notes to Financial Statements.
23
<PAGE>
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
VA SHORT-TERM
FIXED PORTFOLIO
---------------------------------------------------
YEAR YEAR OCT. 3,
YEAR ENDED ENDED ENDED TO
NOV. 30, NOV. 30, NOV. 30, NOV. 30,
1998 1997 1996 1995
---------- -------- -------- ----------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period.............. $ 10.08 $ 10.08 $10.04 $ 10.00
---------- -------- -------- ----------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income........................... 0.53 0.53 0.48 0.08
Net Gains on Securities (Realized and
Unrealized)................................... 0.02 -- 0.04 --
---------- -------- -------- ----------
Total from Investment Operations.............. 0.06 0.53 0.52 0.08
---------- -------- -------- ----------
LESS DISTRIBUTIONS
Net Investment Income........................... (0.53) (0.53) (0.48) (0.04)
Net Realized Gains.............................. (0.01) -- -- --
Tax Return of Capital........................... -- -- -- --
---------- -------- -------- ----------
Total Distributions........................... (0.05) (0.53) (0.48) (0.04)
---------- -------- -------- ----------
Net Asset Value, End of Period.................... $ 10.09 $ 10.08 $10.08 $ 10.04
---------- -------- -------- ----------
---------- -------- -------- ----------
Total Return...................................... 5.54% 5.46% 5.34% 0.81%#
Net Assets, End of Period (thousands)............. $ 18,467 $ 15,136 $7,789 $ 5,041
Ratio of Expenses to Average Net Assets........... 0.41% 0.43% 0.70% 0.63%*
Ratio of Net Investment Income to Average Net
Assets.......................................... 5.24% 5.44% 4.93% 5.11%*
Portfolio Turnover Rate........................... 49.84% 72.92% 29.27% 0.00%*
<CAPTION>
VA GLOBAL
BOND PORTFOLIO
--------------------------------------------------
YEAR YEAR YEAR JAN. 13,
ENDED ENDED ENDED TO
NOV. 30, NOV. 30, NOV. 30, NOV. 30,
1998 1997 1996 1995
-------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period.............. $ 10.69 $ 11.14 $ 10.61 $ 10.00
-------- --------- --------- ---------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income........................... 0.52 0.42 0.37 0.48
Net Gains on Securities (Realized and
Unrealized)................................... 0.30 0.34 0.57 0.81
-------- --------- --------- ---------
Total from Investment Operations.............. 0.82 0.76 0.94 1.29
-------- --------- --------- ---------
LESS DISTRIBUTIONS
Net Investment Income........................... (1.14) (0.94) (0.41) (0.57)
Net Realized Gains.............................. (0.04) (0.27) -- (0.11)
Tax Return of Capital........................... (0.03) -- -- --
-------- --------- --------- ---------
Total Distributions........................... (1.21) (1.21) (0.41) (0.68)
-------- --------- --------- ---------
Net Asset Value, End of Period.................... $ 10.30 $ 10.69 $ 11.14 $ 10.61
-------- --------- --------- ---------
-------- --------- --------- ---------
Total Return...................................... 8.44% 7.58% 9.16% 13.09%#
Net Assets, End of Period (thousands)............. $ 10,483 $ 7,073 $ 3,703 $ 3,393
Ratio of Expenses to Average Net Assets........... 0.57% 0.65% 1.73% 1.31%*
Ratio of Net Investment Income to Average Net
Assets.......................................... 3.65% 4.09% 3.43% 5.08%*
Portfolio Turnover Rate........................... 36.97% 58.35% 88.93% 60.09%*
</TABLE>
- ------------------
(Restated to reflect a 900% stock dividend as of January 2, 1996.)
* Annualized
# Non-Annualized
24
<PAGE>
The total return information shown in the Financial Highlights tables
does not reflect the expenses that apply to a separate account or the related
insurance policies. If these charges were included the total return figures
for all periods shown would be reduced. Until October 1995, VA Large Value
Portfolio invested approximately 50% of its total assets in the stocks of
large non-U.S. companies and approximately 50% of its total assets in the
stocks of U.S. companies. The total return information presented in the
Financial Highlights table for VA Large Value Portfolio for the fiscal year
ended November 30, 1995, reflects the performance of the Portfolio when it
invested in the stocks of both U.S. and non-U.S. companies. The total return
information of VA Large Value Portfolio for the period ended November 30,
1995 should not be considered indicative of its future performance.
25
<PAGE>
SERVICE PROVIDERS
<TABLE>
<S> <C>
INVESTMENT ADVISOR CUSTODIAN--DOMESTIC
DIMENSIONAL FUND ADVISORS INC. PFPC Trust Company
1299 Ocean Avenue, 11th Floor 400 Bellevue Parkway
Santa Monica, CA 90401 Wilmington, DE 19809
Tel. No. (310) 395-8005
SUB-ADVISORS ACCOUNTING SERVICES, DIVIDEND DISBURSING
AND TRANSFER AGENT
DIMENSIONAL FUND ADVISORS LTD.
14 Berkeley Street PFPC INC.
London W1X 5AD 400 Bellevue Parkway
England Wilmington, DE 19809
Tel. No. (171) 495-2343
DFA AUSTRALIA LIMITED LEGAL COUNSEL
Suite 2001, Level 20 Gateway
1 MacQuarie Place STRADLEY, RONON, STEVENS & YOUNG, LLP
Sydney, New South Wales 2000 2600 One Commerce Square
Australia Philadelphia, PA 19103-7098
Tel. No. (612 ) 9 247-7822
CUSTODIAN--INTERNATIONAL INDEPENDENT ACCOUNTANTS
CITIBANK, N.A. PRICEWATERHOUSECOOPERS LLP
111 Wall Street 2400 Eleven Penn Center
New York, NY 10005 19th and Market Streets
Philadelphia, PA 19103
</TABLE>
26
<PAGE>
OTHER AVAILABLE INFORMATION
You can find more information about the Fund and its Portfolios in the Fund's
Statement of Additional Information ("SAI") and Annual and Semi-Annual
Reports.
STATEMENT OF ADDITIONAL INFORMATION. The SAI supplements, and is technically
part of, this Prospectus. It includes an expanded discussion of investment
practices, risks, and fund operations.
ANNUAL AND SEMI-ANNUAL REPORTS TO SHAREHOLDERS. These reports focus on
Portfolio holdings and performance. The Annual Report also discusses the
market conditions and investment strategies that significantly affected the
Portfolios in their last fiscal year.
HOW TO GET THESE AND OTHER MATERIALS ABOUT THE FUND:
If you represent an insurance company, call the Fund collect at (310)
395-8005 to request free copies. Additional materials describing the Fund,
the Advisor and its investment approach are also available.
Access them on the SEC's Internet site -- http://www.sec.gov.
Review and copy them at the SEC's Public Reference Room in Washington D.C.
Request copies from the Public Reference Section of the SEC, Washington, D.C.
20549 (you will be charged a copying fee).
DIMENSIONAL FUND ADVISORS INC.
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
(310) 395-8005
DFA INVESTMENT DIMENSIONS GROUP INC. -- Registration No. 811-3258
27
<PAGE>
DFA INVESTMENT DIMENSIONS GROUP INC.
1299 OCEAN AVENUE, 11TH FLOOR, SANTA MONICA, CALIFORNIA 90401
TELEPHONE: (310) 395-8005
STATEMENT OF ADDITIONAL INFORMATION
MARCH 30, 1999
DFA Investment Dimensions Group Inc.(the "Fund") is an open-end
management investment company that offers thirty-four series of shares. This
statement of additional information ("SAI") describes six of those series:
VA SMALL VALUE PORTFOLIO VA INTERNATIONAL SMALL PORTFOLIO
VA LARGE VALUE PORTFOLIO VA SHORT-TERM FIXED PORTFOLIO
VA INTERNATIONAL VALUE PORTFOLIO VA GLOBAL BOND PORTFOLIO
(individually, a "Portfolio" and collectively, the "Portfolios"). The shares
of the Portfolios are sold only to separate accounts of insurance companies
in conjunction with variable life and variable annuity contracts. This SAI is
not a prospectus but should be read in conjunction with the Portfolios'
prospectus dated March 30, 1999, as amended from time to time. The audited
financial statements and financial highlights of the Fund are incorporated by
reference from the Fund's annual report to shareholders. The prospectus and
annual report can be obtained by writing to the above address or by calling
the above telephone number.
<PAGE>
TABLE OF CONTENTS
PAGE
PORTFOLIO CHARACTERISTICS AND POLICIES......................................1
BROKERAGE TRANSACTIONS......................................................1
INVESTMENT LIMITATIONS......................................................3
FUTURES CONTRACTS...........................................................4
CASH MANAGEMENT PRACTICES...................................................5
CONVERTIBLE DEBENTURES......................................................6
DIRECTORS AND OFFICERS......................................................6
SERVICES TO THE FUND........................................................9
ADVISORY FEES..............................................................10
GENERAL INFORMATION........................................................10
SHAREHOLDER RIGHTS.........................................................11
PRINCIPAL HOLDERS OF SECURITIES............................................11
PURCHASE AND REDEMPTION OF SHARES..........................................12
TAXATION OF THE PORTFOLIOS.................................................13
CALCULATION OF PERFORMANCE DATA............................................15
FINANCIAL STATEMENTS.......................................................16
<PAGE>
PORTFOLIO CHARACTERISTICS AND POLICIES
The following information supplements the information set forth in
the prospectus. Unless otherwise indicated, it applies to all of the
Portfolios. Capitalized terms not otherwise defined in this SAI have the
meaning assigned to them in the prospectus. Each of the Portfolios are
diversified under the federal securities laws and regulations.
Because the structure of the Domestic Equity and International
Equity Portfolios are 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 Portfolio and the issuer would be deemed "affiliated
persons" and certain requirements under the federal securities laws and
regulations regulating dealings between mutual funds and their 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.
BROKERAGE TRANSACTIONS
The following table depicts brokerage commissions paid by the
Portfolios during the fiscal years ended November 30, 1998, 1997 and 1996.
BROKERAGE COMMISSIONS
FISCAL YEARS ENDED NOVEMBER 30, 1998, 1997 AND 1996
<TABLE>
<CAPTION>
1998 1997 1996
<S> <C> <C> <C>
VA Small Value $30,163 $40,533 $12,570
VA Large Value $19,048 $18,486 $11,204
VA International Value $12,695 $12,742 $ 4,863
VA International Small $30,950 $39,704 $ 9,362
VA Short-Term Fixed $ 0 $ 0 $ 0
VA Global Bond $ 0 $ 0 $ 0
</TABLE>
The Fixed Income Portfolios acquire and sell securities on a net
basis with dealers which are major market makers 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. 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 segments of VA
International Small Portfolio and DFA Australia Limited performs these
services for the Japanese and Pacific Small Company segments of VA
International Small Portfolio. Transactions also may be placed with brokers
who provide the Advisor with investment research, such as reports concerning
individual issuers, industries and general economic and financial trends and
other research services.
1
<PAGE>
The over-the-counter market companies eligible for purchase by VA
Small Value Portfolio are thinly traded securities. Therefore, the Advisor
believes it needs maximum flexibility to effect over-the-counter 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 Domestic Equity Portfolios, 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 ended November 30, 1998, the Portfolios paid
commissions for securities transactions to brokers which provided market
price monitoring services, market studies and research services to the
Portfolios as set forth in the following table:
<TABLE>
<CAPTION>
Value of Brokerage
Securities Transactions Commissions
----------------------- -----------
<S> <C> <C>
VA Small Value $ 3,057,117 $ 10,279
VA Large Value $ 6,774,995 $ 10,664
VA International Value $ 0 $ 0
VA International Small $ 911,689 $ 5,850
VA Short-Term Fixed $ 0 $ 0
VA Global Bond $ 0 $ 0
</TABLE>
The investment advisory agreements permit the Advisor knowingly to
pay commissions on securities transactions which are greater than another
broker, dealer or exchange member 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 Portfolios. Subject to obtaining best price and
execution, transactions may be placed with brokers which have assisted in the
sale of the Portfolios' shares.
Brokerage commissions for transactions in securities listed on the
Tokyo Stock Exchange ("TSE") and other Japanese securities exchanges are
fixed. Under the current regulations of the TSE and the Japanese Ministry of
Finance, member and non-member firms of Japanese exchanges are required to
charge full commissions to all customers other than banks and certain
financial institutions, but members and licensed non-member firms may confirm
transactions to banks and financial institution affiliates located outside
Japan with institutional discounts on brokerage commissions. The
International Equity Portfolios expect to be able to avail themselves of
institutional discounts. The Portfolios' 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 Portfolios will be able to realize the
benefit of discounts from fixed commissions.
2
<PAGE>
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, 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 may
purchase or sell financial futures contracts and
options thereon;
(2) make loans of cash, except through the acquisition of
repurchase agreements and obligations customarily
purchased by institutional investors;
(3) as to 75% of the total assets of a Portfolio, invest
in the securities of any issuer (except obligations
of the U.S. Government and its instrumentalities) if,
as a result, more than 5% of the Portfolio's total
assets, at market, would be invested in the
securities of such issuer; provided that the VA
Global Bond Portfolio is not subject to this
limitation;
(4) purchase or retain securities of an issuer if those
officers and directors of the Fund or the Advisor
owning more than 1/2 of 1% of such securities
together own more than 5% of such securities;
(5) borrow, except that each Portfolio may borrow, for
temporary or emergency purposes, amounts not
exceeding 33% of their net assets from banks and
pledge not more than 33% of such assets to secure
such loans;
(6) pledge, mortgage, or hypothecate any of its assets to
an extent greater than 10% of its total assets at
fair market value, except as described in (5) above;
(7) invest more than 15% 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;
(8) engage in the business of underwriting securities issued
by others;
(9) invest for the purpose of exercising control over management
of any company;
(10) invest its assets in securities of any investment
company, except in connection with a merger,
acquisition of assets, consolidation or
reorganization;
(11) acquire any securities of companies within one
industry if, as a result of such acquisition, more
than 25% of the value of the Portfolio's total assets
would be invested in securities of companies within
such industry; except VA Short-Term Fixed Portfolio
shall invest more than 25% of its total assets in
obligations of banks and bank holding companies in
the circumstances described in the prospectus under
"Investments in the Banking Industry" and as
otherwise described under "Portfolio Strategy";
(12) write or acquire options (except as described in (1)
above) or interests in oil, gas or other mineral
exploration, leases or development programs;
3
<PAGE>
(13) purchase warrants, however, the Portfolios may
acquire warrants as a result of corporate actions
involving holdings of other securities;
(14) purchase securities on margin or sell short;
(15) acquire more than 10% of the voting securities of any
issuer and provided that this limitation applies only
to 75% of the assets of the Domestic Equity
Portfolios and VA International Value Portfolio; or
(16) issue senior securities (as such term is defined in
Section 18(f) of the Investment Company Act of 1940
(the "1940 Act")), except to the extent permitted by
the 1940 Act.
The investment limitation described in (1) above, does not
prohibit the Portfolios from making margin deposits in connection with the
purchase or sale of financial futures contracts and options thereon to the
extent permitted under applicable regulations.
Although (2) above prohibits cash loans, the Portfolios are
authorized to lend portfolio securities.
For the purposes of (7) above, VA Short-Term Fixed 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 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.
The International Equity Portfolios and VA Global Bond
Portfolio may acquire and sell forward foreign currency exchange contracts in
order to hedge against changes in the level of future currency rates. Such
contracts involve an obligation to purchase or sell a specific currency at a
future date at a price set in the contract. While each Domestic Equity Portfolio
and VA International Value Portfolio has retained authority to buy and sell
financial futures contracts and options thereon, they have no present intention
to do so.
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 Portfolio owns, and does not include
assets which the Portfolio does not own but over which it has effective control.
For example, when applying a percentage investment limitation that is based on
total assets, the Portfolio will exclude from its total assets those assets
which represent collateral received by the Portfolio for its securities lending
transactions.
Unless otherwise indicated, all limitations applicable to the
Portfolios' investments apply only at the time that a transaction is undertaken.
Any subsequent change in a rating assigned by any rating service to a security
or change in the percentage of a Portfolio's assets invested in certain
securities or other instruments resulting from market fluctuations or other
changes in a Portfolio's total assets will not require a Portfolio to dispose of
an investment until the Advisor determines that it is practicable to sell or
close out 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.
FUTURES CONTRACTS
All Portfolios may enter into futures contracts and options on
futures contracts for the purpose of remaining fully invested and to maintain
liquidity to pay redemptions. Futures contracts provide for the future sale
4
<PAGE>
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 will be
required to make a margin deposit in cash or government securities with a broker
or custodian to initiate and maintain positions in futures contracts. Minimal
initial margin requirements are established by the futures exchange, and brokers
may establish margin requirements which are higher than the exchange
requirements. After a futures contract position is opened, the value of the
contract is marked to market daily. If the futures contract price changes, to
the extent that the margin on deposit does not satisfy margin requirements,
payment of additional "variation" margin will be required. Conversely, reduction
in the contract value may reduce the required margin resulting in a repayment of
excess margin to the Portfolio. Variation margin payments are made to and from
the futures broker for as long as the contract remains open. The Portfolios
expect to earn income on their margin deposits. To the extent that a Portfolio
invests in futures contracts and options thereon for other than bona fide
hedging purposes, the Portfolio will not enter into such transaction if,
immediately thereafter, the sum of the amount of initial margin deposits and
premiums paid for open futures options would exceed 5% of the 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
Securities and Exchange Commission (the "SEC"), the Portfolios may be required
to maintain segregated accounts consisting of liquid assets such as cash or
liquid securities (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 would
continue to be required to make variation margin deposits. In such
circumstances, if the Portfolio 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.
CASH MANAGEMENT PRACTICES
All Portfolios engage in cash management practices in order to
earn income on uncommitted cash balances. Generally cash is uncommitted pending
investment in other obligations, payment of redemptions or in other
circumstances where the Advisor believes liquidity is necessary or desirable.
For example, cash investments may be made for temporary defensive purposes
during periods in which market, economic or political conditions warrant.
All the Portfolios may invest cash in short-term repurchase
agreements. In addition, the following cash investments are permissible:
<TABLE>
<CAPTION>
- ---------------------------------------------- ------------------------------------------- ------------------------
Percentage
PORTFOLIOS PERMISSIBLE CASH INVESTMENT GUIDELINES*
- ---------------------------------------------- ------------------------------------------- ------------------------
- ---------------------------------------------- ------------------------------------------- ------------------------
<S> <C> <C>
The Domestic Equity Portfolios High quality, highly liquid fixed income
securities such as money market
instruments 20%
- ---------------------------------------------- ------------------------------------------- ------------------------
- ---------------------------------------------- ------------------------------------------- ------------------------
VA International Value Portfolio Fixed income obligations as may be
acquired by the Fixed Income Portfolios
20%
- ---------------------------------------------- ------------------------------------------- ------------------------
- ---------------------------------------------- ------------------------------------------- ------------------------
VA International Small Portfolio Fixed income obligations such as money
market instruments 20%
- ---------------------------------------------- ------------------------------------------- ------------------------
</TABLE>
5
<PAGE>
*The percentage guidelines set forth above are not absolute limitations
but the Portfolios do not expect to exceed these guidelines under normal
circumstances.
CONVERTIBLE DEBENTURES
VA International Small Portfolio may invest up to 5% of its
assets in convertible debentures issued by non-U.S. companies. Convertible
debentures include corporate bonds and notes that may be converted into or
exchanged for common stock. These securities are generally convertible either at
a stated price or a stated rate (that is, for a specific number of shares of
common stock or other security). As with other fixed income securities, the
price of a convertible debenture to some extent varies inversely with interest
rates. While providing a fixed-income stream (generally higher in yield than the
income derived from a common stock but lower than that afforded by a
non-convertible debenture), a convertible debenture also affords the investor an
opportunity, through its conversion feature, to participate in the capital
appreciation of the common stock into which it is convertible. As the market
price of the underlying common stock declines, convertible debentures tend to
trade increasingly on a yield basis and so may not experience market value
declines to the same extent as the underlying common stock. When the market
price of the underlying common stock increases, the price of a convertible
debenture tends to rise as a reflection of the value of the underlying common
stock. To obtain such a higher yield, the 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 the Portfolio upon conversion of a convertible
debenture will generally be held for as long as the Advisor anticipates such
stock will provide the Portfolio with opportunities which are consistent with
the Portfolio's investment objective and policies.
DIRECTORS AND OFFICERS
The Board of Directors of the Fund is responsible for
establishing Fund policies and for overseeing the management of the Fund. 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 are 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, DFA Investment Dimensions Group Inc.,
Dimensional Investment Group Inc. and Dimensional Emerging Markets Value Fund
Inc., Trustee, President and Chairman-Chief Executive Officer of The DFA
Investment Trust Company (registered investment company). Chairman and Director,
Dimensional Fund Advisors Ltd.
6
<PAGE>
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, DFA Investment
Dimensions Group Inc., Dimensional Investment Group Inc. and Dimensional
Emerging Markets Value 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, DFA Investment
Dimensions Group Inc., Dimensional Investment Group Inc., Dimensional
Emerging Markets Value 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, DFA Investment Dimensions Group Inc., Dimensional
Investment Group Inc., Dimensional Emerging Markets Value Fund Inc., Hospital
Fund, Inc. (investment management services) and BIRR Portfolio Analysis, Inc.
(software products). Chairman, Ibbotson Associates, Inc., Chicago, IL
(software, data, publishing and consulting).
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,
DFA Investment Dimensions Group Inc., Dimensional Investment Group Inc. and
Dimensional Emerging Markets Value 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, DFA
Investment Dimensions Group Inc., Dimensional Investment Group Inc.,
Dimensional Emerging Markets Value 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,
DFA Investment Dimensions Group Inc., Dimensional Investment Group Inc. and
Dimensional Emerging Markets Value 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, DFA Investment Dimensions Group
Inc., Dimensional Investment Group Inc., The DFA Investment Trust Company,
Dimensional Fund Advisors Ltd., and Dimensional Emerging Markets Value Fund Inc.
Arthur Barlow, (11/7/55), Vice President, Santa Monica, CA.
Truman Clark, (4/18/41), 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.
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.
7
<PAGE>
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.
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 each
Portfolio'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, 1998, and the total compensation received from
all four registered investment companies for which the Advisor serves as
investment advisor during that same fiscal year.
<TABLE>
<CAPTION>
Aggregate Total Compensation from
Compensation Fund
Director from Fund and Fund Complex*
- -------- ------------ -----------------------
<S> <C> <C>
George M. Constantinides $15,000 $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>
* The term Fund Complex refers to all registered investment companies for which
the Advisor performs advisory or administrative services and for which the
individuals listed above serve as directors.
8
<PAGE>
SERVICES TO THE FUND
ADMINISTRATIVE SERVICES
PFPC Inc. ("PFPC"), 400 Bellevue Parkway, Wilmington, DE
19809, serves as the accounting services, dividend disbursing and transfer agent
for each Portfolio. The services provided by PFPC are subject to supervision by
the executive officers and the Board of Directors of the Fund, and include
day-to-day keeping and maintenance of certain records, calculation of the
offering price of the shares, preparation of reports, liaison with its
custodians, and transfer and dividend disbursing agency services. For its
services, each Portfolio pays PFPC fees at the annual rates set forth in the
following table:
DOMESTIC EQUITY PORTFOLIOS
.1025% of the first $300 million of net assets
.0769% of the next $300 million of net assets
.0513% of the next $250 million of net assets
.0205% of the net assets over $850 million
INTERNATIONAL EQUITY PORTFOLIOS
.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 net assets over $850 million
VA SHORT-TERM FIXED PORTFOLIO
.0513% of the first $100 million of net assets
.0308% of the next $100 million of net assets
.0205% of the next $200 million of net assets
VA GLOBAL BOND PORTFOLIO
.1230% of the first $150 million of net assets
.0820% of net assets between $150 million and $300 million
.0615% of net assets between $300 million and $600 million
.0410% of net assets between $600 million and $850 million
.0205% of net assets over $850 million
PFPC also charges minimum fees at the rates of $54,000 per year for VA Large
Value and the Fixed Income Portfolios and $75,000 per year for VA Small Value
and the International Equity Portfolios. PFPC has agreed to limit the minimum
fee for these Portfolios from time to time.
CUSTODIANS
PFPC Trust Company, 400 Bellevue Parkway, Wilmington, DE 19809,
serves as custodian for the Domestic Equity Portfolios and VA Short-Term
Fixed Portfolio. Citibank, N.A., 111 Wall Street, New York, New York 10005,
serves as the global custodian for the International Equity Portfolios and VA
Global Bond Portfolio. The custodians maintain a separate account or accounts
for the Portfolios; receive, hold and release portfolio securities on account
of the Portfolios; make receipts and disbursements of money on behalf of the
Portfolios; and collect and receive income and other payments and
distributions on account of the Portfolios' portfolio securities.
DISTRIBUTOR
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.
9
<PAGE>
LEGAL COUNSEL
Stradley, Ronon, Stevens & Young, LLP serves as legal counsel
to the Fund. Its address is 2600 One Commerce Square, Philadelphia, PA
19103-7098.
ADVISORY FEES
David G. Booth and Rex A. Sinquefield, as directors and
officers of the Advisor and shareholder of the Advisor's outstanding stock, may
be deemed controlling persons of the Advisor. For the services it provides as
investment advisor to each Portfolio, the Advisor is paid a monthly fee
calculated as a percentage of average net assets of the Portfolio. For the
fiscal years ended November 30, 1996, 1997 and 1998, the Portfolios paid
advisory fees to the Advisor (and any sub-advisor) as set forth in the following
table:
<TABLE>
<CAPTION>
1998 1997 1996
(000) (000) (000)
----------- ----------- --------
<S> <C> <C> <C>
VA Small Value $ 89 $ 65 $ 28
VA Large Value $ 69 $ 49 $ 20
VA International Value $ 81 $ 60 $ 28
VA International Small $ 59 $ 42 $ 27
VA Short-Term Fixed $ 42 $ 29 $ 14
VA Global Bond $ 22 $ 15 $ 9
</TABLE>
The Advisor pays DFAL a fee equal to 50,000 pounds sterling
total per year, payable on a quarterly basis, for services to the VA
International Small Portfolio. The Advisor pays DFA Australia a fee equal to
$13,000 per year, payable on a quarterly basis, for services to VA International
Small Portfolio.
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. Until September
18, 1995, VA Large Value Portfolio was named DFA Global Value Portfolio and VA
Global Bond Portfolio was named DFA Global Bond Portfolio. 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.
Pursuant to an exemptive order from the SEC, shares of the
Portfolios may be sold to registered separate accounts of various insurance
companies offering variable annuity and variable life products. At present, the
Board of Directors of the Fund does not foresee any disadvantage arising from
the fact that each Portfolio may offer its shares to separate accounts of
various insurance companies to serve as an investment vehicle for their variable
separate accounts. However, a material conflict could arise between the interest
of the different participating separate accounts. The Fund's Board of Directors
would monitor events in order to identify any material irreconcilable conflicts
that may possibly arise and to determine what action, if any, should be taken in
response to such conflicts of interest. If such conflicts were to occur, one or
more insurance companies' separate accounts might be required to withdraw its
investments in one or more Portfolios, or shares of another Portfolio may be
substituted by the Fund. As a result, a Portfolio might be forced to sell a
portion of its securities at a disadvantageous price. In the event of such a
material conflict, the affected insurance companies agree to take any necessary
steps, including removing its separate account from the Portfolio if required by
law, to resolve the matter.
10
<PAGE>
SHAREHOLDER RIGHTS
Because of current federal securities law requirements, the Fund
expects that its life insurance company shareholders will offer their
contract owners the opportunity to instruct them as to how Portfolio shares
allocable to their variable contracts will be voted with respect to certain
matters, such as approval of investment advisory agreements. Generally, an
insurance company will vote all Portfolio shares held in a separate account
in the same proportion as it receives instructions from contract owners in
that separate account. Under certain circumstances described in the insurance
company separate account prospectus, the insurance company may not vote in
accordance with the contract owner's instructions.
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
by-laws 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.
Shareholder inquiries may be made by writing or calling the Funds
at the address or telephone number appearing on the cover. 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.
PRINCIPAL HOLDERS OF SECURITIES
As of February 26, 1999, the following person(s) beneficially owned
5% or more of the outstanding stock of the Portfolios:
<TABLE>
<S> <C>
VA LARGE VALUE PORTFOLIO
Peoples Benefit Insurance Company Separate Account* (formerly Providian Life and Health) 99.27%
4333 Edgewood Road NE
Cedar Rapids, IA 52499
VA GLOBAL BOND PORTFOLIO
Peoples Benefit Insurance Company Separate Account*(1) (formerly Providian Life and Health) 96.51%
VA SMALL VALUE PORTFOLIO
Peoples Benefit Insurance Company Separate Account*(1) (formerly Providian Life and Health) 99.44%
VA INTERNATIONAL VALUE PORTFOLIO
Peoples Benefit Insurance Company Separate Account*(1) (formerly Providian Life and Health) 99.37%
VA INTERNATIONAL SMALL PORTFOLIO
Peoples Benefit Insurance Company Separate Account*(1) (formerly Providian Life and Health) 99.17%
VA SHORT-TERM FIXED PORTFOLIO
11
<PAGE>
Peoples Benefit Insurance Company Separate Account*(1) (formerly Providian Life and Health) 99.63%
</TABLE>
- ------------------------
*Owner of record only.
(1) See address for shareholder previously listed above.
PURCHASE AND REDEMPTION OF SHARES
The following information supplements the information set forth in
the prospectus under the caption "PURCHASE AND REDEMPTION 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 it 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.
Management believes that any dilutive effect of the cost of
investing the proceeds of the sale of the shares of the Portfolios is minimal
and, therefore, the shares of the Portfolios 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 Portfolios. Any such charges will be described in the prospectus.
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 judgment of management, such suspension or rejection is in the best
interest of the Fund or a Portfolio.
The Fund may suspend redemption privileges or postpone the date of
payment: (1) during any period when the NYSE is closed, or trading on the
NYSE is restricted as determined by the SEC, (2) during any period when an
emergency exists as defined by the rules of the SEC as a result of which it
is not reasonably practicable for the Fund to dispose of securities owned by
it, or fairly to determine the value of its assets and (3) for such other
periods as the SEC may permit.
12
<PAGE>
TAXATION OF THE PORTFOLIOS
The following is a summary of some of the federal income tax consequences
that may affect each Portfolio. Unless your investment in a Portfolio is
through a retirement plan, you should consider the tax implications of
investing, and consult your own tax adviser.
DISTRIBUTION OF NET INCOME
Each Portfolio receives income generally in the form of dividends
and interest on its investments. This income, less expenses incurred in the
operation of a Portfolio, constitute its net investment income from which
dividends may be paid to its shareholders. Any distributions by a Portfolio
from such income will be taxable to a shareholder as ordinary income, whether
they are received in cash or in additional shares.
DISTRIBUTIONS OF CAPITAL GAINS
A Portfolio may derive capital gains and losses in connection with
sales or other dispositions of its portfolio securities. Distributions
derived from the excess of net short-term capital gain over net long-term
capital loss will be taxable to shareholders as ordinary income.
Distributions paid from long-term capital gains realized by a Portfolio will
be taxable to shareholders as long-term capital gain, regardless of how long
the shares of the Portfolio have been held. Any net short-term or long-term
capital gains realized by a Portfolio (net of any capital loss carryovers)
generally will be distributed once each year, and may be distributed more
frequently, if necessary, in order to reduce or eliminate federal excise or
income taxes on the Portfolio.
ELECTION TO BE TAXED AS A REGULATED INVESTMENT COMPANY
Each Portfolio intends to qualify each year as a regulated
investment company by satisfying certain distribution and asset
diversification requirements under Internal Revenue Code (the "Code"). As a
regulated investment company, the Portfolios generally pay no federal income
tax on the income and gains it distributes to its shareholders. The board
reserves the right not to maintain the qualification of a Portfolio as a
regulated investment company, if it determines such course of action to be
beneficial to shareholders. In such case, a Portfolio will be subject to
federal, and possibly state, corporate taxes on its taxable income and gains,
and distributions to shareholders will be taxed as ordinary dividend income
to the extent of a Portfolio's available earnings and profits.
EXCISE TAX DISTRIBUTION REQUIREMENT
The Code requires a Portfolio to distribute at least 98% of its
taxable ordinary income earned during the calendar year and 98% of its
capital gain net income earned during the twelve month period ending October
31 (in addition to undistributed amounts from the prior year) to you by
December 31 of each year in order to avoid federal excise taxes. Each
Portfolio intends to declare and pay sufficient dividends in December (or
January that are treated by you as received in December) but does not
guarantee and can give no assurances that its distributions will be
sufficient to eliminate all such taxes.
EFFECT OF FOREIGN INVESTMENTS ON DISTRIBUTIONS
Most foreign exchange gains realized on the sale of debt
instruments are treated as ordinary income by a Portfolio. Similarly, foreign
exchange losses realized by a Portfolio on the sale of debt instruments are
generally treated as ordinary losses by such Portfolio. These gains when
distributed will be taxable to shareholders as ordinary dividends, and any
losses will reduce a Portfolio's ordinary income otherwise available for
distribution to shareholders. This treatment could increase or reduce a
Portfolio's ordinary income distributions to shareholders, and may cause some
or all of a Portfolio's previously distributed income to be classified as a
return of capital.
A Portfolio which invests in foreign securities 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 are invested in
securities of foreign corporations, such Portfolio may elect to pass through
to its shareholders their pro
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rata share of foreign income taxes paid by such Portfolio. If this election
is made, shareholders will be required to include in their gross income their
pro rata share of foreign taxes paid by the Portfolio. However, shareholders
will be entitled to either deduct (as an itemized deduction in the case of
individuals) their share of such foreign taxes in computing their taxable
income or to claim a credit for such taxes against their U.S. federal income
tax, subject to certain limitations under the Code.
DIVIDENDS RECEIVED DEDUCTION
Portfolios which will receive virtually all their net investment
income from the receipt of interest income or from investments in foreign
securities are not expected to make distributions eligible for the dividends
received deduction for corporations. 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.
REDEMPTION OF PORTFOLIO SHARES
Redemptions and exchanges of Portfolio shares are taxable
transactions for federal and state income tax purposes that cause a
shareholder to recognize a gain or loss. If a shareholder holds his shares as
a capital asset, the gain or loss that he realizes will be capital gain or
loss. Any loss incurred on the redemption or exchange of shares held for six
months or less will be treated as a long-term capital loss to the extent of
any long-term capital gains distributed to the shareholder by the Portfolio
on those shares.
All or a portion of any loss that a shareholder realizes upon the
redemption of a Portfolio's shares will be disallowed to the extent that the
shareholder purchases other shares in the Portfolio (through reinvestment of
dividends or otherwise) within 30 days before or after the share redemption.
Any loss disallowed under these rules will be added to the shareholder's tax
basis in the new shares purchased by the shareholder.
U.S. GOVERNMENT OBLIGATIONS
Many states grant tax-free status to dividends paid from interest
earned on direct obligations of the U.S. government, subject in some states
to minimum investment requirements that must be met by a Portfolio.
Investments in GNMA/FNMA securities, bankers' acceptances, commercial paper
and repurchase agreements collateralized by U.S. government securities do not
generally qualify for tax-free treatment. The rules on exclusion of this
income are different for corporations.
COMPLEX SECURITIES
A Portfolio may invest in complex securities and such investments
may be subject to numerous special and complicated tax rules. These rules
could affect whether gains or losses recognized by a Portfolio are treated as
ordinary income or capital gain, accelerate the recognition of income to the
Portfolio, defer a Portfolio's ability to recognize losses, and, in limited
cases, subject the Portfolio to U.S. federal income tax on income from
certain of its foreign investments. In turn, these rules may affect the
amount, timing or character of the income distributed to a shareholder by a
Portfolio.
INFORMATION ON THE TAX CHARACTER OF DISTRIBUTIONS
The Portfolios will inform shareholders of the amount and character
of distributions at the time they are paid, and will advise shareholders of
the tax status for federal income tax purposes of such distributions shortly
after the close of each calendar year. Shareholders who have not held shares
of a Portfolio a full year may have designated and distributed to them as
ordinary income or capital gain a percentage of income that is not equal to
the actual amount of such income earned during the period of their investment
in the Portfolio.
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SPECIAL RULES APPLICABLE TO VARIABLE CONTRACTS
Finally, in order to comply with regulations under Section 817(h)
of the Code, a Portfolio is required to diversify its investments so that, on
the last day of each quarter of a calendar year, no more than 55% of the
value of its assets is represented by any one investment, no more than 70% is
represented by any two investments, no more than 80% is represented by any
three investments, and no more than 90% is represented by any four
investments. Generally, all securities of the same issuer are treated as a
single investor.
The Treasury Department has indicated that it may issue future
pronouncements addressing the circumstances in which a variable contract
owner's control of the investments of a separate account may cause the
contract owner, rather than the insurance company, to be treated as the owner
of the assets held by the separate account. If the contract owner is
considered the owner of the separate account, income and gains produced by
those securities would be included currently in the contract owner's gross
income. It is not known what standards will be set forth in such
pronouncements or when, if at all, these pronouncements may be issued.
Reference should be made to the prospectus for the applicable
contract for more information regarding the federal income tax consequences
to an owner of a contract.
CALCULATION OF PERFORMANCE DATA
The Portfolios 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. 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.
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 Guidelines. Performance data
is based on historical earnings and is not intended to indicate future
performance. Rates of return expressed on an annual basis will usually not
equal the sum of returns expressed for consecutive interim periods due to the
compounding of the interim yields. The Fund's annual report to shareholders
relating to the Portfolios for the fiscal year ended November 30, 1998
contains additional performance information. A copy of the annual report is
available upon request and without charge.
With respect to the International Equity Portfolios and VA Global
Bond 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.
Quotations of the annualized percentage total returns for each
Portfolio for the one-, five-, and ten-year periods ended November 30, 1998
(as applicable) are set forth in the prospectus. Such quotations utilize the
standardized method of calculation required by the SEC.
Each Portfolio determines its average annual total return 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 calculation
also assumes the account was completely redeemed at the end of each period
and the deduction of all applicable charges and fees. According to the SEC's
formula:
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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
required by the SEC, the Portfolios may disseminate other performance data
and may advertise total return 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 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
PricewaterhouseCoopers LLP (formerly Coopers & Lybrand L.L.P.),
2400 Eleven Penn Center, Philadelphia, PA 19103, are the Fund's independent
accountants. They audit the Fund's financial statements. The audited
financial statements and financial highlights of the Portfolios for the
fiscal year ended November 30, 1998, as set forth in the Fund's annual report
to shareholders relating to the Portfolios, including the report of
PricewaterhouseCoopers LLP, are incorporated by reference into this SAI.
An investor may obtain a copy of the annual report, upon request
and without charge, by contacting the Fund at the address or telephone number
appearing on the cover of this SAI.
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DFA INVESTMENT DIMENSIONS GROUP INC. (53/54)
PART C
OTHER INFORMATION
ITEM 23. EXHIBITS.
(a) Articles of Incorporation.
(1) Articles of Restatement dated August 8, 1995 as filed with
the Maryland Secretary of State on September 18, 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) Articles Supplementary dated December 21, 1995 as filed
with the Maryland Secretary of State on December 28, 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.
(3) Articles Supplementary dated May 14, 1996 as filed with the
Maryland Secretary of State on July 12, 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.
(4) Articles Supplementary dated October 18, 1996 as filed with
the Maryland Secretary of State on December 5, 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.
<PAGE>
(5) Articles of Amendment dated December 20, 1996 as filed with
the Maryland Secretary of State on 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.
(6) Articles of Amendment dated July 28, 1997 as filed with the
Maryland Secretary of State on August 1, 1997.
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.
(7) Articles Supplementary dated September 16, 1997 as filed
with the Maryland Secretary of State on September 17, 1997.
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.
(8) Articles Supplementary dated November 11, 1998 as filed with
the Maryland Secretary of State on November 12, 1998.
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment No. 50/51 to the
Registrant's Registration Statement on Form
N-1A.
File Nos.: 2-73948 and 811-3258.
Filing Date: January 22, 1999.
(9) Articles Supplementary as filed with the Maryland Secretary
of State on December 7, 1998 re: the addition of the:
* Tax-Managed U.S. 5-10 Value Portfolio;
* Tax-Managed U.S. 6-10 Small Company Portfolio;
and
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* Tax-Managed DFA International Value Portfolio;
and
* Tax-Managed U.S. Marketwide Value Portfolio
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment No. 50/51 to
Registrant's Registration Statement on Form
N-1A.
File Nos.: 2-73948 and 811-3258.
Filing Date: January 22, 1999.
(b) By-Laws.
By-Laws of the Registrant, as approved through September
2, 1997.
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.
(c) Instruments Defining the Rights of Securityholders.
(1) 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.
(d) Investment Advisory Agreement.
(i) 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 the Registrant's
Registration Statement on
Form N-1A.
File Nos.: 2-73948 and 811-3258.
Filing Date: March 20, 1998.
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(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 the 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)
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment No. 50/51 to the
Registrant's Registration Statement on Form
N-1A.
File Nos.: 2-73948 and 811-3258.
Filing Date: January 22, 1999.
(4) Investment Advisory Agreement between the
Registrant and DFA dated April 2, 1991 re: the:
* Large Cap International Portfolio
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment No. 50/51 to the
Registrant's Registration Statement on Form
N-1A.
File Nos.: 2-73948 and 811-3258.
Filing Date: January 22, 1999.
(5) Amendment to Investment Advisory Agreement
between the Registrant and DFA dated
September 21, 1992, effective on September 21,
1992 re: the:
* DFA Real Estate Securities Portfolio
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment
No. 48/49 to the Registrant's
Registration Statement on
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Form N-1A.
File Nos.: 2-73948 and 811-3258.
Filing Date: March 20, 1998.
(6) Investment Advisory Agreement between the
Registrant and DFA dated December 20, 1994 re:
the:
* DFA International Small Cap Value
Portfolio)
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment No. 50/51 to the
Registrant's Registration Statement on Form
N-1A.
File Nos.: 2-73948 and 811-3258.
Filing Date: January 22, 1999.
(7) 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)
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment No. 50/51 to the
Registrant's Registration Statement on Form
N-1A.
File Nos.: 2-73948 and 811-3258.
Filing Date: January 22, 1999.
(8) Investment Advisory Agreement between the
Registrant and DFA dated September 8, 1995 re:
the:
* VA Small Value Portfolio
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment No. 50/51 to the
Registrant's Registration Statement on Form
N-1A.
File Nos.: 2-73948 and 811-3258.
Filing Date: January 22, 1999.
(9) Investment Advisory Agreement between the
Registrant and DFA dated September 8, 1995 re:
the:
* VA International Value Portfolio
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment No.
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<PAGE>
50/51 to Registrant's Registration
Statement on Form N-1A.
File Nos.: 2-73948 and 811-3258.
Filing Date: January 22, 1999.
(10) Investment Advisory Agreement between the
Registrant and DFA dated September 8, 1995 re:
the:
* VA International Small Portfolio
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment No. 50/51 to the
Registrant's Registration Statement on Form
N-1A.
File Nos.: 2-73948 and 811-3258.
Filing Date: January 22, 1999.
(11) Investment Advisory Agreement between the
Registrant and DFA dated September 8, 1995 re:
the:
* VA Short-Term Fixed Portfolio
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment No. 50/51 to the
Registrant's Registration Statement on Form
N-1A.
File Nos.: 2-73948 and 811-3258.
Filing Date: January 22, 1999.
(12) Investment Advisory Agreement between the
Registrant and DFA dated August 8, 1996 re:
the:
* International Small Company Portfolio
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment No. 50/51 to the
Registrant's Registration Statement on Form
N-1A.
File Nos.: 2-73948 and 811-3258.
Filing Date: January 22, 1999.
(13) Investment Advisory Agreement between the Registrant
and DFA dated December 7, 1998. re: the
* Tax-Managed U.S. 5-10 Value Portfolio;
* Tax-Managed U.S. 6-10 Small Company Portfolio; and
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<PAGE>
* Tax-Managed DFA International Value Portfolio
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment No. 50/51 to the
Registrant's Registration Statement on Form
N-1A.
File Nos.: 2-73948 and 811-3258.
Filing Date: January 22, 1999.
(ii) 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:
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 DFA and DFA Australia
Ltd. (formerly DFA Australia Pty Limited)
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment No. 50/51 to the
Registrant's Registration Statement on Form
N-1A.
File Nos.: 2-73948 and 811-3258.
Filing Date: January 22, 1999.
(4) Form of Consultant Services Agreement between
DFA and Dimensional Fund Advisors Ltd.,
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<PAGE>
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment No. 50/51 to
Registrant's Registration Statement on Form
N-1A.
File Nos.: 2-73948 and 811-3258.
Filing Date: January 22, 1999.
(e) Underwriting Contracts.
(1) Agreement between the Registrant and DFA Securities Inc.
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.
(f) Bonus or Profit Sharing Plans.
Not Applicable.
(g) Custodian Agreements.
(1) Form of 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
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.
(2) Form of 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
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<PAGE>
* DFA Five-Year Government Portfolio
Previously filed with this registration statement and
incorporated herein by reference
a) Addendum No. 1
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment No. 50/51 to the
Registrant's Registration Statement on Form
N-1A.
File Nos.: 2-73948 and 811-3258.
Filing Date: January 22, 1999.
(h) Other Material Contracts.
(1) Transfer Agency Agreement.
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.
a) Addendum Number One
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment No. 50/51 to the
Registrant's Registration Statement on Form
N-1A.
File Nos.: 2-73948 and 811-3258.
Filing Date: January 22, 1999.
(2) Administration and Accounting Agreement
Administration and Accounting Services Agreement
between the Registrant and PFPC.
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.
a) Addendum Number One
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment No. 50/51 to the
Registrant's Registration
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<PAGE>
Statement on Form N-1A.
File Nos.: 2-73948 and 811-3258.
Filing Date: January 22, 1999.
(3) Administration Agreements.
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)
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment No. 50/51 to the
Registrant's Registration Statement on Form
N-1A.
File Nos.: 2-73948 and 811-3258.
Filing Date: January 22, 1999.
(2) Dated August 8, 1996 re: the:
* Japanese Small Company Portfolio
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment No. 50/51 to the
Registrant's Registration Statement on Form
N-1A.
File Nos.: 2-73948 and 811-3258.
Filing Date: January 22, 1999.
(3) Dated August 8, 1996 re: the
* United Kingdom Small Company Portfolio
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment No. 50/51 to the
Registrant's Registration Statement on Form
N-1A.
File Nos.: 2-73948 and 811-3258.
Filing Date: January 22, 1999.
(4) Dated August 8, 1996 re: the
* Continental Small Company Portfolio
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment No. 50/51 to the
Registrant's Registration Statement on Form
N-1A.
File Nos.: 2-73948 and 811-3258.
Filing Date: January 22, 1999.
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<PAGE>
(5) Dated December 1, 1995 re: the:
* U.S. Large Company Portfolio
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment No. 50/51 to the
Registrant's Registration Statement on Form
N-1A.
File Nos.: 2-73948 and 811-3258.
Filing Date: January 22, 1999.
(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.)
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment No. 50/51 to the
Registrant's Registration Statement on Form
N-1A.
File Nos.: 2-73948 and 811-3258.
Filing Date: January 22, 1999.
(7) Dated January 6, 1993 re: the
* U.S. 6-10 Small Company Portfolio
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment No. 50/51 to the
Registrant's Registration Statement on Form
N-1A.
File Nos.: 2-73948 and 811-3258.
Filing Date: January 22, 1999.
(8) Dated January 6, 1993 re: the:
* U.S. Large Cap Value Portfolio (formerly
the U.S. Large Cap High Book to Market
Portfolio)
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment No. 50/51 to the
Registrant's Registration Statement on Form
N-1A.
File Nos.: 2-73948 and 811-3258.
Filing Date: January 22, 1999.
(9) Dated January 6, 1993 re: the:
* U.S. 6-10 Value Portfolio (formerly the U.S.
Small Cap High Book to Market Portfolio)
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment No.
-11-
<PAGE>
50/51 to the Registrant's Registration
Statement on Form N-1A.
File Nos.: 2-73948 and 811-3258.
Filing Date: January 22, 1999.
(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)
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment No. 50/51 to the
Registrant's Registration Statement on Form
N-1A.
File Nos.: 2-73948 and 811-3258.
Filing Date: January 22, 1999.
(11) Dated March 30, 1994 re:
* Emerging Markets Portfolios
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment No. 50/51 to the
Registrant's Registration Statement on Form
N-1A.
File Nos.: 2-73948 and 811-3258.
Filing Date: January 22, 1999.
(12) Dated February 8, 1996 re: the:
* Enhanced U.S. Large Company Portfolio
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment No. 50/51 to
Registrant's Registration Statement on Form
N-1A.
File Nos.: 2-73948 and 811-3258.
Filing Date: January 22, 1999.
(13) Dated February 8, 1996 re: the:
* DFA Two-Year Corporate Fixed Income
Portfolio
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment No. 50/51 to the
Registrant's Registration Statement on Form
N-1A.
File Nos.: 2-73948 and 811-3258.
-12-
<PAGE>
Filing Date: January 22, 1999.
(14) Dated February 8, 1996 re: the
* DFA Two-Year Global Fixed Income
Portfolio
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment No. 50/51 to the
Registrant's Registration Statement on Form
N-1A.
File Nos.: 2-73948 and 811-3258.
Filing Date: January 22, 1999.
(15) Dated February 8, 1996 re: the:
* DFA Two-Year Government Portfolio
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment No. 50/51 to the
Registrant's Registration Statement on Form
N-1A.
File Nos.: 2-73948 and 811-3258.
Filing Date: January 22, 1999.
(16) Dated August 8, 1996 re: the:
* International Small Company Portfolio
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment No. 50/51 to the
Registrant's Registration Statement on Form
N-1A.
File Nos.: 2-73948 and 811-3258.
Filing Date: January 22, 1999.
(17) Dated December 19, 1996 re: the:
* Emerging Markets Small Cap Portfolio
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment No. 50/51 to the
Registrant's Registration Statement on Form
N-1A.
File Nos.: 2-73948 and 811-3258.
Filing Date: January 22, 1999.
(18) Dated November 30, 1997 re: the:
* U.S. 9-10 Small Company Portfolio
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment No. 50/51 to
Registrant's Registration Statement on Form
N-1A.
-13-
<PAGE>
File Nos.: 2-73948 and 811-3258.
Filing Date: January 22, 1999.
(19) Dated November 30, 1997 re: the:
* U.S. 4-10 Value Portfolio
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment No. 50/51 to the
Registrant's Registration Statement on Form
N-1A.
File Nos.: 2-73948 and 811-3258.
Filing Date: January 22, 1999.
(20) Dated November 30, 1997 re: the:
* Emerging Markets Value Portfolio
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment No. 50/51 to the
Registrant's Registration Statement on Form
N-1A.
File Nos.: 2-73948 and 811-3258.
Filing Date: January 22, 1999.
(21) Dated December 8, 1998 re: the:
* Tax-Managed U.S. Large Cap Value Portfolio;
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment No. 50/51 to the
Registrant's Registration Statement on Form
N-1A.
File Nos.: 2-73948 and 811-3258.
Filing Date: January 22, 1999.
(4) Other.
(a) 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.
(b) Participation Agreement between DFA Investment
Dimensions Group, Inc., DFA, DFA Securities, Inc.
and National Home Life Assurance Company.
INCORPORATED HEREIN BY REFERENCE TO:
-14-
<PAGE>
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.
(c) 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.
(i) Legal Opinion.
Opinion of Stradley, Ronon, Stevens & Young, LLP, IS
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment No. 50/51 to the
Registrant's Registration Statement on Form
N-1A.
File Nos.: 2-73948 and 811-3258.
Filing Date: January 22, 1999.
(j) Other Opinions.
(1) Consent of PricewaterhouseCoopers LLP
IS FILED HEREWITH AS EXHIBIT EX-99.B11.
(k) Omitted Financial Statements.
Not applicable.
(l) Initial Capital Agreements.
Subscription Agreement under Section 14(a)(3) of the Investment
Company Act of 1940.
Previously filed with this registration statement and
incorporated herein by reference.
(m) Rule 12b-1 Plans.
Not Applicable
-15-
<PAGE>
(n) Financial Data Schedules.
Financial Data Schedules as of November 30, 1998 ARE
ELECTRONICALLY FILED HEREWITH AS EXHIBIT EX-27.1-27.28
on behalf of the following series:
(16) RWB/DFA International High Book-to-Market Portfolio;
(17) VA Global Bond Portfolio;
(18) VA Large Value Portfolio;
-16-
<PAGE>
(19) VA Small Value Portfolio;
(20) VA International Value Portfolio;
(21) VA International Small Portfolio;
(22) VA Short-Term Fixed Portfolio;
(o) Plans pursuant to Rule 18f-3.
Not Applicable.
(p) Powers-of-Attorney.
(1) 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.
(2) 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.
-17-
<PAGE>
(3) 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.
ITEM 24. Persons Controlled by or Under Common Control with the Fund.
None.
ITEM 25. 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
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
-18-
<PAGE>
by such person in connection therewith.
ITEM 26. 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.
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 27. 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
-19-
<PAGE>
shares.
(c) Not applicable.
ITEM 28. 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 Group Inc. 1299 Ocean Avenue
11th Floor
Santa Monica, CA 90401
PFPC Inc. 400 Bellevue Parkway,
Wilmington, DE 19809.
ITEM 29. Management Services.
None.
ITEM 30. Undertakings.
Not Applicable.
-20-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant has duly caused this Registration Statement
to be signed on its behalf by the undersigned, duly authorized, in the City of
Santa Monica and State of California on the 26th day of March, 1999.
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, this registration statement
has been signed below by the following persons in the capacities and on the
dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
David G. Booth* Director and March 26, 1999
David G. Booth Chairman-Chief
Executive Officer
Rex A. Sinquefield* Director and March 26, 1999
Rex A. Sinquefield Chairman-Chief
Investment Officer
Michael T. Scardina* Chief Financial March 26, 1999
Michael T. Scardina Officer, Treasurer
and Vice President
George M. Constantinides* Director March 26, 1999
George M. Constantinides
John P. Gould* Director March 26, 1999
John P. Gould
Roger G. Ibbotson* Director March 26, 1999
Roger G. Ibbotson
Merton H. Miller* Director March 26, 1999
Merton H. Miller
-21-
<PAGE>
Myron S. Scholes* Director March 26, 1999
Myron S. Scholes
</TABLE>
* By: Irene R. Diamant
Irene R. Diamant
Attorney-in-Fact (Pursuant to a Power-of-Attorney)
-22-
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
N-1A EXHIBIT NO. EDGAR DESCRIPTION
<S> <C> <C>
23(j) EX-99.b11 Consent of PricewaterhouseCoopers LLP
23(n) Financial Data Schedules dated November
30, 1998 relating to the:
23(n)(16) EX-99.b27.16 RWB/DFA International High Book-to-
Market Portfolio
23(n)(17) EX-99.b27.17 VA Global Bond Portfolio
23(n)(18) EX-99.b27.18 VA Large Value Portfolio
23(n)(19) EX-99.b27.19 VA Small Value Portfolio
23(n)(20) EX-99.b27.20 VA International Value Portfolio
23(n)(21) EX-99.b27.21 VA International Small Portfolio
23(n)(22) EX-99.b27.22 VA Short-Term Fixed Portfolio
</TABLE>
-23-
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this Post-Effective Amendment
No. 53 (File No. 2-73948) under the Securities Act of 1933 and Post Effective
Amendment No. 54 (File No. 811-3258) under the Investment Company Act of 1940
to the Registration Statement on Form N-1A of the Investment Dimensions Group
Inc. (the "Fund") of our reports for the VA Small Value Portfolio, VA Large
Value Portfolio, VA International Value Portfolio, VA International Small
Portfolio, VA Short-Term Fixed Portfolio, and VA Global Bond Portfolio,
RWB/DFA International High Book To Market Portfolio, collectively, the
Portfolios, dated January 15, 1999 on our audits of the financial statements
and financial highlights of The Portfolios of the DFA Investment Dimensions
Group, Inc., as of November 30, 1998 and for the respective periods then
ended, which reports are included in the Annual Reports to Shareholders.
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, Pennsylvania
March 30, 1999
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
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<NUMBER> 18
<NAME> THE RWB/DFA INTERNATIONAL HIGH BOOK TO MARKET
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<TABLE> <S> <C>
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<NAME> VA GLOBAL BOND PORTFOLIO
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<SHARES-REINVESTED> 86600
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<TABLE> <S> <C>
<PAGE>
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<NAME> VA LARGE VALUE PORTFOLIO
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<EXPENSES-NET> (126990)
<NET-INVESTMENT-INCOME> 411213
<REALIZED-GAINS-CURRENT> 1932613
<APPREC-INCREASE-CURRENT> 742727
<NET-CHANGE-FROM-OPS> 3086553
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<DISTRIBUTIONS-OF-GAINS> (1625213)
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<NUMBER-OF-SHARES-SOLD> 747237
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<SHARES-REINVESTED> 133694
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<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 23
<NAME> VA SMALL VALUE PORTFOLIO
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<PERIOD-END> NOV-30-1998
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